Chinese Maritime Cases: Selection for Year of 2016 (Chinese Maritime Cases Series) 3662638096, 9783662638095

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Chinese Maritime Cases Series Series Editors-in-Chief : Martin Davies · Jiang Lin

Martin Davies Jiang Lin Editors

Chinese Maritime Cases Selection for Year of 2016

Chinese Maritime Cases Series Series Editors Martin Davies, Tulane University Law School, New Orleans, LA, USA Jiang Lin, Law School, Shanghai Maritime University, Shanghai, China

The primary aim of this series is to, for the first time, provide the academics, practitioners and businessmen worldwide with a crucial source to perceive how the specially designed Chinese maritime courts apply, interpretate and develop the shipping law in practice to strike a balance of interest among the domestic and international market players. Each year, China trades with other states in trillions of USD, and more than 90% of the cargoes are carried by ocean-going ships. In view of the enormous trade volume and maritime activities, foreign trading houses, shipping companies and marine underwriters, as well as their legal advisors, are keen to track down the developments of Chinese maritime law and court practice so as to predicate and avoid the potential problems or resolve the emerging disputes properly. Cases and judgments are regarded as a crucial source of learning. However, so far, no serial Chinese casebooks, which contain full English translation of selected judgments, have been published. The authors try to make an audacious break-through in this field. This series has a secondary aim: to establish a core part of the database, which can be further developed to be an innovative tool for the foreign students, professors and lawyers to have a systematic study of Chinese maritime law.

More information about this series at https://link.springer.com/bookseries/16710

Martin Davies Jiang Lin •

Editors

Chinese Maritime Cases Selection for Year of 2016

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Editors Martin Davies Law School Tulane University New Orleans, LA, USA

Jiang Lin Law School Shanghai Maritime University Shanghai, China

ISSN 2730-9851 ISSN 2730-986X (electronic) Chinese Maritime Cases Series ISBN 978-3-662-63809-5 ISBN 978-3-662-63810-1 (eBook) https://doi.org/10.1007/978-3-662-63810-1 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer-Verlag GmbH, DE part of Springer Nature. The registered company address is: Heidelberger Platz 3, 14197 Berlin, Germany

Foreword

As the legal professionals worldwide may agree, the vitality of law rests on implementation. The theme and essentials of implementation are embodied in the course of adjudication in particular the ultimate outcome—judgment. The judgment not only demonstrates the crucial elements of legislation and justification but also the specific rules in substance and procedure. In the practice of Chinese maritime trial, the judgment elaborates the maritime law in details and exerts an important function to enhance the materialization and remedy the imperfection of the written statutes. It proffers the legal professionals as well as general public with valuable reference in respect of judicial practice and offers significant materials for theoretic study of the science in application of law. The series of Chinese Maritime Cases is the first audacious project to publish on yearly basis the selected Chinese maritime judgments with literal English translation. This book of 2016, as well as each other book in the series, collects dozens of excellent judgments made in a particular year, which have a great extent of representativeness. The full translation of judgments reveals the whole proceedings of coherent and cogent discussion and deliberation carried out by judges in Chinese maritime trial, on the basis of which the readers can obtain a real picture of the underlying cases and the judges’ decisions on the argued disputes. For convenience of the readers, the editors take efforts to write a brief summary for each judgment, which will help the readers to identify the fundamental issues and comprehend the reasoning for judgment and spirit of justice in relatively effectual way. The birth of Chinese Maritime Cases will benefit the legal professionals worldwide, especially the foreign people who are practicing, studying or researching on maritime law in relation to China. By reading through the serial books, they will grasp a deeper understanding of Chinese maritime law and practice and acquire the ability to conduct a wider scope of business with their Chinese counterparts. These books are also good study materials to improve the legal language capacity of domestic students.

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Foreword

I wish that more talents will work together with the editors, Prof. Martin Davies and Associate Prof. Jiang Lin, to promote the Chinese maritime justice and cross-border cooperation in relation thereto. May 2021

Tong Wang Chief Judge of Shanghai Maritime Court Shanghai, China

Acknowledgements

The editors would like to acknowledge the following for their assistance with the Chinese end of this project: from Shanghai Maritime University Law School, Prof. Dong Nian Yin, Prof. Shi Cheng Yu and Prof. Cun Qiang Cai; from Shanghai Maritime Court, Judge Tong Wang, Judge Zhen Kun Jia and Judge Hai Long Lin; Assistants to editors in particular Hui Zeng, Yu Ming Wang, Yun Fei Han, Rui Ying Chen, Yu Tong Wang and Mu Fan Jia Yang. The editors would also like to acknowledge the following present and former students of Tulane University Law School, who have served as Assistant Editors for the American part of this project: Richard Beaumont (2014–2015); Scott Ferrier (2015–2016); Guyer Bogen (2017–2018); Lindsey Magee Gordley and Katherine Kaplan (2018–2019); Erica Endlein (2019–2020); Robert Bradley and Mary Katherine Koch (2020–2021). The editors also acknowledge the efforts of Jocelyn Mahan and Andrea Felice of IQNection for their work in building the companion website for this project, www. chinesemaritimecases.com.

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About the Editors

Professor Martin Davies is Admiralty Law Institute Professor of Maritime Law at Tulane University Law School in New Orleans and Director of the Tulane Maritime Law Center. He holds the degrees of M.A. and B.C.L. from Oxford University, England, and an LL.M. from Harvard Law School. Before joining Tulane, he was Harrison Moore Professor of Law at The University of Melbourne in Australia and before that he taught at Monash University, The University of Western Australia and Nottingham University. He has also been a visiting professor at universities in China, Italy, Azerbaijan and Singapore. In 2019, he was elected to be Titulary Member of the Comité Maritime International (CMI). He is the author (or co-author) of books on maritime law, international trade law, conflict of laws and the law of torts. He has also published many journal articles on these topics. He has extensive practical experience as a consultant for over 30 years on maritime matters and general international litigation and arbitration, in Australia, Hong Kong, Singapore and the USA. Associate Professor Jiang Lin (John Lin) is Associate Professor of Maritime Law at Shanghai Maritime University and Deputy Director of Shipping Policy and Law Research Center of Shanghai International Shipping Institute. He is also Adjunct Professor at Tulane University Law School. After graduation with a B.Sc. degree from Shanghai Maritime University in 1996 and an LL.M. degree from Southampton University in 1999, he commenced his legal career at Sinclair Roche & Temperley (SRT) and later jointed Ince & Co. He was dually qualified as English solicitor and Chinese lawyer. In 2008, he came back to his mother college to be a lecturer and researcher. Meanwhile, he keeps practicing English and Chinese laws at Sinopar Law Firm. He is also an arbitrator with China Maritime Arbitration Association, Shanghai Arbitration Commission and Shanghai International Arbitration Center and a supporting member of London Maritime Arbitrators’ Association.

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About the Editors

He is the author and chief editor of two serial books: Shanghai Shipping Policy and Law Development White Book and Shipping Finance Law Review. He also writes books and articles on cruise commerce, off-shore trade and insurance. John Lin is a member of Jiusan Society, one of the eight democratic parties in China.

Table of Contents

Table of Cases by Name of Plaintiff in Judgment of First Instance. . . . . . Table of Cases by Jurisdiction (Which Chinese Court Makes the Effective Judgment) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table of Cases by Cause of Action for Maritime Cases in the People’s Republic of China. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . List of Maritime Courts and Their Appeal and Petition Courts in the People’s Republic of China. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . List of Causes of Action for Maritime Cases in the People’s Republic of China (extracted from the Regulations on Causes of Action for Civil Disputes made by the Supreme People’s Court of the People’s Republic of China 2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table of References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chinese Maritime Litigation Digital Report 2016 . . . . . . . . . . . . . . . . . . .

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Table of Cases by Name of Plaintiff in Judgment of First Instance

Anhui Changhui Transportation and Trade Company v. Maritime Safety Administration Xuwen (2015) Guang Hai Fa Xing Chu Zi No. 4, judgment of first instance of Guangzhou Maritime Court . . . . . . . .

1

Anhui Changhui Transportation and Trade Company v. Maritime Safety Administration Xuwen (2015) Yue Gao Fa Xing Zhong Zi No. 551, judgment of second instance of Guangdong High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13

China Transport Groupage International Limited v. Foshan Jehong Logistics Co., Ltd. (2014) Guang Hai Fa Chu Zi No. 505, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . .

23

China Transport Groupage International Limited v. Foshan Jehong Logistics Co., Ltd. (2015) Yue Gao Fa Min Si Zhong Zi No. 14, judgment of second instance of Guangdong High People’s Court . . . . . . .

32

China Transport Groupage International Limited (Shenzhen) v. Guangzhou Index Shipping Ltd. (2014) Guang Hai Fa Chu Zi No. 28, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . .

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China Transport Groupage International Limited (Shenzhen) v. Guangzhou Index Shipping Ltd. (2015) Yue Gao Fa Min Si Zhong Zi No. 39, judgment of second instance of Guangdong High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Chenzhou Shipping Group Co., Ltd. v. People’s Insurance Company of China Co., Ltd. Guangdong Branch (2014) Yong Hai Fa Shang Chu Zi No. 318, judgment of first instance of Ningbo Maritime Court . . . . . . .

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Chenzhou Shipping Group Co., Ltd. v. People’s Insurance Company of China Co., Ltd. Guangdong Branch (2015) Zhe Hai Zhong Zi No. 240, judgment of second instance of Zhejiang High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Table of Cases by Name of Plaintiff in Judgment of First Instance

China Pacific Property Insurance Co., Ltd. Shipping Insurance Operation Center v. NYK Bulk Carrier (Korea) Co., Ltd. (2013) Hai Shang Chu Zi No. 129, judgment of first instance of Beihai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 Chongqing Wanzhou Yangjiang Shipping Co., Ltd. et al. v. Chongqing Sanyi Logistics Co., Ltd. (2015) Wu Hai Fa Shang Zi No. 01209, judgment of first instance of Wuhan Maritime Court . . . . . . . 157 Chongqing Wanzhou Yangjiang Shipping Co., Ltd. et al. v. Chongqing Sanyi Logistics Co., Ltd. (2016) E Min Zhong No. 1014, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . 167 Dalian Beiyuan Ship Outfitting Engineering Co., Ltd. v. Liaoning Dongbao Group Ship Manufacturing Co., Ltd. (2015) Da Hai Shang Chu Zi No. 00662, judgment of first instance of Dalian Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 Fangchenggang Beibu Gulf Port Service Co., Ltd. v. Xinbao Resources Co., Ltd. et al. (2015) Hai Shang Chu Zi No. 218, judgment of first instance of Beihai Maritime Court . . . . . . . . . . . . . . . . . 197 Fairwind International Shipping Co., Ltd. v. Vertex Shipping Co., Ltd. (2015) Hu Hai Fa Hai Chu Zi No. 73, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 Fairwind International Shipping Co., Ltd. v. Vertex Shipping Co., Ltd. (2016) Hu Min Zhong No. 168, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220 Foreign Economic and Technical Cooperation Co., Ltd. of China Changjiang National Shipping Group et al. v. China Construction Bank Co., Ltd. Qingdao Zhongshan Road Sub-branch (2013) Qing Hai Fa Shang Chu Zi No. 945, judgment of first instance of Qingdao Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229 Foreign Economic and Technical Cooperation Co., Ltd. of China Changjiang National Shipping Group et al. v. China Construction Bank Co., Ltd. Qingdao Zhongshan Road Sub-branch (2014) Lu Min Si Zhong Zi No. 148, judgment of second instance of Shandong High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243 Hangzhou Hangsi Garment In & Export Co., Ltd. v. Meiji (China) Transportation and Logistics Co., Ltd. (2014) Hu Hai Fa Shang Chu Zi No. 1534, judgment of first instance of Shanghai Maritime Court . . . . 255 Hangzhou Hangsi Garment In & Export Co., Ltd. v. Meiji (China) Transportation and Logistics Co., Ltd. (2015) Hu Gao Min Si (Hai) Zhong Zi No. 87, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267

Table of Cases by Name of Plaintiff in Judgment of First Instance

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Hehai Technology Engineering Group Co., Ltd. v. Xianghai Heavy Industry Group Co., Ltd. (2015) Hu Hai Fa Shang Chu Zi No. 3274, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . 277 Hehai Technology Engineering Group Co., Ltd. v. Xianghai Heavy Industry Group Co., Ltd. (2016) Hu Min Zhong No. 351, judgment of second instance of Shanghai High People’s Court . . . . . . . . 289 Hehai Technology Engineering Group Co., Ltd. v. Xianghai Heavy Industry Group Co., Ltd. (2017) Zui Gao Fa Min Shen No. 2231, ruling of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . 303 Heilongjiang Sanjiang Foreign Shipping Agency Co., Ltd. v. Fuyuan Port Authority (2015) Da Hai Fa Shang Chu Zi No. 367, judgment of first instance of Dalian Maritime Court . . . . . . . . . . . . . . . . 307 Hin-pro International Logistics Limited v. Chile South American Steamship Co., Ltd. (2013) Yong Hai Fa Shang Chu Zi No. 513, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . . . 315 Hin-pro International Logistics Limited v. Chile South American Steamship Co., Ltd. (2015) Zhe Hai Zhong Zi No. 13, judgment of second instance of Zhejiang High People’s Court . . . . . . . . . 333 Huarong Financial Leasing Company Limited v. China Construction Bank Zhoushan Dinghai Sub-branch (2015) Yong Hai Fa Shang Chu Zi No. 996, judgment of first instance of Ningbo Maritime Court . . . . . . . 349 Huarong Financial Leasing Company Limited v. China Construction Bank Zhoushan Dinghai Sub-branch (2016) Zhe Min Zhong No. 357, judgment of second instance of Zhejiang High People’s Court . . . . . . . . . 375 Huarong Financial Leasing Company Limited v. China Construction Bank Zhoushan Dinghai Sub-branch (2017) Zui Gao Fa Min Shen No. 2014, ruling of retrial of The Supreme People’s Court . . . . . . . . . . . 393 Hubei Branch of China Pacific Property Insurance Co., Ltd. v. SIPG Yangtze River Logistics Co., Ltd. (2014) Wu Hai Fa Shang Zi No. 00906, judgment of first instance of Wuhan Maritime Court . . . . . . . 397 Hubei Branch of China Pacific Property Insurance Co., Ltd. v. SIPG Yangtze River Logistics Co., Ltd. (2014) E Min Si Zhong Zi No. 00075, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . 407 Jiangsu Shuntian Marine Development Co., Ltd. v. Nanjing Yhao Shipbuilding Co., Ltd. (2013) Wu Hai Fa Shang Zi No. 00414, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . . 419

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Jiangsu Shuntian Marine Development Co., Ltd. v. Nanjing Yhao Shipbuilding Co., Ltd. (2015) E Min Si Zhong Zi No. 00067, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . 435 Jiangxi Group Co., Ltd. for the Import & Export of Rare-Earth Metal Tungsten Industry v. RCL Feeder Pte. Ltd. et al. (2009) Guang Hai Fa Chu Zi No. 493, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457 Jiangxi Group Co., Ltd. for the Import & Export of Rare-Earth Metal Tungsten Industry v. RCL Feeder Pte. Ltd. et al. (2016) Yue Min Zai No. 69, judgment of second instance of Guangdong High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 478 Joho Trading Corporation v. New Unite (HK) Marine Shipping Co., Ltd. (2012) Qing Hai Fa Hai Shang Chu Zi No. 958, judgment of first instance of Qingdao Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513 Joho Trading Corporation v. New Unite (HK) Marine Shipping Co., Ltd. (2014) Lu Min Si Zhong Zi No. 106, judgment of second instance of Shandong High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 527 Joho Trading Corporation v. New Unite (HK) Marine Shipping Co., Ltd. (2016) Zui Gao Fa Min Zai No. 17, judgment of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540 LI Jiezhao v. Hainan Province Fishery Mutual Insurance Association et al. (2016) Qiong 72 Min Chu No. 289, judgment of first instance of Haikou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 553 LUAN Shuhai et al. v. Conoco Phillips China Inc. et al. (2012) Jin Hai Fa Shi Chu Zi No. 1, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 559 LUAN Shuhai et al. v. Conoco Phillips China Inc. et al. (2016) Jin Min Zhong No. 69, judgment of second instance of Tianjin High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 575 MAO Xuebo v. CHEN Wei et al. (2014) Hu Hai Fa Hai Chu Zi No. 85, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . 595 MAO Xuebo v. CHEN Wei et al. (2016) Hu Min Zhong Zi No. 24, judgment of second instance of Shanghai High People’s Court . . . . . . . . 626 MAO Xuebo v. CHEN Wei et al. (2016) Zui Gao Fa Min Shen No. 1487, ruling of retrial of The Supreme People’s Court . . . . . . . . . . . 639 Millennium Logistics (Shenzhen) Ltd. v. Ningbo Hetai Import & Export Co., Ltd. (2016) Zhe 72 Min Chu No. 670, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 647

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Nanhai Rescue Bureau of the Ministry of Transport v. Archangelos Investments E.N.E et al. (2012) Guang Hai Fa Chu Zi No. 898, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . 665 Nanhai Rescue Bureau of the Ministry of Transport v. Archangelos Investments E.N.E et al. (2014) Yue Gao Fa Min Si Zhong Zi No. 117, judgment of second instance of Guangdong High People’s Court . . . . . . . 683 Nanhai Rescue Bureau of the Ministry of Transport v. Archangelos Investments E.N.E et al. (2016) Zui Gao Fa Min Zai No. 61, judgment of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . 710 Nanjing Hengye Tanker Co., Ltd. v. Sansha Jiangpeng Shipping Development Co., Ltd. (2015) Qiong Hai Fa Chu Zi No. 289, judgment of first instance of Haikou Maritime Court . . . . . . . . . . . . . . . . 731 Nanjing Boyang Shipping Co., Ltd. v. PICC Property and Casualty Company Limited Dalian Branch (2015) Wu Hai Fa Shang Zi No. 00041, judgment of first instance of Wuhan Maritime Court . . . . . . . 747 Nanjing Boyang Shipping Co., Ltd. v. PICC Property and Casualty Company Limited Dalian Branch (2015) E Min Si Zhong Zi No. 00178, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 755 Nanning City Gongli Steel Tubes Manufacturing Co., Ltd. v. Beihai Jun Hui Sand & Stone Co., Ltd. et al. (2015) Hai Shang Chu Zi No. 342, judgment of first instance of Beihai Maritime Court . . . . . . . . . . 767 Nantong City Fang Zhou Shipping Agency Co., Ltd. v. China People’s Property Insurance Co., Ltd. Nantong City Branch (2016) E 72 Min Chu No. 115, judgment of first instance of Wuhan Maritime Court . . . . . 785 Nantong City Fang Zhou Shipping Agency Co., Ltd. v. China People’s Property Insurance Co., Ltd. Nantong City Branch (2016) E Min Zhong No. 1214, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 794 Ningbo Arts and Crafts Import & Export Co., Ltd. v. Shanghai Wan Shi Hong Logistics Warehousing Co., Ltd. et al. (2014) Hu Hai Fa Shang Chu Zi No. 57, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 805 Ningbo Arts and Crafts Import & Export Co., Ltd. v. Shanghai Wan Shi Hong Logistics Warehousing Co., Ltd. et al. (2015) Hu Gao Min Si (Hai) Zhong Zi No. 98, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 836

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Ningbo Zhenhai Ming Ding Metal Materials Co., Ltd. v. Feng Yuan Shipping Co., Ltd. et al. (2014) Yong Hai Fa Shang Chu Zi No. 436, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . . . 861 PICC Property and Casualty Company Limited Tianjin Branch v. Guangxi Hong Chen Investment Co., Ltd. et al. (2015) Hai Shang Chu Zi No. 216, judgment of first instance of Beihai Maritime Court . . . . . . . 871 PICC Property and Casualty Company Limited Tianjin Branch v. Guangxi Hong Chen Investment Co., Ltd. et al. (2016) Gui Min Zhong No. 69, judgment of second instance of Guangxi Zhuang Autonomous Region High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 885 PICC Property and Casualty Company Limited Xingshan Branch v. Ping An Property & Casualty Insurance Company of China Ltd. Anqing Center Branch (2014) Wu Hai Fa Shang Zi No. 00112, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . . 903 PICC Property and Casualty Company Limited Xingshan Branch v. Ping An Property & Casualty Insurance Company of China Ltd. Anqing Center Branch (2015) E Min Si Zhong Zi No. 00084, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . 919 Ping An Property & Casualty Insurance Company of China Ltd. Shanghai Hongkou Branch v. CLC Shipchartering-VI Co., Ltd. et al. (2012) Hu Hai Fa Shang Chu Zi No. 265, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 943 Ping An Property & Casualty Insurance Company of China Ltd. Shanghai Hongkou Branch v. CLC Shipchartering-VI Co., Ltd. et al. (2013) Hu Gao Min Si (Hai) Zhong Zi No. 105, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . 962 Ping An Property & Casualty Insurance Company of China Ltd. Shanghai Hongkou Branch v. CLC Shipchartering-VI Co., Ltd. et al. (2016) Zui Gao Fa Min Zai No. 18, judgment of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 982 Ping An Property & Casualty Insurance Company of China Ltd. Ningbo Branch et al. v. Ningbo Zhenhai Ship Repair Yard et al. (2015) Yong Hai Fa Shi Chu Zi No. 48, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 997 Ping An Property & Casualty Insurance Company of China Ltd. Ningbo Branch et al. v. Ningbo Zhenhai Ship Repair Yard et al. (2016) Zhe Min Zhong No. 477, judgment of second instance of Zhejiang High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1010

Table of Cases by Name of Plaintiff in Judgment of First Instance

xix

Qinhuangdao Bohai Shipping Matters Engineering Co., Ltd. v. Pai A Qinhuangdao Tourism Culture Management Co., Ltd. (2016) Jin 72 Min Chu No. 399, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1031 Qinhuangdao Jinhai Real Estate Development Co., Ltd. v. Zhuhai Sun Bird Yacht Manufacturing Co., Ltd. (2015) Jin Hai Fa Shang Chu Zi No. 930, judgment of first instance of Tianjin Maritime Court . . . . . . . . . 1039 QU Rongmo v. China Continent Insurance Co., Ltd. Weihai Center Branch et al. (2012) Qing Hai Fa Hai Shang Chu Zi No. 240, judgment of first instance of Qingdao Maritime Court . . . . . . . . . . . . . . . 1047 QU Rongmo v. China Continent Insurance Co., Ltd. Weihai Center Branch et al. (2016) Lu Min Zhong No. 1542, judgment of second instance of Shandong High People’s Court . . . . . . . . . . . . . . . . . . . . . . . 1071 QU Rongmo v. China Continent Insurance Co., Ltd. Weihai Center Branch et al. (2017) Zui Gao Fa Min Zai No. 413, judgment of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1089 Rongcheng Xixiakou Ship Industry Co., Ltd. v. Wartsila Engine (Shanghai) Co., Ltd. et al. (2011) Qing Hai Fa Hai Shang Chu Zi No. 271, judgment of first instance of Qingdao Maritime Court . . . . . . . . 1113 Rongcheng Xixiakou Ship Industry Co., Ltd. v. Wartsila Engine (Shanghai) Co., Ltd. et al. (2013) Lu Min Si Zhong Zi No. 87, judgment of second instance of Shandong High People’s Court . . . . . . . . 1131 Rongcheng Xixiakou Ship Industry Co., Ltd. v. Wartsila Engine (Shanghai) Co., Ltd. et al. (2016) Zui Gao Fa Min Zai No. 15, judgment of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . 1157 Shanghai Changying Industry Co., Ltd. v. Pacific International Lines (Pte) Ltd. (2014) Hu Hai Fa Shang Chu Zi No. 1159, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . 1183 Shanghai Kairun Shipping Co., Ltd. et al. v. Dalian Guorun Shipping Agency Co., Ltd. et al. (2014) Hu Hai Fa Shang Chu Zi No. 753, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . 1193 Shanghai Kairun Shipping Co., Ltd. et al. v. Dalian Guorun Shipping Agency Co., Ltd. et al. (2016) Hu Min Zhong No. 38, judgment of second instance of Shanghai High People’s Court . . . . . . . . 1202 Shanghai Sanhang Benteng Construction Engineering Co., Ltd. v. Zhoushan Alpha Yacht Club Development Co., Ltd. (2013) Yong Hai Fa Shang Chu Zi No. 306, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1213

xx

Table of Cases by Name of Plaintiff in Judgment of First Instance

Shanghai Sanhang Benteng Construction Engineering Co., Ltd. v. Zhoushan Alpha Yacht Club Development Co., Ltd. (2016) Zhe Min Zhong No. 149, judgment of second instance of Zhejiang High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1226 Shanghai Tongshun Transportation Co., Ltd. v. Zhoushan City Dongjing Shipping Co., Ltd. et al. (2015) Yong Hai Fa Shi Chong Zi No. 1, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . 1255 Shanghai Tongshun Transportation Co., Ltd. v. Zhoushan City Dongjing Shipping Co., Ltd. et al. (2016) Zhe Min Zhong No. 561, judgment of second instance of Zhejiang High People’s Court . . . . . . . . . 1267 Shaoxing County Jinsidun Knitting Co., Ltd. v. Mitsui O.S.K. Lines, Ltd. (2014) Yong Hai Fa Shang Chu Zi No. 730, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1283 Shaoxing County Jinsidun Knitting Co., Ltd. v. Mitsui O.S.K. Lines, Ltd. (2016) Zhe Min Zhong No. 480, judgment of second instance of Zhejiang High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1294 TIAN Jiqian v. Wuhu Hengpeng Shipping, LLC. et al. (2015) Yong Hai Fa Shi Chu Zi No. 99, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1303 TIAN Jiqian v. Wuhu Hengpeng Shipping, LLC. et al. (2016) Zhe Min Zhong No. 478, judgment of second instance of Zhejiang High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1323 XU Guoxiang v. Guangxi Fangchenggang City Tai Sheng Shipping Co., Ltd. et al. (2016) Gui 72 Min Chu No. 33, judgment of first instance of Beihai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1337 Yangpu Fuhai Shipping Co., Ltd. v. China United Property Insurance Company Limited Tangshan Central Branch (2016) Jin 72 Min Chu No. 653, judgment of first instance of Tianjin Maritime Court . . . . . . . . . 1353 Yangpu Fuhai Shipping Co., Ltd. v. China United Property Insurance Company Limited Tangshan Central Branch (2016) Jin Min Zhong No. 420, judgment of second instance of Tianjin High People’s Court . . . 1360 Yangpu Fuhai Shipping Co., Ltd. v. China United Property Insurance Company Limited Tangshan Central Branch (2017) Zui Gao Fa Min Shen No. 2477, ruling of retrial of The Supreme People’s Court . . . . . . . 1367 Zhenjiang City Water Company v. KDB Capital Co., Ltd. (2012) Wu Hai Fa Shi Zi No. 00019, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1371

Table of Cases by Name of Plaintiff in Judgment of First Instance

xxi

Zhenjiang City Water Company v. KDB Capital Co., Ltd. (2015) E Min Si Zhong Zi No. 00060, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1394 ZHOU Endian v. Fishery Administration and Fishing Port Supervision and Management Center of Yangpu Economic Development Zone (2015) Qiong Hai Fa Xing Chu Zi No. 14, judgment of first instance of Haikou Maritime Court . . . . . . . . . . . . . . . . 1411 ZHOU Endian v. Fishery Administration and Fishing Port Supervision and Management Center of Yangpu Economic Development Zone (2016) Qiong Xing Zhong No. 235, judgment of second instance of Hainan High People’s Court . . . . . . . . . . 1421 ZHOU Endian v. Fishery Administration and Fishing Port Supervision and Management Center of Yangpu Economic Development Zone (2017) Zui Gao Fa Xing Zai No. 70, ruling of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1432 Zhoushan Baolong Shipping Co., Ltd. v. Tangshan Hongtai Freight Forwarding Co., Ltd. (2015) Jin Hai Fa Shang Chu Zi No. 80-85, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . 1445 Zhoushan Baolong Shipping Co., Ltd. v. Tangshan Hongtai Freight Forwarding Co., Ltd. (2015) Jin Gao Min Si Zhong Zi No. 123-128, judgment of second instance of Tianjin High People’s Court . . . . . . . . . . 1460 Zhoushan Baolong Shipping Co., Ltd. v. Tangshan Hongtai Freight Forwarding Co., Ltd. (2016) Zui Gao Fa Min Shen No. 1485, ruling of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . 1471 Zhoushan Sea Salvage Engineering Co., Ltd. v. Sichuan Highway Bridge Construction Group Co., Ltd. (2016) Zhe 72 Min Chu No. 164, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . . . 1475 Zhoushan Sea Salvage Engineering Co., Ltd. v. Sichuan Highway Bridge Construction Group Co., Ltd. (2016) Zhe Min Zhong No. 609, judgment of second instance of Zhejiang High People’s Court . . . . . . . . . 1490

Table of Cases by Jurisdiction (Which Chinese Court Makes the Effective Judgment)

Effective Judgments Made by Maritime Courts Shanghai Maritime Court Shanghai Changying Industry Co., Ltd. v. Pacific International Lines (Pte) Ltd. (2014) Hu Hai Fa Shang Chu Zi No. 1159, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1183 Tianjin Maritime Court Qinhuangdao Bohai Shipping Matters Engineering Co., Ltd. v. Pai A Qinhuangdao Tourism Culture Management Co., Ltd. (2016) Jin 72 Min Chu No. 399, judgment of first instance of Tianjin Maritime Court . . . . . . . 1031 Qinhuangdao Jinhai Real Estate Development Co., Ltd. v. Zhuhai Sun Bird Yacht Manufacturing Co., Ltd. (2015) Jin Hai Fa Shang Chu Zi No. 930, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . . . 1039 Dalian Maritime Court Dalian Beiyuan Ship Outfitting Engineering Co., Ltd. v. Liaoning Dongbao Group Ship Manufacturing Co., Ltd. (2015) Da Hai Shang Chu Zi No. 00662, judgment of first instance of Dalian Maritime Court . . . . . . . 179 Heilongjiang Sanjiang Foreign Shipping Agency Co., Ltd. v. Fuyuan Port Authority (2015) Da Hai Fa Shang Chu Zi No. 367, judgment of first instance of Dalian Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307 Haikou Maritime Court LI Jiezhao v. Hainan Province Fishery Mutual Insurance Association et al. (2016) Qiong 72 Min Chu No. 289, judgment of first instance of Haikou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 553

xxiii

xxiv

Table of Cases by Jurisdiction (Which Chinese Court Makes the Effective Judgment)

Nanjing Hengye Tanker Co., Ltd. v. Sansha Jiangpeng Shipping Development Co., Ltd. (2015) Qiong Hai Fa Chu Zi No. 289, judgment of first instance of Haikou Maritime Court . . . . . . . . . . . . . . . . . . 731 Ningbo Maritime Court Millennium Logistics (Shenzhen) Ltd. v. Ningbo Hetai Import & Export Co., Ltd. (2016) Zhe 72 Min Chu No. 670, judgment of first instance of Ningbo Maritime Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 647 Ningbo Zhenhai Ming Ding Metal Materials Co., Ltd. v. Feng Yuan Shipping Co., Ltd. et al. (2014) Yong Hai Fa Shang Chu Zi No. 436, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . . . . . 861 Beihai Maritime Court China Pacific Property Insurance Co., Ltd. Shipping Insurance Operation Center v. NYK Bulk Carrier (Korea) Co., Ltd. (2013) Hai Shang Chu Zi No. 129, judgment of first instance of Beihai Maritime Court . . . . . . . . . . Fangchenggang Beibu Gulf Port Service Co., Ltd. v. Xinbao Resources Co., Ltd. et al. (2015) Hai Shang Chu Zi No. 218, judgment of first instance of Beihai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nanning City Gongli Steel Tubes Manufacturing Co., Ltd. v. Beihai Jun Hui Sand & Stone Co., Ltd. et al. (2015) Hai Shang Chu Zi No. 342, judgment of first instance of Beihai Maritime Court . . . . . . . . . . . . . . . . . XU Guoxiang v. Guangxi Fangchenggang City Tai Sheng Shipping Co., Ltd. et al. (2016) Gui 72 Min Chu No. 33, judgment of first instance of Beihai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . 123

. . 197

. . 767

. . 1337

Effective Judgments Made by Appeal Courts Shanghai High People’s Court Fairwind International Shipping Co., Ltd. v. Vertex Shipping Co., Ltd. (2015) Hu Hai Fa Hai Chu Zi No. 73, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fairwind International Shipping Co., Ltd. v. Vertex Shipping Co., Ltd. (2016) Hu Min Zhong No. 168, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hangzhou Hangsi Garment In & Export Co., Ltd. v. Meiji (China) Transportation and Logistics Co., Ltd. (2014) Hu Hai Fa Shang Chu Zi No. 1534, judgment of first instance of Shanghai Maritime Court . . . . . . Hangzhou Hangsi Garment In & Export Co., Ltd. v. Meiji (China) Transportation and Logistics Co., Ltd. (2015) Hu Gao Min Si (Hai) Zhong Zi No. 87, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . 211

. . 220

. . 255

. . 267

Table of Cases by Jurisdiction (Which Chinese Court Makes the Effective Judgment)

Ningbo Arts and Crafts Import & Export Co., Ltd. v. Shanghai Wan Shi Hong Logistics Warehousing Co., Ltd. et al. (2014) Hu Hai Fa Shang Chu Zi No. 57, judgment of first instance of Shanghai Maritime Court . . . . . . Ningbo Arts and Crafts Import & Export Co., Ltd. v. Shanghai Wan Shi Hong Logistics Warehousing Co., Ltd. et al. (2015) Hu Gao Min Si (Hai) Zhong Zi No. 98, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shanghai Kairun Shipping Co., Ltd. et al. v. Dalian Guorun Shipping Agency Co., Ltd. et al. (2014) Hu Hai Fa Shang Chu Zi No. 753, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . Shanghai Kairun Shipping Co., Ltd. et al. v. Dalian Guorun Shipping Agency Co., Ltd. et al. (2016) Hu Min Zhong No. 38, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . .

xxv

. . 805

. . 836

. . 1193

. . 1202

Tianjin High People’s Court LUAN Shuhai et al. v. Conoco Phillips China Inc. et al. (2012) Jin Hai Fa Shi Chu Zi No. 1, judgment of first instance of Tianjin Maritime Court . . . . 559 LUAN Shuhai et al. v. Conoco Phillips China Inc. et al. (2016) Jin Min Zhong No. 69, judgment of second instance of Tianjin High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 575 Shandong High People’s Court Foreign Economic and Technical Cooperation Co., Ltd. of China Changjiang National Shipping Group et al. v. China Construction Bank Co., Ltd. Qindao Zhongshan Road Sub-branch (2013) Qing Hai Fa Shang Chu Zi No. 945, judgment of first instance of Qingdao Maritime Court . . . . 229 Foreign Economic and Technical Cooperation Co., Ltd. of China Changjiang National Shipping Group et al. v. China Construction Bank Co., Ltd. Qindao Zhongshan Road Sub-branch (2014) Lu Min Si Zhong Zi No. 148, judgment of second instance of Shandong High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243 Guangdong High People’s Court Anhui Changhui Transportation and Trade Company v. Maritime Safety Administration Xuwen (2015) Guang Hai Fa Xing Chu Zi No. 4, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . Anhui Changhui Transportation and Trade Company v. Maritime Safety Administration Xuwen (2015) Yue Gao Fa Xing Zhong Zi No. 551, judgment of second instance of Guangdong High People’s Court . . . . . . . . China Transport Groupage International Limited v. Foshan Jehong Logistics Co., Ltd. (2014) Guang Hai Fa Chu Zi No. 505, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

13

23

xxvi

Table of Cases by Jurisdiction (Which Chinese Court Makes the Effective Judgment)

China Transport Groupage International Limited v. Foshan Jehong Logistics Co., Ltd. (2015) Yue Gao Fa Min Si Zhong Zi No. 14, judgment of second instance of Guangdong High People’s Court . . . . . . China Transport Groupage International Limited (Shenzhen) v. Guangzhou Index Shipping Ltd. (2014) Guang Hai Fa Chu Zi No. 28, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . China Transport Groupage International Limited (Shenzhen) v. Guangzhou Index Shipping Ltd. (2015) Yue Gao Fa Min Si Zhong Zi No. 39, judgment of second instance of Guangdong High People’s Court . . . . . . Jiangxi Group Co., Ltd. for the Import & Export of Rare-Earth Metal Tungsten Industry v. RCL Feeder Pte. Ltd. et al. (2009) Guang Hai Fa Chu Zi No. 493, judgment of first instance of Guangzhou Maritime Court . . . Jiangxi Group Co., Ltd. for the Import & Export of Rare-Earth Metal Tungsten Industry v. RCL Feeder Pte. Ltd. et al. (2016) Yue Min Zai No. 69, judgment of second instance of Guangdong High People’s Court . . .

..

32

..

45

..

52

. . 457

. . 478

Hubei High People’s Court Chongqing Wanzhou Yangjiang Shipping Co., Ltd. et al. v. Chongqing Sanyi Logistics Co., Ltd. (2015) Wu Hai Fa Shang Zi No. 01209, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . Chongqing Wanzhou Yangjiang Shipping Co., Ltd. et al. v. Chongqing Sanyi Logistics Co., Ltd. (2016) E Min Zhong No. 1014, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . . . . . . . . . . . Hubei Branch of China Pacific Property Insurance Co., Ltd. v. SIPG Yangtze River Logistics Co., Ltd. (2014) Wu Hai Fa Shang Zi No. 00906, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . . . Hubei Branch of China Pacific Property Insurance Co., Ltd. v. SIPG Yangtze River Logistics Co., Ltd. (2014) E Min Si Zhong Zi No. 00075, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . Jiangsu Shuntian Marine Development Co., Ltd. v. Nanjing Yhao Shipbuilding Co., Ltd. (2013) Wu Hai Fa Shang Zi No. 00414, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . Jiangsu Shuntian Marine Development Co., Ltd. v. Nanjing Yhao Shipbuilding Co., Ltd. (2015) E Min Si Zhong Zi No. 00067, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . . . . . . . . . Nanjing Boyang Shipping Co., Ltd. v. PICC Property and Casualty Company Limited Dalian Branch (2015) Wu Hai Fa Shang Zi No. 00041, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . . . Nanjing Boyang Shipping Co., Ltd. v. PICC Property and Casualty Company Limited Dalian Branch (2015) E Min Si Zhong Zi No. 00178, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . Nantong City Fang Zhou Shipping Agency Co., Ltd. v. China People’s Property Insurance Co., Ltd. Nantong City Branch (2016) E 72 Min Chu No. 115, judgment of first instance of Wuhan Maritime Court . . . . . . . . .

. . 157

. . 167

. . 397

. . 407

. . 419

. . 435

. . 747

. . 755

. . 785

Table of Cases by Jurisdiction (Which Chinese Court Makes the Effective Judgment)

Nantong City Fang Zhou Shipping Agency Co., Ltd. v. China People’s Property Insurance Co., Ltd. Nantong City Branch (2016) E Min Zhong No. 1214, judgment of second instance of Hubei High People’s Court. . . PICC Property and Casualty Company Limited Xingshan Branch v. Ping An Property & Casualty Insurance Company of China Ltd. Anqing Center Branch (2014) Wu Hai Fa Shang Zi No. 00112, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PICC Property and Casualty Company Limited Xingshan Branch v. Ping An Property & Casualty Insurance Company of China Ltd. Anqing Center Branch (2015) E Min Si Zhong Zi No. 00084, judgment of second instance of Hubei High People’s Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Zhenjiang City Water Company v. KDB Capital Co., Ltd. (2012) Wu Hai Fa Shi Zi No. 00019, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Zhenjiang City Water Company v. KDB Capital Co., Ltd. (2015) E Min Si Zhong Zi No. 00060, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

xxvii

. . 794

. . 903

. . 919

. . 1371

. . 1394

Zhejiang High People’s Court Chenzhou Shipping Group Co., Ltd. v. People’s Insurance Company of China Co., Ltd. Guangdong Branch (2014) Yong Hai Fa Shang Chu Zi No. 318, judgment of first instance of Ningbo Maritime Court . . . . . . . . . Chenzhou Shipping Group Co., Ltd. v. People’s Insurance Company of China Co., Ltd. Guangdong Branch (2015) Zhe Hai Zhong Zi No. 240, judgment of second instance of Zhejiang High People’s Court . . . . . . . . . Hin-pro International Logistics Limited v. Chile South American Steamship Co., Ltd. (2013) Yong Hai Fa Shang Chu Zi No. 513, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . . . Hin-pro International Logistics Limited v. Chile South American Steamship Co., Ltd. (2015) Zhe Hai Zhong Zi No. 13, judgment of second instance of Zhejiang High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . Ping An Property & Casualty Insurance Company of China Ltd. Ningbo Branch et al. v. Ningbo Zhenhai Ship Repair Yard et al. (2015) Yong Hai Fa Shi Chu Zi No. 48, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ping An Property & Casualty Insurance Company of China Ltd. Ningbo Branch et al. v. Ningbo Zhenhai Ship Repair Yard et al. (2016) Zhe Min Zhong No. 477, judgment of second instance of Zhejiang High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shanghai Sanhang Benteng Construction Engineering Co., Ltd. v. Zhoushan Alpha Yacht Club Development Co., Ltd. (2013) Yong Hai Fa Shang Chu Zi No. 306, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

..

67

..

93

. . 315

. . 333

. . 997

. . 1010

. . 1213

xxviii

Table of Cases by Jurisdiction (Which Chinese Court Makes the Effective Judgment)

Shanghai Sanhang Benteng Construction Engineering Co., Ltd. v. Zhoushan Alpha Yacht Club Development Co., Ltd. (2016) Zhe Min Zhong No. 149, judgment of second instance of Zhejiang High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shanghai Tongshun Transportation Co., Ltd. v. Zhoushan City Dongjing Shipping Co., Ltd. et al. (2015) Yong Hai Fa Shi Chong Zi No. 1, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . . . Shanghai Tongshun Transportation Co., Ltd. v. Zhoushan City Dongjing Shipping Co., Ltd. et al. (2016) Zhe Min Zhong No. 561, judgment of second instance of Zhejiang High People’s Court . . . . . . . . . . . . . . . . . . . Shaoxing County Jinsidun Knitting Co., Ltd. v. Mitsui O.S.K. Lines, Ltd. (2014) Yong Hai Fa Shang Chu Zi No. 730, judgment of first instance of Ningbo Maritime Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shaoxing County Jinsidun Knitting Co., Ltd. v. Mitsui O.S.K. Lines, Ltd. (2016) Zhe Min Zhong No. 480, judgment of second instance of Zhejiang High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TIAN Jiqian v. Wuhu Hengpeng Shipping, LLC. et al. (2015) Yong Hai Fa Shi Chu Zi No. 99, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TIAN Jiqian v. Wuhu Hengpeng Shipping, LLC. et al. (2016) Zhe Min Zhong No. 478, judgment of second instance of Zhejiang High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Zhoushan Sea Salvage Engineering Co., Ltd. v. Sichuan Highway Bridge Construction Group Co., Ltd. (2016) Zhe 72 Min Chu No. 164, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . Zhoushan Sea Salvage Engineering Co., Ltd. v. Sichuan Highway Bridge Construction Group Co., Ltd. (2016) Zhe Min Zhong No. 609, judgment of second instance of Zhejiang High People’s Court . . . . . . . . . . . . . . . .

. . 1226

. . 1255

. . 1267

. . 1283

. . 1294

. . 1303

. . 1323

. . 1475

. . 1490

Guangxi Zhuang Autonomous Region High People’s Court PICC Property and Casualty Company Limited Tianjin Branch v. Guangxi Hong Chen Investment Co., Ltd. et al. (2015) Hai Shang Chu Zi No. 216, judgment of first instance of Beihai Maritime Court . . . . . . . . . . . . . . . . . . . 871 PICC Property and Casualty Company Limited Tianjin Branch v. Guangxi Hong Chen Investment Co., Ltd. et al. (2016) Gui Min Zhong No. 69, judgment of second instance of Guangxi Zhuang Autonomous Region High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 885 Effective Judgments Made by Petition Court The Supreme People’s Court Hehai Technology Engineering Group Co., Ltd. v. Xianghai Heavy Industry Group Co., Ltd. (2015) Hu Hai Fa Shang Chu Zi No. 3274, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . 277

Table of Cases by Jurisdiction (Which Chinese Court Makes the Effective Judgment)

Hehai Technology Engineering Group Co., Ltd. v. Xianghai Heavy Industry Group Co., Ltd. (2016) Hu Min Zhong No. 351, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . Hehai Technology Engineering Group Co., Ltd. v. Xianghai Heavy Industry Group Co., Ltd. (2017) Zui Gao Fa Min Shen No. 2231, ruling of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . . Huarong Financial Leasing Company Limited v. China Construction Bank Zhoushan Dinghai Sub-branch (2015) Yong Hai Fa Shang Chu Zi No. 996, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . . . Huarong Financial Leasing Company Limited v. China Construction Bank Zhoushan Dinghai Sub-branch (2016) Zhe Min Zhong No. 357, judgment of second instance of Zhejiang High People’s Court . . . . . . . . . . . . . . . . Huarong Financial Leasing Company Limited v. China Construction Bank Zhoushan Dinghai Sub-branch (2017) Zui Gao Fa Min Shen No. 2014, ruling of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . . Joho Trading Corporation v. New Unite (HK) Marine Shipping Co., Ltd. (2012) Qing Hai Fa Hai Shang Chu Zi No. 958, judgment of first instance of Qingdao Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Joho Trading Corporation v. New Unite (HK) Marine Shipping Co., Ltd. (2014) Lu Min Si Zhong Zi No. 106, judgment of second instance of Shandong High People’s Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Joho Trading Corporation v. New Unite (HK) Marine Shipping Co., Ltd. (2016) Zui Gao Fa Min Zai No. 17, judgment of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . MAO Xuebo v. CHEN Wei et al. (2014) Hu Hai Fa Hai Chu Zi No. 85, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . MAO Xuebo v. CHEN Wei et al. (2016) Hu Min Zhong Zi No. 24, judgment of second instance of Shanghai High People’s Court . . . . . . . . MAO Xuebo v. CHEN Wei et al. (2016) Zui Gao Fa Min Shen No. 1487, ruling of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . . Nanhai Rescue Bureau of the Ministry of Transport v. Archangelos Investments E.N.E et al. (2012) Guang Hai Fa Chu Zi No. 898, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . Nanhai Rescue Bureau of the Ministry of Transport v. Archangelos Investments E.N.E et al. (2014) Yue Gao Fa Min Si Zhong Zi No. 117, judgment of second instance of Guangdong High People’s Court . . . . . . Nanhai Rescue Bureau of the Ministry of Transport v. Archangelos Investments E.N.E et al. (2016) Zui Gao Fa Min Zai No. 61, judgment of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . Ping An Property & Casualty Insurance Company of China Ltd. Shanghai Hongkou Branch v. CLC Shipchartering-VI Co., Ltd. et al. (2012) Hu Hai Fa Shang Chu Zi No. 265, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

xxix

. . 289

. . 303

. . 349

. . 375

. . 393

. . 513

. . 527

. . 540 . . 595 . . 626 . . 639

. . 665

. . 683

. . 710

. . 943

xxx

Table of Cases by Jurisdiction (Which Chinese Court Makes the Effective Judgment)

Ping An Property & Casualty Insurance Company of China Ltd. Shanghai Hongkou Branch v. CLC Shipchartering-VI Co., Ltd. et al. (2013) Hu Gao Min Si (Hai) Zhong Zi No. 105, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ping An Property & Casualty Insurance Company of China Ltd. Shanghai Hongkou Branch v. CLC Shipchartering-VI Co., Ltd. et al. (2016) Zui Gao Fa Min Zai No. 18, judgment of retrial of The Supreme People’s Court . QU Rongmo v. China Continent Insurance Co., Ltd. Weihai Center Branch et al. (2012) Qing Hai Fa Hai Shang Chu Zi No. 240, judgment of first instance of Qingdao Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . QU Rongmo v. China Continent Insurance Co., Ltd. Weihai Center Branch et al. (2016) Lu Min Zhong No. 1542, judgment of second instance of Shandong High People’s Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . QU Rongmo v. China Continent Insurance Co., Ltd. Weihai Center Branch et al. (2017) Zui Gao Fa Min Zai No. 413, judgment of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rongcheng Xixiakou Ship Industry Co., Ltd. v. Wartsila Engine (Shanghai) Co., Ltd. et al. (2011) Qing Hai Fa Hai Shang Chu Zi No. 271, judgment of first instance of Qingdao Maritime Court . . . . . . . . . . . . . . . Rongcheng Xixiakou Ship Industry Co., Ltd. v. Wartsila Engine (Shanghai) Co., Ltd. et al. (2013) Lu Min Si Zhong Zi No. 87, judgment of second instance of Shandong High People’s Court . . . . . . . . . . . . . . . . Rongcheng Xixiakou Ship Industry Co., Ltd. v. Wartsila Engine (Shanghai) Co., Ltd. et al. (2016) Zui Gao Fa Min Zai No. 15, judgment of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . Yangpu Fuhai Shipping Co., Ltd. v. China United Property Insurance Company Limited Tangshan Central Branch (2016) Jin 72 Min Chu No. 653, judgment of first instance of Tianjin Maritime Court . . . . . . . . . Yangpu Fuhai Shipping Co., Ltd. v. China United Property Insurance Company Limited Tangshan Central Branch (2016) Jin Min Zhong No. 420, judgment of second instance of Tianjin High People’s Court . . . Yangpu Fuhai Shipping Co., Ltd. v. China United Property Insurance Company Limited Tangshan Central Branch (2017) Zui Gao Fa Min Shen No. 2477, ruling of retrial of The Supreme People’s Court . . . . . . . . . . . ZHOU Endian v. Fishery Administration and Fishing Port Supervision and Management Center of Yangpu Economic Development Zone (2015) Qiong Hai Fa Xing Chu Zi No. 14, judgment of first instance of Haikou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ZHOU Endian v. Fishery Administration and Fishing Port Supervision and Management Center of Yangpu Economic Development Zone (2016) Qiong Xing Zhong No. 235, judgment of second instance of Hainan High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . 962

. . 982

. . 1047

. . 1071

. . 1089

. . 1113

. . 1131

. . 1157

. . 1353

. . 1360

. . 1367

. . 1411

. . 1421

Table of Cases by Jurisdiction (Which Chinese Court Makes the Effective Judgment)

ZHOU Endian v. Fishery Administration and Fishing Port Supervision and Management Center of Yangpu Economic Development Zone (2017) Zui Gao Fa Xing Zai No. 70, ruling of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Zhoushan Baolong Shipping Co., Ltd. v. Tangshan Hongtai Freight Forwarding Co., Ltd. (2015) Jin Hai Fa Shang Chu Zi No. 80-85, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . Zhoushan Baolong Shipping Co., Ltd. v. Tangshan Hongtai Freight Forwarding Co., Ltd. (2015) Jin Gao Min Si Zhong Zi No. 123-128, judgment of second instance of Tianjin High People’s Court . . . . . . . . . . Zhoushan Baolong Shipping Co., Ltd. v. Tangshan Hongtai Freight Forwarding Co., Ltd. (2016) Zui Gao Fa Min Shen No. 1485, ruling of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . .

xxxi

. . 1432

. . 1445

. . 1460

. . 1471

Table of Cases by Cause of Action for Maritime Cases in the People’s Republic of China

193. Dispute over liability for ship collision damage Anhui Changhui Transportation and Trade Company v. Maritime Safety Administration Xuwen (2015) Guang Hai Fa Xing Chu Zi No. 4, judgment of first instance of Guangzhou Maritime Court. . . . . . . . . . . . . . Anhui Changhui Transportation and Trade Company v. Maritime Safety Administration Xuwen (2015) Yue Gao Fa Xing Zhong Zi No. 551, judgment of second instance of Guangdong High People’s Court . . . . . . MAO Xuebo v. CHEN Wei et al. (2014) Hu Hai Fa Hai Chu Zi No. 85, judgment of first instance of Shanghai Maritime Court. . . . . . . . . . . . . . . MAO Xuebo v. CHEN Wei et al. (2016) Hu Min Zhong Zi No. 24, judgment of second instance of Shanghai High People’s Court . . . . . . . . MAO Xuebo v. CHEN Wei et al. (2016) Zui Gao Fa Min Shen No. 1487, ruling of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . . Nanjing Hengye Tanker Co., Ltd. v. Sansha Jiangpeng Shipping Development Co., Ltd. (2015) Qiong Hai Fa Chu Zi No. 289, judgment of first instance of Haikou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . .

..

1

..

13

. . 595 . . 626 . . 639

. . 731

195. Dispute over liability for damage to facility in the air or under water Zhenjiang City Water Company v. KDB Capital Co., Ltd. (2012) Wu Hai Fa Shi Zi No. 00019, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1371 Zhenjiang City Water Company v. KDB Capital Co., Ltd. (2015) E Min Si Zhong Zi No. 00060, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1394

xxxiii

xxxiv

Table of Cases by Cause of Action for Maritime …

196. Dispute over liability for damage of ship pollution Ping An Property & Casualty Insurance Company of China Ltd. Ningbo Branch et al. v. Ningbo Zhenhai Ship Repair Yard et al. (2015) Yong Hai Fa Shi Chu Zi No. 48, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 997 Ping An Property & Casualty Insurance Company of China Ltd. Ningbo Branch et al. v. Ningbo Zhenhai Ship Repair Yard et al. (2016) Zhe Min Zhong No. 477, judgment of second instance of Zhejiang High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1010 197. Dispute over liability for marine pollution damage on the sea or sea-connected waters LUAN Shuhai et al. v. Conoco Phillips China Inc. et al. (2012) Jin Hai Fa Shi Chu Zi No. 1, judgment of first instance of Tianjin Maritime Court . . . . 559 LUAN Shuhai et al. v. Conoco Phillips China Inc. et al. (2016) Jin Min Zhong No. 69, judgment of second instance of Tianjin High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 575 199. Dispute over liability for damage to property on the sea or sea-connected waters Jiangxi Group Co., Ltd. for the Import & Export of Rare-Earth Metal Tungsten Industry v. RCL Feeder Pte. Ltd. et al. (2009) Guang Hai Fa Chu Zi No. 493, judgment of first instance of Guangzhou Maritime Court . . . Jiangxi Group Co., Ltd. for the Import & Export of Rare-Earth Metal Tungsten Industry v. RCL Feeder Pte. Ltd. et al. (2016) Yue Min Zai No. 69, judgment of second instance of Guangdong High People’s Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shanghai Tongshun Transportation Co., Ltd. v. Zhoushan City Dongjing Shipping Co., Ltd. et al. (2015) Yong Hai Fa Shi Chong Zi No. 1, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . . . Shanghai Tongshun Transportation Co., Ltd. v. Zhoushan City Dongjing Shipping Co., Ltd. et al. (2016) Zhe Min Zhong No. 561, judgment of second instance of Zhejiang High People’s Court . . . . . . . . .

. . 457

. . 478

. . 1255

. . 1267

200. Dispute over liability for personal injury at sea TIAN Jiqian v. Wuhu Hengpeng Shipping, LLC. et al. (2015) Yong Hai Fa Shi Chu Zi No. 99, judgment of first instance of Ningbo Maritime Court. . . 1303 TIAN Jiqian v. Wuhu Hengpeng Shipping, LLC. et al. (2016) Zhe Min Zhong No. 478, judgment of second instance of Zhejiang High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1323 XU Guoxiang v. Guangxi Fangchenggang City Tai Sheng Shipping Co., Ltd. et al. (2016) Gui 72 Min Chu No. 33, judgment of first instance of Beihai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1337

Table of Cases by Cause of Action for Maritime …

xxxv

201. Dispute over illegal lien on ship, cargoes carried by ship, bunkers and stores of ship Ningbo Zhenhai Ming Ding Metal Materials Co., Ltd. v. Feng Yuan Shipping Co., Ltd. et al. (2014) Yong Hai Fa Shang Chu Zi No. 436, judgment of first instance of Ningbo Maritime Court. . . . . . . . . . . . . . . . . . . 861 202. Dispute over contract of carriage of goods by sea or sea-connected waters China Pacific Property Insurance Co., Ltd. Shipping Insurance Operation Center v. NYK Bulk Carrier (Korea) Co., Ltd. (2013) Hai Shang Chu Zi No. 129, judgment of first instance of Beihai Maritime Court . . . . . . . . . . Hin-pro International Logistics Limited v. Chile South American Steamship Co., Ltd. (2013) Yong Hai Fa Shang Chu Zi No. 513, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . Hin-pro International Logistics Limited v. Chile South American Steamship Co., Ltd. (2015) Zhe Hai Zhong Zi No. 13, judgment of second instance of Zhejiang High People’s Court... . . . . . . . . . . . . . . . . . . . . . . . Hubei Branch of China Pacific Property Insurance Co., Ltd. v. SIPG Yangtze River Logistics Co., Ltd. (2014) Wu Hai Fa Shang Zi No. 00906, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . . . Hubei Branch of China Pacific Property Insurance Co., Ltd. v. SIPG Yangtze River Logistics Co., Ltd. (2014) E Min Si Zhong Zi No. 00075, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . Joho Trading Corporation v. New Unite (HK) Marine Shipping Co., Ltd. (2012) Qing Hai Fa Hai Shang Chu Zi No. 958, judgment of first instance of Qingdao Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Joho Trading Corporation v. New Unite (HK) Marine Shipping Co., Ltd. (2014) Lu Min Si Zhong Zi No. 106, judgment of second instance of Shandong High People’s Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Joho Trading Corporation v. New Unite (HK) Marine Shipping Co., Ltd. (2016) Zui Gao Fa Min Zai No. 17, judgment of retrial of The Supreme People’s Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Millennium Logistics (Shenzhen) Ltd. v. Ningbo Hetai Import & Export Co., Ltd. (2016) Zhe 72 Min Chu No. 670, judgment of first instance of Ningbo Maritime Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PICC Property and Casualty Company Limited Tianjin Branch v. Guangxi Hong Chen Investment Co., Ltd. et al. (2015) Hai Shang Chu Zi No. 216, judgment of first instance of Beihai Maritime Court. . . . . . . . . . . . . . . . . . PICC Property and Casualty Company Limited Tianjin Branch v. Guangxi Hong Chen Investment Co., Ltd. et al. (2016) Gui Min Zhong No. 69, judgment of second instance of Guangxi Zhuang Autonomous Region High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . 123

. . 315

. . 333

. . 397

. . 407

. . 513

. . 527

. . 540

. . 647

. . 871

. . 885

xxxvi

Table of Cases by Cause of Action for Maritime …

Ping An Casualty & Property Insurance Company of China Ltd. Shanghai Hongkou Branch v. CLC Shipchartering-VI Co., Ltd. et al. (2012) Hu Hai Fa Shang Chu Zi No. 265, judgment of first instance of Shanghai Maritime Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ping An Casualty & Property Insurance Company of China Ltd. Shanghai Hongkou Branch v. CLC Shipchartering-VI Co., Ltd. et al. (2013) Hu Gao Min Si (Hai) Zhong Zi No. 105, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ping An Casualty & Property Insurance Company of China Ltd. Shanghai Hongkou Branch v. CLC Shipchartering-VI Co., Ltd. et al. (2016) Zui Gao Fa Min Zai No. 18, judgment of retrial of The Supreme People’s Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shanghai Changying Industry Co., Ltd. v. Pacific International Lines (Pte) Ltd. (2014) Hu Hai Fa Shang Chu Zi No. 1159, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shaoxing County Jinsidun Knitting Co., Ltd. v. Mitsui O.S.K. Lines, Ltd. (2014) Yong Hai Fa Shang Chu Zi No. 730, judgment of first instance of Ningbo Maritime Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shaoxing County Jinsidun Knitting Co., Ltd. v. Mitsui O.S.K. Lines, Ltd. (2016) Zhe Min Zhong No. 480, judgment of second instance of Zhejiang High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . 943

. . 962

. . 982

. . 1183

. . 1283

. . 1294

207. Dispute over shipbuilding contract Dalian Beiyuan Ship Outfitting Engineering Co., Ltd. v. Liaoning Dongbao Group Ship Manufacturing Co., Ltd. (2015) Da Hai Shang Chu Zi No. 00662, judgment of first instance of Dalian Maritime Court.. . . . . Jiangsu Shuntian Marine Development Co., Ltd. v. Nanjing Yhao Shipbuilding Co., Ltd. (2013) Wu Hai Fa Shang Zi No. 00414, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . Jiangsu Shuntian Marine Development Co., Ltd. v. Nanjing Yhao Shipbuilding Co., Ltd. (2015) E Min Si Zhong Zi No. 00067, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . Qinhuangdao Jinhai Real Estate Development Co., Ltd. v. Zhuhai Sun Bird Yacht Manufacturing Co., Ltd. (2015) Jin Hai Fa Shang Chu Zi No. 930, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . .

. . 179

. . 419

. . 435

. . 1039

211. Dispute over ship mortgage contract ZHOU Endian v. Fishery Administration and Fishing Port Supervision and Management Center of Yangpu Economic Development Zone (2015) Qiong Hai Fa Xing Chu Zi No. 14, judgment of first instance of Haikou Maritime Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1411

Table of Cases by Cause of Action for Maritime …

xxxvii

ZHOU Endian v. Fishery Administration and Fishing Port Supervision and Management Center of Yangpu Economic Development Zone (2016) Qiong Xing Zhong No. 235, judgment of second instance of Hainan High People’s Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1421 ZHOU Endian v. Fishery Administration and Fishing Port Supervision and Management Center of Yangpu Economic Development Zone (2017) Zui Gao Fa Xing Zai No. 70, ruling of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1432 212. Dispute over voyage charter party Zhoushan Baolong Shipping Co., Ltd. v. Tangshan Hongtai Freight Forwarding Co., Ltd. (2015) Jin Hai Fa Shang Chu Zi No. 80-85, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . . . 1445 Zhoushan Baolong Shipping Co., Ltd. v. Tangshan Hongtai Freight Forwarding Co., Ltd. (2015) Jin Gao Min Si Zhong Zi No. 123-128, judgment of second instance of Tianjin High People’s Court.. . . . . . . . . . . . 1460 Zhoushan Baolong Shipping Co., Ltd. v. Tangshan Hongtai Freight Forwarding Co., Ltd. (2016) Zui Gao Fa Min Shen No. 1485, ruling of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . . . . 1471 213. Dispute over charter party Heilongjiang Sanjiang Foreign Shipping Agency Co., Ltd. v. Fuyuan Port Authority (2015) Da Hai Fa Shang Chu Zi No. 367, judgment of first instance of Dalian Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307 213.(1) Dispute over time charter party Nanning City Gongli Steel Tubes Manufacturing Co., Ltd. v. Beihai Jun Hui Sand & Stone Co., Ltd. et al. (2015) Hai Shang Chu Zi No. 342, judgment of first instance of Beihai Maritime Court. . . . . . . . . . . . . . . . . . . . 767 Zhoushan Sea Salvage Engineering Co., Ltd. v. Sichuan Highway Bridge Construction Group Co., Ltd. (2016) Zhe 72 Min Chu No. 164, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . . . . . 1475 Zhoushan Sea Salvage Engineering Co., Ltd. v. Sichuan Highway Bridge Construction Group Co., Ltd. (2016) Zhe Min Zhong No. 609, judgment of second instance of Zhejiang High People’s Court. . . . . . . . . . . 1490 213.(2) Dispute over baseboat charter party Chongqing Wanzhou Yangjiang Shipping Co., Ltd. et al. v. Chongqing Sanyi Logistics Co., Ltd. (2015) Wu Hai Fa Shang Zi No. 01209, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . . . . . 157 Chongqing Wanzhou Yangjiang Shipping Co., Ltd. et al. v. Chongqing Sanyi Logistics Co., Ltd. (2016) E Min Zhong No. 1014, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . . . . . . . . . . . 167

xxxviii

Table of Cases by Cause of Action for Maritime …

221. Dispute over contract on custody of cargo in port Fangchenggang Beibu Gulf Port Service Co., Ltd. v. Xinbao Resources Co., Ltd. et al. (2015) Hai Shang Chu Zi No. 218, judgment of first instance of Beihai Maritime Court.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197 Ningbo Arts and Crafts Import & Export Co., Ltd. v. Shanghai Wan Shi Hong Logistics Warehousing Co., Ltd. et al. (2014) Hu Hai Fa Shang Chu Zi No. 57, judgment of first instance of Shanghai Maritime Court . . . . . . . . 805 Ningbo Arts and Crafts Import & Export Co., Ltd. v. Shanghai Wan Shi Hong Logistics Warehousing Co., Ltd. et al. (2015) Hu Gao Min Si (Hai) Zhong Zi No. 98, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 836 223. Dispute over freight forwarding contract on the sea or sea-connected waters China Transport Groupage International Limited v. Foshan Jehong Logistics Co., Ltd. (2014) Guang Hai Fa Chu Zi No. 505, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . China Transport Groupage International Limited v. Foshan Jehong Logistics Co., Ltd. (2015) Yue Gao Fa Min Si Zhong Zi No. 14, judgment of second instance of Guangdong High People’s Court . . . . . . China Transport Groupage International Limited (Shenzhen) v. Guangzhou Index Shipping Ltd. (2014) Guang Hai Fa Chu Zi No. 28, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . China Transport Groupage International Limited (Shenzhen) v. Guangzhou Index Shipping Ltd. (2015) Yue Gao Fa Min Si Zhong Zi No. 39, judgment of second instance of Guangdong High People’s Court . . . . . . Hangzhou Hangsi Garment In & Export Co., Ltd. v. Meiji (China) Transportation and Logistics Co., Ltd. (2014) Hu Hai Fa Shang Chu Zi No. 1534, judgment of first instance of Shanghai Maritime Court. . . . . . . Hangzhou Hangsi Garment In & Export Co., Ltd. v. Meiji (China) Transportation and Logistics Co., Ltd. (2015) Hu Gao Min Si (Hai) Zhong Zi No. 87, judgment of second instance of Shanghai High People’s Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

..

23

..

32

..

45

..

52

. . 255

. . 267

227. Dispute over salvage contract Nanhai Rescue Bureau of the Ministry of Transport v. Archangelos Investments E.N.E et al. (2012) Guang Hai Fa Chu Zi No. 898, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . 665 Nanhai Rescue Bureau of the Ministry of Transport v. Archangelos Investments E.N.E et al. (2014) Yue Gao Fa Min Si Zhong Zi No. 117, judgment of second instance of Guangdong High People’s Court . . . . . . . . 683

Table of Cases by Cause of Action for Maritime …

xxxix

Nanhai Rescue Bureau of the Ministry of Transport v. Archangelos Investments E.N.E et al. (2016) Zui Gao Fa Min Zai No. 61, judgment of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . 710 230. Dispute over marine insurance contract on the sea or sea-connected waters Chenzhou Shipping Group Co., Ltd. v. People’s Insurance Company of China Co., Ltd. Guangdong Branch (2014) Yong Hai Fa Shang Chu Zi No. 318, judgment of first instance of Ningbo Maritime Court . . . . . . . . . Chenzhou Shipping Group Co., Ltd. v. People’s Insurance Company of China Co., Ltd. Guangdong Branch (2015) Zhe Hai Zhong Zi No. 240, judgment of second instance of Zhejiang High People’s Court . . . . . . . . . LI Jiezhao v. Hainan Province Fishery Mutual Insurance Association et al. (2016) Qiong 72 Min Chu No. 289, judgment of first instance of Haikou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nantong City Fang Zhou Shipping Agency Co., Ltd. v. China People’s Property Insurance Co., Ltd. Nantong City Branch (2016) E 72 Min Chu No. 115, judgment of first instance of Wuhan Maritime Court. . . . . . . . . . Nantong City Fang Zhou Shipping Agency Co., Ltd. v. China People’s Property Insurance Co., Ltd. Nantong City Branch (2016) E Min Zhong No. 1214, judgment of second instance of Hubei High People’s Court. . . QU Rongmo v. China Continent Insurance Co., Ltd. Weihai Center Branch et al. (2012) Qing Hai Fa Hai Shang Chu Zi No. 240, judgment of first instance of Qingdao Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . QU Rongmo v. China Continent Insurance Co., Ltd. Weihai Center Branch et al. (2016) Lu Min Zhong No. 1542, judgment of second instance of Shandong High People’s Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . QU Rongmo v. China Continent Insurance Co., Ltd. Weihai Center Branch et al. (2017) Zui Gao Fa Min Zai No. 413, judgment of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yangpu Fuhai Shipping Co., Ltd. v. China United Property Insurance Company Limited Tangshan Central Branch (2016) Jin 72 Min Chu No. 653, judgment of first instance of Tianjin Maritime Court . . . . . . . . . Yangpu Fuhai Shipping Co., Ltd. v. China United Property Insurance Company Limited Tangshan Central Branch (2016) Jin Min Zhong No. 420, judgment of second instance of Tianjin High People’s Court . . . Yangpu Fuhai Shipping Co., Ltd. v. China United Property Insurance Company Limited Tangshan Central Branch (2017) Zui Gao Fa Min Shen No. 2477, ruling of retrial of The Supreme People’s Court . . . . . . . . . . .

..

67

..

93

. . 553

. . 785

. . 794

. . 1047

. . 1071

. . 1089

. . 1353

. . 1360

. . 1367

xl

Table of Cases by Cause of Action for Maritime …

231. Dispute over contract for protection and indemnity insurance on the sea or sea-connected waters Nanjing Boyang Shipping Co., Ltd. v. PICC Property and Casualty Company Limited Dalian Branch (2015) Wu Hai Fa Shang Zi No. 00041, judgment of first instance of Wuhan Maritime Court. . . . . . . . . . . . . . . . . Nanjing Boyang Shipping Co., Ltd. v. PICC Property and Casualty Company Limited Dalian Branch (2015) E Min Si Zhong Zi No. 00178, judgment of second instance of Hubei High People’s Court.. . . . . . . . . . . PICC Property and Casualty Company Limited Xingshan Branch v. Ping An Property & Casualty Insurance Company of China Ltd. Anqing Center Branch (2014) Wu Hai Fa Shang Zi No. 00112, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PICC Property and Casualty Company Limited Xingshan Branch v. Ping An Property & Casualty Insurance Company of China Ltd. Anqing Center Branch (2015) E Min Si Zhong Zi No. 00084, judgment of second instance of Hubei High People’s Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . 747

. . 755

. . 903

. . 919

234. Dispute over maritime security contract Foreign Economic and Technical Cooperation Co., Ltd. of China Changjiang National Shipping Group et al. v. China Construction Bank Co., Ltd. Qindao Zhongshan Road Sub-branch (2013) Qing Hai Fa Shang Chu Zi No. 945, judgment of first instance of Qingdao Maritime Court . . . . 229 Foreign Economic and Technical Cooperation Co., Ltd. of China Changjiang National Shipping Group et al. v. China Construction Bank Co., Ltd. Qindao Zhongshan Road Sub-branch (2014) Lu Min Si Zhong Zi No. 148, judgment of second instance of Shandong High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243 236. Dispute over contract for construction of dock or harbor Hehai Technology Engineering Group Co., Ltd. v. Xianghai Heavy Industry Group Co., Ltd. (2015) Hu Hai Fa Shang Chu Zi No. 3274, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . Hehai Technology Engineering Group Co., Ltd. v. Xianghai Heavy Industry Group Co., Ltd. (2016) Hu Min Zhong No. 351, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . Hehai Technology Engineering Group Co., Ltd. v. Xianghai Heavy Industry Group Co., Ltd. (2017) Zui Gao Fa Min Shen No. 2231, ruling of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . . Qinhuangdao Bohai Shipping Matters Engineering Co., Ltd. v. Pai A Qinhuangdao Tourism Culture Management Co., Ltd. (2016) Jin 72 Min Chu No. 399, judgment of first instance of Tianjin Maritime Court . . . . .

. . 277

. . 289

. . 303

. . 1031

Table of Cases by Cause of Action for Maritime …

xli

Shanghai Sanhang Benteng Construction Engineering Co., Ltd. v. Zhoushan Alpha Yacht Club Development Co., Ltd. (2013) Yong Hai Fa Shang Chu Zi No. 306, judgment of first instance of Ningbo Maritime Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1213 Shanghai Sanhang Benteng Construction Engineering Co., Ltd. v. Zhoushan Alpha Yacht Club Development Co., Ltd. (2016) Zhe Min Zhong No. 149, judgment of second instance of Zhejiang High People’s Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1226 238. Dispute over maritime security Fairwind International Shipping Co., Ltd. v. Vertex Shipping Co., Ltd. (2015) Hu Hai Fa Hai Chu Zi No. 73, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fairwind International Shipping Co., Ltd. v. Vertex Shipping Co., Ltd. (2016) Hu Min Zhong No. 168, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Huarong Financial Leasing Company Limited v. China Construction Bank Zhoushan Dinghai Sub-branch (2015) Yong Hai Fa Shang Chu Zi No. 996, judgment of first instance of Ningbo Maritime Court. . . . . . . . . . . . . . . . . Huarong Financial Leasing Company Limited v. China Construction Bank Zhoushan Dinghai Sub-branch (2016) Zhe Min Zhong No. 357, judgment of second instance of Zhejiang High People’s Court. . . . . . . . . . . . . . . . . Huarong Financial Leasing Company Limited v. China Construction Bank Zhoushan Dinghai Sub-branch (2017) Zui Gao Fa Min Shen No. 2014, ruling of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . .

. . 211

. . 220

. . 349

. . 375

. . 393

242. Dispute over general average Shanghai Kairun Shipping Co., Ltd. et al. v. Dalian Guorun Shipping Agency Co., Ltd. et al. (2014) Hu Hai Fa Shang Chu Zi No. 753, judgment of first instance of Shanghai Maritime Court. . . . . . . . . . . . . . . . . . . . . . . . . 1193 Shanghai Kairun Shipping Co., Ltd. et al. v. Dalian Guorun Shipping Agency Co., Ltd. et al. (2016) Hu Min Zhong No. 38, judgment of second instance of Shanghai High People’s Court. . . . . . . . . . . . . . . . . . . . . . . . . . . 1202 246. Dispute over maritime fraud Rongcheng Xixiakou Ship Industry Co., Ltd. v. Wartsila Engine (Shanghai) Co., Ltd. et al. (2011) Qing Hai Fa Hai Shang Chu Zi No. 271, judgment of first instance of Qingdao Maritime Court . . . . . . . . . . . . . . . . . 1113 Rongcheng Xixiakou Ship Industry Co., Ltd. v. Wartsila Engine (Shanghai) Co., Ltd. et al. (2013) Lu Min Si Zhong Zi No. 87, judgment of second instance of Shandong High People’s Court . . . . . . . . . . 1131 Rongcheng Xixiakou Ship Industry Co., Ltd. v. Wartsila Engine (Shanghai) Co., Ltd. et al. (2016) Zui Gao Fa Min Zai No. 15, judgment of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . 1157

List of Maritime Courts and Their Appeal and Petition Courts in the People’s Republic of China

Maritime Courts

Appeal Courts

Petition Court

Shanghai Maritime Court http://shhsfy.gov.cn/hsfyytwx/hsfyytwx/

Shanghai High People’s Court http://www.hshfy.sh.cn/

Tianjin Maritime Court http://tjhsfy.chinacourt.gov.cn/index.html

Tianjin High People’s Court http://tjfy.chinacourt.gov.cn/ index.shtml

The Supreme People’s Court of the People’s Republic of China http://www.court.gov.cn/

Qingdao Maritime Court http://qdhsfy.sdcourt.gov.cn/qdhsfy/sjb/ index.html

Shandong High People’s Court http://sdcourt.gov.cn/

Dalian Maritime Court http://www.dlhsfy.gov.cn/court/

Liaoning High People’s Court http://lnfy.chinacourt.gov. cn/index.shtml

Guangzhou Maritime Court http://www.gzhsfy.gov.cn/

Guangdong High People’s Court http://www.gdcourts.gov.cn/

Wuhan Maritime Court http://whhsfy.hbfy.gov.cn/

Hubei High People’s Court http://www.hbfy.gov.cn/

Haikou Maritime Court http://www.hkhsfy.gov.cn/

Hainan High People’s Court http://www.hicourt.gov.cn/

Xiamen Maritime Court http://www.xmhsfy.gov.cn/

Fujian High People’s Court http://www.fjcourt.gov.cn/

Ningbo Maritime Court https://www.nbhsfy.cn/court/index.html

Zhejiang High People’s Court http://www.zjsfgkw.cn/

Beihai Maritime Court http://www.bhhsfy.gov.cn/platformData/ infoplat/pub/bhhs_32/shouye_1003/ index.html

Guangxi Zhuang Autonomous Region High People’s Court http://www.gxcourt.gov.cn/

Nanjing Maritime Court www.njhsfy.gov.cn/

Jiangsu High People’s Court http://www.jsfy.gov.cn/

xliii

List of Causes of Action for Maritime Cases in the People’s Republic of China (extracted from the Regulations on Causes of Action for Civil Disputes made by the Supreme People’s Court of the People’s Republic of China 2020)

Part 6 Ownership Dispute 49. Dispute over return of property buried underground Part 7 Usufruct Dispute 55. Dispute over exploration right Part 8 Mortgage Dispute 67. Dispute over mortgage (8) Dispute over mortgage of movables (9) Dispute over mortgage of vessels and aircrafts under manufacture (10) Dispute over floating charge of movables (11) Dispute over right of mortgage of ceiling amount 68. Dispute over right of pledge (1) Dispute over right of pledge of movables (2) Dispute over right of re-pledge (3) Dispute over right of pledge of ceiling amount (7) Dispute over right of pledge of warehouse receipts (8) Dispute over right of pledge of bills of lading (9) Dispute over right of pledge of equity interest (12) Dispute over right of pledge of receivables 69. Dispute over right of lien Part 10 Contract Dispute 74. Dispute over liability for fault in contracting 76. Dispute over confirming the validity of contract (1) Dispute over confirming the validity of contract (2) Dispute over confirming the invalidity of contract 77. Dispute over contract for assignment of creditor’s rights 103. Dispute over contract of loan (1) Dispute over contract of financial loan 104. Dispute over contract of suretyship 106. Dispute over pledge contract 114. Dispute over contract for contracting work (1) Dispute over contract for processing

(continued)

xlv

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List of Causes of Action for Maritime …

(continued) (2) Dispute over contract for manufacturing (5) Dispute over contract for testing (6) Dispute over contract for inspecting 116. Dispute over contract for carriage (3) Dispute over contract for carriage of passengers by waterway (4) Dispute over contract for carriage of goods by waterway (10) Dispute over contract for combined transport (11) Dispute over contract for combined transport by multiple way 118. Dispute over contract of warehouse 119. Dispute over agency contract (1) Dispute over contract for agency contract for import/ export 121. Dispute over commission contract 123. Dispute over intermediary contract 143. Dispute over right of recourse Part 19 Maritime Dispute 193. Dispute over liability for ship collision damage 194. Dispute over liability for contact of vessel 195. Dispute over liability for damage to facility in the air or under water 196. Dispute over liability for damage of ship pollution 197. Dispute over liability for marine pollution damage on the sea or sea-connected waters 198. Dispute over liability for damage to breeding on the sea or sea-connected waters 199. Dispute over liability for damage to property on the sea or sea-connected waters 200. Dispute over liability for personal injury at sea 201. Dispute over illegal lien on ship, cargoes carried by ship, bunkers and stores of ship 202. Dispute over contract of carriage of goods by sea or sea-connected waters 203. Dispute over contract of carriage of passenger by sea or sea-connected waters 204. Dispute over contract of carriage of luggage by sea or sea-connected waters 205. Dispute over ship operation contract 206. Dispute over ship sales and purchases contract 207. Dispute over shipbuilding contract 208. Dispute over ship repairing contract 209. Dispute over ship rebuilding contract 210. Dispute over ship dismantling contract 211. Dispute over ship mortgage contract 212. Dispute over voyage charter party 213. Dispute over charter party (1) Dispute over time charter party (2) Dispute over bareboat charter party 214. Dispute over ship financial leasing contract 215. Dispute over undertaking contract of transporting ship on the sea or sea-connected waters 216. Dispute over undertaking contract of fishing ships 217. Dispute over contract for lease of utensils affixed to ship 218. Dispute over contract for custody of utensils affixed to ship 219. Dispute over contract on lease of shipping container 220. Dispute over contract on custody of shipping container

(continued)

List of Causes of Action for Maritime …

xlvii

(continued) 221. Dispute over contract on custody of cargo in port 222. Dispute over shipping agency contract 223. Dispute over freight forwarding contract on the sea or sea-connected waters 224. Dispute over tally contract 225. Dispute over contract for marine stores and spare parts supply 226. Dispute over contract for employment of seaman 227. Dispute over salvage contract 228. Dispute over contract on refloatation on the sea or sea-connected waters 229. Dispute over towage contract on the sea or sea-connected waters 230. Dispute over marine insurance contract on the sea or sea-connected waters 231. Dispute over contract for protection and indemnity insurance on the sea or sea-connected waters 232. Dispute over contract for joint transport on the sea or sea-connected waters 233. Dispute over ship operation loan contract 234. Dispute over maritime security contract 235. Dispute over channel and port dredging contract 236. Dispute over contract for construction of dock or harbor 237. Dispute over contract for inspection of ship 238. Dispute over maritime security 239. Dispute over liability for major transport accident on the sea or sea-connected waters 240. Dispute over liability for major accident of port operation 241. Dispute over port operation 242. Dispute over general average 243. Dispute over marine development and utilization of sea 244. Dispute over joint ownership of ship 245. Dispute over ownership of ship 246. Dispute over maritime fraud 247. Dispute over confirmation of maritime claim Part 20 Business-related Dispute 256. Dispute over contract for affiliated operation 258. Dispute over contract for joint operation Part 27 Insurance Dispute 333. Dispute over contract for property insurance (4) Dispute over contract for guarantee insurance (5) Dispute over insurer’s right of subrogation 335. Dispute over contract for reinsurance 336. Dispute over contract for insurance brokerage 337. Dispute over contract for insurance agency Part 31 Tort Liability Dispute 390. Dispute over liability for damage caused by water transport (1) Dispute over liability for personal injury caused by water transport (2) Dispute over liability for property damage caused by water transport 392. Dispute over damage caused by application for pre-litigation property preservation 393. Dispute over damage caused by application for pre-litigation evidence preservation 395. Dispute over damage caused by application for advance execution

(continued)

xlviii

List of Causes of Action for Maritime …

(continued) Part 32 Cases of Declaration of Missing and Declaration of Death 400. Application for adjudication of death of citizen 401. Application for revocation of adjudication of death of citizen Part 36 Cases of Holding Properties Unclaimed 407. Application for determining certain property as ownerless 408. Application for revocation of determination of certain property as ownerless Part 40 Cases of Procedure for Hastening 418. Application for payment orders Part 41 Cases of Procedure of Public Summons for Exhortation 419. Application for public summons for exhortation Part 45 Cases of Application for Preservation 431. Application for pre-litigation property preservation 432. Application for pre-litigation behaviors preservation 433. Application for pre-litigation evidence preservation 434. Application for pre-arbitration property preservation 435. Application for pre-arbitration behaviors preservation 436. Application for pre-arbitration evidence preservation 437. Property preservation in arbitration proceedings 438. Evidence preservation in arbitration proceedings 439. Application for suspending payment of the amount under a letter of credit 441. Application for suspending payment of the amount under a letter of guarantee Part 48 Arbitration Cases 444. Application for confirmation of effectiveness of arbitration agreements 445. Application for revocation in arbitral award Part 49 Special Maritime Procedure Cases 446. Application for reservation of maritime claims (1) Application for detention of vessels (2) Application for auction of detained vessels (3) Application for seizure of vessel cargoes (4) Application for auction of seizure vessel cargoes (5) Application for seizure of bunker oil and ship’s stores (6) Application for auction of seizure bunker oil and ship’s stores 447. Application for maritime payment orders 448. Application for maritime injunctions 449. Application for maritime evidence preservation 450. Application for establishment of a fund for limitation liability for maritime claims 451. Application for publicizing notices for assertion of maritime priority rights 452. Application for registration and repayment of maritime claims Part 50 Application for Recognition and Enforcement of Judgments and Awards Cases 453. Application for enforcement of maritime arbitral award 454. Application for enforcement of intellectual property arbitral award 455. Application for enforcement of foreign affairs arbitral award 456. Application for recognition and enforcement of civil judgment rendered by court of the Hong Kong Special Administrative Region

(continued)

List of Causes of Action for Maritime …

xlix

(continued) 457. Application for recognition and enforcement of arbitration award rendered by court of the Hong Kong Special Administrative Region 458. Application for recognition and enforcement of civil judgment rendered by court of the Macao Special Administrative Region 459. Application for recognition and enforcement of arbitration award rendered by court of the Macao Special Administrative Region 460. Application for recognition and enforcement of civil judgment rendered by court of Taiwan Special Administrative Region 461. Application for recognition and enforcement of arbitration award rendered by court of Taiwan Special Administrative Region 462. Application for recognition and enforcement of civil judgment rendered by foreign court 463. Application for recognition and enforcement of foreign arbitration award Part 54 Action of Opposition to Enforcement Cases 471. Offense against enforcement (1) Offense against enforcement by an outsider (2) Application for enforcement of objection 472. Objection over the implementation of the distribution plan

Table of References

Chinese Legislation 2015 Calculation Standards for Personal Injury Compensation Items of Road Traffic Accidents in the Guangxi Zhuang Autonomous Region General......XU Guoxiang (p. 1344, p. 1347) Administrative Litigation Law of the People’s Republic of China (or Administrative Procedure Law of the People’s Republic of China) General......Anhui Changhui (p. 17) ZHOU Endian (p. 1439, p. 1440, p. 1442) Art. 25 Para. 1......ZHOU Endian (p. 1418, p. 1423, p. 1435) Art. 46......ZHOU Endian (p. 1418) Art. 46 Para. 1......ZHOU Endian (p. 1440) Art. 48......ZHOU Endian (p. 1442) Art. 58......ZHOU Endian (p. 1419, p. 1424, p. 1436) Art. 63......ZHOU Endian (p. 1430, p. 1436) Art. 69......Anhui Changhui (p. 11, p. 17) ZHOU Endian (p. 1419, p. 1424, p. 1436) Art. 89 Para. 1 Sub-Para. 1......Anhui Changhui (p. 22) ZHOU Endian (p. 1431, p. 1437) Art. 91......ZHOU Endian (p. 1439) Anti-Unfair Competition Law of the People’s Republic of China Art. 8......Chenzhou Shipping (p. 116) Civil Procedure Law of the People’s Republic of China General......Fairwind (p. 218, p. 222, p. 224) Hangzhou Hangsi (p. 275) Hehai Technology (p. 305) MAO Xuebo (p. 637, p. 640) Nanjing Hengye (p. 744) PICC Property Tianjin (p. 874, p. 888) Shanghai Tongshun (p. 1276) Art. 23......China Transport v. Foshan Jehong (p. 29, p. 38, p. 42) China Transport (Shenzhen) v. Guangzhou Index (p. 49, p. 55) Jiangsu Shuntian (p. 420) Art. 24......Chongqing Wanzhou (p. 158) Nantong City (p. 786) Art. 25......Hin-pro International (p. 331) Art. 27......Shaoxing County (p. 1289, p. 1297) Art. 28......Ningbo Zhenhai (p. 868) Art. 29.....Jiangxi Group (p. 496) Art. 31......Nanhai Rescue (p. 676, p. 692, p. 716) (continued)

li

lii

Table of References

(continued) Art. 48......QU Rongmo (p. 1069, p. 1082, p. 1097) Art. 64......Nanhai Rescue (p. 706, p. 723) QU Rongmo (p. 1070, p. 1082, p. 1098) Art. 64 Para. 1......China Transport v. Foshan Jehong (p. 30, p. 39) China Pacific (p. 151, p. 155) Chongqing Wanzhou (p. 165, p. 174) Fangchenggang Beibu (p. 208) Fairwind International (p. 208, p. 218, p. 225) Hangzhou Hangsi (p. 264) Hehai Technology (p. 287, p. 296) Jiangxi Group (p. 477, p. 492) Joho Trading (p. 526, p. 534) LUAN Shuhai (p. 572, p. 573, p. 585, p. 587, p. 592) MAO Xuebo (p. 622, p. 635) Millennium Logistics (p. 662) Nanjing Hengye (p. 753, p. 760) Nantong City (p. 800) Ningbo Arts (p. 834, p. 854) Ningbo Zhenhai (p. 868) Ping An Shanghai (p. 958, p. 969, p. 978) Ping An Ningbo (p. 1008, p. 1021) Qinhuangdao Bohai (p. 1037) Shanghai Changying (p. 1189) Shanghai Kairun (p. 1199, p. 1207) Shanghai Sanhang (p. 1224, p. 1234) Shanghai Tongshun (p. 1265, p. 1274) Shaoxing County (p. 1291, p. 1300) XU Guoxiang (p. 1350) Yangpu Fuhai (p. 1358, p. 1365) Zhoushan Baolong (p. 1459, p. 1466) Zhoushan Sea (p. 1488, p. 1498) Art. 64 Para. 2......Rongcheng Xixiakou (p. 1172) Art. 64 Para. 4......Qinghuangdao Bohai (p. 1046) Art. 70......China Pacific (p. 137) Jiangsu Shuntian (p. 453) Art. 70 Para. 1 Sub-Para. 2......Hin-pro International (p. 346) Art. 76.....Zhoushan Sea ( p. 1502) Art. 79......QU Rongmo (p. 1085, p. 1101) Art. 100 Para. 1......Fairwind International (p. 218, p. 225, p. 585) Art. 108......Nanjing Hengye (p. 751, p. 758, p. 760) Art. 119......QU Rongmo (p. 1070, p. 1082, p. 1098) Art. 142......Chongqing Wanzhou (p. 165, p. 174) Hubei Branch (p. 406, p. 413) Jiangsu Shuntian (p. 433, p. 444) Jiangxi Group (p. 477, p. 492) Nanjing Hengye (p. 753, p. 760) Nantong City (p. 800) PICC Property Xingshan (p. 917, p. 929) Zhenjiang City (p. 1392, p. 1403) Art. 144......Fangchenggang Beibu (p. 208) Nanjing Hengye (p. 753, p. 760) Ningbo Arts (p. 834, p. 852) Ningbo Zhenhai (p. 868) Ping An Shanghai (p. 958, p. 969) Shanghai Tongshun (p. 1265, p. 1274) Art. 153.....Chenzhou Shipping (p. 89, p. 90, p. 106) Art. 169.....Nanjing Hengye (p. 756) Art. 170 Para. 1.....Jiangxi Group (p. 499, p. 511) Ping An Ningbo (p. 1030) Shanghai Kairun (p. 1211) Art. 170 Para. 1 Sub-Para. 1.....China Transport v. Foshan Jehong (p. 44) China Transport (Shenzhen) v. Guangzhou Index (p. 64) Chenzhou Shipping (p. 122) Chongqing Wanzhou (p. 178) Fairwind International (p. 226) Foreign Economic (p. 254) Hangzhou Hangsi (p. 275) Hehai Technology (p. 302) Huarong Financial (p. 392) Hubei Branch (p. 418) Jiangsu Shuntian (p. 456) LUAN Shuhai (p. 593) MAO Xuebo (p. 638) Nanjing Boyang (p. 765) Nantong City (p. 804) Ningbo Arts (p. 858) PICC Property Tianjin (p. 901) PICC Property Xingshan (p. 940) Shanghai Sanhang (p. 1253) Shanghai Tongshun (p. 1280) Shaoxing County (p. 1302) TIAN Jiqian (p. 1336) Zhoushan Baolong (p. 1470) Zhoushan Sea (p. 1503) Art. 170 Para. 1 Sub-Para. 2.....Joho Trading (p. 539) Nanhai Rescue (p. 706, p. 723, p. 728) Ping An Shanghai (p. 978, p. 996) QU Rongmo (p. 1087, p. 1103, p. 1110) Rongcheng Xixiakou (p. 1156, p. 1167, p. 1180) Yangpu Fuhai (p. 1366) Zhenjiang City (p. 1409) Art. 175.....Fairwind International (p. 226) Hangzhou Hangsi (p. 275) Hehai Technology (p. 302) MAO Xuebo (p. 638) Ningbo Arts (p. 858) Ping An Shanghai (p. 978) Shanghai Kairun (p. 1211) Art. 200.....Hehai Technology (p. 306) Huarong Financial (p. 396) Jiangxi Group (p. 499) Yangpu Fuhai (p. 1370) Zhoushan Baolong (p. 1474) Art. 200 Sub-Para. 2..... Hehai Technology (p. 305) MAO Xuebo (p. 642) Yangpu Fuhai (p. 1369) Art. 200 Sub-Para. 3.....Zhoushan Baolong (p. 1473) Art. 200 Sub-Para. 6.....MAO Xuebo (p. 642, p. 645) Yangpu Fuhai (p. 1369) (continued)

Table of References

liii

(continued) Art. 204.....Jiangxi Group (p. 499) Art. 204 Para. 1.....Hehai Technology (p. 306) Huarong Financial (p. 396) MAO Xuebo (p. 645) Yangpu Fuhai (p. 1370) Zhoushan Baolong (p. 1474) Art. 206.....Jiangxi Group (p. 499) Art. 207.....Jiangxi Group (p. 512) Art. 207 Para. 1.....Joho Trading (p. 552) Ping An Shanghai (p. 996) Rongcheng Xixiakou (p. 1180) Art. 253.....China Transport v. Foshan Jehong (p. 31, p. 39) China Transport (Shenzhen) v. Guangzhou Index (p. 51, p. 57) Chenzhou Shipping (p. 90) Chongqing Wanzhou (p. 166, p. 174) Dalian Beiyuan (p. 195) Foreign Economic (p. 241, p. 251) Hangzhou Hangsi (p. 265) Hehai Technology (p. 287) Hin-pro International (p. 338) Huarong Financial (p. 373, p. 386) Hubei Branch (p. 406, p. 414) Joho Trading (p. 526) LI Jiezhao (p. 557) LUAN Shuhai (p. 574, p. 587) MAO Xuebo (p. 622) Millennium Logistics (p. 663) Nanhai Rescue (p. 682, p. 707) Nanning City (p. 783) Ningbo Arts (p. 834) Ningbo Zhenhai (p. 868) PICC Property Xingshan (p. 917, p. 929) Ping An Shanghai (p. 958) Ping An Ningbo (p. 1008, p. 1021) Qinhuangdao Bohai (p. 1037) QU Rongmo (p. 1070, p. 1082, p. 1088, p. 1098, p. 1103, p. 1110) Rongcheng Xixiakou (p. 1130, p. 1143, p. 1156) Shanghai Changying (p. 1189) Shanghai Sanhang (p. 1224, p. 1234) Shanghai Tongshun (p. 1265, p. 1274) TIAN Jiqian (p. 1318, p. 1331) XU Guoxiang (p. 1350) Yangpu Fuhai (p. 1359, p. 1365) Zhenjiang City (p. 1392, p. 1403, p. 1409) Zhoushan Baolong (p. 1459, p. 1466) Zhoushan Sea (p. 1488, p. 1498) Art. 259.....Ningbo Zhenhai (p. 868) Shaoxing County (p. 1291, p. 1300) Contract Law of the People’s Republic of China General.....China Transport v. Foshan Jehong (p. 41) Chenzhou Shipping (p. 95) Chongqing Wanzhou (p. 162, p. 171) Fangchenggang Beibu (p. 199) Hin-pro International (p. 330, p. 338) Nanhai Rescue (p. 699, p. 725, p. 727) Nanjing Boyang (p. 749, p. 752, p. 762, p. 763, p. 764) PICC Property Xingshan (p. 914, p. 926, p. 937) QU Rongmo (p. 1069, p. 1081, p. 1097) Rongcheng Xixiakou (p. 1146, p. 1180) Shanghai Tongshun (p. 1275) Art. 5.....Fangchenggang Beibu (p. 206, p. 208) Art. 6.....Heilongjiang Sanjiang (p. 314) Zhoushan Sea (p. 1486, p. 1488, p. 1496, p. 1498) Art. 8.....Dalian Beiyuan (p. 188, p. 194) Nanhai Rescue (p. 728) Art. 26 Para. 1.....China Transport (Shenzhen) v. Guangzhou Index (p. 49) Art. 39.....Hangzhou Hangsi (p. 264) Art. 40.....Chenzhou Shipping (p. 115) Hangzhou Hangsi (p. 264) Art. 44 Para. 1.....Fangchenggang Beibu (p. 206) Art. 48.....Hubei Branch (p. 404, p. 411) Art. 49.....Ningbo Arts (p. 829, p. 847) Art. 52.....Huarong Financial (p. 387) Art. 54.....Hehai Technology (p. 285, p. 294) Nanhai Rescue (p. 702, p. 721) Art. 60.....China Pacific (p. 155) Art. 60 Para. 1.....China Pacific (p. 152) Chongqing Wanzhou (p. 165, p. 174) Hehai Technology (p. 287, p. 296) Jiangsu Shuntian (p. 433, p. 444) Shanghai Changying (p. 1189) Art. 61.....Qinhuangdao Jinhai (p. 1044, p. 1045, p. 1046) Art. 62.....Nanhai Rescue (p. 681, p. 697, p. 719) Yangpu Fuhai (p. 1369) Art. 62 Sub-Para. 3.....Qinhuangdao Jinhai (p. 1045, p. 1046) Art. 67 Para. 1.....Zhoushan Sea (p. 1487, p. 1488, p. 1497, p. 1498) Art. 69.....Zhoushan Sea (p. 1500) Art. 73.....Nanjing Boyang (p. 761, p. 762) PICC Property Xingshan (p. 917, p. 929, p. 933, p. 935) Art. 77 Para. 1.....Shanghai Sanhang (p. 1224, p. 1233) Art. 93.....Heilongjiang Sanjiang (p. 308) Art. 93 Para. 2.....Chenzhou Shipping (p. 110) Nanning City (p. 780) (continued)

liv

Table of References

(continued) Art. 94 Para. 3.....Heilongjiang Sanjiang (p. 313) Art. 94 Para. 5.....Huarong Financial (p. 372, p. 385) Art. 94 Sub-Para4.....Nanning City (p. 780) Art. 96.....Chenzhou Shipping (p. 110) Nanning City (p. 780) Art. 97.....Huarong Financial (p. 372, p. 385) Nanning City (p. 780, p. 782) Zhoushan Sea (p. 1488, p. 1488, p. 1497, p. 1498) Art. 99.....Chenzhou Shipping (p. 110) China Pacific (p. 154, p. 155) Art. 107.....China Pacific (p. 152, p. 154, p. 155) Chongqing Wanzhou (p. 165, p. 174) Dalian Beiyuan (p. 193, p. 194) Fangchenggang Beibu (p. 207, p. 208) Hangzhou Hangsi (p. 264) Nanhai Rescue (p. 706, p. 723, p. 728) Ping An Shanghai (p. 958, p. 969) Shanghai Changying (p. 1189) Shanghai Sanhang (p. 1224, p. 1233) Zhoushan Baolong (p. 1458, p. 1466, p. 1488, p. 1498) Zhoushan Sea (p. 1488, p. 1498) Art. 107 Para. 1.....Jiangsu Shuntian (p. 433, p. 444) Art. 109.....Qinhuangdao Bohai (p. 996) Shanghai Sanhang (p. 1036, p. 1224, p. 1233) Art. 113.....China Pacific (p. 155) Art. 113 Para. 1.....Hehai Technology (p. 287, p. 296) Ping An Shanghai (p. 958, p. 969) Art. 114 Para. 1.....Fangchenggang Beibu (p. 208) Art. 114 Para. 2.....Chongqing Wanzhou (p. 165, p. 174) Art. 114 Para. 3.....Chongqing Wanzhou (p. 165, p. 174) Art. 119.....China Transport (Shenzhen) v. Guangzhou Index (p. 50, p. 51, p. 57) Art. 119 Para. 1.....Millennium Logistics (p. 662) Art. 122.....Jiangxi Group (p. 476) Art. 125.....Nanhai Rescue (p. 703) Art. 126 Para. 1.....China Transport v. Foshan Jehong (p. 29, p. 38) China Transport (Shenzhen) v. Guangzhou Index (p. 55, p. 61) Art. 212.....Zhoushan Sea (p. 1501) Art. 220.....Chongqing Wanzhou (p. 165, p. 174) Art. 226.....Chongqing Wanzhou (p. 165, p. 174) Art. 248.....Chenzhou Shipping (p. 117) Art. 311.....Hubei Branch (p. 404, p. 406, p. 412, p. 413) Shanghai Kairun (p. 1199, p. 1207) Art. 370.....Shanghai Kairun (p. 1210) Art. 396.....Hangzhou Hangsi (p. 264) Art. 398.....China Transport v. Foshan Jehong (p. 30, p. 38, p. 39) China Transport (Shenzhen) v. Guangzhou Index (p. 50, p. 51, p. 56, p. 57) Art. 402.....China Transport v. Foshan Jehong (p. 42) China Transport (Shenzhen) v. Guangzhou Index (p. 61) Fangchenggang Beibu (p. 206, p. 208) Art. 403.....Nanhai Rescue (p. 699) Art. 406 Para. 1.....Hangzhou Hangsi (p. 264) Company Law of the People’s Republic of China General.....China Transport (Shenzhen) v. Guangzhou Index (p. 49) Nanning City (p. 770) Ping An Ningbo (p. 1027) Art. 14 Para. 1.....China Transport (Shenzhen) v. Guangzhou Index (p. 56) Art. 20 Para. 3.....Nanning City (p. 782) Art. 148 Para. 1 Sub-Para. 2.....Nanning City (p. 781) Art. 171.....Nanning City (p. 781) Criminal Law of the People's Republic of China General.....Jiangxi Group (p. 467, p. 482, p. 494) (continued)

Table of References

lv

(continued) Decision of the Standing Committee of the National People’s Congress on the Issues Concerning the Management of Judicial Evaluation General.....LUAN Shuhai (p. 578, p. 588, p. 591) Dispute Resolution Policy on Investigation and Evaluation Qualification of Fishing Industry Pollution Accident General.....LUAN Shuhai (p. 578, p. 588) Enterprise Bankruptcy Law of the People’s Republic of China General.....Huarong Financial (p. 351, p. 352, p. 368, p. 377, p. 378, p. 381) Art. 18.....Huarong Financial (p. 371, p. 384, p. 394, p. 395) Art. 18 Para. 1.....Huarong Financial (p. 372, p. 385) Environmental Protection Law of the People’s Republic of China Art. 7 Para. 2.....Zhenjiang City (p. 1389, 1391, p. 1400) Art. 33.....Zhenjiang City (p. 1402, p. 1403) Art. 33 Para. 1.....Zhenjiang City (p. 1392) Art. 41.....Zhenjiang City (p. 1392) Art. 41 Para. 1.....Zhenjiang City (p. 1403) Fishery Law of the People’s Republic of China General.....QU Rongmo (p. 1049, p. 1050, p. 1094) Art. 11.....LUAN Shuhai (p. 562, p. 570, p. 584) General Principles of the Civil Law of the People’s Republic of China General.....Nanjing Boyang (p. 761, p. 763) Rongcheng Xixiakou (p. 1148) Zhoushan Baolong S (p. 1456, p. 1463) Art. 4.....Rongcheng Xixiakou (p. 1129, p. 1142, p. 1164) Art. 48.....LI Jiezhao (p. 557) Art. 56 Para. 1.....Zhoushan Sea (p. 1486, p. 1488, p. 1496, p. 1498) Art. 63.....Nanhai Rescue (p. 690) Art. 106 Para. 1.....QU Rongmo (p. 1070, p. 1082, p. 1098) Art. 106 Para. 2.....Ningbo Arts (p. 834, p. 852) Art. 117.....Rongcheng Xixiakou (p. 1127, p. 1129, p. 1140, p. 1142, p. 1164) Art. 117 Para. 1.....Ningbo Arts (p. 834, p. 852) Art. 117 Para. 3.....Ningbo Arts (p. 834, p. 852) Art. 134.....Rongcheng Xixiakou (p. 1169) Art. 135.....Zhoushan Baolong (p. 1456, p. 1458, p. 1464, p. 1466) Art. 140.....Nantong City (p. 792, p. 799, p. 803, p. 804) Art. 142.....Nantong City (p. 792) Art. 146.....Jiangxi Group (p. 491) Rongcheng Xixiakou (p. 1124, p. 1137) Guaranty Law of the People’s Republic of China General.....Foreign Economic (p. 248) PICC Property Xingshan (p. 934) Art. 18.....China Transport (Shenzhen) v. Guangzhou Index (p. 64) Foreign Economic (p. 241, p. 249, p. 251) Huarong Financial (p. 372, p. 385) Art. 18 Para. 1.....China Transport v. Foshan Jehong (p. 43) Art. 19.....Foreign Economic (p. 239, p. 249, p. 251) Art. 21.....Foreign Economic (p. 251) Art. 26.....China Transport (Shenzhen) v. Guangzhou Index (p. 64) Art. 26 Para. 1.....China Transport v. Foshan Jehong (p. 43) (continued)

lvi

Table of References

(continued) Art. 30.....Huarong Financial (p. 387) Art. 54.....ZHOU Endian (p. 1441) Art. 121.....Foreign Economic (p. 241) Hong Kong Merchant Shipping Registration Ordinance General......Ping An Shanghai (p. 950) Hong Kong Ship Registration Handbook General......Ping An Shanghai (p. 950) Inland Waterway Cargo Transport Rules Art. 48.....Shanghai Kairun (p. 1210) Insurance Law of the People’s Republic of China General.....Chenzhou Shipping (p. 71, p. 73, p. 87, p. 96, p. 104, p. 107, p. 108, p. 109) Nanjing Boyang (p. 752, p. 758, p. 759, p. 764) PICC Property Xingshan (p. 914, p. 915, p. 926, p. 927, p. 938) QU Rongmo (p. 1059, p. 1074) Yangpu Fuhai (p. 1361, p. 1362) Art. 10.....Chenzhou Shipping (p. 109) Art. 13.....Chenzhou Shipping (p. 115) Art. 14.....LI Jiezhao (p. 557) Art. 16 Para. 3.....PICC Property Xingshan (p. 917, p. 929) Art. 17.....Chenzhou Shipping (p. 116) LI Jiezhao (p. 556) QU Rongmo (p. 1104) Yangpu Fuhai (p. 1368, p. 1369) Art. 17 Para. 2.....Shipping (p. 114, p. 116, p. 118) QU Rongmo (p. 1086, p. 1102, p. 1107) Art. 18 Para. 3.....PICC Property Xingshan (p. 936) Art. 18 Para. 4.....PICC Property Xingshan (p. 940) Art. 20.....Chenzhou Shipping (p. 87, p. 103) Art. 21.....Yangpu Fuhai (p. 1358, p. 1364, p. 1365) Art. 22.....Yangpu Fuhai (p. 1369) Art. 22 Para. 1.....Chenzhou Shipping (p. 118) Yangpu Fuhai (p. 1365) Art. 23.....QU Rongmo (p. 1073, p. 1109, p. 1110) Art. 26.....PICC Property Xingshan (p. 930, p. 936) Art. 26 Para. 1.....Nantong City (p. 792, p. 799, p. 803) Art. 60.....PICC Property Tianjin (p. 873, p. 888) Ping An Ningbo (p. 1028) Art. 60 Para. 1.....PICC Property Tianjin (p. 881, p. 883, p. 892, p. 894) PICC Property Xingshan (p. 930) Art. 62.....Ping An Ningbo (p. 1023, p. 1026, p. 1029) Art. 65 Para. 1.....XU Guoxiang (p. 1349) Art. 65 Para. 2.....Nanjing Boyang (p. 752, p. 759) XU Guoxiang (p. 1349) Art. 65 Para. 4.....Nanjing Boyang (p. 752, p. 759) Art. 116.....Chenzhou Shipping (p. 116) Art. 118.....Chenzhou Shipping (p. 84, p. 100, p. 120) Interim Measures for the Administration of RMB Settlement Prohibitions General.....Nanning City (p. 770) Interpretation of the Supreme People’s Court Concerning the Application of the Civil Procedure Law of the People’s Republic of China Art. 28......Jiangxi Group (p. 496) Art. 52......QU Rongmo (p. 1069, p. 1082, p. 1097) (continued)

Table of References

lvii

(continued) Art. 90......China Pacific (p. 151, p. 155) Dalian Beiyuan (p. 191, p. 194) Hehai Technology (p. 287, p. 297) LUAN Shuhai (p. 572, p. 573, p. 585, p. 587) PICC Property Tianjin (p. 883, p. 894) Yangpu Fuhai (p. 1358, p. 1365) Art. 91 Para. 1......Nantong City (p. 803) Art. 94......Rongcheng Xixiakou (p. 1172) Art. 114......QU Rongmo (p. 1066, p. 1078, p. 1094) Art. 115......Jiangsu Shuntian (p. 454) Art. 117......Jiangsu Shuntian (p. 451) Art. 122......QU Rongmo (p. 1085, p. 1101) Art. 233 Para. 2......Zhoushan Baolong (p. 1457, p. 1458, p. 1465, p. 1466, p. 1468) Art. 328......Shanghai Sanhang (p. 1252) Art. 334......Nantong City (p. 804) Art. 395 Para. 2......Hehai Technology (p. 306) Huarong Financial (p. 396) Yangpu Fuhai (p. 1370) Zhoushan Baolong (p. 1474) Art. 407 Para. 1......Nanhai Rescue (p. 728) Art. 407 Para. 2......Joho Trading (p. 552) Ping An Shanghai (p. 996) QU Rongmo (p. 1110) Art. 522 Para. 1......LUAN Shuhai (p. 590) Art. 527......Jiangsu Shuntian (p. 449) Interpretation of the Supreme People’s Court on Several Issues Concerning Hearing the Case of Joint Contract Dispute (Fa [Jing] Fa (1990) No. 27) Regulation 2 of the Question 4......Jiangsu Shuntian (p. 431, p. 441) Interpretation of the Supreme People’s Court on Several Issues concerning the Application of the Administrative Litigation Law of the People’s Republic of China Art. 3 Para. 1 Sub-Para. 2......ZHOU Endian (p. 1442) Art. 26 Para. 1......ZHOU Endian (p. 1440) Interpretation of the Supreme People’s Court on Several Issues concerning the Implementation of the Administrative Litigation Law of the People’s Republic of China Art. 41 Para. 1......ZHOU Endian (p. 1440, p. 1443) Art. 46 Para. 1......ZHOU Endian (p. 1440) Art. 76 Para. 1......ZHOU Endian (p. 1443) Art. 79 Sub-Para. 1......ZHOU Endian (p. 1443) Interpretation of the Supreme People’s Court on Several Issues concerning the Application of the Contract Law of the People’s Republic of China (I) Art. 13......Jiangxi Group (p. 475) Nanjing Boyang (p. 751, p. 758) PICC Property Xingshan (p. 935) Art. 14......Nanjing Boyang (p. 758) Art. 15......PICC Property Xingshan (p. 930) Art. 15 Para. 1......Nanjing Boyang (p. 758) Art. 18 Para. 1......Nanjing Boyang (p. 753, p. 760, p. 761) Art. 20......Zhoushan Baolong (p. 1457, p. 1465) Interpretation of the Supreme People’s Court on Several Issues concerning the Application of the Contract Law of the People’s Republic of China (II) Art. 24......Chenzhou Shipping (p. 110) Art. 26......Nanhai Rescue (p. 727) Art. 29......Chongqing Wanzhou (p. 165, p. 173, p. 174) (continued)

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Table of References

(continued) Interpretation of the Supreme People’s Court on Several Issues concerning the Application of the Guaranty Law of the People’s Republic of China Art. 29......Chongqing Wanzhou (p. 164) Art. 44......Huarong Financial (p. 372, p. 385) Art. 44.Para.1......Huarong Financial (p. 391) Art. 76......ZHOU Endian (p. 1441) Interpretation of the Supreme People’s Court on Several Issues concerning the Application of the Insurance Law of the People’s Republic of China (II) General......Chenzhou Shipping (p. 83, p. 100) Art. 3......QU Rongmo (p. 1104) Art. 9......Chenzhou Shipping (p. 114, p. 118) Art. 14 Para. 1......Chenzhou Shipping (p. 89, p. 106, p. 107, p. 112, p. 115, p. 120) Interpretation of the Supreme People’s Court on Several Issues concerning the Application of the Insurance Law of the People’s Republic of China (III) Art. 13......LI Jiezhao (p. 556) Interpretation of the Supreme People’s Court on Some Issues concerning the Application of Law for the Trial of Cases Involving Compensation for Personal Injury General......XU Guoxiang (p. 1340) Art. 9 Para. 2......XU Guoxiang (p. 1344) Art. 11 Para. 1......XU Guoxiang (p. 1344, p. 1345) Art. 12......TIAN Jiqian (p. 1306, p. 1325) Art. 17 Para. 1......TIAN Jiqian (p. 1318, p. 1331) XU Guoxiang (p. 1345, p. 1350) Art. 17 Para. 2......TIAN Jiqian (p. 1318, p. 1331) XU Guoxiang (p. 1345, p. 1350) Art. 18 Para. 1......TIAN Jiqian (p. 1318, p. 1331) Art. 19......TIAN Jiqian (p. 1318, p. 1331) Art. 19 Para. 1......XU Guoxiang (p. 1346) Art. 19 Para. 2......XU Guoxiang (p. 1346) Art. 20......TIAN Jiqian (p. 1318, p. 1331) Art. 20 Para. 2......XU Guoxiang (p. 1346) Art. 20 Para. 3......XU Guoxiang (p. 1346) Art. 21 Para. 1......XU Guoxiang (p. 1348) Art. 22......XU Guoxiang (p. 1348) Art. 23 Para. 1......TIAN Jiqian (p. 1318, p. 1331) XU Guoxiang (p. 1348) Art. 24......TIAN Jiqian (p. 1318, p. 1348) Art. 25 Para. 1......TIAN Jiqian (p. 1318, p. 1331) XU Guoxiang (p. 1339, p. 1347) Art. 28......TIAN Jiqian (p. 1318, p. 1331) Art. 30 Para. 1......XU Guoxiang (p. 1347) Art. 35......TIAN Jiqian (p. 1318, p. 1331) Interpretation of the Supreme People’s Court on Several Issues Concerning Application of the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China (I) Art. 1 Para. 1......LUAN Shuhai (p. 570, p. 573, p. 583, p. 587) (continued)

Table of References

lix

(continued) Interpretation of the Supreme People's Court on Several Issues concerning the Application of Law in the Trial of Disputes over Liability for Environmental Torts Art.10......LUAN Shuhai (p. 566) Interpretation on Certain Issues concerning the Determination of Compensation Liability for Mental Damage in Civil Torts of the Supreme People’s Court Art. 1 Para. 1......XU Guoxiang (p. 1346) Art. 8 Para. 2......XU Guoxiang (p. 1346, p. 1350) Art. 10 Para. 1......TIAN Jiqian (p. 1318, p. 1331, p. 1349) Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China Art. 2.......Shaoxing County (p. 1289, p. 1298) Art. 3......China Pacific (p. 149, p. 155) Nanhai Rescue (p. 676, p. 692, p. 716, p. 725) PICC Property Tianjin (p. 897) Art. 8......PICC Property Tianjin (p. 880, p. 891) Art. 10......Hin-pro International (p. 331, p. 338) Art. 41......China Transport v. Foshan Jehong (p. 29, p. 38, p. 42) Art. 44......LUAN Shuhai (p. 570, p. 573, p. 583, p. 587, p. 590) Ningbo Zhenhai (p. 867, p. 868) Rongcheng Xixiakou (p. 1124, p. 1137, p. 1151, p. 1165, p. 1175) Zhenjiang City (p. 1407) Law of the People’s Republic of China on Individual Proprietorship Enterprises Art. 2......Ping An Ningbo (p. 999, p. 1008, p. 1020) Marine Environmental Protection Law of the People’s Republic of China General......LUAN Shuhai (p. 591) Maritime Code of the People’s Republic of China General......Chenzhou Shipping (p. 71, p. 96) Chenzhou Shipping (p. 109) China Pacific (p. 128) Heilongjiang Sanjiang (p. 312) Hin-pro International (p. 319) Joho Trading (p. 515) MAO Xuebo (p. 637) Nanhai Rescue (p. 717, p. 722, p. 724, p, 725, p. 726, p. 728) Nanjing Boyang (p. 761, p. 763, p. 764) QU Rongmo (p. 1055, p. 1056, p. 1058, p. 1059) Art. 2 Para. 2......Shanghai Kairun (p. 1199, p. 1207) Art. 3......Heilongjiang Sanjiang (p. 312) Nanhai Rescue (p. 678, p. 693, p. 717) Art. 7......PICC Property Tianjin (p. 899) Art. 9 Para. 1......Nanhai Rescue (p. 678) Rongcheng Xixiakou (p. 1176) Art. 12......Nanhai Rescue (p. 726) Art. 22 Para. 1 Sub-Para. 2......TIAN Jiqian (p. 1318, p. 1331) Art. 32......MAO Xuebo (p. 614, p. 622, p. 635) Art. 42......Joho Trading (p. 538, p. 546) Ping An Shanghai (p. 958, p. 969, p. 978, p. 993) Art. 42 Sub-Para. 4.......PICC Property Tianjin (p. 880, p. 883, p. 891, p. 894) Art. 46......Jiangxi Group (p. 501) Shanghai Changying (p. 1188, p. 1189) Shaoxing County (p. 1291, p. 1300) Art. 46 Para. 1......PICC Property Tianjin (p. 882, p. 883, p. 893, p. 894) Ping An Shanghai (p. 958, p. 969, p. 978) Art. 47......Jiangxi Group (p. 501) Shanghai Changying (p. 1189) Art. 48......Jiangxi Group (p. 501) Ping An Shanghai (p. 958, p. 969) Shanghai Changying (p. 1189) Art. 50......Jiangxi Group (p. 481) Art. 51......China Pacific (p. 128, p. 153, p. 155) Shanghai Changying (p. 1300) Art. 51 Para. 1......China Pacific (p. 152) Art. 51 Para. 1 Sub-Para. 1......China Pacific (p. 152, p. 153) Art. 51 Para. 1 Sub-Para. 9......China Pacific (p. 153) Art. 51 Para. 1 Sub-Para. 11......Shaoxing County (p. 1290, p. 1291, p. 1299, p. 1300, p. 1301) (continued)

lx

Table of References

(continued) Art. 51 Para. 2......China Pacific (p. 152, p. 153) Art. 55......Jiangxi Group (p. 460) Art. 55 Para. 1......Hubei Branch (p. 405, p. 406, p. 413) Shanghai Changying (p. 1189) Art. 55 Para. 2......Hubei Branch (p. 405, p. 406, p. 413) Shanghai Changying (p. 1189) Art. 63......Ping An Shanghai (p. 995) Art. 69......Millennium Logistics (p. 662) Art. 71......Hin-pro International (p. 331, p. 338) Joho Trading (p. 526, p. 534) PICC Property Tianjin (p. 882, p. 893, p. 898) Ping An Shanghai (p. 958, p. 969, p. 978, p. 994, p. 996) Art. 72......Joho Trading (p. 522, p. 523, p. 526, p. 531, p. 534, p. 538, p. 543) PICC Property Tianjin (p. 899) Art. 72 Para. 1......Joho Trading (p. 548) Art. 72 Para. 2......Joho Trading (p. 549) PICC Property Tianjin (p. 893, p. 895) Ping An Shanghai (p. 958, p. 969) Art. 73........Jiangxi Group (p. 503) Art. 75......Jiangxi Group (p. 502, p. 503) Ping An Shanghai (p. 978) Art. 77......Jiangxi Group (p. 492, p. 494, p. 501) Art. 78 Para. 1......Millennium Logistics (p. 662) PICC Property Tianjin (p. 881, p. 892) Art. 81......PICC Property Tianjin (p. 882, p. 883, p. 893, p. 894) Art. 83......Nanhai Rescue (p. 677) Art. 86......China Transport (Shenzhen) v. Guangzhou Index (p. 40) Art. 87......China Transport (Shenzhen) v. Guangzhou Index (p. 40, p. 51, p. 57) Art. 88......China Transport (Shenzhen) v. Guangzhou Index (p. 40) Art. 92......PICC Property Tianjin (p. 898) Art. 95......Joho Trading (p. 515) PICC Property Tianjin (p. 898) Ping An Shanghai (p. 978) Art. 102......Hubei Branch (p. 416) PICC Property Tianjin (p. 899) Art. 102 Para. 1......Hubei Branch (p. 416) Art. 104 Para. 1......Hubei Branch (p. 417) Art. 104 Para. 2......Hubei Branch (p. 417) Art. 106......Hubei Branch (p. 417) Art. 141......Zhoushan Sea (p. 1500) Art. 152......Heilongjiang Sanjiang (p. 312) Art. 166......MAO Xuebo (p. 616, p. 617, p. 622, p. 632, p. 635) Art. 168......Nanjing Hengye (p. 743) Art. 169 Para. 1......MAO Xuebo (p. 622, p. 635) Art. 169 Para. 2......MAO Xuebo (p. 622, p. 635) Art. 172......Nanhai Rescue (p. 705, p. 722) Art. 175......Nanhai Rescue (p. 704, p. 705, p. 706, p. 722, p. 723, p. 724) Art. 175 Para. 1......Nanhai Rescue (p. 677, p. 682, p. 692, p. 697, p. 716, p. 719) Art. 175 Para. 2......Nanhai Rescue (p. 699) Art. 176 Para. 2......Nanhai Rescue (p. 680, p. 682, p. 696, p. 697, p. 704, p. 708, p. 718, p. 719) Art. 179......Nanhai Rescue (p. 678, p. 682, p. 694, p. 697, p. 703, p. 705, p. 717, p. 719, p. 721, p. 722, p. 724, p. 726) Art. 180......Nanhai Rescue (p. 680, p. 682, p. 695, p. 697, p. 704, p. 718, p. 719, p. 721, p. 726, p. 727) Art. 182......Nanhai Rescue (p. 697, p. 694, p. 703, p. 705) Art. 183......Nanhai Rescue (p. 693, p. 698, p. 699, p. 705, p. 706, p. 716, p. 722, p. 723, p. 724, p. 726, p. 727) Art. 186......Nanhai Rescue (p. 678, p. 693, p. 717) Art. 188......Nanhai Rescue (p. 723) Art. 193 Para. 1......Shanghai Kairun (p. 1199, p. 1207) Art. 194......Shanghai Kairun (p. 1199, p. 1207) Art. 196......Shanghai Kairun (p. 1210) Art. 197......Shanghai Kairun (p. 1199, p. 1207) (continued)

Table of References

lxi

(continued) Art. 204......Zhenjiang City (p. 1391, p. 1402, p. 1408) Art. 207......Zhenjiang City (p. 1373, p. 1391, p. 1392, p. 1402, p. 1403, p. 1405, p. 1408, p. 1409) Art. 207 Para. 1 Sub-Para. 1......MAO Xuebo (p. 618) Art. 208......Zhenjiang City (p. 1391, p. 1402) Art. 209......MAO Xuebo (p. 618, p. 622, p. 635, p. 643) Zhenjiang City (p. 1373, p. 1391, p. 1392, p. 1402, p. 1403, p. 1405, p. 1408) Art. 216......Chenzhou Shipping (p. 88, p. 89, p. 104, p. 106, p. 109) QU Rongmo (p. 1101) Art. 216 Para. 1......QU Rongmo (p. 1085, p. 1087, p. 1103) Art. 219 Para. 1......QU Rongmo (p. 1068, p. 1070, p. 1081, p. 1082, p. 1096, p. 1098) Art. 220......QU Rongmo (p. 1068, p. 1070, p. 1081, p. 1082, p. 1096, p. 1098) Art. 227......Chenzhou Shipping (p. 89, p. 106, p. 112, p. 121) Art. 237......Chenzhou Shipping (p. 89, p. 106) QU Rongmo (p. 1070, p. 1082, p. 1098) Art. 238......Chenzhou Shipping (p. 89, p. 106) QU Rongmo (p. 1068, p. 1070, p. 1082, p. 1096, p. 1098, p. 1109) Art. 242......QU Rongmo (p. 1068, p. 1080, p. 1096) Art. 244......QU Rongmo (p. 1104) Art. 244 Para. 1......QU Rongmo (p. 1068, p. 1080, p. 1096, p. 1108) Art. 252......Ping An Shanghai (p. 958, p. 969) Ping An Ningbo (p. 1008, p. 1020) Art. 257......Hin-pro International (p. 329, p. 337) Art. 264......Nanjing Boyang (p. 753, p. 759, p. 760, p. 764) Art. 267......Nanjing Boyang (p. 753, p. 759, p. 760, p. 764) Art. 269......PICC Property Tianjin (p. 880, p. 891) PIng An Shanghai (p. 958, p. 969) Maritime Traffic Safety Law of the People’s Republic of China General......Anhui Changhui (p. 5) MAO Xuebo (p. 614) Art. 4......MAO Xuebo (p. 614, p. 617, p. 622, p. 632, p. 635) Art. 5......MAO Xuebo (p. 614, p. 617, p. 622, p. 632, p. 635) Art. 6......MAO Xuebo (p. 614, p. 617, p. 622, p. 632, p. 635) Art. 7......MAO Xuebo (p. 614, p. 622, p. 635) Art. 9......MAO Xuebo (p. 614, p. 622, p. 635) Art. 10......Anhui Changhui (p. 2, p. 21) MAO Xuebo (p. 615, p. 622, p. 635) Art. 34......MAO Xuebo (p. 616, p. 617, p. 632) Art. 37......MAO Xuebo (p. 616, p. 617, p. 632) Art. 44......Anhui Changhui (p. 21) Measures for Water Traffic Accident Statistics (Ministry of Transport No. 5) General......Anhui Changhui (p. 9, p. 14) Measures of Waters and Tidal Flats Aquaculture Permit Registration promulgated by the Ministry of Agriculture Art. 9……LUAN Shuhai (p. 562) Measures of the People’s Republic of China for the Registration of Fishing Vessels General......ZHOU Endian (p. 1427, p. 1430, p. 1437) Art. 2......ZHOU Endian (p. 1415) Art. 3......ZHOU Endian (p. 1415) Art. 4......ZHOU Endian (p. 1415) Art. 21......ZHOU Endian (p. 1424, p. 1426, p. 1427, p. 1430, p. 1435, p. 1437) Art. 41......ZHOU Endian (p. 1438) (continued)

lxii

Table of References

(continued) Measures on Fishery Pollution Incident Economic Loss Calculation General......LUAN Shuhai (p. 563) Measures on the Payment of Litigation Costs General.....LUAN Shuhai (p. 574, p. 587 p. 593) Art. 13 Para. 1.....Nanjing Boyang (p. 753) Nantong City (p. 793) PICC Property (p. 917) Notice of the Supreme People’s Court on Adjustment of the Jurisdiction and the Scope of Cases Entertained by Dalian, Wuhan and Beihai Maritime Courts Art. 2......Chongqing Wanzhou (p. 158) Notice of the Zhangpu County of Fujian Province on Issuing the Tentative Measures for the Registration and Administration of the Pledge of the Ratification of Fishing Ship Network Tool General......QU Rongmo (p. 1062) On-duty Rules of Seamen of the People’s Republic of China General......Anhui Changhui (p. 5) Ping An Ningbo (p. 1023) Art. 21 Sub Para 1......Anhui Changhui (p. 3, p. 21) Art. 21 Sub Para 2......Anhui Changhui (p. 3, p. 21) Art. 21......Anhui Changhui (p. 21) Art. 29......Anhui Changhui (p. 3) Opinions of the Supreme People’s Court on Several Issues concerning the Implementation of the General Principles of the Civil Law of the People’s Republic of China (for Trial Implementation) Art. 71.....Hehai Technology (p. 285, p. 294) Art. 148.....Ningbo Arts (p. 829, p. 984) Art. 148 Para. 1.....Ningbo Arts (p. 834, p. 852) Art. 164.....Jiangxi Group (p. 496) Art. 187.....Jiangxi Group (p. 476, p. 491) Procedures of the Ministry of Communications of the People’s Republic of China for Collecting Salvage Charges on International Passage General.....Nanhai Rescue (p. 669, p. 676, p. 686, p. 691, p. 718) Procedures of the Ministry of Communications of the People’s Republic of China for Collecting Port Charges General.....Nanhai Rescue (p. 669, p. 676, p. 686, p. 691, p. 718) Procedures of Guangdong Province for Collecting Port Charges General.....Nanhai Rescue (p. 669, p. 676, p. 686, p. 691, p. 718) Property Law of the People’s Republic of China General......PICC Property Xingshan (p. 933, p. 938) ZHOU Endian (p. 1442) Art. 23......Jiangsu Shuntian (p. 455) Art. 174......PICC Property Xingshan (p. 916, p. 928, p. 929, p. 932, p. 937, p. 938) Art. 199......ZHOU Endian (p. 1441) Art. 230 Para. 1......Fangchenggang Beibu (p. 208) Art. 233......Fangchenggang Beibu (p. 208) (continued)

Table of References

lxiii

(continued) Provisions of the People’s Republic of China on Marine and Maritime Administrative Punishments General......Anhui Changhui (p. 5) Art. 37 Para. 1......Anhui Changhui (p. 21) Art. 84......Anhui Changhui (p. 6, p. 9, p. 14) Art. 85......Anhui Changhui (p. 6) Art. 85 Para. 2......Anhui Changhui (p. 9, p. 15) Provisions of the Supreme People’s Court on Certain Issues concerning the Application of Law to the Trial of Cases Involving Delivery of Goods without Original Bills of Lading General......Hin-pro International (p. 344) Art. 2......Hin-pro International (p. 331, p. 338, p. 343, p. 346) Millennium Logistics (p. 662) Art. 3......Hin-pro International (p. 345, p. 346) Art. 4......Hin-pro International (p. 331, p. 338) Art. 5......Millennium Logistics (p. 662) Art. 6......Hin-pro International (p. 331, p. 338, p. 346) Art. 7......Hin-pro International (p. 343, p. 344, p. 345) Art. 14 Para 1......Hin-pro International (p. 331, p. 338) Provisions of the Supreme People’s Court on Several Issues concerning the Trial of Cases of Marine Insurance Disputes General......Nanjing Boyang (p. 761, p. 763) Art. 1......Chenzhou Shipping (p. 89, p. 106) Nanjing Boyang (p. 752, p. 758, p. 764) Art. 5......Chenzhou Shipping (p. 112, p. 121) Art. 14......Ping An Shanghai (p. 958, p. 969) Provisions of the Supreme People’s Court on Several Issues concerning Economic Crimes Suspected in the Trial of Economic Disputes Art. 3......Ningbo Arts (p. 828, p. 846) Provisions of the Supreme People’s Court on Several Issues concerning the Application of Statute of Limitations during the Trial of Civil Cases Art. 10 Para. 1 Sub-Para. 2......Nantong City (p. 803, p. 804) Provisions of the Supreme People's Court on Some Issues Concerning the Trial of Cases of Disputes over Letter of Credit Art.8......Jiangxi Group (p. 505, p. 510, p. 511) Art.9......Jiangxi Group (p. 505, p. 510, p. 511) Art.10......Jiangxi Group (p. 505, p. 510, p. 511) Provisions of the Supreme People's Court on Several Issues Concerning the Trial of Cases of Disputes over Marine Freight Forwarding Art. 10......Hangzhou Hangsi (p. 264) Art. 13......China Transport (Shenzhen) v. Guangzhou Index (p. 49, p. 55) Provisions of the Supreme People’s Court on the Trial of Certain Issues in Cases of Disputes over Collision of Ships Art. 11......Nanjing Hengye (p. 744) (continued)

lxiv

Table of References

(continued) Provisions of the Supreme People’s Court on the Trial of Compensation for Property Damage in Cases of Collision and Contact of Ships Art. 3 Para. 2......Nanjing Hengye (p. 743) Art. 7......MAO Xuebo (p. 622, p. 635) Art. 8......MAO Xuebo (p. 622, p. 635) Provisions on Entering and Leaving of Fishing Port of the People’s Republic of China Art. 6......MAO Xuebo (p. 609) Provisions on Fishery Waters Pollution Incident Investigation and Handling Procedures General.....LUAN Shuhai (p. 563) Provisions on the Supervision of Insurance Brokerage Institutions General.....Chenzhou Shipping (p. 107) Quality Assessment Procedure and Standard of Jiangsu Water Transport Project (Su Jiao Gui [2012] No.8) General.....Hehai Technology (p. 282, p. 286, p. 296) Regulations of the People’s Republic of China Governing the Registration of Ships General......ZHOU Endian (p. 1430, p. 1437) Art. 11......ZHOU Endian (p. 1442) Art.14......ZHOU Endian (p. 1442) Art.20......ZHOU Endian (p. 1438) Art.20 Para.1......ZHOU Endian (p. 1430, p. 1436) Art.21......ZHOU Endian (p. 1438) Regulations of the People’s Republic of China on International Ocean Shipping General......Hubei Branch (p. 414) Art. 7 Para. 2......Hubei Branch (p. 403, p. 410) Regulations of the People’s Republic of China on the Administration of International Freight Forwarding Industry Art. 2......Hubei Branch (p. 403, p. 410) Regulations of the People’s Republic of China on the Exploitation of Offshore Petroleum Resources in Cooperation with Foreign Countries General......LUAN Shuhai (p. 586) Regulations of the People’s Republic of China on the Investigation and Handling of Maritime Traffic Accidents General......Anhui Changhui (p. 6) Art. 10 Para. 2......Anhui Changhui (p. 5) Art. 15......Anhui Changhui (p. 19) Art. 16......Anhui Changhui (p. 19) Art. 17......Anhui Changhui (p. 19) Regulations of the Supreme People’s Court of the People’s Republic of China on Certain Issues concerning the Disputes over Compensation for Oil Pollution Damage of Vessel General......LUAN Shuhai (p. 577, p. 579, p. 593) (continued)

Table of References

lxv

(continued) Regulations of the Supreme People’s Court of the People’s Republic of China on the Management of Forensic Evaluation Appointed by the People’s Court General......LUAN Shuhai (p. 578) Regulations on Domestic Carriage of Goods by Water Art. 23......Shanghai Tongshun (p. 1263, p. 1271, p. 1276, p. 1279) Rules of the Supreme People’s Court on Several Issues concerning the Trial of Cases Involving the Disputes Over Financial Leasing Contract Art. 22......Chenzhou Shipping (p. 117) Sea Water Quality Standard (GB3097-1997) General......LUAN Shuhai (p. 570, p. 583) Several Provisions of the Supreme People’s Court on Evidence in Civil Procedures General......Zhenjiang City (p. 1382) Art. 2......Ping An Shanghai (p. 978) Art. 9 Para. 1 Sub-Para. 4......Zhenjiang City (p. 1383) Art. 11......Joho Trading (p. 532, p. 544) Art. 11 Para. 1......China Pacific (p. 131) Art. 34......China Pacific (p. 143) Art. 42......China Pacific (p. 143) Art. 75......Dalian Beiyuan (p. 192, p. 194) Jiangsu Shuntian (p. 445) Art. 77 Para. 1......Zhenjiang City (p. 1383, p. 1407) Several Provisions of the Supreme People’s Court on the Trial of Cases of Disputes over the Limitation of Liability for Maritime Claims Art. 14......MAO Xuebo (p. 622, p. 635) Art. 18......Zhenjiang City (p. 1408) Art. 19......MAO Xuebo (p. 622, p. 635) Zhenjiang City (p. 1408) Some Provisions of the Supreme People’s Court on Evidence in Administrative Litigation Art. 63......Anhui Changhui (p. 19) Some Provisions of the Supreme People’s Court on the Scope of Cases to be Entertained by Maritime Courts Art. 16......Joho Trading (p. 522, p. 531) Art. 23......China Transport v. Foshan Jehong (p. 29, p. 37) Art. 26......Nanhai Rescue (p. 676, p. 691, p. 716) Special Maritime Procedure Law of the People’s Republic of China General......Fairwind International (p. 218, p. 222, p. 224, p. 226) Art. 6 Para. 2 Sub-Para. 2......Hubei Branch (p. 398) Art. 7 Para. 2......Zhenjiang City (p. 1389, p. 1400,p. 1407) Art. 12......Fairwind International (p. 218, p. 225) Art. 15......Fairwind International (p. 218, p. 225) Art. 23......PICC Property Xingshan (p. 929) Art. 93......Hubei Branch (p. 406, p. 413) Specification for Ecological Environment Monitoring of Fisheries General......LUAN Shuhai (p. 592) Part 1……LUAN Shuhai (p. 589) (continued)

lxvi

Table of References

(continued) Part 2……LUAN Shuhai (p. 589) Part 6……LUAN Shuhai (p. 589) Specification for Identification System of Oil Spill on the Sea General......LUAN Shuhai (p. 592) Statutory Inspection Rules for Fishery Ships General......QU Rongmo (p. 1050) Tort Liability Law of the People’s Republic of China General.....Ningbo Arts (p. 829) Rongcheng Xixiakou (p. 1148, p. 1159, p. 1168, p. 1171, p. 1180) Art. 2.....Rongcheng Xixiakou (p. 1180) Art. 6.....Ningbo Zhenhai (p. 868) Rongcheng Xixiakou (p. 1127, p. 1129, p. 1140, p. 1142, p. 1164) Art. 6 Para. 1.....MAO Xuebo (p. 622, p. 635) Ping An Ningbo (p. 1008, p. 1020) TIAN Jiqian (p. 1318, p. 1331) Art. 7.....XU Guoxiang (p. 1345, p. 1350) Art. 8.....Ningbo Zhenhai (p. 868) Rongcheng Xixiakou (p. 1127, p. 1129, p. 1140, p. 1142, p. 1164) Art. 12.....Shanghai Tongshun (p. 1264, p. 1265, p. 1273, p. 1274) Art. 15.....Rongcheng Xixiakou (p. 1129, p. 1142, p. 1164, p. 1169) Art. 15 Para. 6.....Zhenjiang City (p. 1392, p. 1403) Art. 16.....TIAN Jiqian (p. 1318, p. 1331) Art. 19.....Rongcheng Xixiakou (p. 1129, p. 1142, p. 1164) Art. 26.....Ping An Ningbo (p. 1008, p. 1020) Art. 34 Para. 1......Ping An Ningbo (p. 1008, p. 1020, p. 1022) Zhenjiang City (p. 1392, p. 1403) Art. 65......LUAN Shuhai (p. 573, p. 586, p. 587) Zhenjiang City (p. 1392, p. 1403) Art. 66......Zhenjiang City (p. 1390, p. 1392, p. 1401, p. 1403, p. 1407) Art. 72......Zhenjiang City (p. 1392, p. 1403) Water Pollution Prevention and Control Law of the People’s Republic of China General......LUAN Shuhai (p. 591) Zhenjiang City (p. 1405) Art. 8 Para. 1......Zhenjiang City (p. 1389, p. 1400) Art. 8 Para. 2......Zhenjiang City (p. 1389, p. 1400) Art. 52 Para. 4......Zhenjiang City (p. 1392, p. 1403) Work Safety Law of the People’s Republic of China Art. 25 Para. 1......TIAN Jiqian (p. 1317, p. 1330) Art. 25 Para. 4......TIAN Jiqian (p. 1317, p. 1330) Art. 40......TIAN Jiqian (p. 1317, p. 1330) Working Unit (Department) Responsibility of MSA Zhanjiang General......Anhui Changhui (p. 5, p. 6) Art. 9......Anhui Changhui (p. 10, p. 15)

Table of References

lxvii

International Conventions, Customs and Standard Terms International Maritime Conference Liquid Tanker Safety Guide (Chemicals) Art. 5.6.1......Zhenjiang City (p. 1391, p. 1402) Art. 5.6.2......Zhenjiang City (p. 1391, p. 1402) International Regulations for Preventing Collisions at Sea 1972 (COLREG) General......MAO Xuebo (p. 605, p. 614, p. 615, p. 616) Art. 2 Para. 1......Anhui Changhui (p. 2, p. 21) Art. 5......Anhui Changhui (p. 2, p. 21) MAO Xuebo (p. 615, p. 617, p. 632) Art. 6......MAO Xuebo (p. 615, p. 617, p. 632) Art. 8......MAO Xuebo (p. 615) Art. 8 Para. 1......Anhui Changhui (p. 2, p. 21) Art. 8 Para. 3......Anhui Changhui (p. 2, p. 21) Art. 8 Para. 4......Anhui Changhui (p. 2, p. 21) Art. 16......Anhui Changhui (p. 2, p. 21) Art. 18 Para. 1 Sub 3......Anhui Changhui (p. 2, p. 21) Art. 19 Para. 2......MAO Xuebo (p. 617, p. 632) Art. 19 Para. 4......MAO Xuebo (p. 617, p. 632) Art. 19 Para. 5......MAO Xuebo (p. 617, p. 632) Art. 35......MAO Xuebo (p. 617, p. 632) Art. 35 Para. 1......MAO Xuebo (p. 617, p. 632) Protocol to Amend the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading 1968 (Hague-Visby Rules) General......Shaoxing County (p. 1285, p. 1286, p. 1289, p. 1296, p. 1297, p. 1298) Uniform Rules for Demand Guarantees General......Foreign Economic (p. 239, p. 248) United Nations Convention on the Carriage of Goods by Sea 1978 (Hamburg Rules) General......PICC Property Tianjin (p. 895) International Convention on Salvage, 1989 (Salvage Convention) General......Nanhai Rescue (p. 723, p. 725, p. 726, p. 727) Art. 6......Nanhai Rescue (p. 724) Art. 12......Nanhai Rescue (p. 726) Art. 13......Nanhai Rescue (p. 726)

Chinese Customs and Standard Terms PICC Ocean Shipping Insurance Terms (2009 version) General.....Chenzhou Shipping (p. 98, p. 114, p. 116, p. 119) Art. 3.....Chenzhou Shipping (p. 118, p. 121) Art. 6.....Chenzhou Shipping (p. 115, p. 118) Art. 7.....Chenzhou Shipping (p. 115, p 118) Art. 10.....Chenzhou Shipping (p. 121)

lxviii

Table of References

Chinese Judgments (2004) Hu Hai Fa Shang Chu Zi No.195......Ningbo Arts (p. 819) (2004) Yong Hai Fa Shang Chu Zi No.869......Ping An Ningbo (p. 1024) (2005) Hu Gao Min Si (Hai) Zhong Zi No.16......Ningbo Arts (p. 819) (2005) Hu Hai Fa Shang Chu Zi No.528......Ningbo Arts (p. 855) (2007) Yue Zhan Hai Shi Ren No.12......Anhui Changhui (p. 10, p. 15) (2008) Hu Hai Fa Shang Chu Zi No.434......Ningbo Arts (p. 820, p. 827, p. 845, p. 853, p. 858) (2011) Hu Er Zhong Xing Chu Zi No.147......Ningbo Arts (p. 814, p. 815, p. 820, p. 826, p. 844) (2011) Hu Hai Fa Shang Chu Zi No.881......Ping An Shanghai (p. 946, p. 955, p. 966, p. 992) (2011) Wu Hai Fa Shi Zi No.00082......PICC Property Xingshan (p. 905, p. 908, p. 912, p. 914, p. 921, p. 924, p. 925, p. 926, p. 935) (2012) Lu Min Xia Zhong Zi No.62......Rongcheng Xixiakou (p. 1124, p. 1137, p. 1175) (2012) Min Ti Zi No.130......Rongcheng Xixiakou (p. 1124, p. 1137, p. 1175, p. 1177) (2012) Qing Hai Fa Zhi Zi No.109-4......ZHOU Endian (p. 1413, p. 1414, p. 1416, p. 1417, p. 1418, p. 1423, p. 1434, p. 1438) (2012) Wu Hai Fa Bao Zi No.9......Zhenjiang City (p. 1381, p. 1388, p. 1399) (2012) Wu Hai Fa Shi Zi No.00046......PICC Property Xingshan (p. 905, p. 908, p. 909, p. 910, p. 913, p. 921, p. 924, p. 939) (2012) Wu Hai Fa Shou Zi No.00001......PICC Property Xingshan (p. 925) (2012) Wu Hai Fa Xian Zi No.00003......Zhenjiang City (p. 1381, p. 1383, p. 1384, p. 1389, p. 1390, p. 1400, p. 1401, p. 1403) (2012) Yong Hai Fa Shang Chu Zi No.93......Huarong Financial (p. 355) (2012) Yong Hai Fa Zhou Shang Chu Zi No.27......Huarong Financial (p. 356) (2013) Wu Hai Fa Shi Zi No.00267......PICC Property Xingshan (p. 925) (2013) Yong Hai Fa Shang Chu Zi No.380......Huarong Financial (p. 356, p. 364) (2014) E Min Si Zhong Zi No.00076......Zhenjiang City (p. 1381, p. 1383, p. 1389, p. 1390, p. 1400, p. 1401, p. 1403) (2014) Huang Pu Min Er (Shang) Chu Zi No.1075......Hangzhou Hangsi (p. 256) (2014) Min Shen Zi No.687......Jiangxi Group (p. 479, p. 499) (2014) Min Shen Zi No.1722......Rongcheng Xixiakou (p. 1160) (2014) Qiong Hai Fa Bao No.27......Nanjing Hengye (p. 742) (2014) Yong Hai Fa Shang Chu Zi No.869......Ping An Ningbo (p. 1002, p. 1004, p. 1017) (2015) Yong Hai Fa Shang Chu No.381......Millennium Logistics (p. 652, p. 654, p. 655, p. 656) (2015) Yong Hai Fa Shang Chu No.382, No.383, No.384, No.380......(p. 654, p. 655 p. 656) (2015) Zhe Hai Zhong Zi No.296, No.297, No.298, No.294 and No.295......Millennium Logistics (p. 655) (2015) Zhe Xia Zhong Zi No.230......Huarong Financial (p. 357, p. 389, p. 390) (2015) Yong Hai Fa Shang Chu Zi No.1027......Huarong Financial (p. 356) (2015) Zhe Xing Zhong Zi No.286......Ping An Ningbo (p. 1004, p. 1015, p. 1016, p. 1023, p. 1024) (2015) Zhe Yong Xing Chu Zi No.8......Ping An Ningbo (p. 998, p. 1004, p. 1015, p. 1016) (2016) Gui 72 Min Chu No.103......China Pacific (p. 154) (2016) Zhe 0902 Min Chu No.2579......Huarong Financial (p. 395) (2016) Zhe 0902 Min Chu No.2580......Huarong Financial (p. 395)

Table of References

Foreign Legislation and Judgments Arbitration Act of the United Kingdom 1996 General.....Fairwind International (p. 225, p. 226) Art. 14.....Fairwind International (p. 225) Venezuela Customs Organization Law (or Customs Organization Law of Venezuela) General.....Hin-pro International (p. 321) Art. 22.....Hin-pro International (p. 321, p. 330, p. 338, p. 345) Art. 23....Hin-pro International (p. 321, p. 322) Art. 97.....Hin-pro International (p. 322) Venezuela General Port Law Art. 83....Hin-pro International (p. 322) Art. 85....Hin-pro International (p. 322) Venezuela Maritime Law (or Maritime Law of Venezuela) General.....Hin-pro International (p. 321, p. 330, p. 338) Art. 203.....Hin-pro International (p. 330, p. 338, p. 345) Art. 203.2.....Hin-pro International (p. 321)

lxix

52

20

62

17

/

71

11

112

54

28

312

81

Shanghai Maritime Court

Tianjin Maritime Court

Qingdao Maritime Court

Dalian Maritime Court

Guangzhou Maritime Court

Wuhan Maritime Court

Haikou Maritime Court

11

3

230

Dispute over contract of carriage of goods by sea or sea-connected waters

1125

Dispute over contract for employment of seaman

Maritime Courts (Sub-total)

No. of Cases Judged by Courts

Top 10 Causes of Action

/

9

31

33

7

16

55

210

Dispute over freight forwarding contract on the sea or sea-connected waters

1

16

12

8

14

4

7

135

Dispute over contract for marine stores and spare parts supply

Chinese Maritime Litigation Digital Report 20161

/

9

3

11

12

6

3

73

Dispute over liability for personal injury at sea

/

8

4

8

8

/

1

59

Dispute over marine insurance contract on the sea or sea-connected waters

3

40

6

/

1

/

1

85

Dispute over ship mortgage contract

1

11

1

7

/

/

4

50

Dispute over ship sales and purchases contract

6

3

1

/

6

/

1

52

Dispute over ship operation loan contract

(continued)

1

11

4

2

11

2

1

49

Dispute over charter party

lxx Table of References

5

12

7

22

/

118

35

/

60

Beihai Maritime Court

Nanjing Maritime Court2

Appeal Courts (Sub-total)

Shanghai High People’s Court

Tianjin High People’s Court

Shandong High People’s Court

13

57

/

54

281

Ningbo Maritime Court

6

Dispute over contract of carriage of goods by sea or sea-connected waters

153

Dispute over contract for employment of seaman

Xiamen Maritime Court

No. of Cases Judged by Courts

Top 10 Causes of Action

(continued)

9

/

7

41

/

9

47

3

Dispute over freight forwarding contract on the sea or sea-connected waters

3

1

/

11

/

2

56

15

Dispute over contract for marine stores and spare parts supply

19

3

2

35

/

3

24

2

Dispute over liability for personal injury at sea

4

2

1

30

/

13

13

4

Dispute over marine insurance contract on the sea or sea-connected waters

/

/

/

1

/

/

30

4

Dispute over ship mortgage contract

6

1

/

27

/

3

18

5

Dispute over ship sales and purchases contract

/

/

1

12

/

20

12

3

Dispute over ship operation loan contract

(continued)

1

1

1

13

/

1

14

2

Dispute over charter party

Table of References lxxi

3

11

1

1

2

/

4

3

11

Guangdong High People’s Court

Hubei High People’s Court

Hainan High People’s Court

Fujian High People’s Court

Zhejiang High People’s Court

Guangxi Zhuang Autonomous Region High People’’s Court

4

/

6

/

Dispute over contract of carriage of goods by sea or sea-connected waters

2

Dispute over contract for employment of seaman

Liaoning High People’s Court

No. of Cases Judged by Courts

Top 10 Causes of Action

(continued)

2

6

/

/

1

16

/

Dispute over freight forwarding contract on the sea or sea-connected waters

1

3

1

/

1

1

/

Dispute over contract for marine stores and spare parts supply

4

1

2

/

0

3

1

Dispute over liability for personal injury at sea

2

13

/

/

5

3

/

Dispute over marine insurance contract on the sea or sea-connected waters

/

/

/

/

/

1

/

Dispute over ship mortgage contract

5

6

1

/

5

3

/

Dispute over ship sales and purchases contract

3

2

/

1

4

/

1

Dispute over ship operation loan contract

(continued)

2

1

/

/

4

3

/

Dispute over charter party

lxxii Table of References

2

/

1243

The Supreme People’s Court of China

Total

289

2

/

Petition Court (Sub-total)

253

2

2

/

Dispute over freight forwarding contract on the sea or sea-connected waters

146

/

/

/

Dispute over contract for marine stores and spare parts supply

108

/

/

/

Dispute over liability for personal injury at sea

89

/

/

/

Dispute over marine insurance contract on the sea or sea-connected waters

86

/

/

/

Dispute over ship mortgage contract

77

/

/

/

Dispute over ship sales and purchases contract

64

/

/

/

Dispute over ship operation loan contract

62

/

/

/

Dispute over charter party

The court system in China runs the so-called writs system, which means that the court will entertain and adjudicate a case if that falls in one of the statutory causes of action. Now, there are about 90 statutory causes of action for maritime cases, which may grow in the future. This Report only covers the cases/judgments of top 10 maritime causes of action assessed by number of cases/judgments, and the covered cases/judgments are about 2,420, representing about 75% of the cases/judgments analyzed for the year of 2016. The cases/judgments analyzed (about 3,240) refer to those which are accessible to the public via internet, and those cases/judgments are estimated to be 65-75% of all the cases/judgments adjudicated by the 11 maritime courts, their appeal courts (11) and the petition court (i.e., the Supreme People’s Court of China). 2 Nanjing Maritime Court was established at the end of 2019, so did not hand down any judgments in 2016. 3 As Nanjing Maritime Court was established at the end of 2019 and did not hand down any judgments in 2016, there was no appeal case to Jiangsu High People’s Court in 2016.

1

/

Dispute over contract of carriage of goods by sea or sea-connected waters

/

Dispute over contract for employment of seaman

Jiangsu High People’s Court3

No. of Cases Judged by Courts

Top 10 Causes of Action

(continued)

Table of References lxxiii

Guangzhou Maritime Court Administrative Judgment Anhui Changhui Transportation and Trade Company v. Maritime Safety Administration Xuwen (2015) Guang Hai Fa Xing Chu Zi No.4 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 13. Cause(s) of Action 193. Dispute over liability for ship collision damage. (Editor’s Note: This is an administrative case, which arose from collision between ships (a civil matter). So, the cause of action “193” is chosen for sake of convenience.) Headnote Affirming administrative penalty imposed by the Defendant Maritime Safety Authority after Authority’s finding that the Plaintiff’s vessel had caused the sinking of a fishing vessel. Summary The Defendant Maritime Safety Administration Xuwen (MSA Xuwen) issued an administrative penalty against the Plaintiff following an incident between the Plaintiff’s vessel “Changhui 88” and a fishing vessel. M.V. “Changhui 88” crossed paths with the fishing vessel at sea. Although the vessels did not collide, the fishing vessel subsequently sank. The sinking was probably caused by M.V. “Changhui 88” running over the fishing vessel’s deployed trawling gear, as a later investigation found line marks, consistent with fishing gear, on the bulbous bow of M.V. “Changhui 88” and the recovered trawl gear belonging to the sunken fishing vessel contained traces of hull paint that matched the paint used on the bow of M.V. “Changhui 88”. Additionally, interviews conducted later by MSA Xuwen showed that the on-duty officer standing lookout on M.V. “Changhui 88” had left the post around the time of the accident in question. Following the investigation and penalty, the Plaintiff brought this claim denying MSA Xuwen’s jurisdiction over the matter and disputing the relevant facts and evidence. The court, however, found that MSA Xuwen’s finding of fault in this matter was sufficiently supported by facts supported with proper evidence and that the administrative penalty against the Plaintiff was issued in compliance with regulatory statutes and under MSA Xuwen’s proper authority.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_1

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M. Davies and J. Lin

Judgment The Plaintiff: Anhui Changhui Transportation and Trade Company Domicile: Taoxin Town, Wuhu County, Wuhu, Anhui. Legal representative: JIANG Ya, general manager of the company. Agent ad litem: LEI Yingxi, lawyer of Guangdong Hongmian Law Firm. The Defendant: Maritime Safety Administration Xuwen Domicile: No.56, Haian Road, Haian Town, Xuwen County, Guangdong. Legal representative: PENG Qian, director. Agent ad litem: LV Wentong, male, living in Zhenjiang, Guangdong. Agent ad litem: HUANG Zhuo, lawyer of Guangdong Zhengda United Law Firm. The Plaintiff Anhui Changhui Transportation and Trade Company was dissatisfied with the case involving administrative penalty made by the Defendant Maritime Safety Administration Xuwen (hereinafter referred to as MSA Xuwen) and filed an administrative claim before the court on January 29, 2015 and supplemented materials on February 9, 2015. The court filed the case on March 4, 2015 and delivered a copy of statement of claim and notice of responding to claim to the Defendant on March 16, 2015. The court legally formed a collegiate panel and held a hearing in public for this case on March 31, 2015. Agent ad litem of the Plaintiff, LEI Yingxi, and agents ad litem of the Defendant, LV Wentong and HUANG Zhuo, attended the hearing. Now the case has been concluded. The Defendant made Maritime Administrative Penalty Decision of (2014) Yue Zhan Hai Shi Fa Zi No.080072 (hereinafter referred to as Administrative Penalty Decision) on October 10, 2014 and recognized the malfeasance of the Plaintiff as follows. At 0110 on September 14, 2013, M.V. “Changhui 88” collided with a fishing boat owned by LAN Zhixi at the water area of Qishuiduikai in Leizhou Zhanjiang. The collision caused five fishermen on the boat to fall into water; three fishermen were salved and two were missing. This constituted a maritime traffic accident graded as great accident class. Upon investigation, it was found that M.V. “Changhui 88” contacted with fishing net towline at the right side of stern of the fishing boat owned by LAN Zhixi conducting operation of trawling resulting in the subject fishing boat overturning and subsequently sinking. The fault, including the failure of navigator, MAO Donggen, on duty to keep regular watch and misfeasance of avoidance collision, were the main reasons causing the occurrence of the subject collision. Hence, M.V. “Changhui 88” should assume main liability. The above facts were proven by maritime traffic investigation inquiry record, Investigation Report of “9.14” Sinking of Fishing Boat in Leizhou Zhanjiang in North Sea Caused by Collision ((hereinafter referred to as investigation report), recognition of offending vessel in maritime traffic and conclusion of maritime traffic investigation etc. The above actions violated Article 10 of Maritime Traffic Safety Law of the People’s Republic of China, Article 2 Paragraph 1, Article 5, Article 8 Paragraph 1, Paragraph 3, Paragraph 4, Article 16, Article 18 Paragraph 1

Anhui Changhui Transportation and Trade Company v. Maritime Safety …

3

Sub-paragraph 3 of Convention on the International Regulations for Preventing Collisions at Sea, 1972 and Article 21 Sub-paragraph 1 and Sub-paragraph 2, Article 29 of On-duty Rules of Seamen of the People’s Republic of China. Therefore, the Defendant decided to give the Plaintiff an administrative penalty in the amount of RMB7000. The Plaintiff claimed that it was dissatisfied with the decision of administrative penalty and decided to file an administrative reconsideration before MSA Zhanjiang. As a result, MSA Zhanjiang made the decision of a maritime administrative reconsideration maintaining the decision of administrative penalty. The Plaintiff held that, firstly, the Defendant was not entitled to investigate the subject accident. The recognition of the administrative penalty decision that such accident fell into the scope of a great accident shall be investigated by provincial maritime institution or other branches and grass-root maritime institution as the affiliate of branches were merely entitled to govern small accidents, which failed to cause casualty or death of person. Secondly, evidence indicated in recognition of offending vessel in maritime traffic were not capable of proving that M.V. “Changhui 88” was the offending vessel. The Defendant failed to present evidence to prove the detailed position of the occurrence of collision and M.V. “Changhui” sailed across the subject water area. The accident water area (position: North Latitude 20°37′58″ and East Longitude 109°24′08″) nominated by the Defendant was the position where the sinking boat was found several days after the occurrence of the accident. However, the boat “Guibeiyu 91079” was the wooden boat and fishing net was not sufficient to fix the position of fishing boat and the fishing boat and fishing net will float under the influence of buoyance and sea tide. Therefore, the position of sinking of such vessel should not be identified as the location where the collision occurred. The record of AIS that M.V. “Changhui 88” sailed across the location of sinking failed to amount to that it sailed across the subject water area. According to the report of MSA Guangxi stating that the position of collision and sinking of vessel received by North Sea Maritime Search and Rescue Center was North Latitude 20°28.2′ and East Longitude 109°24′, which was the realest location provided by crew members of fishing boat at that time and should be identified as the location where such accident occurred while M.V. “Changhui 88” failed to sail across such sea area, of which the nearest distance was 10 nautical miles. The marks at front, left and right side of bulb bow were not possibly marks arising from the contact with fishing net. The Defendant had no evidence to prove that the characteristics of the offending vessel reported by the aggrieved boat were consistent with M.V. “Changhui 88”. The concentration of navigation of subject sea area was huge and no evidence was presented to prove whether the met fishing boat stated by the on duty third officer was M.V. “Guibeiyu 91079”. After the occurrence of the accident in dispute, M.V. “Guibeiyu 91079” and its fishing net had sunk into the sea, which would not be attached by paint when it was get out of water after a long period of immersion of seawater and tidal washing. The Defendant failed to make an explanation or provide relevant evidence in respect of whether the sampled paint was taken at first time by the inspection report and such sample was saved; so, the authenticity and legality of such sample should be challenged. The conclusion of

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the infrared spectrum inspection for the paint failed to have uniqueness and the offending vessel may use the paint having the same brand with such vessel. Thirdly, the conclusion of the maritime traffic investigation as to the accident process, reason and liability was not correct. Such investigation was made by the Defendant on the basis of the recognition of maritime traffic offending vessel and its attached evidence. The grounds relied by the recognition of maritime traffic offending vessel was incorrect, and the Defendant also failed to present further evidence. The Defendant regarded M.V. “Changhui 88” as the give-way vessel but failed to adduce evidence to prove that such vessel had the obligation to give way. Since M. V. “Changhui 88” was not the offending vessel of the accident in dispute without the grounds to bear the liability to such accident, the recognition that such vessel assumed the main liability of the accident was incorrect. Fourthly, M.V. “Changhui 88” was not the offending vessel, and the Defendant should be fined. The evidence relied on by the Defendant was insufficient to prove that M.V. “Changhui 88” was the offending vessel. If M.V. “Changhui 88” was not the offending vessel, the actual grounds that the obligation of keeping regular watch and taking appropriate measures to avoid collisions failed to be performed and was hence not present. The recognition of the administrative decision as to the fact, cause, and liability was incorrect. Therefore, the Plaintiff required the court to decide to revoke Maritime Administrative Penalty Decision (2014) Yue Zhan Hai Shi Fa Zi No.080072 made by the Defendant and the Defendant should bear the court fees of this case. The Plaintiff submitted the following evidence within the period of adducing evidence: 1. Maritime Administrative Penalty Decision and Maritime Administrative Reconsideration Decision, to prove the fact that the Defendant made the administrative penalty and the Plaintiff filed an administrative reconsideration; 2. recognition of maritime traffic offending vessel, to prove that the Defendant was not entitled to have jurisdiction over the accident in dispute and such recognition of facts lacked evidence and therefore it was wrongful to apply the Provisions of Investigation and Handling on the Case of Maritime Traffic Hit and Run for this case; 3. Notice of Requiring the Crew of M.V. “Changhui 88” to Accept the Maritime Investigation of (2014) Zhan Xu Hai Shi No.1, to prove that the Defendant recognized the offending vessel first and then made an accident investigation again about the subject accident, which violated the statutory procedure; 4. conclusion of maritime traffic investigation, to prove that the Defendant failed to have the right to issue an investigation conclusion for the subject accident and there was lack of evidence for the recognition of accident; 5. advice on safety and administration of (2014) Zhan Xu Hai Shi No.10, to prove the fact that the Defendant issued safety and administrative advice; 6. AIS video of M.V. “Changhui 88”, to prove the situation of water area across which M.V. “Changhui 88” sailed at the material time; 7. report of MSA Guangxi in relation to the joint rescue action of “Guibeiyu 91079” led by Director LI Guokai, to prove that M.V. “Changhui 88” did not sail across the accident water area; 8. photo of M.V. “Changhui 88”, to prove that the marks of M. V. “Changhui 88” were not consistent with the recognition of the Defendant; 9. statement of fact made by the second officer, MAO Donggen, to prove that the consultant record made by the Defendant was not true.

Anhui Changhui Transportation and Trade Company v. Maritime Safety …

5

The Defendant argued as follows: 1. the evidence of the administrative penalty were sufficient and confirmed, applied the law correctly and the procedure was legal. As the malfeasance in this case occurred in the jurisdiction of the Defendant, the Defendant had the jurisdiction to make administrative penalty. Article 10 Paragraph 2 of Regulations of the People’s Republic of China on the Investigation and Handling of Maritime Traffic Accidents provided that maritime traffic accidents taking place outside the water area of the port should be investigated by MSA adjacent to the port or of the first arrival port at which the vessel arrive. The right to make investigation of each branch (maritime department) under MSA Guangdong should be defined by each branch. Working Unit (Department) Responsibility of MSA Zhanjiang (in trial) (Yue Zhan Hai Shi Ren [2007] No.12) provided that the right of investigation possessed by MSA Xuwen was limited to the investigation against the accidents below great maritime traffic accidents (not including great maritime traffic accident). Currently, such limits were still being performed. Given that the accident in dispute fell within the scope of great accident, the Defendant had the right to make an investigation against the accident. The fact of malfeasance indicated by Administrative Penalty Decision derived from the accident investigation report and the fact of malfeasance recognized by the conclusion were based on the accident investigation report and the conclusion. The accident investigation report and the conclusion were professional advice issued by the competent authorities in accordance with the statutory rights and procedures. The fined actions of violation were failure to keep regular watching and take measures properly that resulted in the collision, and the Defendant made an administrative penalty in accordance with Maritime Traffic Safety Law of the People’s Republic of China, Convention on the International Regulations for Preventing Collisions at Sea 1972, On-duty Rules of Seamen of the People’s Republic of China and Provisions of the People’s Republic of China on Marine and Maritime Administrative Punishments etc. Therefore, the Defendant applied the law correctly. The procedure of making an administrative penalty by the Defendant was legal; it legally fulfilled the obligation to give notice and take and review the argument of the Plaintiff. Meanwhile, the relevant legal papers were all delivered to the Plaintiff. 2. Maritime Traffic Offending Vessel Recognition and Maritime Traffic Accident Investigation Conclusion were both supported by evidence legally acquired by the investigation. The Defendant legally investigated the maritime traffic accident in dispute on the basis of the statutory rights and the collection, establishment, analysis and demonstration of relevant evidence materials were performed in accordance with the statutory procedure. The Defendant collected the statements of parties concerned, record of AIS, report of exploration for sinking vessel, record of inspection, inspection report of paints, etc. and made a professional conclusion According to the fix of evidence and technical analysis and demonstration and facts including the time, place, process, and consequence of the accident as well as liability of parties concerned. The accident investigation report had described the process of the investigation of the accident in detail and described evidence and investigation conclusion in accordance with the analysis by special technology. The points of view stated in the pleadings of the Plaintiff were the sole and unilateral points of

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view and failed to be supported by legally effective evidence; hence, it could not deny evidence legally taken by the accident investigation. The Defendant required the court to reject the claims of the Plaintiff. The Defendant submitted the following evidence within the period of adducing evidence: 1. two sets of notice of malfeasance, penalty decision and proof of service, to prove the legality of administrative procedure; 2. copy of certificate of nationality of ship of M.V. “Changhui 88”, certificate of competency of two crew members and service book, to prove that the Plaintiff was the operator of M.V. “Changhui 88” and the status of crew members; 3. two sets of the consulting record, to prove the condition of crew members and vessel before and after the occurrence of accident; 4. recognition of maritime traffic offending vessel, to prove the recognition and its evidence that M.V. “Changhui 88” was the offending vessel; 5. investigation report, to prove that the investigation situation and consequence and the presence of malfeasance of concerned party; 6. conclusion of Maritime Traffic Investigation, to prove the accident condition and cause and the presence of malfeasance; 7. Regulations of the People’s Republic of China on the Investigation and Handling of Maritime Traffic Accidents and Working Unit (Department) Responsibility of MSA Zhanjiang (in trial) (Yue Zhan Hai Shi Ren [2007] No.12), to prove that the Defendant had jurisdiction over the investigation of the maritime accident; 8. Article 84 and Article 85 of Provisions of the People’s Republic of China on Marine and Maritime Administrative Punishments, to prove that the Defendant had jurisdiction over the administrative penalty in this case; 9. detailed print of filing and investigation report, to prove that the procedure of administrative penalty made by the Defendant was legal; 10. inspection report, to prove that M.V. “Changhui 88” was the offending vessel; 11. report with regard to the sinking accident of the fishing boat “Guibeiyu 91079” issued by Guangxi Searching and Rescue Office, to prove the sea area of occurrence of accident. After cross-examination, the Defendant confirmed the legality and authenticity of evidence varying from evidence 1 to 5 but dissented to the fact that was intended to be proven. The Defendant did not confirm the authenticity and legality of evidence 6 and had objection to authenticity, legality and relevancy of evidence 7 and 8. Defendant further considered that evidence 7 failed to prove the accurate location of the vessel, and evidence 8 failed to indicate that the ship’s name and location and differences were present between the condition indicated and that when investigating. The Defendant had objection to the relevancy of evidence 9 as it was not able to prove the reality of the stated facts. The Plaintiff recognized the authenticity and legality of evidence 1 submitted by the Defendant but considered the administrative penalty illegal. The Plaintiff had no objection to authenticity, legality and relevancy of evidence 2 and 11 while it had demurral against the authenticity of evidence 3 as the original was absent to check. The Plaintiff had no dissent to the authenticity of evidence 4, 5 and 6 while it refused to recognize the basic fact and evidence. The legality of evidence 7 was not challenged. The Plaintiff had objection to the proven content of evidence 8 as it was not capable of prove the Defendant had jurisdiction over the great accident. The Plaintiff challenged the legality of evidence 9 as it was of the view that evidence 9

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was the internal documents of the Defendant. The Plaintiff had the demurral against the legality of evidence 10 as the competence of inspection authority was considered illegible; such inspection report merely had a conclusion without embodying the process from taking samples to detailed analysis. The court recognizes the above evidence as follows. The court had no objection to the authenticity of evidence 1–5 and evidence 9 submitted by the Plaintiff; hence, the court confirms its probative force while the facts waiting for proof should be recognized comprehensively coupled with other evidence. Evidence 6 submitted by the Plaintiff is electronic evidence, and the Defendant denied its authenticity and legality as the Plaintiff failed to provide the original carrier of such electronic data and relevant evidence also failed to be presented. Hence, the court does not accept such evidence. Evidence 7 is the materials acquiring from a public website. The Defendant had objection to the facts to be proved but confirmed such report true. Hence, the court confirms the evidential characteristics. Evidence 8 was electronic evidence. Since it lacked proof, including the time of picturing and the location, hence relevancy is not confirmed with this case. In this respect, the court refuses to accept this evidence. The Plaintiff had demurrer against the legality of evidence 9 submitted by the Defendant as such evidence is the internal filing and review procedure during the process of making administrative penalty by the Defendant, complying with the working procedure of administrative competent authority, which had relevancy with this case. The court confirms its probative force. Although evidence 10 has the original to check, the content to be proven by such inspection report shall be recognized comprehensively coupled with other evidence. The Plaintiff had no objection to the authenticity of other evidence, and the court confirms the probative force. The fact in this case proved by all evidence shall be recognized comprehensively on the basis of the situation of the court hearing and other evidence. Upon the hearing and finding, at 1203 on September 18, 2013, the staff of the Defendant inquired about the third officer, YU Taibin, of this vessel in respect of the subject accident on M.V. “Changhui 88” anchored at Zhengzhifa dock in Jieyang, Guangdong and YU Taibin signed on the enquiry record, which provided the statement of YU Taibin that he was on duty on the bridge between 2300 September 13 and 0200 September 14 and responsible for the navigation, giving way and supervising the temperature of oil and water. The second officer, MAO Donggen, was also on duty with YU Taibin, who was responsible for the commanding navigation. About 0100 on September 14, M.V. “Changhui 88” crossed with the fishing boat, of which the side part was red and the above part was green. The nearest distance varied from 150 to 200 meters when avoiding conflict, during which the second officer commanded at the side of vessel and told the vessel not to turn right to the effect that the vessel should turn left. M.V. “Changhui 88” turned left and cross the stern of fishing boat without any abnormality, during which the distance of the right side of M.V. “Changhui 88” with the stern of fishing boat was 130 meters. The crew members on M.V. “Changhui 88” saw the operation of trawling conducted by two or three members at the stern when avoiding collision but failed to saw the name of vessel. The fishing boat was lighting green side light and mast head light. M.V. “Changhui 88” was found by crew members not to

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contact the fishing net in the course of avoiding collision without any abnormality, during which the second officer said nothing after a glance to the left side of M.V. “Changhui 88” for one minute. No vessels were present and the closest vessel was that fishing boat during the on-duty period. At 1045 on September 19, the staff of the Defendant made an inquiry to the second officer, MAO Donggen, of M.V. “Changhui 88” at municipal port in Jieyang, Guangdong, who signed on the inquiry record. The inquiry record provided the statement of MAO Donggen that M.V. “Changhui 88” did have the new marks indicating contact with the fishing line and the net and had the possibility that our vessel contact with the fishing net of the fishing boat at the stern, causing the occurrence of accident. However, he failed to see the circumstance at the material time as the accident might take place at on-duty time when he left the bridge to use the restroom, which might have a few minutes. Thereafter, I heard nothing when he went back to the bridge. MAO Donggen also clarified that he was on duty for commanding navigation during the period from 2300 September 13 to 0500 September 14 and YU Taibin was navigating and then turned to MAO Donggen for navigation from 0200 September 14. On January 6, 2014, the Defendant issued the Notice of Requiring Crew Members on M.V. “Changhui 88” to Participate in Maritime Investigation to Wuhu Ruzheng Investment Consultant Ltd. and required it to notify crew members of Master ZHONG Kanlai, second officer MAO Donggen and on-duty AB (third officer) YU Taibin on M.V. “Changhui 88” to participate in the maritime investigation in respect of the accident in dispute. At the same day, the Defendant made the Maritime Traffic Offending Recognition of No.201301 providing that, after collection of evidence, M.V. “Changhui 88” was the offending vessel of the collision occurred at the adjacent water area of Qishui Leizhou Zhanjiang (North Latitude 20°37′58″, East Longitude 109°24′08″) on September 14, 2013 in accordance with Provisions for Investigation and Handling for Cases of Maritime Traffic Hit and Run. The evidence is recognized as follows. (1) Data Record of AIS: M.V. “Changhui 88” sailed across the water area in dispute at the material time; (2) field inspection indicates that the left side of the bulb bow of M.V. “Changhui 88” had express new marks; (3) on-duty crew members stated that M.V. “Changhui 88” once came across a fishing boat having consistent character with the subject fishing boat at the material time and the description of crossing of both vessels was basically consistent with that of fishing boat; (4) inspection result of paint was that the infrared spectrogram and constitution of the black external paint attached at the fishing net of the fishing boat was identical to that of the ostensible black paint of the left side of bulb bow of M.V. “Changhui 88”; (5) on-duty second officer, MAO Donggen, comprehensively analyzed and stated that coupled with the video of AIS that the left side of M.V. “Changhui 88” did have new marks arising from contact with the line and fishing net, which could be the fishing net located in the stern of the fishing boat. On January 23, 2014, the Defendant made the Investigation Report of Collision and Sinking of North Sea Fishing Boat Occurred in Leizhou, Zhanjiang, indicating the operation of investigation and acquired thirty six sets of evidence, twenty eight sets of photos and nine sets of videos by investigating and consulting relevant crew

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members, field inspecting the subject vessel, testing the sinking vessel and getting out of the fishing net and taking samples of the paint for inspection and check. On January 27, 2014, the Defendant made the Maritime Traffic Investigation Conclusion No.3 in 2013, indicating that at 0110 on September 14, 2013, the contact occurred at North Latitude 20°37′58″ and East Longitude 109°24′08″ resulting in the sinking of fishing boat owned by LAN Zhixi, where five people fell into sea water. Three people were rescued, and two people were missing. The cause of the accident in dispute was the failure of M.V. “Changhui 88” as the give-way vessel to keep regular lookout and avert the boat engaged in fishing substantially and comfortably, which was also the main cause. The secondary cause of the occurrence of accident was the failure of the subject fishing boat to maintain regular lookout. From this perspective, it was recognized that M.V. “Changhui 88” shall assume primary liability while the fishing boat should bear the secondary liability in this accident. On the same day, the Defendant made Safe Management Advice of (2014) Zhan Xu Hai Shi No.10. On April 24, the Defendant issued Notice of Maritime Malfeasance of (2014) Yue Zhan Hai Shi Fa Zi No.080072 to the Plaintiff, informing the Plaintiff that it could make a clarification within three days upon receipt of such Notice, and if the period of clarification expired, the above rights should be deemed as waived. Such notice was delivered to the Plaintiff on September 10. On October 10, the Defendant made Maritime Administrative Penalty Decision of (2014) Yue Zhan Hai Shi Fa Zi No.080072 and delivered to the Plaintiff on October 20. The Plaintiff was dissatisfied with the administrative penalty and filed a reconsideration before MSA Zhanjiang. MSA Zhanjiang made Maritime Administrative Reconsideration on January 12, 2015, affirming the administrative penalty made by the Defendant. The owner of M.V. “Changhui 88” was Wuhu Ruzheng Investment and Consultation Ltd., and the Plaintiff was the operator of such vessel. The member certificate indicated MAO Donggen as the second officer of such vessel on August 19, 2013 and YU Taibin as the third officer of such vessel on July 18, 2013. The court holds that this case relates to the dispute over the Plaintiff’s dissatisfaction of a maritime administrative penalty made by the Defendant. Three issues between the Plaintiff and Defendant are concluded as follows. 1. Whether the Defendant is entitled to investigate the accident in dispute. 2. Whether M.V. “Changhui 88” sailed across the place of occurrence of accident. 3. Whether the evidence relied on by the Defendant for recognition of maritime administrative malfeasance is sufficient. With regard to the issue whether the Defendant has the right to investigate the accident in dispute, this accident falls into the scope of a great accident because two people are missing in the accident in dispute According to Measures for Water Traffic Accident Statistics (Ministry of Transport No.5). According to Article 84 of Provisions of the People’s Republic of China on Marine and Maritime Administrative Punishments, cases of maritime administrative penalty are subject to the jurisdiction of maritime administrative authority located at the place where the maritime administrative malfeasance occurred unless otherwise provided by the law and administrative regulation and these provisions and Article 85 Paragraph 2 of

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Provisions of the People’s Republic of China on Marine and Maritime Administrative Punishments, maritime administrative penalties in their jurisdiction, a warning to the legal person or other entity or the fine below the amount of RMB10,000 is subject to the jurisdiction of maritime departments belonging to all classes MSA. Article 9 of the part of responsibility of MSA Xuwen in the Working Unit (Department) Responsibility of MSA Zhanjiang (in trial) (2007) Yue Zhan Hai Shi Ren No.12 provides that MSA Xuwen is responsible for the investigation of accidents below great maritime traffic (not including great maritime traffic accident). The original name of the Defendant was MSA Xuwen. Therefore, the Defendant has the right to investigate and handle the accident in dispute and make the administrative penalty to the malfeasance in dispute. The argument of the Plaintiff that the Defendant fails to have jurisdiction over the accident in dispute lacks legal grounds and hence is untenable. Regarding the issue whether M.V. “Changhui 88” sailed across the place of the accident in dispute, the Plaintiff submitted the report that the director, LI Guokai, commanded the action of joint rescue of fishing boat “Guibeiyu 91079” indicated on the website of MSA Guangxi, to prove that M.V. “Changhui 88” did not sail across the water area of the accident indicated by such report. The Defendant submitted the report concerning the situation of sinking of fishing boat at the jurisdiction of Guangdong issued by Guangxi Maritime Searching and Rescue Center, intending to show that the report in relation to the place where the accident in dispute occurred is incorrect. After the investigation, on September 14, 2013, Guangxi Maritime Searching and Rescue Center reported the report concerning the situation of sinking of fishing boat in the jurisdiction of Guangdong to the general on-duty office of Autonomous Regional People's Government, providing that three fishermen of the boat “Guibeiyu 91079” were found and rescued by the fishing boat 15 nautical miles South East of Xieyang island of north sea. It was said by the rescued persons that such boat was collided ino and sank by an uncertain vessel in the adjacent water area 20 nautical miles at south east of Xieyang island of North Sea (about North Latitude 20°38′, East Longitude 109°24′). The website of MSA Guangxi issued a report that the director, LI Guokai, commanded the action of joint searching and rescue for the fishing boat “Guibeiyu 91079” on 16 September 2013 indicating that at 0715 on September 14, the maritime searching and rescue center of North Sea received the report that the fishing boat “Guibeiyu 91079” had been collided into and sank at North Latitude 20°28′2″ and East Longitude 109°24′ (in the jurisdiction of Guangdong Zhanjiang). Five fishermen were on board. Three fishermen were rescued, and two men were missing. The report on the website is inconsistent with that of the Report of Sinking of Fishing Boat “Guibeiyu 91079” in Guangdong jurisdiction. The report on the website is hearsay testimony without any other evidence to prove the place of the accident to be true on the basis of the probative force. The probative force of such report shall overweight that of the report on the website, which shall not be relied on to recognize the place of accident. Therefore, the conclusion of the Plaintiff that it regards the place reported on the website as evidence for proving M.V. “Changhui 88” failed to sail across such place and making the inference that M.V.

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“Changhui 88” had never sailed across the subject place is untenable. Besides, the recognition as to the place of accident considers that the data record mainly relied on by the Defendant may be mutually proven by the statement of on-duty crew member, YU Taibin, at the material time. M.V. “Changhui 88” did come across a fishing boat with a satisfying character with the aggrieved fishing boat at the material water area at 0110 on September 14, 2013. Therefore, the claims of the Plaintiff that M.V. “Changhui 88” failed to sail across the place of accident in dispute lack of support of evidence and are untenable legally. With regard to whether the evidence of recognition of the maritime administrative malfeasance by the Defendant are sufficient, the Defendant submitted seven pieces of evidence, including the consulting record of on-duty AB, MAO Donggen and YU Taibin, the recognition of maritime traffic offending vessel, Investigation Report, Maritime Traffic Investigation Conclusion, Inspection Report and Report of Sinking of Fishing Boat “Guibeiyu 91079” in Guangdong jurisdiction issued by Guangxi Maritime Searching and Rescue Center Office to prove the establishment of the maritime administrative malfeasance of the Plaintiff. All the recognition of maritime traffic offending vessel, Investigation Report and Maritime Traffic Investigation Conclusion are the results of analysis and recognition made by the Defendant on the basis of the investigation and collected evidence coupled with professional knowledge. While they are not direct and objective evidence to recognize the maritime administrative malfeasance, its conclusion is based on the collected objective evidence during the process of investigation against the accident and professional analyses, coupled with the statement of the on-duty fishermen as to the situation of crossing with a fishing boat at the material time in the consulting record and the inspection conclusion that the black external paint attached at the fishing net of the fishing boat has the same infrared spectrogram and composition with the ostensible black paint of the mark at the left side of bulb bow of M.V. “Changhui 88”, complete an evidence chain to recognize M.V. “Changhui 88” as the offending vessel in dispute. Together with the consulting record of on-duty navigator, MAO Donggen, made by the Defendant, MAO Donggen stated that he left the on-duty job for several minutes before and after the occurrence of the accident without other men to act, hence the recognition of the Decision of Penalty that the failure of the on-duty navigator to maintain regular look-out and take proper measures to avoid collision, etc. are the primary causes of this accident has factual grounds. Since the Plaintiff has no evidence to override the facts recognized by the Defendant in the Administrative Penalty Decision, the contentions of the Plaintiff that M.V. “Changhui 88” is not the offending vessel and it is wrongful for the Penalty Decision to recognize the liability and the fact of administrative malfeasance lack support of evidence and are not supported legally. In conclusion, the decision of maritime administrative penalty made by the Defendant has established evidence, applied the law and regulation correctly, and complied with the statutory procedures. The judgment is specified as below in accordance with Article 69 of the Administrative Litigation Law of the People’s Republic of China. The judgment is as follows:

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Reject the claims of the Plaintiff, Anhui Changhui Transportation and Trade Company. Court acceptance fee in the amount of RMB100, shall be born by the Plaintiff, Anhui Changhui Transportation and Trade Company. If either party is dissatisfied with this judgment, it may submit a petition of appeal and copies to the court on the basis of the number of the opposite party and file the appeal before the Guangdong High People’s Court within fifteen days from the date of service of this judgment. Presiding Judge: XIONG Shaohui Judge: ZHANG Kexiong Acting Judge: YANG Yaxiao July 3, 2015 Clerk: LU Shiying

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Guangdong High People’s Court Administrative Judgment Anhui Changhui Transportation and Trade Company v. Maritime Safety Administration Xuwen (2015) Yue Gao Fa Xing Zhong Zi No.551 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 1. Cause(s) of Action 193. Dispute over liability for ship collision damage. (Editor’s Note: This is an administrative case, which arose from collision between ships (a civil matter). So, the cause of action “193” is chosen for sake of convenience.) Headnote Affirming lower court decision affirming administrative penalty imposed by the Defendant Maritime Safety Authority after Authority’s finding that the Plaintiff’s vessel had caused the sinking of a fishing vessel. Summary The Defendant Maritime Safety Administration Xuwen (MSA Xuwen) issued an administrative penalty against the Plaintifffollowing an incident between the Plaintiff’s vessel “Changhui 88” and a fishing vessel. M.V. “Changhui 88” crossed paths with the fishing vessel at sea. Although the vessels did not collide, the fishing vessel subsequently sank. The sinking was probably caused by M.V. “Changhui 88” running over the fishing vessel’s deployed trawling gear, as a later investigation found line marks, consistent with fishing gear, on the bulbous bow of M.V. “Changhui 88” and the recovered trawl gear belonging to the sunken fishing vessel contained traces of hull paint that matched the paint used on the bow of M.V. “Changhui 88”. Additionally, interviews conducted later by MSA Xuwen showed that the on-duty officer standing lookout on M.V. “Changhui 88” had left his post around the time of the accident in question. Following the investigation and penalty, the Plaintiff brought this claim denying MSA Xuwen’s jurisdiction over the matter and disputing the relevant facts and evidence. The court of first instance found that MSA Xuwen’s finding of fault in this matter was sufficiently supported by facts supported with proper evidence and that the administrative penalty against the Plaintiff was issued in compliance with regulatory statutes and under MSA Xuwen’s proper authority. The Plaintiff appealed, making several contentions, including that MSA’s accident investigation was not made objectively, that MSA failed to provide the court below with all the relevant evidence it possessed, and that the accident could not possibly have occurred in the manner that MSA alleges. The appeal court rejected the Plaintiff-Appellant’s claims and found that MSA properly and objectively

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investigated the accident and provided sufficient evidence to prove that the Plaintiff-Appellant’s vessel was at fault for the accident because of failure to maintain a lookout while underway. MSA’s conclusion was supported by a strong factual basis and complied with all laws and regulations concerning administrative procedure. Therefore, the original judgment upholding MSA’s issuance of an administrative penalty against the Plaintiff-Appellant was affirmed and court costs were also assessed against the Plaintiff-Appellant.

Judgment The Appellant (the Plaintiff of first instance): Anhui Changhui Transportation and Trade Company Domicile: Taoxin Town, Wuhu County, Wuhu, Anhui. Legal representative: JIANG Ya, general manager of the company. Agent ad litem: LEI Yingxi, lawyer of Guangdong Hongmian Law Firm. The Respondent (the Defendant of first instance): Maritime Safety Administration Xuwen Domicile: No. 56, Hainan Road, Hainan Town, Xuwen County, Guangdong. Legal representative: PENG Qian, director. Agent ad litem: HUANG Zhuo, lawyer of Guangdong Zhengda United Law Firm. Agent ad litem: LV Wentong, male, Han, living in Xiashan District, Zhanjiang, Guangdong. The Appellant Anhui Changhui Transportation and Trade Company was dissatisfied with the administrative judgment of (2015) Guang Hai Fa Xing Chu Zi No.4 made by the Guangzhou Maritime Court in respect of a case about an administrative penalty made by the Respondent Maritime Safety Administration Xuwen (hereinafter referred to as MSA Xuwen) and raised an appeal before the court. The court legally formed a collegiate panel and tried this case. Now the case has been concluded. The court of first instance was of the view that this case relates to a dispute over the Plaintiff’s dissatisfaction of a maritime administrative penalty made by the Defendant. Three issues in this dispute were concluded as follows: 1. whether the Defendant was entitled to investigate the accident involved in the dispute. 2. Whether M.V. “Changhui 88” sailed across the place of where the accident occurred. 3. Whether the evidence relied on by the Defendant for recognition of the maritime administrative malfeasance was sufficient. With regard to the issue whether the Defendant had the right to investigate the accident in dispute, this accident fell into the scope of a great accident because two people were missing in the accident in the dispute According to Measures for Water Traffic Accident Statistics (Ministry of Transport No. 5). According to Article 84 of the Provisions of the People’s Republic of China on Marine and Maritime

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Administrative Punishments that cases of maritime administrative penalty are subject to the jurisdiction of maritime administrative authority located at the place where the maritime administrative malfeasance occurred unless otherwise provided by the law, administrative regulations and these provisions and Article 85 Paragraph 2 of the Provisions of the People’s Republic of China on Marine and Maritime Administrative Punishments that maritime administrative penalty in the jurisdiction, which was a warning to the legal person or other entity or a fine below the amount of RMB10,000 was subject to the jurisdiction of maritime departments belonging to all classes MSA. Article 9 of the part of responsibility of MSA Xuwen in the Working Unit (Department) Responsibility of MSA Zhanjiang (in trial) of (2007) Yue Zhan Hai Shi Ren No.12 provided that MSA Xuwen was responsible for the investigation of accidents below great maritime traffic (not including great maritime traffic accident). The original name of the Defendant was MSA Xuwen. Therefore, the Defendant had the right to investigate and handle the accident in dispute and make the administrative penalty to the malfeasance in dispute. The argument of the Plaintiff that the Defendant failed to have jurisdiction over the accident in dispute lacked legal grounds and hence was untenable. Regarding the issue whether M.V. “Changhui 88” sailed across the place of the accident in dispute, the Plaintiff submitted the report that the director, LI Guokai, commanded the action of joint rescue of the fishing boat “Guibeiyu 91079” indicated on the website of MSA Guangxi. This intended to prove M.V. “Changhui 88” did not sail across the water area of accident indicated by such report. The Defendant submitted the report concerning the situation of sinking of the fishing boat at the jurisdiction of Guangdong issued by Guangxi Maritime Searching and Rescue Center. This intended to show that the report in relation to the place where the accident in dispute occurred was incorrect. After the investigation, on September 14, 2013, Guangxi Maritime Searching and Rescue Center reported the report concerning the situation of the sinking of the fishing boat at the jurisdiction of Guangdong to the general on-duty office of the Autonomous Regional People’s Government. The report provided that three fishermen of “Guibeiyu 91079” were found and rescued by the fishing boat 15 nautical miles to South East of Xieyang island of North Sea. It was said by the rescued persons that such boat was collided into and sunk by an uncertain vessel at the adjacent water area 20 nautical miles at south east of Xieyang island of North Sea (about North Latitude 20°38′, East Longitude 109°24′). The website of MSA Guangxi issued a report that the director, LI Guokai, commanded the action of joint searching and rescue for fishing boat “Guibeiyu 91079” on September 16, 2013. The report indicated that at 0715 on 14 September, the maritime searching and rescue center of the North Sea received the report that the fishing boat “Guibeiyu 91079” had been collided into and sank at North Latitude 20°28′2″ and East Longitude 109°24′ (in the jurisdiction of Guangdong Zhanjiang). Five fishermen were on board. Three men were rescued, and two men were missing. The report on the website was inconsistent with that of the Report of Sinking of Fishing Boat “Guibeiyu 91079” in Guangdong jurisdiction. The report on the website was hearsay testimony without any other evidence to prove the place of accident to be true on the basis of the probative force.

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The probative force of such report should overweight the probative force of the report on the website, which should not be relied on to recognize the place of accident. Therefore, the conclusion of the Plaintiff was that it regards the place reported on the website as evidence for proving M.V. “Changhui 88” failed to sail across such place and made the inference that M.V. “Changhui 88” had never sailed across the subject place is untenable. Besides, the recognition as to the place of accident considered that the data record mainly relied on by the Defendant could be mutually proved by the statement of on-duty crew member YU Taibin at the material time. M.V. “Changhui 88” did come across a fishing boat with a satisfying character with the aggrieved fishing boat at the material water area at 0110 on September 14, 2013. Therefore, the claims of the Plaintiff that M.V. “Changhui 88” failed to sail across the place of accident in dispute lacked support of evidence and were legally untenable. With regard to whether the evidence of recognition of maritime administrative malfeasance by the Defendant was sufficient, the Defendant submitted seven pieces of evidence, including the consulting record of on-duty AB MAO Donggen and YU Taibin, the recognition of maritime traffic offending vessel, Investigation Report, Maritime Traffic Investigation Conclusion, Inspection Report and Report of Sinking of Fishing Boat “Guibeiyu 91079” in Guangdong jurisdiction issued by Guangxi Maritime Searching and Rescue Center Office to prove the establishment of maritime administrative malfeasance of the Plaintiff. All the recognition of maritime traffic offending vessel, Investigation Report and Maritime Traffic Investigation Conclusion were the result of analysis and recognition made by the Defendant on the basis of the investigated and collected evidence coupled with professional knowledge. While they were not direct and objective evidence to recognize the maritime administrative malfeasance, its conclusion was based on the collected objective evidence during the process of investigation against the accident and professional analyses coupled with the statement of the on-duty fishermen as to the situation of crossing with a fishing boat at the material time in the consulting record and the inspection conclusion that the black external paint attached at the fishing net of the fishing boat had the same infra-red spectrogram and composition with the ostensible black paint of the mark at the left side of bulb bow of M.V. “Changhui 88.” The aforementioned completed an evidence chain that recognized M.V. “Changhui 88” as the offending vessel in dispute. Together with the consulting record of on-duty navigator, MAO Donggen, made by the Defendant, MAO Donggen stated that he left the on-duty job for several minutes before and after the occurrence of the accident without other men to act, hence the recognition of the decision of penalty that the failure of the on-duty navigator to maintain regular look-out and take improper measures to avoid collision etc. were the primary cause of this accident had factual grounds. Since the Plaintiff had no evidence to override the facts recognized by the Defendant in Administrative Penalty Decision, the contentions of the Plaintiff that M.V. “Changhui 88” was not the offending vessel and it was wrongful for Administrative Penalty Decision to recognize the liability and the fact of administrative malfeasance lacked supporting evidence and were not supported legally.

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In conclusion, the decision of the maritime administrative penalty made by the Defendant had established evidence, applied the law and regulation correctly, and complied with statutory procedures. In accordance with Article 69 of Administrative Litigation Law of the People’s Republic of China, the judgment of first instance was as follows: reject the claims of the Plaintiff Anhui Changhui Transportation and Trade Company. The Appellant Anhui Changhui Transportation and Trade Company was dissatisfied with the original instance and filed an appeal before the court and stated as follows. Firstly, the Respondent derogated from provisions of Administrative Litigation Law of the People’s Republic of China, namely, it refused to provide objective facts and evidence to the Appellant and the court of first instance for proof as to whether the action of the Respondent was illegal. In first instance, evidence submitted by the Respondent was merely two sets of a consulting record and an inspection report. The Report of Sinking of Fishing Boat “Guibeiyu” in Guangdong jurisdiction issued by Guangxi Maritime Searching and Rescue Center Office belonged to the objective facts and evidence materials of the administrative actions in dispute while the Inspection Conclusion merely presented the conclusion of Inspection Conclusion without the process of inspection like sample-taking, inspection and evidence. The Appellant considered that the above three pieces of evidence could not support the conclusion issued by Investigation Report of Sinking of Fishing Boat in North Sea in Leizhou Zhanjiang 9.14; namely, M.V. “Changhui” was the offending vessel that collided with the fishing boat owned by LAN Zhixi on September 14, 2013. Secondly, Investigation Report of Sinking of Fishing Boat in North Sea in Leizhou Zhanjiang 9.14 should not act as factual grounds for Maritime Administrative Penalty Decision in dispute. Such report was the subjective recognition of the Respondent rather than the objective evidence materials to prove the violation of law in dispute committed by the Appellant. Thirdly, during the first instance, the Respondent had enormous investigation materials while the Respondent expressly refused to present to the court. The Respondent, as the investigation authority, had the obligation to investigate the entire accident, including consulting crew members of both parties during the first time and collecting other investigation materials after the occurrence of accident in dispute. The above materials were the objective grounds whereby the Respondent recognized that the fishing boat owned by LAN Zhixi collided with the vessel of the Appellant. However, the Defendant refused to submit the above investigation materials to the court and the Appellant; this contravened the provisions of Administrative Litigation Law of the People’s Republic of China. Given that the Respondent had the first hand materials but refused to submit them, the Appellant considered that the investigation materials of the Respondent had evidence not to support such Investigation Report. Fourthly, the time of the collision had not been established. The Investigation Report in dispute actually was based on the place of sinking to establish the location of collision, but the collided vessel had no possibility to sink immediately after the collision According to the nautical experience and relevant common sense, namely, due to certain sealed room in the body of the fishing boat caused some auxiliary buoyance. The fishing boat would sink after

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some period of drifting. Meanwhile, the owner of the fishing boat stated that the boat in dispute sank ten minutes after the occurrence of the collision. Because the statement of the owner that the fishing boat was overridden by the wind with the result that the fishing boat should drift for a distance under the gigantic internal influence, the place of collision and sinking could not be located in the same place. Sixthly, the contact of M.V. “Changhui” with the fishing net of fishing boat could not possibly cause the overriding of such boat. According to the statement of the owner, the fishing boat was overridden by the line of a big vessel rather than a direct collision with the fishing boat in dispute. Since some fishing line was fixed in the body of the fishing boat and the other part was drifting in the water, a big vessel would not override the fishing boat merely under the condition that the head of the big vessel contacted the fishing line as the line would drift with the water and cause the big vessel not to affect the fishing line and then the fishing to be overridden. The only possibility causing the overriding of fishing boat was that big contacts the line of fishing boat and then entangle the fishing line by its propeller with the result that the fishing boat in dispute overrode. Under this circumstance, the body of the fishing boat would vibrate severely, and the speed would diminish. According to the AIS record provided by MSA, the speed of big vessel had no obvious change before and after the so-called collision. Meanwhile, the report issued by the Respondent also referred to how the line of fishing boat was affected causing the overriding was unknown. Therefore, it could not be inferred that the big vessel contact with the line of the fishing boat resulted in the overriding of fishing boat. Seventhly, the overriding of the fishing boat from the right side to the left side was inconsistent with the recognition of the Respondent that the head or left side of big vessel contacted the right side of fishing boat. Upon contact with the right side of fishing boat by the big vessel, the fishing boat merely overrode from the left side and impossibly from the right side. If the fishing boat overrode from the right side, it would overwhelm the body of big vessel, namely, such body would have some marks. However, no marks were present on the body of vessel apart from some so-called marks in the head of vessel upon the investigation of the big vessel by the Respondent. Hence, the fishing boat could not possibly override from the right side to the left side. Eighthly, according to the statement of master of the fishing boat that the fishing boat sank within ten minutes upon contact, the fishing boat and offending vessel should have had a severe collision. Under this circumstance, the vessel of the Appellant would change obviously in the speed and heading before and after the collision. However, the vessel of the Appellant had no obvious change in accordance with the AIS record. Meanwhile, the on-duty AS used the left rudder to avert the fishing boat on the basis of its statement. If the collision actually occurred, it would not use the right rudder to collide the fishing boat again in accordance with the customary practices and such little change was merely normal adjustment to amend its heading. In conclusion, Investigation Report of Sinking of Fishing Boat in North Sea in Leizhou Zhanjiang 9.14 should be the conclusion made by the Respondent on the basis of the objective facts while evidence submitted by the Respondent failed to support its conclusion. It was wrongful for the court of first instance to reject the claims of the Appellant. Therefore, the appeal was

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to revoke Administrative Judgment of (2015) Guang Hai Fa Xing Chu Zi No.4 and to revoke Maritime Administrative Penalty Decision of Yue Zhan Hai Shi Fa Zi [2014] No.080072 made by the Respondent. The Respondent MSA Xuwen argued as follows. Firstly, the claims filed by the Appellant were not the key issues in this case. This case referred to two legal procedures, the first being the process for the maritime traffic accident investigation and the other being the penalty for the party conducting malfeasance. The procedure for penalty in this case was not a re-investigation and re-demonstration for the process and result of the investigation of accident but a direct quote of the result of the process of investigation of the accident, namely the investigation report and its conclusion as the professional conclusion. The above handling system was the normal practice taken by the administrative enforcement department dealing with the type of case of investigation of accidents. The key issue in this case should be whether the administrative penalty was legal rather than reviewing whether the conclusion of investigation conclusion was correct. Secondly, the penalty made by the Respondent had clear facts and applied the law correctly and its procedure was legal. The investigation and its conclusion were the primary evidence for the penalty in dispute whereby the recognition of the Appellant’s malfeasance was established and sufficient. The maritime traffic investigation and penalty of illegal actions were two compositions when handling the investigation of accident. According to Article 15, Article 16 and Article 17 of Regulations of the People’s Republic of China on the Investigation and Handling of Maritime Traffic Accidents, the Respondent made the investigation report upon the investigation of accident with which it recognized illegal actions and made the administrative penalty, which had the sufficient factual grounds. From the probative force, the maritime report was a public document made by the statutory authority in accordance with its responsibility and Article 63 of Some Provisions of the Supreme People’s Court on Evidence in Administrative Litigation provided that such investigation and its conclusion had higher probative force. Meanwhile, such investigation report and its conclusion was the professional conclusion on the basis of the comprehensive analysis of enormous evidence made by maritime authority According to its responsibility and procedures. From the perspective of practice in investigations of accidents, the penalty for illegal actions on the basis of the conclusion of the investigation of accidents was the normal practice for maritime accidents and similar deposition would present advice on the penalty for the party who should be liable in the investigation report. The petition and facts of the Appellant were merely a simple repeat of the content of the statement of claims in first instance without support of evidence and legal grounds. After hearing, the court found out that at 1 o’clock on September 14, 2013, the fishing boat “Guibeiyu” overrode and sank at the location of 20°37′58″N, 109°24′ 08″E. The accident caused the maritime traffic accident where five fishermen fell into the water, and two men were missing. The Respondent MSA Xuwen started an investigation against such accident. After the analysis of the time of the accident and AIS record, the Respondent found that M.V. “Changhui”, owned by the Appellant Anhui Changhui Transportation and Trade Company, sailed across the

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place of accident at the material time and route and subsequently made an investigation against M.V. “Changhui” and its relevant crew members. On September 18, 2013, the Respondent made an investigation against and consulting to the on-duty third officer, YU Taibin, at the material time; he stated that at 1 o’clock on September 14, M.V. “Changhui” came across and then averted a fishing boat with its above part green and its below part red and its right side passed from the stern of the fishing boat without finding of abnormalities. On September 19, 2013, the Respondent consulted the on-duty second officer of M.V. “Changhui” MAO Donggen at the material time. His statement was that the left side of heading of M.V. “Changhui” did have new marks arising from the contact with the line and fishing net or probably the fishing net of the fishing boat while it declared to fail to see the status of accident, which may occur within the period of the leave of the bridge for a short time. The Respondent made the record for the above investigation results and made the investigated person sign for confirmation. The Respondent also simultaneously inspected the fishing boat “Guibeiyu” and M. V. “Changhui,” which were out of water and found that four fishing lines had obvious marks and were attached by paints of which one line was attached by the paint for twenty four meters. The left side of bulb bow of M.V. “Changhui” had new strip marks. The inspection result of the paint indicated that the paint attached on the fishing line was consistent with the composition of that on the left side of bulb bow of M.V. “Changhui”. On January 6, 2014, the Respondent issued the recognition of maritime traffic offending vessel to the Appellant and held the view that, according to the Provisions of Investigation and Handling on Maritime Traffic Hit and Run, AIS data record, field inspection, statement of on-duty AB, the inspection result of the paint, it was confirmed that M.V. “Changhui” was the offending vessel. On January 23, 2014, the Respondent made the Investigation Report of Sinking of Fishing Boat in North Sea in Leizhou Zhanjiang 9.14 after the investigation, which carefully recorded the process of investigation and evidence materials and decided the cause and liability of parties involved in this accident. On January 27 of the same year, the Respondent made the Maritime Traffic Investigation Conclusion, recognizing that M.V. “Changhui,” as the give-way vessel, failed to maintain regular look-out and averted the boat engaged in collecting fish in a boarder term. This was the main reason of the occurrence of the accident, and it should bear the primary liability. On April 24, 2014, the Respondent issued the Notice of Maritime Malfeasance providing that M.V. “Changhui” should assume primary liability as the result of the collision between M.V. “Changhui” and the fishing boat owned by LAN Zhixi. According to relevant provisions, the Respondent decided to give the Appellant a fine in the amount of RMB7,000 and informed the Appellant that it had the right to make a clarification within three days. On October 10, 2014, the Respondent made Maritime Administrative Penalty Decision of (2014) Yue Zhan Hai Shi Fa Zi No.080072, recognizing that at about 0110 on September 14, 2013, M.V. “Changhui” collided with the fishing boat owned by LAN Zhixi at Qishui Leizhou Zhanjiang, causing a maritime accident where five fishermen fell into water, and two men were missing. The cause was that M.V. “Changhui” contacted the fishing

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line of a fishing boat located on the right side engaged in the collection of fish when sailing across Qishui water area in Leizhou Zhanjiang, causing the overriding and sinking of fishing boat. On-duty AB of M.V. “Changhui” failed to maintain regular lookout and take proper measures to avoid the collision, which was the primary reason, and hence M.V. “Changhui” shall bear the main liability. The above actions of the Appellant violated Article 10 of Maritime Traffic Safety Law of the People’s Republic of China, Article 2 Paragraph 1, Article 5, Article 8 Paragraph 1, Paragraph 3, Paragraph 4, Article 16, Article 18 Paragraph 1 Sub-paragraph 3 of Convention on the International Regulations for Preventing Collisions at Sea, 1972 and Article 21 Sub-paragraph 1 and Sub-paragraph 2, Article 29 of On-duty Rules of Seamen of the People’s Republic of China. Therefore, the Respondent decided to give the Plaintiff an administrative penalty in the amount of RMB7,000. The Appellant was dissatisfied with such penalty and filed an administrative reconsideration before the superior authority and such authority maintained the decision of penalty made the Respondent on January 21, 2015. The Appellant was still dissatisfied and lodged this case before the original court. The court holds that Article 5 of the International Regulations for Preventing Collisions at Sea 1972 provides that every vessel shall, at all times, maintain a proper lookout by sight and hearing as well as by all available means appropriate in the prevailing circumstances and conditions so as to make a full appraisal of the situation and of the risk of collision. Article 8 Paragraph 1 provides that action taken to avoid a collision with another vessel shall be such as to result in passing at a safe distance. The effectiveness of the action shall be carefully checked until the other vessel has finally passed and clear. Article 16 provides that every vessel that is directed by these Rules to keep out of the way of another vessel shall, so far as possible, take early and substantial actions to keep well clear. Article 21 of On-duty Rules of Seamen of the People’s Republic of China provides that on-duty navigators shall always maintain regular lookout and satisfy the following requirements: 1. visibility, hearing and other all available methods and ways shall be used for continuous observation to the current surrounding and status. 2. Sufficient expectation shall be made to the collision, stranding and other situation and risk which may endanger the nautical safety. Article 37 Paragraph 1 of Provisions of the People’s Republic of China on Marine and Maritime Administrative Punishments provides that vessels and facilities derogating Article 10 of Maritime Traffic Safety Law of the People’s Republic of China and failing to comply with relevant law, regulation and provision, affecting the safety of navigation, mooring and operation of other vessels and facilities, shall be fined in accordance with Article 44 of Maritime Traffic Safety Law of the People’s Republic of China. 3. Malfeasance belonging to business activities or if no illegal incomes, the owner or operator of vessels or facilities shall be given a fine varying from RMB300 to RMB10,000. Meanwhile, master or the main leader and other person in charge shall be given the fine varying from RMB100 to RMB10,000. The Respondent established M.V. “Changhui” as the offending vessel and the primary cause was that crew member failed to maintain regular lookout and improperly took measures to avoid the

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collision by the maritime traffic investigation against the sank fishing boat on the basis of the collection of the material time and AIS record and comparison and inspection of the fishing line and marks on M.V. “Changhui” and consulting of on-duty AB on the material day. Then, the Respondent made the administrative penalty in dispute in accordance with the above provisions, which was within the extent of statutory provision. Therefore, the administrative penalty in dispute made by the Respondent has clear facts and applied the law correctly and complies with the statutory procedures and the claim that the Appellant required to withdraw the administrative penalty in dispute is untenable. It is proper for the original judgment to reject its claims, and the court affirms the judgment. The following pertains to the contention of the Appellant that the investigation report made by the Appellant failed to be objective and hence shall not be deemed as the legal grounds for the penalty in dispute. The Respondent forms a maritime traffic investigation report where M.V. “Changhui” was the offending vessel and shall bear the primary liability on the basis of the analysis of the material time and AIS record, the inspection of the paint attached in the line of the sank fishing boat and attached on the marks on M.V. “Changhui” coupled with the consulting contents of on-duty AB of M.V. “Changhui”. The investigation report in dispute made by the Respondent has corresponding evidence to support it, which is objective and convincing. The argument of the Appellant that such investigation report failed to be equipped with objectivity is insufficient whereby it is arguable that the time and place of collision in dispute may not be established and the collision of M.V. “Changhui” with the line of the fishing boat could not possibly cause the overriding and the fishing boat could not possibly override from the right side to the left side. The above argument is an inference without a submission of evidence in support. The appeal of the Appellant that the above investigation report is not able to support its conclusion has no sufficient grounds and hence the court refuses to accept. In conclusion, the original judgment clearly found the facts, applied the law correctly, which should be affirmed by the court. The appeal is untenable and the court makes the rejection. According to Article 89 Sub-paragraph 1 of Administrative Litigation Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of RMB100, shall be born by the Appellant, Anhui Changhui Transportation and Trade Company. This judgment is final. Presiding Judge: DOU Jiaying Acting Judge: FANG Lida Acting Judge: HUANG Weiming December 8, 2015 Clerk: LI Sha

Guangzhou Maritime Court Civil Judgment China Transport Groupage International Limited v. Foshan Jehong Logistics Co., Ltd. (2014) Guang Hai Fa Chu Zi No.505 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 32. Cause(s) of Action 223. Dispute over freight forwarding contract on the sea or sea-connected waters. Headnote The Defendant cargo-owner held liable to reimburse the Plaintiff freight forwarder for container detention charges paid by the Plaintiff at port of destination, but the Defendant’s liability limited to the cost of buying a new container. Summary The Plaintiff-freight forwarder, China Transport Groupage International Limited brought this case against the Defendant-shipper, Forshan Jehong Logistics Co., Ltd. (Forshan) to recover the detention charges it paid at the port of Alger for failure of the consignee to accept delivery of four containers of ceramic tiles. These containers were consequently detained by customs at the port. The Defendant issued a letter of guarantee to the Plaintiff before booking and guaranteed to bear all economic losses or responsibilities caused by improper description of goods, shortages, and losses. The court held that an agency relationship existed between the shipper and the freight forwarder, and thus ordered the Defendant to reimburse the charges paid by the Plaintiff at the port of Alger. The court, however, found that the amount that the Defendant was to pay the Plaintiff was not to exceed the cost of purchasing a new container, which at that time was RMB20,000. Thus, the court found that the Defendant was to pay the Plaintiff RMB80,000 for the detention charges related to the four containers.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_2

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Judgment The Plaintiff: China Transport Groupage International Limited Domicile: Luohu District, Shenzhen, Guangdong. Legal representative: SUN Peilun, general manager. Agent ad litem: LI Zelin, employee. Agent ad litem: HUANG Sufang, lawyer of Guangdong Shengtang Law Firm. The Defendant: Foshan Jehong Logistics Co., Ltd. Domicile: Chancheng District, Foshan, Guangdong. Legal representative: JI Yongsheng, general manager. Agent ad litem: LIU Feng, lawyer of Guangdong Hongmian Law Firm. Agent ad litem: ZENG Xiangfa, lawyer of Guangdong Hongmian Law Firm. With respect to the case arising from dispute over contract of marine freight forwarding filed by the Plaintiff, China Transport Groupage International Limited, against the Defendant, Foshan Jehong Logistics Co., Ltd., before the court on June 10, 2014. After accepting the case on September 5, 2014, the court formed a collegiate panel which was composed of Presiding Judge SONG Ruiqiu, Acting Judges HU Shi and WANG Xin. On September 5, 2014, the court held a pre-litigation meeting to organize the parties to exchange evidence and then held a hearing in public. HUANG Sufang as agent ad litem of the Plaintiff, JI Yongsheng as legal representative of the Defendant, LIU Feng and ZENG Xiangfa as agents ad litem of the Defendant, appeared in court to attend the hearing. Now the case has been concluded. The Plaintiff alleged that: in August 2013, the Defendant made a booking to the Plaintiff and entrusted the Plaintiff with the shipment of container goods. The port of loading was Foshan Port and the port of destination was Alger Port. The Plaintiff accepted the Defendant’s entrustment and delivered the involved goods to Mediterranean Shipping Company S.A. (hereinafter referred to as “MSC”). The carrier issued bills of lading No.MSCUDT848068, No.MSCUDT848019, No.MSCUDT848043 and No.MSCUDT834399. The goods were loaded in container No.MEDU3614155, No.TRHU1588602, No.MEDU6462354 and No. INBU3682794. The involved goods arrived at destination Alger Port on November 7. The consignee of the B/L could not be contacted. No one took delivery of goods until the goods were detained by the customs at destination Alger Port because the goods declaration information did not correspond with the actual information. And the goods were still detained at destination Alger Port. As of April 30, 2014, the container detention charge reached USD15,024 and the unpacking charge was USD1,208. The destination port charge totaled USD16,232. The Plaintiff was the freight forwarder of the Defendant and the bailor who made a booking to the MSC and entrusted MSC with the shipment of container goods. The Plaintiff paid the above-mentioned charge to the carrier MSC. The Defendant, as the Plaintiff’s bailor, refused to pay the above-mentioned charge to the Plaintiff. The Plaintiff sued

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to the court and required the court to judge that: the Defendant should pay the destination port charge USD16,232. (The interest rate should be calculated in accordance with the RMB-US dollar rate on June 10, 2014, totaling RMB101,450); the Defendant should be responsible for the legal cost of this lawsuit. In the course of the time limitation for adducing evidence, the Plaintiff submitted the following 18 sets of evidence: 1. booking note issued by the Defendant to the Plaintiff. 2. The Defendant’s payment voucher to the Plaintiff to pay the relevant charge of the involved goods. 3. Freight invoice of the involved goods issued by the Plaintiff to the Defendant. 4. Mailing document proxy issued by the Defendant to the Plaintiff and the express receipt of bill of lading which the Plaintiff send to the Defendant. The aforesaid Evidence 1 to 4 was to prove the fact that the Defendant entrusted the Plaintiff to the shipment of the involved goods, there was a contract of marine freight forwarding relationship between the Defendant and the Plaintiff, the Plaintiff was the bailee and the Defendant was the bailor. 5. Email and translation between the Plaintiff and the Defendant, to prove the fact that the Plaintiff informed of the Defendant the condition that no one took delivery of goods until the goods were detained by the customs and the destination port charge generated whereas the Defendant was not able to provide effective consignee information. 6. Notification issued by the Plaintiff to the Defendant about the condition that no one took delivery of goods and the destination port charge generated. The express receipt which the Plaintiff send the notification to the Defendant and online express record. 7. Lawyer’s letter issued by the Plaintiff to the Defendant about the condition that no one took delivery of goods and the destination port charge generated. The express receipt used to send the lawyer’s letter to the Defendant and online express record. The aforesaid evidence 6 and 7 was to prove the fact that the Plaintiff informed the Defendant of the condition that no one took delivery of goods and the destination port charge generated. 8. Letter of guarantee and translation issued by the Defendant to the Plaintiff, to prove that the Defendant guaranteed to bear the loss caused by the reason that no one took delivery of involved goods and be held jointly liable with the shipper on the bill of lading. 9. 4 bills of lading and translation issued by MSC, to prove that MSC was the actual carrier of the involved goods. 10. Emails between Lisheng Mediterranean Shipping (Shanghai) Company S.A. Shenzhen Branch (hereinafter referred to as “MSC Shenzhen”) and the Plaintiff, to prove the condition that no one took delivery of goods and the destination port charge generated. 11. Letter of guarantee and translation issued by the Plaintiff to MSC, to prove that the Plaintiff should bear the charge arising from the involved goods to the actual carrier. 12. The transportation status of the involved goods on the website of the MSC, to prove the fact that the goods were still detained at destination Alger Port since it arrived at the destination port on November 7, 2013. 13. The handover certification, translation and the business license of the translation company provided by the customs at destination port, to prove the fact that the goods declaration information did not correspond with the actual information. 14. Proxy by the Plaintiff to CASA China Limited (hereinafter referred to as “CASA China”) which entrusted CASA China with payment to the

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payee Mediterranean Shipping (Hong Kong) Company S.A. (hereinafter referred to as “MSC Hong Kong”) nominated by the carrier, to prove the fact that the Plaintiff entrusted CASA China with payment of the destination port charge USD16,232 to MSC Hong Kong. 15. Check receipt issued by Hang Seng Bank Limited, to prove the fact that the Plaintiff paid the destination port charge USD16,232 to the carrier. 16. Proof issued by MSC Shenzhen, to prove the fact that the involved goods were detained by the customs at destination Alger Port because the goods declaration information did not correspond with the actual information, the fact that the Plaintiff paid destination port charge USD16,232 to the carrier for the Defendant to be paid back later and the calculation method of the container detention charge. 17. Business registration information of Lisheng Mediterranean Shipping (Shanghai) Company S.A. (hereinafter referred to as “MSC Shanghai”) and MSC Shenzhen, to prove the fact that MSC Shenzhen had the right to provide goods and issue the bills of lading, settle freight and sign a contract for ships owned or operated by MSC. 18. Confirmation letter issued by CASA China, to prove the right as principal of CASA China. The Defendant, Foshan Jehong Logistics Co., Ltd. argued that: 1. The Defendant only accepted the shipper’s entrustment consignment on the bill of lading for booking. The Defendant was not the consignee of the involved goods. The Defendant was only liable to pay the agency fees. The consignee should be liable to pay the destination port charge. There was no basis in law for the Plaintiff to allege that the Defendant was liable to pay the above-mentioned charge. 2. The profit earned by the Defendant for booking did not match cost that the Plaintiff asked the Defendant to pay. 3. The involved goods were detained by the customs at destination Alger Port because the goods declaration information did not correspond with the actual information. The Plaintiff had the obligation to verify the record of the goods as the bailee of the Defendant. The Plaintiff should be held accountable for fault in handling matters relating to entrustment. 4. Although the applied deadline for the letter of guarantee issued by the defendant was not clear, the date of the letter of guarantee was far from the date of the carriage of the involved goods. The relevancy of the letter of guarantee should not be confirmed. 5. The Plaintiff had no evidence to prove the reasonableness of paying the destination delivery charge. So it requested to reject the Plaintiff’s claims. In the course of the time limitation for adducing evidence, the Defendant did not submit any evidence in the case. After the trial of proof and cross-examination, in respect of evidence in this case, the ascertainment opinions and analysis of the court are as follows: The Defendant confirmed the authenticity, legality and relevancy of evidences 1–4, 6, 7, 9, 14–18. The court confirms the probative force of the aforesaid evidence. The Defendant did not confirm the authenticity of evidence 5. The court holds that: the Defendant confirmed that the email address used in the correspondence was the email address of its external contact business. The content of the email was relevant to the case. Under the condition that the Defendant did not provide the opposite evidence, the court confirmed the probative force of evidence 5. The Defendant confirmed the authenticity and legality of evidence 8, but not

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confirmed the relevancy of the evidence 8. The court confirms the authenticity of evidence 8. Whether the court confirms the facts of the Plaintiff’s claims depends on the combination of evidence. The Defendant did not confirm the authenticity of evidences 10–13. The court holds that: according to evidence 10, the employee of the Plaintiff contacted with the employee of MSC Shenzhen in the email address with the suffix of their respective companies. The content of the email was relevant to the case and corroborate the evidences 15, 16. The Defendant did not provide the opposite evidence. The court confirms the probative force of evidence 10. Evidence 11 is relevant to the case. Original copy could be offered. The court confirms the probative force of evidence 11. Evidence 12 submitted by the Plaintiff is the transportation status of the involved goods on the website of MSC. Under the condition that the Defendant did not provide the opposite evidence, the court confirms the probative force of evidence 12. Evidence 13 submitted by the Plaintiff lacks original copy for verification. Evidence 13 is not notarized as external evidence. The court does not confirm the probative force of evidence 13. Based on the confirmed evidence and the hearing conditions, the court finds out that: The Defendant issued a letter of guarantee to CASA China and the Plaintiff on July 10, 2009. The Defendant guaranteed to bear all economic losses or responsibilities caused by improper description of goods, shortage and loss as the company that made a booking to CASA China and the Plaintiff. The Defendant should be jointly and severally liable with the shipper on the bill of lading or other relevant persons without preconditions. On August 15, 2013, the Defendant as a shipper issued a booking note to the Plaintiff’s Foshan Branch (hereinafter referred to as China Transport Foshan). The Defendant entrusted the Plaintiff with the shipment of four 20-foot containers loaded with ceramic tiles from Foshan Port to Alger Port. China Transport Foshan accepted the entrustment, charged the Defendant freight USD7,208 and RMB8,480 and issued an invoice. After accepting the Defendant’s entrustment, China Transport Foshan made a booking to MSC. China Marine Shipping Agency Shenzhen Co., Ltd. as the agent of MSC issued 4 bills of lading of MSCUDT848068, MSCUDT848019, MSCUDT848043 and MSCUDT834399. All the 4 bills of lading recorded that the consignor was Fareast Golden Lion Trading Co. The consignee was to order of Algeria Gulf Bank. The notify party was Eurl Nezzar Hamza Import Export. The goods were 505 cases of ceramic tiles loaded in four 20-foot containers of MSCUDT848068, MSCUDT848019, MSCUDT848043 and MSCUDT834399. The port of loading was Foshan Port and the port of destination was Alger Port. The freight should be prepaid. The ship was M.V. “FOHANG928” and the voyage number was 130819 from Huangpu port to Shenzhen Chiwan Port. The free detention was 15 days. From the 16th day to 22nd day, the container detention charge of 20-foot containers was USD12 per day. After the 23rd day, the container detention charge of 20-foot containers was USD24 per day.

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The involved containers were loaded in M.V. “FOHANG928” on August 19, 2013, arrived at Shenzhen Chiwan Port and were unloaded. The involved containers were loaded in M.V. “MSCDANIT” on August 24, 2013. The involved containers arrived at Barcelona and unloaded. The involved containers were loaded in M.V. “ASMARS” on October 26. The involved containers arrived at Alger Port on November 7. The transportation status of the involved goods on the website of the MSC showed that the container was still detained at the Port of Algiers. After the involved goods arrived at the destination port and detained at the port, MSC Shenzhen informed China Transport Foshan of the fact that no one took delivery of goods until the goods were detained by the customs and the destination port charge generated many times by email. China Transport Foshan also informed the Defendant of the fact that no one took delivery of goods until the goods were detained by the customs and the destination port charge generated and required the Defendant to provide the correct information of consignee many times by email. On 9th April 2014, MSC Shenzhen informed China Transport Foshan of the fact that as of April 30, the container detention charge of each container was USD3,756, and the destination delivery charge of each container was USD302. China Transport Foshan informed the Defendant of the above information by email on the same day. On May 5, 2014, the Plaintiff issued a payment order to CASA China. The Plaintiff entrust CASA China with the payment of the container detention charge caused by the reason that no one took delivery of goods until the goods were detained by the customs at destination Alger Port, totaling USD16,232. On May 9, CASA China issued a check of Hang Seng Bank amounting to USD16,233 to MSC Hong Kong and the check number was 144943. MSC Hong Kong signed for the check with the seal. On May 29, MSC Shenzhen issued two copies of proof of 4 involved containers. The proof showed that 4 involved containers arrived at destination port on November 7, 2013 and were detained by the customs at destination Alger Port because the goods declaration information did not correspond with the actual information. As a result of the fault information of the consignee, the carrier could not contact with the consignee, the goods were still detained at destination port. As of April 30, 2014, the container detention charge was USD15,024 and the destination delivery charge was USD1,208. (The calculation of the container detention charge for each 20-foot container was as follows: from November 22, 2013 to November 28, 2013, the charge was 12 dollars per container per day for the 7 days. From November 29, 2013 to April 30, 2014, the charge was 24 dollars per container per day for the 153 days). CASA China as the bailee of the Plaintiff paid the above-mentioned charge to MSC Hong Kong nominated by MSC Shenzhen. The court finds out that: MSC Shanghai was a wholly foreign owned enterprise founded in China by MSC. MSC Shenzhen was affiliated to MSC Shanghai. Their business scope all included solicitation, issuing bill of lading, settlement of freight, and service contract signing for ship owned or operated by the MSC. The Plaintiff applied the court for property preservation, and requested to seal up, seize and freeze the Defendant’s property of RMB101,450. The court made a ruling to grant that application on September 26.

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The Plaintiff and the Defendant unanimously chose to apply the laws of the People’s Republic of China in the court hearing. The court holds that: the present case is the dispute over contract of marine freight forwarding. The involved goods were transported by sea from Foshan Port in China to the Alger Port in Algeria. The Plaintiff and the Defendant were in dispute over the cost of the destination port caused by the reason that no one took delivery of goods. The case is a foreign-related case. According to Article 23 of the Some Provisions of the Supreme People’s Court on the Scope of Cases to be Entertained by Maritime Courts, the case is exclusively governed by maritime court. The domicile of the Defendant is within the jurisdiction region of the court. According to Article 23 of Civil Procedure Law of People’s Republic of China, a lawsuit brought on a contract dispute shall be under the jurisdiction of the people’s court located in the place where the defendant has his domicile or where the contract is performed. Therefore, the court has the jurisdiction over this case. According to Article 126 Paragraph 1 of Contract Law of the People’s Republic of China, Contracts Subject to Mandatory Application of Chinese Law Parties to a foreign related contract may select the applicable law for resolution of a contractual dispute. The Plaintiff and the Defendant unanimously chose to apply the laws of the People’s Republic of China. According to Article 41 of Law of the Application of Law for Foreign-related Civil Relations, the parties concerned may choose the laws applicable to contracts by agreement. The case shall apply to the laws of the People’s Republic of China. The Defendant issued a booking note to China Transport Foshan in its own name. The Defendant entrusted China Transport Foshan with the shipment of containers. After receiving the booking note, China Transport Foshan arranged the booking and charged the Defendant. China Transport Foshan did not possess the status of a legal person as the branch office of the Plaintiff, and the civil liability should be born by the insurance company. There was a contractual relationship of marine freight forwarding between the Defendant and the Plaintiff, the Plaintiff was the bailee and the Defendant was the bailor. The Defendant issued a letter of guarantee to CASA China before booking. The Defendant guaranteed to bear all economic losses or responsibilities caused by improper description of goods, shortage and loss. The Defendant should be jointly and severally liable with the shipper on the bill of lading or other relevant persons. The letter of guarantee was issued by the Defendant on a voluntary basis. The Defendant did not prove that there was a revocable or invalid situation. The Defendant did not indicate that the letter of guarantee was issued for the shipment of the specific batch of goods. Therefore the letter of guarantee shall be taken as being included in the contract of marine freight forwarding of the case. The contract of marine freight forwarding was genuine intention of the parties, in compliance with the compulsory law and compulsory administrative regulation and was lawful and effective. The parties should exercise their rights and perform their obligations in accordance with contractual stipulations and relevant laws.

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The claim for USD15,024 of the container detention charge. On the basis of emails between the Plaintiff and the Defendant which proved the condition that no one took delivery of goods and the transportation status of the involved goods on the website of MSC, without the rebuttal evidence brought by the Defendant, the court affirms the fact that no one took delivery of goods until the goods were detained by the customs at destination Alger Port. The Plaintiff paid the destination port charge USD16,232 to the carrier for the Defendant to be paid back later. According to Article 398 of Contract Law of the People’s Republic of China, Principal’s Obligation to Prepay Expenses. The principal shall prepay the expenses for handling the entrusted affair. Any expense necessary for handling the entrusted affair advanced by the agent shall be repaid with interest by the principal. The Defendant should reimburse the Plaintiff for the container detention charge which paid by the Plaintiff for handling the entrustment matters of the Defendant. As for the argument that the consignee should bear the container detention charge by the Defendant, it lacked legal grounds, so the court did not adopt it. The reasonable amount of container detention charge should be determined according to the loss of the containers owner when the containers were occupied. Containers owner could avoid losses by replacing new containers when the containers were occupied for a long time. The accumulative actual losses caused by the container detention charge should not exceed the replacement price of new containers in the same period in the market. Currently, the market price of a 20-foot container is about RMB20,000. In consideration of the carrier’s responsibility cut down, the Defendant shall reimburse the Plaintiff for the detention charge of one container RMB20,000. The total container detention charge of the four containers was RMB80,000. The excess amount claimed by the Plaintiff was not supported. The claim for USD1,208 of the destination delivery charge. The Plaintiff did not prove that the destination delivery charge should be charged by the carrier or the port, did not prove that the party that ultimately had the right to charge the destination delivery charge actually charged it, also did not prove that the destination delivery charge was the inevitable cost incurred by the fact that no one took delivery of goods at destination Alger Port. According to Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China and it was provided that “a party shall have the responsibility to provide evidence in support of its own proposition”, the Plaintiff’s claim about the destination delivery charge lacks factual basis, the court rejects it. In conclusion, According to Article 398 of the Contract Law of the People’s Republic of China and Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: 1. The Defendant Foshan Jehong Logistics Co., Ltd. shall pay the Plaintiff RMB80,000; 2. Reject other claims of the Plaintiff. The above duty on money-paying shall be fulfilled within 10 days from the date of effect.

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If the obligor fails to fulfill its obligation to make the said payments within the time limit provided by this Judgment, the interest shall be double paid for the period of deferred payment in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB2,329, the Plaintiff shall bear RMB492, and the Defendant shall bear RMB1,837. The property security expense in amount of RMB1,027.25, the Plaintiff shall bear RMB217.2, and the Defendant shall bear RMB810.05. In case of dissatisfaction with this judgment, both parties may within 15 days upon the service of this judgment, submit a statement of appeal to the court, together with copies in accordance with the number of the opposite party, to make an appeal before the Guangdong High People’s Court. Presiding Judge: SONG Ruiqiu Acting Judge: HU Shi Acting Judge: WANG Xin November 10, 2014 Clerk: SHU Jian

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Guangdong High People’s Court Civil Judgment China Transport Groupage International Limited v. Foshan Jehong Logistics Co., Ltd. (2015) Yue Gao Fa Min Si Zhong Zi No.14 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 23. Cause(s) of Action 223. Dispute over freight forwarding contract on the sea or sea-connected waters. Headnote The Defendant cargo-owner held liable to reimburse the Plaintiff freight forwarder for container detention charges paid by the Plaintiff at port of destination, but the Defendant’s liability limited to the cost of buying a new container. Summary The Plaintiff-freight forwarder, China Transport Groupage International Limited brought this case against the Defendant-shipper, Forshan Jehong Logistics Co., Ltd. (Forshan) to recover the detention charges it paid at the port of Alger for failure of the consignee to accept delivery of four containers of ceramic tiles. These containers were consequently detained by customs at the port. The Defendant issued a letter of guarantee to the Plaintiff before booking and guaranteed to bear all economic losses or responsibilities caused by improper description of goods, shortages, and losses. The court held that an agency relationship existed between the shipper and the freight forwarder, and thus ordered the Defendant to reimburse the charges paid by the Plaintiff at the port of Alger. The court, however, found that the amount that the Defendant was to pay the Plaintiff was not to exceed the cost of purchasing a new container, which at that time was RMB20,000. Thus, the court found that the Defendant was to pay the Plaintiff RMB80,000 for the detention charges related to the four containers.

Judgment The Appellant (the Defendant of first instance): Foshan Jehong Logistics Co., Ltd. Domicile: Chancheng District, Foshan, Guangdong. Legal representative: JI Yongsheng, general manager.

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Agent ad litem: LIU Feng, lawyer of Guangdong Hongmian Law Firm. Agent ad litem: ZENG Xiangfa, lawyer of Guangdong Hongmian Law Firm. The Respondent (the Plaintiff of first instance): China Transport Groupage International Limited Domicile: Luohu District, Shenzhen, Guangdong. Legal representative: SUN Peilun, general manager. Agent ad litem: HUANG Sufang, lawyer of Guangdong Shengtang Law Firm. With respect to the case arising from dispute over marine freight forwarding contract between the Appellant, Foshan Jehong Logistics Co., Ltd. (hereinafter referred to as Jiehang), and the Respondent, China Transport Groupage International Limited (hereinafter referred to as China Transport), the Appellant disagreed with the Guangzhou Maritime Court (2014) Guang Hai Fa Chu Zi No.505 Civil Judgment, and appealed to the court. After accepting the case, the court formed a collegiate panel. Legal representative of Jiehang, JI Yongsheng, its agents ad litem, LIU Feng and ZENG Xiangfa, agent ad litem of China Transport, HUANG Sufang, appeared in court to attend the hearing. Now the case has been concluded. China Transport claimed in first instance that: in August 2013, Jiehang made a booking to China Transport and entrusted China Transport with the shipment of container goods. The port of loading was Foshan Port and the port of destination was Alger Port. China Transport accepted Jiehang’s entrustment and delivered the goods involved to Mediterranean Shipping Company S.A. (hereinafter referred to as “MSC”). The carrier issued bills of lading No.MSCUDT848068, No. MSCUDT848019, No.MSCUDT848043 and No.MSCUDT834399. The goods were loaded in container No.MEDU3614155, No.TRHU1588602, No.MEDU6462354 and No.INBU3682794. The goods involved arrived at destination Alger Port on November 7. The consignee of the B/L could not be contacted. No one took delivery of goods until the goods were detained by the customs at destination Alger Port because the goods declaration information did not correspond with the actual information. And the goods were still detained at destination Alger Port. As of April 30, 2014, the container detention charge reached USD15,024 and the unpacking charge was USD1,208. The destination port charge totaled USD16,232. China Transport was the freight forwarder of Jiehang and the bailor who made a booking to the MSC and entrusted MSC with the shipment of container goods. China Transport paid the above-mentioned charge to the carrier MSC. Jiehang, as China Transport’s bailor, refused to pay the above-mentioned charge to China Transport. China Transport sued to the court and required the court to rule that: Jiehang should pay for the destination port charge USD16,232. (The interest rate should be calculated in accordance with the RMB-US dollar rate on June 10, 2014, totaling RMB101,450 yuan); Jiehang should be responsible for the legal cost in this lawsuit. In the course of the time limitation for adducing evidence, China Transport submitted the following 18 sets of evidence: 1. booking note issued by Jiehang to China Transport. 2. Jiehang’s payment voucher to China Transport to pay the relevant charge of the involved goods. 3. Freight invoice of the goods involved

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issued by China Transport to Jiehang. 4. Mailing document proxy issued by Jiehang to China Transport and the express receipt of bill of lading which China Transport send to Jiehang. The aforesaid evidence 1 to 4 was to prove the fact that Jiehang entrusted China Transport to the shipment of the goods involved, there was a contract of marine freight forwarding relationship between Jiehang and China Transport, China Transport was the bailee and Jiehang was the bailor. 5. Email and translation between China Transport and Jiehang was to prove the fact that China Transport had informed of Jiehang the condition that no one took delivery of goods until the goods were detained by the customs and the destination port charge generated whereas Jiehang was not able to provide effective consignee information. 6. Notification issued by China Transport to Jiehang about the condition that no one took delivery of goods and the destination port charge generated. The express receipt which China Transport send the notification to Jiehang and online express record. 7. Lawyer’s letter issued by China Transport to Jiehang about the condition that no one took delivery of goods and the destination port charge generated. The express receipt used to send the lawyer’s letter to Jiehang and online express record. The aforesaid evidences 6 and 7 was to prove the fact that China Transport informed Jiehang of the condition that no one took delivery of goods and the destination port charge generated. 8. Letter of guarantee and translation issued by Jiehang to China Transport, to prove that Jiehang guaranteed to bear the loss caused by the reason that no one took delivery of the goods involved and be held jointly liable with the shipper on the bill of lading. 9. 4 bills of lading and translation issued by MSC, to prove that MSC was the actual carrier of the involved goods. 10. Emails between Lisheng Mediterranean Shipping (Shanghai) Company S.A. Shenzhen Branch (hereinafter referred to as “MSC Shenzhen”) and China Transport, to prove the condition that no one took delivery of goods and the destination port charge generated. 11. Letter of guarantee and translation issued by China Transport to MSC, to prove that China Transport should bear the charge arising from the goods involved to the actual carrier. 12. Transportation status of the goods involved on the website of MSC, to prove the fact that the goods were still detained at destination Alger Port since it arrived at the destination port on November 7, 2013. 13. Handover certification, translation and the business license of the translation company provided by the customs at destination port, to prove the fact that the goods declaration information did not correspond with the actual information. 14. Proxy by China Transport to CASA China Limited (hereinafter referred to as “CASA China”) which entrusted CASA China with payment to the payee Mediterranean Shipping (Hong Kong) Company S.A. (hereinafter referred to as “MSC Hong Kong”) nominated by the carrier, to prove the fact that China Transport entrusted CASA China with payment of the destination port charge USD 16,232 to MSC Hong Kong. 15. Check receipt issued by Hang Seng Bank Limited, to prove the fact that China Transport paid the destination port charge USD 16,232 to the carrier. 16. Proof issued by MSC Shenzhen, to prove the fact that the goods involved were detained by the customs at destination Alger Port because the goods declaration information did not correspond with the actual information, the fact that China Transport paid destination port charge USD 16,232 to the carrier for Jiehang

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to be paid back later and the calculation method of the container detention charge. 17. Business registration information of Lisheng Mediterranean Shipping (Shanghai) Company S.A. (hereinafter referred to as “MSC Shanghai”) and MSC Shenzhen, to prove the fact that MSC Shenzhen had the right to provide goods and issue the bills of lading, settle freight and conclude a contract for ships owned or operated by MSC. 18. Confirmation letter issued by CASA China, to prove the right as principal of CASA China. Jiehang argued in first instance that: 1. Jiehang only accepted the shipper’s entrustment consignment on the bill of lading for booking. Jiehang was not the consignee of the goods involved. Jiehang was only liable to pay the freight forwarding fees. The consignee should be liable to pay the destination port charge. There was no basis in law for China Transport to allege that Jiehang was liable to pay the above-mentioned charge. 2. The profit earned by Jiehang for booking did not match cost that China Transport asked Jiehang to pay. 3. The goods involved were detained by the customs at destination Alger Port because the goods declaration information did not correspond with the actual information. China Transport had the obligation to verify the record of the goods as the bailee of Jiehang. China Transport should be held accountable for fault in handling matters relating to entrustment. 4. Although the applied deadline for the letter of guarantee issued by Jiehang was not clear, the date of the letter of guarantee was far from the date of the carriage of the goods involved. The relevancy of the letter of guarantee should not be confirmed. 5. China Transport had no evidence to prove the reasonableness of paying the destination delivery charge. So it requested to reject China Transport’s claims. In the course of the time limitation for adducing evidence, Jiehang did not submit any evidence in the case. After the trial of proof and cross-examination, in respect of evidence in this case, the ascertainment opinions and analysis of the court of first instance were as follows: Jiehang recognized the authenticity, legality and relevancy of evidences 1–4, 6, 7, 9, 14–18. The court of first instance confirmed the probative force of the aforesaid evidence. Jiehang did not recognize the authenticity of evidence 5. The court of first instance held that: Jiehang recognized that the email address used in the correspondence was the email address of its external contact business. The content of the email was relevant to the case. Under the condition that Jiehang did not provide the opposite evidence, the court of first instance confirmed the probative force of evidence 5. Jiehang recognized the authenticity and legality of evidence 8, but not recognized the relevancy of the evidence 8. The court of first instance confirmed the authenticity of evidence 8. Whether the court of first instance confirmed the facts of China Transport’s claims depended on the combination of evidence. Jiehang did not recognize the authenticity of evidences 10–13. The court of first instance held that: according to evidence 10, the employee of China Transport contacted with the employee of MSC Shenzhen in the email address with the suffix of their respective companies. The content of the email was relevant to the case and corroborate evidences 15, 16. Jiehang did not provide the opposite

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evidence. The court of first instance confirmed the probative force of evidence 10. Evidence 11 was relevant to the case. Original copy could be offered. The court of first instance confirmed the probative force of evidence 11. Evidence 12 submitted by China Transport was the transportation status of the goods involved on the website of MSC. Under the condition that Jiehang did not provide the opposite evidence, the court of first instance confirmed the probative force of evidence 12. Evidence 13 submitted by China Transport lacked original copy for verification. Evidence 13 was not notarized as external evidence. The court of first instance does not confirm the probative force of evidence 13. Based on the evidence confirmed and the hearing conditions, the court of first instance found out that: Jiehang issued a letter of guarantee to CASA China and China Transport on July 10, 2009. Jiehang guaranteed to bear all economic losses or responsibilities caused by improper description of goods, shortage and loss as the company that made a booking to CASA China and China Transport. Jiehang should be jointly and severally liable with the shipper on the bill of lading or other relevant persons without preconditions. On August 15, 2013, Jiehang as a shipper issued a booking note to China Transport Foshan Branch (hereinafter referred to as “China Transport Foshan”). Jiehang entrusted China Transport with the shipment of four 20-foot containers loaded with ceramic tiles from Foshan Port to Alger Port. China Transport Foshan accepted the entrustment, charged Jiehang freight USD7,208 and RMB8,480 yuan and issued an invoice. After accepting Jiehang’s entrustment, China Transport Foshan made a booking to MSC. China Marine Shipping Agency Shenzhen Co., Ltd. as the agent of MSC issued 4 bills of lading of MSCUDT848068, MSCUDT848019, MSCUDT848043 and MSCUDT834399. All the 4 bills of lading recorded that the consignor was Fareast Golden Lion Trading Co. The consignee was to order of Algeria Gulf Bank. The notify party was Eurl Nezzar Hamza Import Export. The goods were 505 cases of ceramic tiles loaded in four 20-foot containers of MSCUDT848068, MSCUDT848019, MSCUDT848043 and MSCUDT834399. The port of loading was Foshan Port and the port of destination was Alger Port. The freight should be prepaid. The ship was M.V. “FOHANG928” and the voyage number was 130819 from Huangpu Port to Shenzhen Chiwan Port. The free detention was 15 days. From the 16th day to 22nd day, the container detention charge of 20-foot containers was USD12 per day. After the 23rd day, the container detention charge of 20-foot containers was USD24 per day. The containers involved were loaded in M.V. “FOHANG928” on August 19, 2013, arrived at Shenzhen Chiwan Port and were unloaded. The containers involved were loaded in M.V. “MSCDANIT” on August 24, 2013. The containers involved arrived at Barcelona and unloaded. The containers involved were loaded in M.V. “ASMARS” on October 26. The containers involved arrived at Alger Port on November 7. The transportation status of the goods involved on the website of MSC showed that the container was still detained at the Port of Algiers. After the goods involved arrived at the destination port and detained at the port, MSC Shenzhen informed China Transport Foshan of the fact that no one took

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delivery of goods until the goods were detained by the customs and the destination port charge generated many times by email. China Transport Foshan also informed Jiehang of the fact that no one took delivery of goods until the goods were detained by the customs and the destination port charge generated and required Jiehang to provide the correct information of consignee many times by email. On April 9, 2014, MSC Shenzhen informed China Transport Foshan of the fact that as of April 30, the container detention charge of each container was USD3,756, and the destination delivery charge of each container was USD302. China Transport Foshan informed Jiehang of the above information by email on the same day. On May 5, 2014, China Transport issued a payment order to CASA China. China Transport entrust CASA China with the payment of the container detention charge caused by the reason that no one took delivery of goods until the goods were detained by the customs at destination Alger Port, totaling USD16,232. On May 9, CASA China issued a check of Hang Seng Bank amounting to USD16,233 to MSC Hong Kong and the check number was 144943. MSC Hong Kong signed for the check with the seal. On May 29, MSC Shenzhen issued two copies of proof of 4 involved containers. The proof showed that 4 containers involved arrived at destination port on November 7, 2013 and were detained by the customs at destination Alger Port because the goods declaration information did not correspond with the actual information. As a result of the fault information of the consignee, the carrier could not contact with the consignee, the goods were still detained at destination port. As of April 30, 2014, the container detention charge was USD15,024 and the destination delivery charge was USD1,208 (the calculation of the container detention charge for each 20-foot container was as follows: from November 22, 2013 to November 28, 2013, the charge was 12US dollars per container per day for the 7 days. From November 29, 2013 to April 30, 2014, the charge was 24US dollars per container per day for the 153 days). CASA China as the bailee of China Transport paid the above-mentioned charge to MSC Hong Kong nominated by MSC Shenzhen. The court of first instance found out that: MSC Shanghai was a wholly foreign owned enterprise founded in China by MSC. MSC Shenzhen was affiliated to MSC Shanghai. Their business scope all included solicitation, issuing bill of lading, settlement of freight, and service contract concluding for ship owned or operated by MSC. China Transport applied the court for property preservation, and requested to seal up, seize and freeze Jiehang’s property of RMB101,450 yuan. The court of first instance rendered a ruling to grant that application on September 26. China Transport and Jiehang unanimously chose to apply the laws of the People’s Republic of China in the court hearing. The court of first instance held that: the case was the dispute over marine freight forwarding contract. The goods involved were transported by sea from Foshan Port in China to Alger Port in Algeria. China Transport and Jiehang were in dispute over the cost of the destination port caused by the reason that no one took delivery of goods. The case was a foreign-related case. According to Article 23 of the Some Provisions of the

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Supreme People’s Court on the Scope of Cases to be Entertained by Maritime Courts, the case was exclusively governed by maritime court. The domicile of Jiehang was within the jurisdiction region of the court. According to Article 23 of the Civil Procedure Law of People’s Republic of China, a lawsuit brought on a contract dispute should be under the jurisdiction of the people’s court located in the place where Jiehang had his domicile or where the contract was performed. Therefore, the court of first instance had the jurisdiction over this case. According to Article 126 Paragraph 1 of the Contract Law of the People’s Republic of China, contracts subject to mandatory application of Chinese law parties to a foreign related contract could select the applicable law for resolution of a contractual dispute. China Transport and Jiehang unanimously chose to apply the laws of the People’s Republic of China. According to Article 41 of the Law of the Application of Law for Foreign-related Civil Relations, the parties concerned could choose the laws applicable to contracts by agreement. The case should apply to the laws of the People’s Republic of China. Jiehang issued a booking note to China Transport Foshan in its own name. Jiehang entrusted China Transport Foshan with the shipment of containers. After receiving the booking note, China Transport Foshan arranged the booking and charged Jiehang. China Transport Foshan did not possess the status of a legal person as the branch office of China Transport, and the civil liability should be born by the insurance company. There was a contractual relationship of marine freight forwarding between Jiehang and China Transport, China Transport was the bailee and Jiehang was the bailor. Jiehang issued a letter of guarantee to CASA China before booking. Jiehang guaranteed to bear all economic losses or responsibilities caused by improper description of goods, shortage and loss. Jiehang should be jointly and severally liable with the shipper on the bill of lading or other relevant persons. The letter of guarantee was issued by Jiehang on a voluntary basis. Jiehang did not prove that there was a revocable or invalid situation. Jiehang did not indicate that the letter of guarantee was issued for the shipment of the specific batch of goods. Therefore the letter of guarantee should be taken as being included in the contract of marine freight forwarding of the case. The contract of marine freight forwarding was genuine intention of the parties, in compliance with the compulsory law and compulsory administrative regulation and was lawful and effective. The parties should exercise their rights and perform their obligations in accordance with contractual stipulations and relevant laws. The claim for USD15,024 of the container detention charge. On the basis of emails between China Transport and Jiehang which proved the condition that no one took delivery of goods and the transportation status of the goods involved on the website of MSC, without the rebuttal evidence brought by Jiehang, the court of first instance affirmed the fact that no one took delivery of goods until the goods were detained by the customs at destination Alger Port. China Transport paid the destination port charge USD16,232 to the carrier for Jiehang to be paid back later. According to Article 398 of the Contract Law of the People’s Republic of China, the principal should prepay the expenses for handling the entrusted affair. Any

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expense necessary for handling the entrusted affair advanced by the agent should be repaid with interest by the principal. Jiehang should reimburse China Transport for the container detention charge which paid by China Transport for handling the entrustment matters of Jiehang. As for the argument that the consignee should bear the container detention charge by Jiehang, it lacked legal grounds, so the court of first instance did not adopt it. The reasonable amount of container detention charge should be determined according to the loss of the containers owner when the containers were occupied. Containers’ owner could avoid losses by replacing new containers when the containers were occupied for a long time. The accumulative actual losses caused by the container detention charge should not exceed the replacement price of new containers in the same period in the market. Currently, the market price of a 20-foot container was about RMB20,000 yuan. In consideration of the carrier’s responsibility cut down, Jiehang should reimburse China Transport for the detention charge of one container RMB20,000 yuan. The total container detention charge of the four containers was RMB80,000 yuan. The excess amount claimed by China Transport was not supported. The claim for USD1,208 of the destination delivery charge. China Transport did not prove that the destination delivery charge should be charged by the carrier or the port, did not prove that the party that ultimately had the right to charge the destination delivery charge actually charged it, also did not prove that the destination delivery charge was the inevitable cost incurred by the fact that no one took delivery of goods at destination Alger Port. According to Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China and it was provided that “a party shall have the responsibility to provide evidence in support of its own proposition”, China Transport’s claim about the destination delivery charge lacked factual basis, so the court of first instance rejected it. Pulling the threads together, According to Article 398 of the Contract Law of the People’s Republic of China and Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment was as follows: 1. Jiehang should pay China Transport RMB80,000 yuan; 2. other claims of China Transport should be rejected. The above duty on money-paying should be fulfilled within 10 days after the judgment came into effect. If the obligor failed to fulfill its obligation to make the said payments within the time limit provided by this Judgment, the interest should be double paid for the period of deferred payment in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee of first instance in amount of RMB2,329 yuan, China Transport should bear RMB492 yuan, and Jiehang should bear RMB1,837 yuan. The property preservation expense in amount of RMB1,027.25 yuan, China Transport should bear RMB217.2 yuan, and Jiehang should bear RMB810.05 yuan. Jiehang disagreed with the judgment of first instance and appealed to the court that: firstly, revoke the judgment of first instance, change to reject the claims of China Transport; secondly, litigation fees of first and second instances should be born by China Transport. Main reasons: firstly, the court of first instance applied the letter of guarantee involved to the case, which was wrong confirmation of facts. Although the letter of guarantee was the true meaning of both parties at the time, the

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signing and issuance of the letter of guarantee was far away from the dispute in this case, and it was not recorded whether it was applicable to the goods involved. Therefore, in the case where the guarantee letter did not clearly stipulate the applicable time and batch of goods, China Transport should bear the burden of proof to prove that the guarantee letter was related to the case. Secondly, according to the Maritime Code of the People’s Republic of China Article 86, Article 87, Article 88, if no one took the goods at the destination port or the consignee refuses to take the goods, the carrier could retain the goods and apply to the court for auction. Therefore, China Transport should actively deal with the goods involved when it knew that no one had taken the goods and had received a notice from Jiehang that the consignee could not be contacted to reduce the expansion of loss. Jiehang was not the actual shipper or consignee, and only assisted in booking from it, so the obligation to reduce the damage was with China Transport. The court of first instance did not calculate the standard for the container detention fee, which caused Jiehang to be overly responsible. In conclusion, it required the court of second instance to support the appeal of Jiehang. China Transport argued in second instance that: firstly, the guarantee letter was issued by Jiehang to China Transport voluntarily. In the event that Jiehang could not provide evidence to prove that it was revocable or invalid, its content should be regarded as part of the contract obligations agreed by China Transport, so the judgment of first instance was correct. In this case, China Transport had a long-term business relationship with Jiehang, and both parties concluded a long-term letter of guarantee. Jiehang assured China Transport to bear the responsibility for China Transport due to improper description of the goods involved, poor or abandoned goods in the event of any economic loss, it also guaranteed unconditional joint liability with the shipper or other relevant persons on the bill of lading. This guarantee was the true meaning of both parties, and did not violate the mandatory provisions of the laws and administrative regulations. It should take effect on July 10, 2009, the day the guarantee was issued. The letter of guarantee did not indicate the validity period, and when there was no reason that made the letter of guarantee invalid or revoked, it should be understood as long-term validity. The letter of guarantee did not specifically indicate that it was suitable for a specific batch of transported goods, and should be understood to include all freight forwarding services entrusted by China Transport to Jiehang. The entrustment matters of the goods involved were within the validity period of the guarantee, and accordingly, the contents of the guarantee were also applicable to the goods involved. Secondly, China Transport did not improperly handle the entrusted transportation of the goods involved. The carrier and customs had nothing to do with China Transport. After the goods involved arrived at the destination port, although the carrier had been in contact with the consignee to urge the consignee to take the goods, but the goods involved had not been taken, Jiehang could not provide the consignee with other effective contact methods, leading to the detention in the port of destination till the day of lawsuit, resulting in a large amount of demurrage. The evidence provided by China Transport formed a complete evidence chain to prove it. China Transport, as the freight forwarder of Jiehang, had fulfilled its contractual obligations in full and

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correctly according to the entrustment of Jiehang. The matter involved was not collected after the goods arrived at the port of destination, resulting in demurrage costs due to the fault of China Transport, China Transport should not need to bear any responsibility according to law. Thirdly, China Transport and Jiehang established a freight forwarding contract relationship. China Transport was not a carrier and could not exercise the rights of the carrier. The carrier’s retention of goods and the application for court auction of the goods were the rights conferred on the carrier by law but not the carrier’s obligation. Besides, each country’s ports had different regulations for handling container cargoes, and carriers often could not require the relevant departments of the destination port to auction or process the cargo in a timely manner in accordance with the relevant provisions of Chinese law. Fourthly, an independent freight forwarding contract relationship was established between China Transport and Jiehang. Jiehang, as the principal who entrusted China Transport to book a cabin, was a qualified Defendant of first instance. As the trustee of Jiehang, China Transport had paid Mediterranean Company the container detention fee according to the freight forwarding agreement with Jiehang and the general authorization entrustment. Jiehang should repay the fee to China Transport in accordance with the relevant provisions of the Contract Law and the contract between the two parties. Fifthly, the judgment of first instance was reasonable in determining the amount of container detention fee, which should be affirmed. In conclusion, it required the court to affirm the judgment of first instance. Jiehang submitted the following evidence to the court of second instance: evidence 1, original freight invoice, evidence 2, original banking notice of Bank of China, evidence 3, copy of B/L, to prove that the letter of guarantee involved was only for the maritime transport that occurred in July 2009. China Transport cross-examined that: the letter of guarantee involved was a long-term letter of guarantee, which was effective from the time of signing and applied to all subsequent goods, and did not specifically refer to specific goods. The court holds that, the above-mentioned evidence submitted by Jiehang had exceeded the statutory time limit for proof, and did not affect the determination of the basic facts in this case, so it was not used as evidence for the case. After investigation, the court holds that: the facts found out by the court of first instance are clear, so the court confirms them. In addition, the court finds out that: firstly, Jiehang recognized in first instance that the company was the principal of the contract of maritime freight agency involved and recognized that the goods involved arrived at the port of destination on November 7, 2013. Secondly, the letter of guarantee issued by Jiehang on July 10, 2009 to China Transport did not stipulate a guarantee period, and Jiehang promised to unconditionally bear joint and several liability with the shipper or other relevant persons on the bill of lading and as a Defendant sued by China Transport to bear responsibility. The validity of this letter of guarantee dids not prevent China Transport from claiming rights to the bill of lading shipper or other relevant parties. Thirdly, China Transport recognized in second instance that Jiehang disclosed the shipper and consignee information to China Transport when replenishing the bill of lading. Fourthly, in first instance, Jiehang recognized the authenticity of the notice letter issued by China Transport to

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Jiehang for the unattended extraction of the goods involved and the related costs, the courier receipt stub and online tracking record of the notification letter, the lawyer letter, and the delivery, the courier note stub and online tracking record of the lawyer’s letter. Fifthly, Jiehang had no objection in first instance to the facts that the goods involved were detained by the customs due to the inconsistency of the declared information after arriving at the destination port, and China Transport paid the carrier detention fee in May 2014. The court holds that, in this case, China Transport sued Jiehang, claiming that Jiehang was the principal of the freight forwarding contract, and should pay China Transport the necessary expenses paid by the company as agent. Jiehang had no objection to China Transport’s claim that it was the principal in the contractual relationship of sea freight forwarding. After investigation, Jiehang had disclosed the shipper information to China Transport when replenishing the bill of lading, according to the Article 402 of Contract Law of the People’s Republic of China, if the trustee concludes a contract with a third party within the authorization of the principal in his own name, and the third party knows the agency relationship between the trustee and the principal when the contract is concluded, the contract directly binds the principal and third party, except where there is clear evidence that the contract only binds the trustee and the third party, this marine freight forwarding contract relationship directly binds China Transport and the shipper Far East Golden Lion Trading Co., Ltd., but based on that Jiehang had issued a letter of guarantee to China Transport undertaking to unconditionally bear with the shipper or other relevant persons on the bill of lading joint and several liability, Jiehang, as the joint and several guarantor, is still jointly and severally liable for the economic losses suffered by China Transport. So this case should be a guarantee contract dispute arising from a dispute over marine freight forwarding contract, the court of first instance confirmed that the case was the dispute over marine freight forwarding contract, which does not affect the judgment of the case, so it can be affirmed. This case has foreign-related factors. The parties had no objection to the jurisdiction of the court of first instance according to the Article 23 of Civil Procedure Law of the People’s Republic of China and the application of Chinese laws according to the Article 41 of Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China, so the court confirms them. According to the appeal reasons of Jiehang, the court summarizes the issues of the case as follows: firstly, whether the letter of guarantee involved is applicable to the entrusted transportation of the goods involved, and whether Jiehang should take joint and several liability for container detention fee paid by China Transport; secondly, whether China Transport has any obligation to reduce the expenses incurred by the unattended delivery of the goods in the destination port, and the amount of container detention fee. As to the first issue. The facts in this case show that the goods involved arrived at the port of destination on November 7, 2013 and were detained by the local customs because of the inconsistency between the declared information and the actual information of the consignee, which made the carrier unable to contact the consignee, then the goods were stayed at the destination port, resulting in fees such

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as container detention fee. China Transport paid the carrier the above fees, resulting in economic losses. After investigation, Jiehang issued a letter of guarantee to China Transport on July 10, 2009, clearly stating that as a company that booked cargo to China Transport, it was responsible for China Transport due to improper description of the goods, cargo difference, and abandoned goods, all economic losses or liabilities caused by it or its agent should be jointly and severally liable with the shipper or other related persons on the bill of lading, the validity of this guarantee did not prevent China Transport from claiming rights to the bill of lading shipper or other relevant parties. China Transport recognized the above L/G. Therefore, The guarantee contract relationship formed by the above guarantee letter is the true intention of Jiehang and China Transport, the content is legal and valid, and both parties should perform according to the contract. According the Guaranty Law of the People’s Republic of China Article 18 Paragraph 1, if the parties agree in the guarantee contract that the guarantor and the debtor shall bear joint and several liabilities, by issuing the above-mentioned letter of guarantee, Jiehang provided the joint liability guarantee for the shipper of bill of lading or other relevant principal debtor to China Transport. Based on the fact that the goods involved were detained by the customs because of the inconsistency of the declared information and the situation of improper description of the goods, the economic losses suffered by China Transport belong to the possible losses due to breach of contract that should be foreseen when Jiehang issued the guarantee, so the above-mentioned economic losses suffered by China Transport in this case belong to the scope of joint guarantee guarantee of Jiehang. The above letter of guarantee does not stipulate the contract effective period. Because there is no evidence to prove that there is invalid or canceled situation, the letter of guarantee was still valid when the facts involved occurred. The above letter of guarantee also had no agreed warranty period, according to the Guaranty Law of the People’s Republic of China Article 26 Paragraph 1, if the guarantor and the creditor of the joint and several liability guarantee have not agreed on the guarantee period, the creditor has the right to request the guarantor to assume the guarantee responsibility within 6 months from the expiration date, because Jiehang recognized the fact that China Transport paid the container detention fee and other fees in May 2014, and there was no evidence in this case that the shipper on the bill of lading and China Transport carried out the time limit for the fulfillment of the main debt. It was agreed that even if China Transport actually paid the relevant fees as the starting point for the expiration of the main debt performance period, by the time China Transport filed a lawsuit in the court of first instance on July 9, 2014, it still did not exceed the statutory 6 guarantee period. Therefore, China Transport claimed against Jiehang for joint and several liability for its economic losses, which has legal basis, so the court supports it. The court of first instance failed to correctly determine the legal status of Jiehang in the dispute in this case, but the result of the settlement is not inappropriate, so the court affirms the result of the court of first instance. As to the second issue. China Transport was not the carrier in the contract of transportation of the goods involved. There was no agreed loss reduction obligation for the related charges caused by the unmanned withdrawal after the goods arrived

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at the port of destination. Therefore, Jiehang appealed that China Transport had the obligation to reduce damage to prevent the loss of the goods involved in the expansion caused by unmanned extraction, which lacks factual or legal basis, so the court does not support it. The judgment of first instance only supported Weihang Shenzhen Company’s application for container detention fee in this case, and at its discretion determined that the loss of 4 container detention fee was RMB80,000 yuan, China Transport had no objection to this in second instance. Although Jiehang appealed that the court of first instance found that the calculation standard for container detention fee was incorrect, it failed to provide evidence to prove that the calculation standard was unreasonable, so the court does not support the appeal. The court of first instance is correct and should be affirmed by the court. Pulling the threads together, the facts confirmed by the court of first instance are basically clear, but part of application of law is inappropriate, however, the result is correct, which should be affirmed. The appeal of Jiehang lacks basis, which should be dismissed. According to the Civil Procedure Law of the People’s Republic of China Article 170 Paragraph 1 Sub-paragraph 1, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of RMB2,329 yuan, shall be born by the Appellant Jiehang. The judgment is final. Presiding Judge: DU Yixing Acting Judge: GU Enzhen Acting Judge: YE Dan April 13, 2015 Clerk: PAN Wanqin

Guangzhou Maritime Court Civil Judgment China Transport Groupage International Limited (Shenzhen) v. Guangzhou Index Shipping Ltd. (2014) Guang Hai Fa Chu Zi No.28 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 52. Cause(s) of Action 223. Dispute over freight forwarding contract on the sea or sea-connected waters. Headnote Plaintiff freight forwarder held entitled to recover container demurrage from defendant cargo shipper because of consignee's failure to take delivery of container at port of discharge, but damages limited to market value of container. Summary The Plaintiff (freight forwarder) sued the Defendant (shipper) for container demurrage and landing charges incurred at the port of destination. The Defendant claimed that the Plaintiff failed to prove that the goods were not accepted after their arrival at the discharging port. The Court found in favour of the Plaintiff, holding that the Defendant had the obligation to pay the fees. However, the Court also held the Plaintiff as a shipper should have estimated the maximum container demurrage based on the value of a container when entering into the contract. Thus, the amount of fees was adjusted according to the market value of a container.

Judgment The Plaintiff: China Transport Groupage International Limited (Shenzhen) Domicile: Jiabin Road, Nanhu Street, Luohu District, Shenzhen, Guangdong. Legal representative: SUN Peilun, general manager of the company. Agent ad litem: ZHENG Xia, staff of the company. Agent ad litem: HUANG Sufang, lawyer of Guangdong Shengtang Law Firm.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_3

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The Defendant: Guangzhou Index Shipping Ltd. Domicile: Tianhe Road, Tianhe District, Guangzhou, Guangdong. Legal representative: LIN Xiaokui, general manager of the company. Agent ad litem: CAI Peiran, lawyer of Guangdong Xiangyuan Law Firm. With respect to the case arising from dispute over freight forwarding contract between the Plaintiff China Transport Groupage International Limited (Shenzhen) (hereinafter referred to as China Transport) and the Defendant Guangzhou Index Shipping Ltd., the Plaintiff filed an action before the court on October 21, 2013. After accepting it, the court formed a collegiate panel constituted by Presiding Judge SONG Ruiqiu, Judge LI Zhengping and Acting Judge HU Shi to try the case according to the law, the court summoned both parties in court to exchange evidence on March 24, 2014, and held a hearing in public on the same day. Agent ad litem of the Plaintiff, HUANG Sufang, and agent ad litem of the Defendant, CAI Peiran, appeared in court to attend the hearing. Now the case has been concluded. The Plaintiff claimed that: in November 2012, the Plaintiff accepted the entrustment of the Defendant and acted as the freight forwarder of the Defendant to handle the carriage of the goods involved by sea from Nansha Port, China to ALGER, ALGERIERS. The Plaintiff handed over the goods involved to MEDITERRANEAN SHIPPING COMPANY S.A. (hereinafter referred to as MEDITERRANEAN) for actual carriage. The number of the bill of lading was xxx19 and the container number was xxx2. After the goods arrived at the destination port, nobody took it. As of September 30, 2013, the container overdue fee and container unloading fee had happened, in aggregate amount of 6,270 USD. The Plaintiff, as the Defendant’s freight forwarder, had paid the carrier the fee. The Defendant should compensate the Plaintiff for the fee of the destination port 6,270 USD (calculated based on 1 USD to RMB6.15, equivalent to RMB38,560.5 yuan), and bear the litigation fee of the case. The Plaintiff submitted the following evidence within the period for presenting evidence: 1. booking note issued by the Defendant to the Plaintiff, to prove that the Defendant entrusted the Plaintiff to handle the carriage of goods involved; 2. bank payment receipt and invoice, to prove that the Defendant prepaid the freight to the Plaintiff; 3. exchange e-mails of the Plaintiff and the Defendant; 4. notice issued by the Plaintiff to the Defendant concerning that nobody took the goods involved and the relevant fee happened and delivery and signing receipts of courier receipts. Evidences 3 and 4 proved that the Plaintiff had informed the Defendant of the situation that nobody took the goods and fee happened in time; 5. guarantee issued by the Defendant to the Plaintiff, to prove that the Defendant promised to bear all the economic loss caused by that nobody took the goods involved; 6. bill of lading No.MSCUNS605219 issued by MEDITERRANEAN, to prove that MEDITERRANEAN was the carrier of the goods involved; 7. entrustment of bill taking and sign for the bill of lading issued by the Defendant, to prove that the Plaintiff had delivered the original bill of lading to the Defendant; 8. correspondence between MEDITERRANEAN and the Plaintiff, to prove that the goods involved was not taken at the port of destination and relevant fee happened;

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9. dynamic results of carriage of goods inquired on the website of MEDITERRANEAN, to prove that the goods involved had been stranded at the destination port after arriving on July 18, 2012; 10. rate of container overdue fee at the port of shipment published on the website of MEDITERRANEAN, to prove the basis for calculating the container overdue fee; 11. letter of guarantee issued by the Plaintiff to MEDITERRANEAN, to prove that the Plaintiff, as the principal and joint liability guarantor who booked directly with it, should pay the container overdue fee according to law; 12. two certification issued by Lisheng Mediterranean Shipping (Shanghai) Co., Ltd. Shenzhen Branch, 13. Hang Seng Bank’s cheque receipts and cheque stub, 14. authorization to pay issued by the Plaintiff, evidence 12 to 14 was used to prove that nobody took the goods involved and the Plaintiff entrusted CASA LTD (hereinafter referred to as CASA) to pay the fee of the port of destination to MEDITERRANEAN SHIPPING CO (HK) LTD (hereinafter referred to as MEDITERRANEAN HK); 15. industrial and commercial registration information of Lisheng Mediterranean Shipping (Shanghai) Co., Ltd. and its Shenzhen Branch, to prove that the company had the right to provide goods collection, issuance of bills of lading, freight settlement and signing service contracts for ships owned or operated by MEDITERRANEAN; 16. notarized confirmation letter issued by CASA, to prove CASA’s subject qualification and legal relationship with the Plaintiff; 17. notarized certificate, to prove that the Plaintiff entrusted CASA to actually pay the fee of the port of destination to MEDITERRANEAN HK. The Defendant argued that: the Defendant only entrusted China Transport Guangzhou Branch for the carriage of the goods involved, and did not entrust the Plaintiff. The Plaintiff’s subject was unqualified; if nobody took it after the goods arrived at the destination port, the actual carrier should take measures to reduce loss, only the part that the amount of the auction of goods with a lien was not enough to pay could be claimed from the shipper. The Plaintiff’s claim was unreasonable in the amount. If the loss was allowed, the rights must be claimed, which had no legal basis. The court should reject the Plaintiff’s action. The Defendant submitted the following evidence within the period for presenting evidence: 1. basic information of the company registration, to prove that China Transport Guangzhou Branch was not canceled; 2. correspondence between China Transport Guangzhou Branch and the Defendant, to prove that the goods involved were business transactions between the Defendant and a Guangzhou company, and the Plaintiff had no direct interest in the case. After cross-examination in court, the Defendant recognized the authenticity of evidences 1, 2, 4, 5, 6, 7, 13, 15, 16, 17 submitted by the Plaintiff and had objection to the authenticity of evidences 3, 8, 9, 10, 11, 12 of the Plaintiff; the Plaintiff recognized the authenticity of the evidence submitted by the Defendant, but had objection to the content of the evidence 2 of the Defendant. The court confirms probative force for evidence materials that the Defendant had no objection to the authenticity. The Plaintiff’s evidence 3 had neither the original nor could it be proved with other Plaintiff’s other evidence, and its probative force is not confirmed; although the Plaintiff’s evidence 9 and evidence 10 had no original, after the website of MEDITERRANEAN was checked, they are consistent with the content

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of the above evidence and its probative force is confirmed; although the Plaintiff’s evidence 11 was the original, but lacks relevancy to the case, its probative force is not confirmed; the Plaintiff’s evidence 12 was the original, and when the Defendant only raised an objection and there was no evidence to the contrary, the court confirms its probative force; although the Plaintiff’s evidence 8 had no original, it can be proved with the Plaintiff’s evidences 9 and 12 and its probative force is confirmed. The Defendant’s evidence 2 and the Plaintiff’s evidence 4 mutually proved each other, and the court confirms its probative force. According to the above-mentioned evidence that confirmed with probative force and the court hearing, the court finds out the facts of the case as follows: On June 4, 2012, the Defendant issued a letter of guarantee to CASA and the Plaintiff, assuring that, as the company that booked to entrusted to ship the goods to CASA and the Plaintiff, for the goods booked entrusted by the it, it would bear all economic loss or liabilities caused to CASA and the Plaintiff or its agent due to improper description, miscarriage or abandonment of the goods, and would unconditionally bear joint and several liabilities with the shipper or other relevant persons on the bill of lading. On November 23, 2012, the Defendant issued a booking note No. 181MN12C01A002374 to the Plaintiff Guangzhou Branch, entrusting it to ship a 20-foot container from Nansha, China to Alger. After accepting the entrustment, the Plaintiff Guangzhou Branch charged the Defendant with a fee 1,600 USD and RMB 1,390 yuan, and issued an invoice to the Defendant. The Plaintiff booked with MEDITERRANEAN for the carriage of the goods involved. On December 4, MEDITERRANEAN as the carrier issued a bill of lading No.MSCUNS605219. The goods was a 20-foot container with box number MSCU6978072, the loading port Nansha, China, and the unloading Alger Port, Algeriers, the freight was prepaid and was carried by M.V. MSCTERESA 1241A voyage. The waiver period was 7 days. The overdue fee for 20-foot containers was 12 USD per day from day 8 to day 15 and 24 USD per day after day 16. On the same day, the Defendant appointed its employee Liao Mingde to receive the original bill of lading No.MSCUNS605219. Container No.MSCU6978072 was loaded on November 30, 2012, shipped to Chiwan on December 1, loaded on M.V. MSCKALINA on December 8, and shipped to Barcelona on January 7, 2013, and loaded on M.V. VEGAMERCURY on January 14, and arrived in Alger on January 17. On September 25, 2013, the dynamic inquiry results of container on the website of MEDITERRANEAN showed that the container was still stranded at the destination port. After the goods arrived at the port of destination, nobody took it. MEDITERRANEAN repeatedly notified the Plaintiff of the fee happened of that the goods was at the port of destination and nobody took it via e-mails. On April 11, 2013, MEDITERRANEAN emailed the Plaintiff to inform the Plaintiff that the container overdue fee as of April 30 was 2,232 USD and the storage fee was 2,508 USD. The Plaintiff Guangzhou Branch sent a letter on behalf of the Plaintiff on April 15 to inform the Defendant that as of April 30, the container involved had incurred a fee 4,740 USD at the destination port, and requested the Defendant to give a written reply before April 22 on how to handle the container involved.

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Otherwise, it reserved the right to pursue all legal recourse against the Defendant. The Defendant recognized the receipt of the above letter during the hearing, but did not recognize the fact that nobody took the goods, and held that the goods involved might not have arrived at the port of destination within a reasonable time, the carrier might not have notified the consignee in time, and the Defendant did not provide evidence for this. The Plaintiff issued an authorization to pay to CASA, entrusting CASA to pay MEDITERRANEAN’s agent, MEDITERRANEAN HK, for the container overdue fee arising from that nobody took No.MSCU6978072 container at the destination port. On September 30, CASA issued a cheque No.143462 of Hang Seng Bank with an amount of 6,270 USD to MEDITERRANEAN HK. MEDITERRANEAN HK stamped and signed the above cheque. On October 8, Lisheng Mediterranean Shipping (Shanghai) Co., Ltd. Shenzhen Branch issued two certifications to the facts that the container involved was still stranded at the destination port and the Plaintiff had entrusted CASA to pay the fee of destination port. In addition, Lisheng Mediterranean Shipping (Shanghai) Co., Ltd. was a limited liability company wholly foreign-owned by MEDITERRANEAN established in China. Lisheng Mediterranean Shipping (Shanghai) Co., Ltd. and Lisheng Mediterranean Shipping (Shanghai) Co., Ltd. Shenzhen Branch had head and branch relationship. The business scope was to provide goods collection, issuance of bills of lading, freight settlement and signing service contracts for ships owned or operated by MEDITERRANEAN. China Transport Guangzhou Branch was established on June 19, 2006. The company type was branch. During the hearing, the Plaintiff and the Defendant unanimously agreed to apply the laws of the People’s Republic of China to settle dispute in the case. The court holds that: the case is the dispute over freight forwarding contract. The goods in the case were shipped from Nansha, China to Alger, Algeriers by sea. The dispute happened in the case because nobody took the goods at the port of destination. The case has foreign-related factors. According to the Provisions of the Supreme People’s Court on Several Issues concerning the Trial of Cases of Disputes over Marine Freight Forwarding Article 13, the case is under the jurisdiction of the Maritime Court. The domicile of the Defendant in the case is within the jurisdiction of the court, and according to the Civil Procedure Law of the People’s Republic of China Article 23, the court has jurisdiction over the case due to the action arising from contract disputes. The Contract Law of the People’s Republic of China Article 26 Paragraph 1 stipulates that the parties to a foreign-related contract can choose the law applicable to the handling of contract disputes. The Plaintiff and the Defendant unanimously agreed to apply Chinese law during the court hearing, so the law of the People’s Republic of China should be used to settle the dispute in the case. The Defendant issued a booking note to the Plaintiff Guangzhou Branch. As the branch of the Plaintiff, the Plaintiff Guangzhou Branch accepted the entrustment of the Defendant and charged the Defendant. However, the booking note involved was the Plaintiff’s booking note, and the Defendant also issued a letter of guarantee to the Plaintiff. According to the Company Law of the People’s Republic of China

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Article 14 Paragraph 1, the Plaintiff Guangzhou Branch is not qualified as a legal person, and its civil liability should be born by the Plaintiff. Both the Plaintiff and the Defendant agreed that the freight forwarding contractual relationship was established according to law, with the Defendant as the principal and the Plaintiff as the trustee. The Defendant’s argument that the Plaintiff had no direct interest in the case lacks factual or legal basis and is not accepted. The freight forwarding contract at sea in the case is the true intention of both parties and does not violate the mandatory provisions of the laws and administrative regulations. It is legal and effective, and both parties should exercise their rights and perform their obligations according to the contract and relevant laws. The Defendant issued a letter of guarantee to the Plaintiff on June 4, 2012 to undertake to bear all economic loss or liabilities caused to the Plaintiff due to improper description, miscarriage or abandonment of the goods, and unconditionally bear joint and several liabilities with the shipper or other relevant persons. The letter of guarantee was issued by the Defendant voluntarily. If it was not proved that it was revocable and invalid, nor did it show that the letter of guarantee was issued for the carriage of a specific batch of goods, it should be deemed to include the carriage involved. The Plaintiff proved that the goods involved were not taken at the port of destination. The Defendant held that the goods involved might not have arrived at the port of destination within a reasonable time, and the carrier might not have notified the consignee in time, but did not provide evidence for this. According to the Contract Law of the People’s Republic of China Article 398, “if the agent pays for the principal necessary expenses in handling entrusted affairs, the principal shall repay the expenses as well as the interest accrued”, the Plaintiff should complete the freight forwarding at sea affairs involved according to the general entrustment authority. After paying MEDITERRANEAN the fee happened for that nobody took the goods at the destination port, the claim that the Defendant should pay the fee of destination port is consistent with the contract and has factual and legal basis. The Defendant’s failure to pay the Plaintiff constitutes a breach of contract. The container overdue fee is compensation for the loss of the carrier caused by the long-term occupation of the container by the goods involved. The Plaintiff proved that it paid the carrier the fee, but the container overdue fee has the nature of progressive superposition, resulting in that after a long period of time, the accumulated fee often exceeds the value of the container itself. According to the Contract Law of the People’s Republic of China Article 119, “after either party breaches the contract, the other party shall take appropriate measures to prevent the increase of the loss”, when the Plaintiff paid the carrier an overdue fee for the container, the reasonableness of the fee of the port of destination should be defended. After investigation, the market price of a 20-foot general container is about RMB 20,000 yuan. Taking into account the carrier’s own impairment obligations and other factors, the Defendant is confirmed to compensate the Plaintiff for the loss of container overdue fee RMB 20,000 yuan. For the part which exceeds the amount that the Plaintiff claimed, the court does not support. The Plaintiff did not provide evidence to prove that the unloading fee should be collected by the carrier or the port and the subject that was finally entitled to collect the fee actually charged

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the fee, nor did it prove that the unloading fee was inevitable fee happened because the goods involved was not taken at the destination port. Therefore, the court does not support the unloading fee claimed by the Plaintiff. The Maritime Code of the People’s Republic of China Article 87 stipulates that “if the freight, contribution in general average, demurrage to be paid to the carrier and other necessary charges paid by the carrier on behalf of the owner of the goods as well as other charges to be paid to the carrier have not been paid in full, nor has appropriate security been given, the carrier may have a lien, to a reasonable extent, on the goods.” The provision grants the carrier the right to retain the goods at the port of destination, rather than restricting the carrier to realize the rights only by retaining the goods. If the goods are not taken at the destination port and fee happened, the carrier has the right to choose to realize the rights by retaining the goods, and also has the right to choose to require the shipper to bear the fee. In the case, only the dispute between the Plaintiff and the Defendant in the freight forwarding contract at sea is heard. The plea that Defendant proposed against the Plaintiff that the actual carrier should first exercise the right of lien to reduce the loss, and the amount of auction of goods with a lien was not enough to pay the relevant fee lacks factual or legal basis and the court does not accept. Pulling the threads together, according to the Contract Law of the People’s Republic of China Article 119 and Article 398, the judgment is as follows: 1. The Defendant, Guangzhou Index Shipping Ltd., shall pay the Plaintiff RMB20,000 yuan; 2. Reject other claims of the Plaintiff. The above pecuniary obligation shall be fulfilled within 10 days after the judgment comes into effect. If the Defendant fails to perform the obligation to pay money according to the period specified in this judgment, it shall double the payment of interest on the debt during the period of delay according to the Civil Procedure Law of the People’s Republic of China Article 253. Court acceptance fee in amount of RMB764 yuan, the Plaintiff shall bear RMB367 yuan and the Defendant, Guangzhou Index Shipping Ltd., shall bear RMB397 yuan. The Defendant, Guangzhou Index Shipping Ltd., shall directly pay the acceptance fee RMB397 it bears to the Plaintiff which will not be refunded by the court. If not satisfy with the judgment, the parties within 15 days of the date that the judgment is served, can submit an appeal to the court and submit copies according to the number of the other party, and appeal to the Guangdong High People’s Court. Presiding Judge: SONG Ruiqiu Judge: LI Zhengping Acting Judge: HU Shi December 25, 2014 Clerk: ZHANG Xiujie

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Guangdong High People’s Court Civil Judgment China Transport Groupage International Limited (Shenzhen) v. Guangzhou Index Shipping Ltd. (2015) Yue Gao Fa Min Si Zhong Zi No.39 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 45. Cause(s) of Action 223. Dispute over freight forwarding contract on the sea or sea-connected waters. Headnote Affirming lower court decision holding the Plaintiff freight forwarder entitled to recover container demurrage from the Defendant cargo shipper because of consignee’s failure to take delivery of container at port of discharge, but damages limited to market value of container. Summary The Plaintiff (freight forwarder) sued the Defendant (shipper) for container demurrage and landing charges incurred at the port of destination. The Defendant argued that the Plaintiff failed to prove that the goods were not accepted after their arrival at the discharging port. The court of first instance found in favour of the Plaintiff, holding that the Defendant had the obligation to pay the fees. However, the court of first instance also held the Plaintiff as a shipper should have estimated the maximum container demurrage based on the value of a container when entering into the contract. Thus, the amount of fees was adjusted according to the market value of a container. The Defendant appealed, alleging that the Plaintiff-Respondent did not have standing and failed to prove that it gave reasonable notice to the consignee when the goods arrived at the destination port. The Plaintiff-Respondent alleged that the notice obligation was unenforceable since the contact information provided by the Defendant-Shipper on the bill of lading was invalid. The appeal court found in favor of the Plaintiff-Respondent and held there was no breach of the notice obligation. Therefore, the appeal court dismissed the appeal and affirmed the judgment of first instance.

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Judgment The Appellant (the Defendant of first instance): Guangzhou Index Shipping Ltd. Domicile: Tianhe Road, Tianhe District, Guangzhou, Guangdong. Legal representative: LIN Xiaokui, general manager. Agent ad litem: CAI Peiran, lawyer of Guangdong Xiangyuan Law Firm. The Respondent (the Plaintiff of first instance): China Transport Groupage International Limited (Shenzhen) Domicile: Jiabin Road, Nanhu Street, Luohu District, Shenzhen, Guangdong. Legal representative: SUN Peilun, general manager of the Company. Agent ad litem: HUANG Sufang, lawyer of Guangdong Shengtang Law Firm. Dissatisfied with Civil Judgment (2014) Guang Hai Fa Chu Zi No.28 rendered by Guangzhou Maritime Court in respect of the case of dispute over marine freight forwarding contract, in which the Respondent China Transport Groupage International Limited (Shenzhen) (hereinafter referred to as “China Transport (Shenzhen)”) was involved, the Appellant Guangzhou Index Shipping Ltd. (hereinafter referred to as “Index Company”) filed an appeal before the court. The court, after entertaining this case, constituted a collegiate panel according to the law and tried this case. CAI Peiran, agent ad litem of Index Company, and HUANG Sufang, agent ad litem of China Transport (Shenzhen) participated in the investigation of the second instance organized by the court. Now the case has been concluded. China Transport (Shenzhen) alleged in first instance that: China Transport (Shenzhen) accepted the commission of Index Company on November 2012, as a freight forwarder to carry the goods involved from Nansha, China, to Algiers, Algeria by sea. China Transport (Shenzhen) delivered the goods involved to Mediterranean Shipping Company S.A. (hereinafter referred to as “Mediterranean Company”) who was the actual carrier. The B/L number was MSCUNS605219 and the number of the container was MSCU6978072. The goods were not taken delivery of at the port of discharge and the container demurrage and landing charges had added up to 6,270 US dollars till September 30, 2013. China Transport (Shenzhen), as a freight forwarder of Index Company had paid those charges to the carrier. Therefore, China Transport (Shenzhen) sued to the court and required the court to rule that Index Company should pay China Transport (Shenzhen) for the charges incurred at the discharging port, 6,270 US dollars (equivalent to RMB38,560.5, calculating according to the conversion that 1 US dollar can be exchanged into RMB 6.15) and bear the litigation fees. Index Company argued in first instance that: in terms of the carriage of the goods involved, Index Company only commissioned China Transport (Shenzhen) Guangzhou Branch (hereinafter referred to as “China Transport Guangzhou Branch”) to handle it, instead of China Transport (Shenzhen), so China Transport (Shenzhen) was not qualified as a party in this case. The goods were not taken delivery of after the arrival at the discharging port, so the actual carrier should have

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a lien to mitigate loss, and only when the proceeds from the auction sale fell short of such charges, the actual carrier should be entitled to claim the difference from the shipper. As a consequence, the amount of payment asked by China Transport (Shenzhen) was irrational. If China Transport (Shenzhen) did not devote itself to mitigation and still had a right to claim, there was no solid legal ground. Index Company required the court to reject the claims of China Transport (Shenzhen). The court of first instance ascertained that: Index Company provided a letter of guarantee (hereinafter referred to as “L/G”) to CASA LTD (hereinafter referred to as “CASA”) and China Transport (Shenzhen) on June 4, 2012, promising that as the company that commissioned CASA and China Transport (Shenzhen) to book space and carry the goods, it should undertake all economic loss and liability arising from inaccurate description, freight loss and jettison of the goods, which were brought to CASA and China Transport (Shenzhen) or its agent, and that it should assume joint and several liability with the B/L shipper or other relevant persons unconditionally. Index Company sent No.181MN12C01A002374 booking note to China Transport Guangzhou Branch on November 23, 2012 and commissioned it to carry the goods in a container with 20-foot from Nansha China to Algiers Algeria. After accepting the commission, China Transport Guangzhou Branch asked Index Company for 1,600 US dollars and RMB1,390 as agent charges, and provided an invoice. Then China Transport (Shenzhen) booked space from Mediterranean Company and Mediterranean Company, as the carrier, issued No. MSCUNS605219 B/L on December 4, stating that: the goods was in a container 20-foot, the number of the container was MSCU6978072, Nansha China was the port of loading, Algiers Algeria was the port of discharging, the freight was prepaid, the carrying ship was M.V. “MSCTERESA” (124A Voyage), free demurrage was 7 days, the demurrage of the container 20-foot was 12 US dollars per day from eighth day to fifteenth day, and 24 US dollars per day after sixteenth day. Index Company delegated its staff Liao Mingde to get the original B/L No.MSCUNS605219 on the same day. No.MSCU6978072 container was loaded on the ship on November 30, 2012, then it was carried to Chiwan on December 1. The goods were loaded on M.V. “MSCKALINA” on December 8, then were carried to Barcelona on January 7, 2013. The goods were loaded again on M.V. “VEGAMERCURY” on January 14 and arrived at Algiers on January 1. The result about container’s situation on the Mediterranean Company’s website on September 25, 2013, showed that the container had still stayed at the discharging port after the arrival. The goods were not taken delivery of after arrival at the discharging port. Mediterranean Company sent emails for many times to inform China Transport (Shenzhen) that the goods were not taken delivery of and thus related charges were incurred. On April 11, 2013, Mediterranean Company sent an email to tell China Transport (Shenzhen) that the container demurrage was 2,232 US dollars and storage charges were 360.86 US dollars till April 30. Then China Transport Guangzhou Branch informed Index Company of the aforesaid situation by emails on the behalf of China Transport (Shenzhen), and asked for a written reply about how to deal with the container involved, otherwise China Transport Guangzhou

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Branch would reserve the rights to claim for damages from Index Company. In the trial of the first instance, Index Company admitted to accept the above emails, but it did not affirm the fact of no delivery of the goods. Apart from it, Index Company considered that the goods might not reach the discharging port in rational time and the carrier might not inform the consignee in time. However, Index Company did not put forward any evidence about it. China Transport (Shenzhen) provided the letter of authorization to pay for CASA and commissioned it to pay the No.MSCU6978072 Container’s demurrage because of no delivery of the goods at the discharging port to Mediterranean HK Company, who was the agent of Mediterranean Company. CASA wrote a check of Hang Seng Bank, whose amounts were 6,270 US dollars and the check number was 143462, for Mediterranean HK Company on September 30. Mediterranean HK Company sealed and signed for the aforesaid check. On October 8, Lisheng Mediterranean Shipping (Shanghai) Company Shenzhen Branch provided two certificates about the fact that the goods had been still staying at the port of discharge and that China Transport (Shenzhen) had commissioned CASA to pay the charges incurred at the discharging port. Besides, Lisheng Mediterranean Shipping (Shanghai) Company was a limited company that was a corporation set up by Mediterranean Company with 100% foreign investment. Lisheng Mediterranean Shipping (Shanghai) Company Shenzhen Branch is a brand office of Lisheng Mediterranean Shipping (Shanghai) Company, the parent company. The business scope of both includes canvassing cargo, issuing B/L, settling freight and entering into a service contract for the ships which Mediterranean Company owned or operated. China Transport Guangzhou Branch was established on June 19, 2006, and the category of it was a branch office. In the hearing, China Transport (Shenzhen) and Index Company agreed to apply Chinese Law to hear this case. The court of first instance held that: this case was the dispute over a marine freight forwarding contract. The goods involved were carried from Nansha Guangzhou China to Algiers Algeria by sea, and the fact that the charges were incurred because the goods were not taken delivery of at the discharging port, took place in the foreign territory. Therefore, this case had foreign-related factors. According to Article 13 of the Provisions of the Supreme People’s Court on Several Issues concerning the Trial of Cases of Disputes over Marine Freight Forwarding, this case should be heard by Maritime Court. Index Company’s domicile came within the jurisdiction of the court, and in line with Article 23 of the Civil Procedure Law of the People’s Republic of China, “an action instituted for a contract dispute shall be under the jurisdiction of the people’s court at the place of domicile of the defendant or at the place where the contract is performed.”, the court had the right of jurisdiction over this case. Article 126 Paragraph 1 of the Contract Law of the People’s Republic of China stipulated that, “parties to a foreign-related contract may select the applicable law for resolution of a contractual dispute.” In the hearing, China Transport (Shenzhen) and Index Company agreed to

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apply Chinese Law to hear this case. Therefore, the court should apply Chinese Law to hear this case. Index Company sent a booking note to China Transport Guangzhou Branch, which was a branch of China Transport (Shenzhen). Then China Transport Guangzhou Branch accepted the commission of Index Company and asked for the agent freight. However, the booking note involved was one of China Transport (Shenzhen) and Index Company also provided a L/G for China Transport (Shenzhen). In accordance with Article 14 Paragraph 1 of the Company Law of the People’s Republic of China, China Transport Guangzhou Branch should not enjoy the status of an enterprise legal person and its civil liabilities should be born by China Transport (Shenzhen). The declaration of intention of China Transport (Shenzhen) and Index Company was unanimous and the legal relationship of freight forwarding contract established according to the law. Thus Index Company was the principal and China Transport (Shenzhen) was the mandatary. The court of first instance did not adopted the opinion of Index Company that China Transport (Shenzhen) had no direct interest relationship with this case, which lacked a fact and legal basis. In this case, this marine freight forwarding contract consisted of the authentic declaration of intention of the parties, and did not violate any mandatory provision of any law or administrative regulation. The contract was legitimate and effective and the parties should exercise their rights and perform their obligations in pursuance of the contract and relevant laws. On June 4, 2012, Index Company had provided China Transport (Shenzhen) with a L/G, assuring to undertake all economic loss and liability arising from inaccurate description, freight loss and jettison of the goods, which were brought to China Transport (Shenzhen), and to assume joint and several liability with the B/L shipper or other relevant persons unconditionally. Index Company volunteered to provide the L/G. If Index Company had not proven that there was revocable or invalid situation and that the L/G was provided for a particular shipment of goods, the L/G should be regarded to be included in the carriage involved. China Transport (Shenzhen) had proven that the goods had not been taken delivery of at the discharging port. Index Company thought that the goods involved might not be carried to the discharging port at reasonable time or the carrier might not inform the consignee on time, but it had not provided any evidence for it. Article 398 of the Contract Law of the People’s Republic of China stipulated that “any expense necessary for handling the entrusted affair advanced by the mandatary shall be repaid with interest by the principal”. China Transport (Shenzhen) completed the marine freight forwarding affairs involved according to the entrusted scope of the power and paid Mediterranean Company for the charges because of no delivery of the goods at the discharging port, then asked Index Company for the above charges, which conformed to the contract and had facts and legal basis. Index Company had not paid China Transport (Shenzhen) the charges, which had constituted a breach of the contract. The container demurrage, arising from the long-term occupation of container with the goods, was the compensation to the carrier and the shipper should pay the carrier for it. The evidence provided by China Transport (Shenzhen) proved that

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China Transport (Shenzhen) had paid the charges to the carrier. However, the container demurrage possesses progressive nature so that the accumulated charges always exceeded the value of one or even several containers after a long time. According to Article 119 of the Contract Law of the People’s Republic of China, “where a party breached the contract, the other party shall take the appropriate measures to prevent further loss”, China Transport (Shenzhen) should undertake the defense against the rationality of the charges incurred at the discharging port when paying the carrier for the container demurrage. After an investigation, the market price of an ordinary container 20-foot was around RMB20,000 in the recent two years. Considering mitigation of the carrier and the factor that Index Company might predict the maximum loss when concluding the contract, the court of first instance decided that Index Company should compensate China Transport (Shenzhen) for the container demurrage in amount of RMB20,000, and denied the exceeded part of the claim of China Transport (Shenzhen). China Transport (Shenzhen) did not prove that whether the landing charges should be collected by the carrier or by the port, and that the person who should be entitled to charge eventually had charged the fees actually. Besides, China Transport (Shenzhen) neither proved that the landing charges were incurred inevitably because the goods were not taken delivery of at the discharging port. So the court of first instance denied the landing charges claimed by China Transport (Shenzhen). Article 87 of the Maritime Code of the People’s Republic of China stipulated that “if the freight, contribution in general average, demurrage to be paid to the carrier and other necessary charges paid by the carrier on behalf of the owner of the goods as well as other charges to be paid to the carrier have not been paid in full, nor has appropriate security been given, the carrier may have a lien, to a reasonable extent, on the goods”. The provision stipulated that a carrier was vested with a lien on the goods at the port of discharge, but did not prescribe that a carrier could realize rights only through a lien. As for the discharging port charges due to no delivery of the goods, the carrier was entitled to realize the rights through a lien on the goods but also to ask the shipper to pay for the charges. Only the case of dispute over marine freight forwarding contract between Index Company and China Transport (Shenzhen) should be heard by the court of first instance. The defense of Index Company that the actual carrier should have a lien to mitigate loss first and that the actual carrier should be entitled to claim the difference only when the proceeds from the auction sale fell short of such charges, was without any facts and legal basis, and it could not be accepted by the court of first instance. In view of above, according to Article 119 and Article 398 of the Contract Law of the People’s Republic of China, the judgment was rendered as follows: 1. Index Company should compensate China Transport (Shenzhen) for the loss in amount of RMB20,000; 2. reject other claims of China Transport (Shenzhen). The aforementioned obligation with respect to pecuniary payment should be performed within 10 days after this judgment came into force. If the obligor failed to fulfill its obligations to make the said payment within the time limit specified by this judgment, the interest should be double paid for the period of deferred payment in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of

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China. Court acceptance fee of first instance in amount of RMB764, RMB367 should be born by China Transport (Shenzhen) and RMB397 should be born by Index Company. Index Company appealed to the court because of dissatisfying with the judgment of first instance. Therefore, Index Company required the court to judge that: 1. the court should revoke the judgment of first instance; 2. the court should reject the lawsuit and claims of China Transport (Shenzhen); 3. litigation fees of first and second instance should be born by China Transport (Shenzhen). The main reasons were as follows: 1. China Transport (Shenzhen) was not qualified as the Plaintiff in this case, so the court should reject the lawsuit. Index Company had only established business relationship with China Transport Guangzhou Branch rather than China Transport (Shenzhen). The fact of this case was that Index Company sent the booking note to China Transport Guangzhou Branch and China Transport Guangzhou Branch asked the charges for Index Company after accepting the commission, as well as providing an invoice. Besides, the note of B/L-taking and signed documents provided by China Transport (Shenzhen) showed that it was China Transport Guangzhou Branch where the staff of Index Company got the B/L. China Transport Guangzhou Branch was a branch of a company, belonging to “any other organization” ruled in law, so China Transport Guangzhou Branch had the qualification of litigation party and should exercise rights in light of law. Unless China Transport Guangzhou Branch had been cancelled, this suit should be filed by China Transport Guangzhou Branch. 2. The false determination of facts of this case were made by the judgment of first instance. First of all, the court of first instance held that the goods were not taken delivery of at the discharging port according to online goods’ information published by Mediterranean Company (actual carrier), which was provided by China Transport (Shenzhen). Index Company had raised an objection to the authenticity of this evidence in first instance and considered that the actual carrier was an interested party instead of a neutral third party in this case. However, the court of first instance still believed the online information published by the actual carrier (a foreign corporation). In this case, under a situation when the actual carrier and consignee did not appear in the court and participate in the action, if China Transport (Shenzhen) thought that the consignee breached the contract, it should at least prove the fact that the goods were carried to the discharging port at reasonable time or that the carrier informed the consignee in time after the arrival of the goods. But China Transport (Shenzhen) had not put forward any evidence about the said facts, so it should undertake any adverse consequence due to failure on burden of proof. Secondly, even though China Transport (Shenzhen) provided a notarized certificate to prove that the copy of Hang Seng Bank’s check was consistent with the original one, it was not able to put forward any evidence to prove that the check of Hang Seng Bank had been cashed actually or paid for any currency. Index Company raised an objection to it in the first instance but the court did not adopt the opinion of cross-examination. The court of first instance made a false determination of facts of this case because the court held that the overseas relevant corporation of China Transport (Shenzhen) had paid the other overseas company for the related charges when China Transport (Shenzhen) was without any

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support of legal and effective evidence. Overall, Index Company required the court of second instance to support the appeal of Index Company according to law. China Transport (Shenzhen) argued in second instance: 1. China Transport (Shenzhen) was the qualified Plaintiff in this case and could claim from Index Company in accordance with law. Firstly, the relationship of marine freight forwarding contract of this case was set up between China Transport (Shenzhen) and Index Company and China Transport (Shenzhen) was entitled to claim from Index Company. The booking note involved illustrated that the name of mandatary was China Transport (Shenzhen) rather than China Transport Guangzhou Branch and the shipper was Index Company. In addition, according to a L/G which Index Company provided for China Transport (Shenzhen) to assume joint and several liability, the surety was Index Company and the creditor was China Transport (Shenzhen). The L/G was signed before Index Company commissioned to book space for the goods of this case. All goods for which Index Company commissioned China Transport (Shenzhen) to book space, were included in the guarantee scope of the L/G, so were the goods involved. Consequently, the party who established a relationship of marine freight forwarding contract with Index Company always was China Transport (Shenzhen) instead of China Transport Guangzhou Branch. Considering that the loading port of the goods was Guangzhou and operators of Index Company were in Guangzhou as well, for China Transport (Shenzhen) as the head office of China Transport Guangzhou Branch, it is spontaneous and usual to commission China Transport Guangzhou Branch to handle these relevant operating affairs and it did not infringe related law. China Transport (Shenzhen) commissioned China Transport Guangzhou Branch to ask for the freight of this case, which conformed with operating usage as well. Secondly, to say the least, even though the relationship of freight forwarding contract was set up between China Transport Guangzhou Branch and Index Company, China Transport (Shenzhen) was entitled to claim from Index Company as the Plaintiff in light of law because China Transport (Shenzhen) was the head office of China Transport Guangzhou Branch. 2. The facts were clearly found and the law was correctly applied in the judgment of first instance. Firstly, as for the fact that showed the goods were not taken delivery of at the discharging port, apart from the transporting information of the goods on the carrier’s website as evidence provided by China Transport (Shenzhen), there were emails between China Transport (Shenzhen) and Index Company, the notifications that China Transport (Shenzhen) sent to Index Company as well as the copy sender and receiver of the express waybill, and correspondence between Mediterranean Company and China Transport (Shenzhen) to prove. After China Transport (Shenzhen) provided evidence to prove that the goods still stayed at the discharging port till then, if Index Company thought that the goods were taken delivery of at the discharging port, it should put forward refutatory evidence to prove its claim, otherwise, it should bear liability because of failure on burden of proof. Secondly, all contact information of consignor, consignee and notify party on the B/L were provided by Index Company for China Transport (Shenzhen), and there was a reminder stating that “carrier and his agent will not assume any liability if he or his agent cannot notify relevant parities” on the

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B/L carrier could not contact consignee and notify party through the contact information provided by Index Company, so carrier could not perform his notification obligation at all and all legal consequences resulted from it should be born by Index Company. Thirdly, China Transport (Shenzhen) paid Mediterranean Company for the container demurrage and landing charges incurred at the discharging port actually, so Index Company should repay China Transport (Shenzhen). In addition to notarization, China Transport (Shenzhen) also submitted certificates provided by Mediterranean Company and the letter of authorization to pay provided by China Transport (Shenzhen) in first instance, proving that China Transport (Shenzhen) had actually paid Mediterranean Company the container demurrage and landing charges. Besides, signing date and amount of money of check’s signature form as well as check stub of Hang Seng Bank were consistent with time of payment and total amount of container demurrage and landing charges, which were provided by China Transport (Shenzhen). As a result, if Index Company stuck to consider that the payment of China Transport (Shenzhen) was not related to this case, Index Company should put forward opposite evidence or should bear disadvantage consequence due to failure on burden of proof. Overall, China Transport (Shenzhen) required the court to affirm the original judgment. The facts found by the court of first instance were evidenced by relevant proof and the court confirms them. The court finds additionally that: 1. The recipient of booking note sent by Index Company was China Transport (Shenzhen). 2. Index Company affirmed the authenticity of the notification that China Transport Guangzhou Branch sent to Index Company, about the goods which were not taken delivery of, and about related charges incurred by it as well as the copy sender and receiver of the express waybill in the first instance. In that notification, China Transport Guangzhou Branch sealed a signature of “for and on behalf of China Transport Groupage International LIMITED SHENZHEN”. 3. On June 4, 2012, Index Company had provided China Transport (Shenzhen) with a L/G, assuring to undertake all economic loss and liability arising from inaccurate description, freight loss and jettison of the goods, which were brought to China Transport (Shenzhen), and to assume joint and several liability with the B/L shipper or other relevant persons unconditionally as well as the obligation of this L/G and the responsibility as the Defendant against whom China Transport (Shenzhen) filed an action to the court. The legal effect of this L/G will not prevent China Transport (Shenzhen) claiming from B/L shipper or other relevant persons. 4. Carrier stated on the B/L which Index Company got from China Transport Guangzhou Branch, was Mediterranean Company and consignor was WEST BEACH INTERNATIONAL, LTD. Index Company admitted that the information of B/L consignor, consignee and notify party was provided by itself. 5. The court found that the container involved reached at the discharging port on 17 January 2014 and that the goods were taken out of the container on 12 June

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2014, on the column of “track a shipment” with B/L number through the URL (http://www.msc.com/chn/help-centre/tools/track-a-shipment). 6. The column of notify party on the B/L stated that “carrier and his agent will not assume any liability if he or his agent cannot notify relevant parities”. 7. Index Company affirmed the authenticity of the certificate provided by Chinese notary and HK lawyer Yang in first instance, which was submitted by China Transport (Shenzhen). The certificate showed that China Transport (Shenzhen) commissioned CASA to pay Mediterranean HK Company 6,270 US dollars and that the date when CASA issued an invoice in Hong Kong region was 30 September 2013. 8. The court of first instance received a statement of complaint submitted by China Transport (Shenzhen) on October 21, 2013. The court holds: in this case, China Transport (Shenzhen) sued Index Company and claimed that Index Company, as the principal of freight forwarding contract, should pay China Transport (Shenzhen) (as mandatary) for necessary charges paid on behalf of Index Company. After review, Index Company revealed consignor’s information to mandatary while arranging the carriage affairs and the column of “consignor” on the B/L received by Index Company clearly was WEST BEACH INTERNATIONAL, LTD. According to Article 402 of the Contract Law of the People’s Republic of China, “where the agent, acting within the scope of authority granted by the principal, entered into a contract in its own name with a third person who was aware of the agency relationship between the principal and agent, the contract is directly binding upon the principal and such outsider, except where there is conclusive evidence establishing that the contract is only binding upon the agent and such third person”, the marine freight forwarding contract was directly binding upon China Transport (Shenzhen) and WEST BEACH INTERNATIONAL, LTD (consignor). However, considering that Index Company had provided China Transport (Shenzhen) with a L/G assuring to assume joint and several liability with the B/L shipper or other relevant persons unconditionally, Index Company, as a joint liable surety, should undertake joint and several liability for economic loss suffered by China Transport (Shenzhen). As a consequence, this case shall be a case of dispute over a suretyship contract triggered from the marine freight forwarding contract. The court of first instance regarded this case as a marine freight forwarding contract, not affecting the result of this case and sustaining it. The discharging port of the goods involved was Algiers, Algeria, so this case has foreign element. Both parties raised no objection to apply Chinese law to handle this case according to Article 126 Paragraph 1 of the Contract Law of the People’s Republic of China. The court confirms it. According to the appeal reasons, the court concludes the second-instance dispute issues as follows: 1. whether China Transport (Shenzhen) is the qualified Plaintiff in this case; 2. whether China Transport (Shenzhen) suffered loss due to no delivery of the goods at the discharging port; 3. the question of affirming the liability of Index Company.

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The following statement is about the first issue. The facts of this case indicate that China Transport Guangzhou Branch accepted the booking note, asked Index Company for relevant freight and deliver the B/L to Index Company, but the booking note involved was China Transport (Shenzhen)’s one and Index Company provided China Transport (Shenzhen) with a L/G, assuring to undertake all economic loss and liability arising from inaccurate description, freight loss and jettison of the goods, which were brought to China Transport (Shenzhen). Besides, China Transport Guangzhou Branch sent notification in the name of China Transport (Shenzhen) to Index Company, about the goods involved, which were not taken delivery of, and about related charges incurred by it. So the court holds that China Transport Guangzhou Branch accepted the booking note of Index Company on behalf of its head office and arranged the carriage affairs, and related legal results shall be born by China Transport (Shenzhen). Besides, China Transport (Shenzhen) is the party that shall assume civil liability for China Transport Guangzhou Branch because of as the head office of China Transport Guangzhou Branch. Whether China Transport Guangzhou Branch brings a legal action does not influence China Transport (Shenzhen) to exercises litigation right for this case. Therefore, China Transport (Shenzhen) is entitled to file a lawsuit and is the qualified Plaintiff. The claim of Index Company that China Transport (Shenzhen) was not the qualified Plaintiff lacks facts and legal basis. So the court does not support this claim. The following statement is about the second issue. First of all, the fact that whether the goods were not taken delivery of at the discharging port shall be confirmed. In this case, China Transport (Shenzhen) considered that the goods were not taken delivery of at the discharging port and the consignor, notify party could not be connected, so the fact that whether the goods were not taken delivery of at the discharging port becomes essential when actual carrier claims from China Transport (Shenzhen). As the party who put forward the claim, China Transport (Shenzhen) submit some evidence including carriage result on Mediterranean Company’s website, notification that China Transport Guangzhou Branch sent to Index Company on behalf of China Transport (Shenzhen), about the goods which were not taken delivery of and about related charges incurred by it as well as the copy sender and receiver of the express waybill. Index Company raised no objection to the notification and the copy sender and receiver of the express waybill, but did not agree the carriage result on Mediterranean Company’s website and considered that Mediterranean Company was the actual carrier instead of a neutral third party in this case. So the online information of such company should not be treated as basis for the case. Through an investigation, Index Company received the notification from China Transport Guangzhou Branch on behalf of China Transport (Shenzhen) on April 2013, but did not raise an objection to the fact about the arrival of the goods on January 17, 2013 and no delivery of the goods at the discharging port, even till China Transport (Shenzhen) filed a lawsuit. Considering that the container involved reached at the discharging port on January 17, 2014 and that the goods were taken out of the container on June 12, 2014, which was search from Mediterranean Company’s website (http://www.msc.com/chn/help-centre/tools/ track-a-shipment), the court holds that the goods involved has stayed at the

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discharging port when China Transport (Shenzhen) brought a lawsuit, in other words, there indeed was a fact that the goods was not taken delivery of at the discharging port. Index Company argued that China Transport (Shenzhen) should put forward evidence to prove that it did perform the obligation of notification. After review, the column of notify party on the B/L stated that “carrier and his agent will not assume any liability if he or his agent cannot notify relevant parities” and the consignor, consignee and the notify party’s information was provided by Index Company. However, Index Company did not raise any objection to the reminder “carrier and his agent will not assume any liability if he or his agent cannot notify relevant parities” after receiving the B/L. It meant that every party agreed the appointment of B/L and all affirmed that carrier should not undertake any liability when Index Company showed so inaccuracy information that carrier could not notify relevant parties. Consequently, Index Company shall undertake the burden of proof and prove that the consignee and notify party can be connected through the information. If Index Company cannot submit any evidence for it, it shall bear the legal consequence of failure on burden of proof. The second question is whether China Transport (Shenzhen) suffered loss. Index Company affirmed the authenticity of the certificate provided by Chinese notary and HK lawyer Yang in first instance, which was submitted by China Transport (Shenzhen). Index Company argued in the appeal that the certificate merely could prove the copy of the check was consistent with the original one, but was not able to prove that the check had been cashed actually or paid for any currency. After review, China Transport (Shenzhen) submitted a certificate provided by Lisheng Mediterranean Shipping (Shanghai) Company Shenzhen Branch on October 8, 2013, which proved China Transport (Shenzhen) commissioned CASA to pay Mediterranean HK Company 6,270 US dollars in Hong Kong region. The certificate was the original. Although Index Company did not affirm the authenticity of the certificate, it could not put forward any evidence to refute. So the court affirms the authenticity and probative force of the certificate. The certificate corresponded to the check of Lawyer Yang’s certificate, which could prove that Mediterranean HK Company received 6,270 US dollars from CASA in Hong Kong region. As a result, the claim of Index Company that the check did not be cashed actually or paid for any currency lacks legal basis and the court denies the claim. In conclusion, the court holds that China Transport (Shenzhen) was indeed asked for compensation by actual carrier because of no delivery of the goods at the discharging port and suffered related loss of charges. The following statement is about the third issue. The facts of this case show that the goods involved reached at the discharging port on January 17, 2013 and container demurrage incurred because of no delivery of the goods. China Transport (Shenzhen) paid the carrier for the said charges and thus suffered loss. After review, on June 4, 2012, Index Company had provided China Transport (Shenzhen) with a L/G, as a company that sent a booking note to China Transport (Shenzhen), assuring to undertake all economic loss and liability arising from inaccurate description, freight loss and jettison of the goods, which were brought to China Transport (Shenzhen), and to assume joint and several liability with the B/L shipper or other relevant persons unconditionally. As a consequence, a suretyship contract

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relationship arising from the aforesaid L/G consists of the authentic declaration of intention of China Transport (Shenzhen) and Index Company, the content is legitimate and effective, and the parties shall perform the contract in light of law. According to Article 18 of the Guaranty Law of the People’s Republic of China, “a suretyship of joint and several liability refers to a suretyship contract wherein the parties agree that the surety and the debtor shall be jointly and severally liable”, Index Company provided China Transport (Shenzhen) with a suretyship of joint and several liability for the B/L shipper or other relevant debtors through the said G/ L. Concerning that no delivery of the goods is regarded as jettison of the goods, the economic loss suffered by China Transport (Shenzhen) belongs to the loss due to breach of the contract, which Index Company should predict when providing the G/ L. So the economic loss suffered by China Transport (Shenzhen) is in the scope of Index Company’s suretyship of joint and several liability. The said G/L has no effective date and there is no proof to prove any revocable or invalid situation exists, so the L/G was valid while this case taking place. The aforementioned G/L has no agreement on the term of suretyship. According to Article 26 of the Guaranty Law of the People’s Republic of China, “where the surety of a suretyship of joint and several liability and the creditor have no agreement on the term of suretyship, the creditor shall, within six months from the date of maturity of the principal debts, have the right to demand that the surety undertake suretyship liability”. The date when China Transport (Shenzhen) commissioned CASA to issue an invoice in Hong Kong region was September 30, 2013 and there is no evidence to prove that the B/L shipper and China Transport (Shenzhen) had an agreement on the performance term of the principal debts. Consequently, even though the date (September 30, 2013) when China Transport (Shenzhen) commissioned CASA to issue an invoice is considered as the starting point of the date of maturity of the principal debts, the period which stopped when the court of first instance received a statement of complaint submitted by China Transport (Shenzhen) on October 21, 2013, was still within six months of the term of suretyship. As a result, China Transport (Shenzhen) claimed that Index Company should assume joint and several liability for its economic loss, which complied with law, so the court supports it. The court of first instance could not recognize the legal position of Index Company in this case, but its decision was without fault, so the court affirms the decision. As for the amount of loss of China Transport (Shenzhen), the court of first instance supported the container demurrage which was equivalent to the market price of an ordinary container 20-foot (RMB20,000). Meanwhile, the court of first instance denied the landing charges and the parties did not raise any objection to it, so the court will not hear it. The court affirms the judgment of first instance. In view of above, the facts were clearly ascertained and the several law and regulations were inappropriately applied in the judgment of first instance, but hearing result was correct. So the court affirms the judgment of first instance. The appeal of Index Company lacks legal basis, so the court dismisses the appeal. According to Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows:

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Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of RMB367, shall be born by the Appellant Index Company. The judgment is final. Presiding Judge: DU Yixing Acting Judge: GU Enzhen Acting Judge: YE Dan June 16, 2015 Clerk: PAN Wanqin

Appendix: Relevant Laws Civil Procedure Law of the People’s Republic of China Article 170 After hearing an appeal case, a people’s court of second instance shall handle the case according to the specific circumstances, as follows: 1. if, during the original adjudication, the facts were ascertained clearly and the law was applied correctly, a judgment shall be made to dismiss the appeal and uphold the original judgment; 2. if, during the original adjudication, the facts were ascertained incorrectly or the law was applied incorrectly, a judgment amending, quashing or modifying the original judgment shall be made according to law; 3. if, during the original adjudication, the facts were ascertained unclearly, a ruling shall be made to quash the original judgment and to remand the case to the people’s court that originally tried it for retrial; or, after the facts have been clarified, a judgment amending the original judgment shall be made; and 4. if, during the original adjudication, statutory procedure was violated seriously including omitting the parties or a judgment by default illegally, a ruling shall be made to quash the original judgment and to remand the case to the people’s court that originally tried it for retrial. After the people’s court of first instance made a judgment for the case that was remanded for retrial, if the party lodges an appeal, the people’s court of second instance shall not remand the case for retrial again.

Ningbo Maritime Court Civil Judgment Chenzhou Shipping Group Co., Ltd. v. People’s Insurance Company of China Co., Ltd. Guangdong Branch (2014) Yong Hai Fa Shang Chu Zi No.318 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 93. Cause(s) of Action 230. Dispute over marine insurance contract on the sea or sea-connected waters. Headnote The Plaintiff insured held to be entitled to recover damages from the Defendant insurer for total loss of insured ship; although the Plaintiff was ship finance lessee, it had sufficient insurable interest; contract was not automatically terminated for failure to pay premium, because contract did not clearly so provide. Summary The Plaintiff-Insured sued the Defendant-Insurer for the total loss of the vessel insured and relevant damages in a collision accident. The Defendant-Insurer denied coverage based on five grounds. The outstanding issues here were focused on: (1) whether the Plaintiff-Insured as a ship finance lessee had the right to sue; (2) whether there was an insured accident; (3) whether the insurance slip stipulated that “failure to pay the premium would lead to the automatic termination of the insurance contract”; (4) whether the insurance contract had been terminated. The court found for the Plaintiff-Insured. The court held that although the Plaintiff-Insured was not the ship owner, it has a legally recognizable interest in the ship as a ship finance lessee. Meanwhile, the Plaintiff-Insured had proven the existence of an insured accident while the Defendant-Insurer had failed to provide contrary evidence. The court also found only the insurance slip stated that “failure of payment could bring adverse legal effect” and no official written document mentioned automatic termination. Since the Defendant-Insurer failed to effectively deliver the notice of termination to the listed receiving parties on the policy, the contract was still valid. Thus, the Defendant-Insurer was obliged to pay for the total loss of the ship.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_4

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Judgment The Plaintiff: Chenzhou Shipping Group Co., Ltd. Domicile: Huimin Bridge Village, Lincheng Street, Dinghai District, Zhoushan City, Zhejiang, China. Legal representative: WU Jingguo, chairman. Agent ad litem: WAN Renshan, lawyer of Shanghai Chuangyuan Law Firm. The Defendant: People’s Insurance Company of China Co., Ltd. Guangdong Branch Domicile: Room 303 and 305, PICC Mansion, Guangzhou Avenue, Yuexiu District, Guangzhou City, Guangdong, China. Legal representative: GUO Wenge, general manager. Agent ad litem: YANG Yunfu, lawyer of Guangdong Hengfu Law Firm. Agent ad litem: REN Yanbing, lawyer of Guangdong Hengfu Law Firm. The Third Party: Huarong Financial Leasing Co., Ltd. Domicile: Floor 6&7, World Trade Mansion, No.122, Shuguang Road, Xihu District, Hangzhou City, Zhejiang, China. Legal representative: LI Peng, chairman. Agent ad litem: CHEN Bo, lawyer of Zhejiang Hightac Law Firm. Agent ad litem: YANG Liping, lawyer of Zhejiang Hightac Law Firm. With respect to the case arising from dispute over maritime insurance contract between Plaintiff Chenzhou Shipping Group Co., Ltd. (hereinafter referred to as Chenzhou Group) and the Defendant People’s Insurance Company of China Co., Ltd. Guangdong Branch (hereinafter referred to as PICC Guangdong) before the court on February 26, 2014. The court entertained the case on April 8, 2014 and formed a trial bench according to law. PICC Guangdong submitted the challenge of jurisdiction of the court in the period of answering and was rejected by the court on May 12, 2014. The Defendant appealed the application and was dismissed by the Zhejiang High People’s Court on August 18, 2014. As for the application of Huarong Financial Leasing Co., Ltd. (hereinafter referred to as Huarong Company), the court added it as the Third Party entered into this litigation. The court held twice hearings in public on November 18, 2014 and March 26, 2015. Now the case has been concluded. The Plaintiff Chenzhou Group claimed that Hong Kong Chenglu International Shipping Management Co., Ltd. (hereinafter referred to as Chenglu Company) purchased insurance for M.V. “Chenglu 15” under its management from the Defendant in March 2015. PICC Guangdong accepted the coverage and issued the policy No.PICC2013AX940000000801 with the specification that: (1) the Plaintiff was the assured; (2) the insurance liability was from March 11, 2014 PM 12:00 to March 11, 2015 PM 12:00; (3) the risk covered was all risks; (4) the insurance amount was RMB39,000,000; (5) the insured value was RMB39,000,000; (6) the

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premium should be paid in four installments. In the evening of October 14, 2013, after discharging the whole cargo at Puxiang, South Korea, M.V. “Chenglu 15” dropped anchor at a local outer anchorage for the reason of gale, at PM 15:40 of October 15 the vessel encountered strong wind and dragged its anchor to the breakwater and had multiple collisions which resulted the sinking on account of hull break and bottom hole and caused 10 crew members’ death, 1 crew missing and damage to the breakwater. The Plaintiff alleged that the accident was in the scope of the insurance liability which should be compensated by the Defendant, thus requesting that PICC Guangdong should compensate (1) the total loss of the vessel in the amount of RMB39,000,000 plus interests (at the rate in accordance with the corporate lending rate at the same time of People’s Bank of China calculating from November 15, 2013 till the actual payment date); (2) loss from the damage toward the breakwater in the amount of RMB9,000,000. During the trial, the Plaintiff changed its claim of the second compensation arising from the damage toward the breakwater here above into the compensation claiming from the South Korean Authority in the amount of WON2,997,500,000 (RMB17,205,650), and if M.V. “Chenglu 15” could enjoy the limitation of liability for maritime claims under maritime court in South Korea, the amount should be calculated as per the limitation of SDR1,496,487 (RMB13,924,512). Moreover, as for the breakwater had been destroyed, another vessel owned by the Plaintiff called M.V. “Chenglu 21” was arrested by South Korean marine court till now, thus the Plaintiff added its claim that the Defendant should pay the operating loss arising from the arrest in the amount of USD880,000 (RMB5,412,000), but the Plaintiff Chenzhou Group withdrew this last claim before the ending of the court investigation. The Defendant replied that: (1) the vessel in this case was owned by Huarong Company, the Plaintiff Chenzhou Group was merely the charterer, not the owner of the vessel, so the Plaintiff subject was unqualified; (2) Chenzhou Group, Lishen International Shipping Group Co., Ltd. (hereinafter referred to as Lishen Company) and Chenglu Company stated in the policy and the special list that as the three assureds were merely the charterer, the bareboat charterer and the management company, not the owner, so the insurance contract should be invalid for the reason of no insurable interest of the assured; (3) the Plaintiff Chenzhou Group had transferred the vessel without informing the Defendant when purchased the insurance, but still declared itself as the shipowner, so the contract in this case could not be formed; (4) when Chenzhou Group and Chenglu Company appointed Noah Tianze Insurance Broker (Shanghai) Co., Ltd. (hereinafter referred to as Noah Broker) to negotiate the matters of vessel insurance with the Defendant, they bargained on the clause of installment payment of insurance premium, and the policy in this case specially stipulated that the four installment payment of the premium shall be stated in the list, failure to pay according to the agreement should result in the lapse of the policy. Such agreement should be legitimate and valid, by which the second installment of the premium should be paid before June 15, 2013, but the Plaintiff failed to do so, thus the Defendant gave an announcement about the cancellation of the policy to Noah Broker on June 20, 2013, and Noah Broker informed the Plaintiff through email after receiving this announcement. Whereafter

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the Defendant canceled the insurance contract in the form of insurance endorsement, and after receiving the endorsement the Plaintiff raised no objection to such lapse and cancellation of the insurance contract, without paying the remaining premium and filing an action under the statutory period of three months stipulated in the Contract Law. In consideration of the lapse and cancellation of the insurance contract in June 2013, the contract had been terminated, so the Defendant was not liable for any loss arising from the accident involved; (5) hitherto the Plaintiff Chenzhou Group did not provide any valid evidence to prove the existence of the economic loss and the amount of loss was obviously unreasonable. For the reasons above, the Defendant requested to reject the claims of the Plaintiff Chenzhou Group. The Third Party Huarong Company claimed that the subject matter M.V. “Chenglu 15” in this case was the leased object in the financing leasing contract concluded with Chenzhou Group, Huarong Company was the registered owner of the vessel. According to the leasing contract, Chenzhou Group was obliged to cover the hull insurance and pay the premium. The policy in this case specified that Chenzhou Group was the assured and Huarong Company was the first beneficiary. Chenzhou Group encountered operating deficit by reason of the shipping market after the first payment of installment, it had repeatedly applied for a deferred payment of the second installment from PICC Guangdong, and paid the premium soon after the insurance accident happened, thus the insurance contract in this case should be valid at the time of delete insurance accident. As the registered owner of M.V. “Chenglu 15” and the first beneficiary of the insurance contract, Huarong Company was legally and beneficially related to the result of this case, thus having the right to attend the litigation in this case. The vessel had an insurance accident in the insurance period and should be deemed as total loss, the Defendant PICC Guangdong should directly and wholly compensate Huarong Company as per the insurance amount. Moreover, M.V. “Chenglu 15” collided and broke the breakwater, resulting in the sister vessel M.V. “Chenglu 21” owned by Huarong Company and chartered by Chenzhou Group being judicially arrested in South Korea, if that vessel was judicially auctioned, the corresponding loss should also be directly compensated by PICC Guangdong to Huarong Company, thus requesting that PICC Guangdong should compensate: (1) the insurance indemnities of the total loss of M.V. “Chenglu 15” in the amount of RMB39,000,000 plus interests (at the rate in accordance with the loading rate at the same time of People’s Bank of China calculating from November 15, 2013 till the actual payment date); (2) the loss arising from the repair of breakwater in the amount of RMB9,000,000. During the trial, Huarong Company changed its claim of the second one here above into calculating as per the limitation of liability enjoyed by M.V. “Chenglu 15” in the amount of SDR1,496,487 (RMB13,924,512). With respect to the statement of the Third Party Huarong Company, the Plaintiff Chenzhou Group alleged that Huarong Company was indeed the first beneficiary of the policy in this case and agreed the Defendant to directly compensate all the insurance indemnities arising from the sunk M.V. “Chenglu 15” to Huarong Company. On the other side the Defendant PICC Guangdong alleged that even

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Huarong Company was specified as the first beneficiary in the policy, but according to the stipulation of Maritime Code and Insurance Law, the word “beneficiary” only existed in the personal insurance contract, parties in the contract relationship of property insurance contract shall merely be the applicant (policy holder) and insurer, and only the assured was entitled to claim right in the property insurance contract. The beneficiary should not be the contractual party in the property insurance contract, so Huarong Company was not entitled to file a suit against the Defendant in this case. In consideration of all the motions from the Plaintiff, the Defendant and the Third Party, the issues under this case should be (1) the fact about the fundamental situation of the vessel; (2) the process of when purchasing the insurance; (3) the payment of the premium, and the Plaintiff submitted the following evidence to the court: Evidence 1: insurance slip; Evidence 2: original insurance policy (attached to the special agreement list); Evidence 3: Hong Kong business registration certificate of Chenglu Company; Evidence 4: navigation registration certificate of M.V. “Chenglu 15”; Evidence 5: classification certificate of M.V. “Chenglu 15”; Evidence 6: ship ownership registration certificate of M.V. “Chenglu 15” (early time); Evidence 7: description of the covering situation issued by Chenglu Company. Evidences 1–7 here above purported to prove that (1) M.V. “Chenglu 15” was originally owned by Chenzhou Group; (2) Chenglu Company purchased the hull insurance from the defendant; (3) there was no special agreement about “failure to pay the premium would result in the lapse of the policy” at the time of covering, so this clause appeared in the policy was added by PICC Guangdong arbitrarily. Evidence 8: notice of premium receivable issued by the Defendant on March 19, 2013; Evidence 9: payment voucher and premium invoice of the first installment premium; Evidence 10: payment voucher of all the remaining premium; Evidence 11: fax throughout the Plaintiff and the Defendant; Evidence 12: second payment voucher of all the remaining premium. Evidences 8–12 here above purported to prove that the Plaintiff had paid the first installment premium in accordance with the arrangement of the installment premium demanded by the Defendant, and paid all the remaining premium on December 6, 2013, the Defendant had returned the premium for the reason of the recession of the insurance contract, but the Plaintiff alleged that the contract remained continuously valid and remitted all the premium. Evidence 13: reinforced evidence of evidence 5, which was the original and Chinese translation document of the class maintenance certificate of M.V. “Chenglu 15” provided by the ship inspection company, to prove that the vessel was qualified by inspection on July 31, 2013 and was seaworthy before the accident happened;

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Evidence 14: notice of premium receivable and the proof of payments issued by the defendant on March 8, 2013, to prove that (1) the Defendant accepted the covering in this case and asked the Plaintiff for the whole premium in the amount of RMB1,440,600, so the insurance contract had been formed on March 8; (2) the Plaintiff had paid the premium in the amount of 215,050 + 145,100 = RMB360,150 on March 11, 2013 in accordance with the Defendant’s request. The Defendant PICC Guangdong cross-examined the evidence and held that: (1) the Defendant admitted the authenticity of the insurance slip and policy from evidence 1 and 2, but did not admit the content they proved, and the special agreement with regard to “failure to pay the premium would result in the lapse of the policy” in the policy should be confirmed; (2) evidence 3 the registration material of Chenglu Company was formed in Hong Kong region and was not delete admitted because no certificate of notarization was handled; (3) the Defendant admitted the authenticity of evidence 4 the navigation registration certificate of the vessel, but held that what the applicant in this case issued was this evidence when insured with the Defendant and the applicant disclosed to the Defendant that the Plaintiff in this case was the owner of the vessel, but the content of this evidence was different from the ownership registration certificate of the vessel issued by Hangzhou Maritime Safety Administration, which meant that the Plaintiff was not the owner of the vessel; (4) the authenticity of evidence 5 the classification certificate could not be identified and the defendant held a suspicion of forgery toward such certificate, because the issuing time stated on which was November 17, 2013 but according to the statement of the Plaintiff the vessel had a total loss on November 15, 2013; (5) the Defendant did not admit evidence 6 ownership registration certificate of the vessel for the reason of in consistence with the realistic situation; (6) evidence 7 the description of the covering situation issued by Chenglu Company was merely the unilateral statement of the applicant, so the “three natures” and the content of which could not be identified, such evidence could not be the basis to ascertain the fact in this case; (7) the Defendant admitted the authenticity of evidence 8 notice of premium receivable issued by the Defendant on March 19, 2013, during the consultant of covering in this case, the Defendant once sent a notice of payment to the Plaintiff on March 8, 2013 before the policy had been issued, at that time the applicant and the assured had paid the first installment on March 11, 2013. Later as for the alteration of the content of the insurance contract, the Defendant sent the notice of payment again as per the new operation of the premium on March 19, 2013, but the Plaintiff and the assured had actually paid the premium before that date, so the payment of the first installment by the Plaintiff was not overdue; (8) the Defendant admitted the authenticity of evidences 9–12 but did not admit the content they proved, the Defendant had notified Chenzhou Group and Chenglu Company twice that the policy in this case was lapsed and canceled on June 20 and 21, 2013, rather than notifying in December 2013. The payment voucher in a second time of all the remaining premium was the remaining premium of M.V. “Chenglu 15” paid to the Defendant 2 months after the happening of the

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accident in this case, but the hull insurance in this case was related to totally 10 vessels chartered or owned by the Plaintiff when consulting and the insurance premium of the 10 vessels should all be paid in four installments. If the Plaintiff claimed that the insurance policy was still valid,, which meant that the remaining premium of the 10 vessels should be all paid, not just for one of them (Chenglu 15); (9) evidence 13 was merely the copy with a seal on that, which meant it was still a copy rather than an origin in consideration of its character, also the corresponding certificate of notarization was not handled, thus the defendant did not admit such evidence; (10) the Defendant admitted the authenticity of evidence 14, for it indeed notified the applicant to pay the premium on March 8, 2013 and formed a slip on the computer stated that the time of first installment was March 8, 2013, but on account that the Plaintiff actually paid such premium on March 11, 2013, not March 8, 2013, thus re-sending the notice of payment on March 19, 2013. The Third Party cross-examined the evidence and held that: (1) the Third Party admitted the external authenticity of evidence 1 the insurance slip, but did not admit the legality and relevancy of that. According to the statement of the slip, the shipowner was Chenzhou Group, the applicant was Chenglu Company, the assured listed were Chenzhou Group as the owner, Chenzhou Group as the ship manager and Lishen Company as the bareboat charterer, which was different from the real condition that the shipowner was Huarong Company. The Defendant did not strictly investigate the condition of the shipowner and should be responsible for the partial liability itself. In addition, the period of insurance stated on the insurance slip was different from that on the insurance policy. Moreover, though the slip specified the statement of the applicant that “the insurer had provided the applicant with a detailed introduction of the content of clause and clear instruction of the execution clause therein as well as the content payment agreement and special agreement in the insurance contract. The applicant had sufficiently understood and accepted the content above, and voluntarily covered this insurance”, actually the applicant never saw such clause on the back of the contract and the special agreement list when covering, but just went through the formality; and though the fixture note of the insurance selling matters column specified that “in term of this hull insurance covered by China PICC Co., Ltd., affirming that the salesman of the product had explicated the content of clause to the applicant”, actually the applicant never knew such salesman. Thus the content of promise which was necessary to be made by the applicant on the slip did not reach the “special mark of word, symbol, font and others which needs to be noticed by the applicant” regulated in the Insurance Law; (2) the Third Party admitted the authenticity of evidence 2 the policy, but did not admit the legality and relevancy of that. The first beneficiary was Huarong Company, as the “beneficiary” was just regulated in the personal insurance not in the property insurance, the concept of “the first beneficiary” shall be interpreted unfavorably to the insurer; (3) as for evidence 8 the notice of premium receivable issued by the Defendant on March 19, 2013, the Third Party admitted the authenticity but did not admit the legality and relevancy of that, Chenzhou Group did not receive such notice until March 19, 2013 and the payment should be made after receiving the notice without doubt, which was entirely conflict with the front

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page clause on the policy; (4) evidence 14 the notice of premium receivable on March 8, 2013 required the lump-sum payment of the premium toward all the 10 vessels in the amount of RMB1,140,000 and specified that “only after the premium has been paid, the insurance could commence”, which meant the payment should be disposable at the time of the formation of contract, not by installment, neither had any notice that the contract would be lapsed and canceled without payment on any due; the issuing date of such notice of premium receivable was March 8, clearly showed that the applicant purchased the insurance on March 7, and on March 8 the insured demanded the payment of premium, so at that time the insurance contract had been formed; (5) in regard of the bank slip about paying the premium on March 11, the Third Party raised objection toward the “three natures” of such evidence, because the notice of premium receivable was received again on March 19, which meant that the payment had not been received on March 11, but according to the statement of the Defendant the payment had been returned and paid again after March 11, which meant the payment on March 11 was invalid, as per the agreement of “the policy comes into effect only after the premium has been paid”, the so-called clause that “failure to pay the premium would result in the lapse of the policy” was also not effective. In addition, since the Defendant admitted the notice of premium receivable on March 8, 2013, when such notice was different from the special agreement on the policy, the notice of premium receivable shall prevail which meant that the premium should be paid all at once as required, not in four installments; (6) the Third Party had no objection to the remaining evidence. In order to support the defense, the Defendant PICC Guangdong submitted the following evidence: Evidence 1: insurance policy (including the special agreement list), endorsement, slip and appendix to prove the agreement of premium payment in the policy in this case shall be in four installments, otherwise the policy shall be lapsed. As the assured failed to pay the second installment as per the agreement, the insurer canceled the insurance contract in the form of endorsement, thus the Defendant was not liable for the insurance compensation. Evidence 2: instruction of the fact and attachments issued by Noah Broker, to prove that the Plaintiff and Noah Broker appointed by Chenglu Company had considered the difficulty toward the disposable payment of the premium, thus asked the Defendant for the installment payment of premium as per the requirement of the Plaintiff. The Defendant agreed and issued the policy hereby; but the assured did not pay the second installment of the premium later, and PICC Guangdong issued the endorsement of policy cancellation transmitted by Noah Broker to the Plaintiff. The Plaintiff did not express any objection and never paid the premium, thus the insurance contract had been terminated on June 21, 2013. Evidence 3: Guangzhou South Notarial Office and Zhoushan Fangzheng Notarial Office respectively issued three notarization altogether. The former office proved the communication situation of the email between Noah Broker and the Defendant with respect to the ship covering matters, the latter office proved that after the lapse and cancellation of the policy in this case, the Plaintiff appointed Noah Broker and others to contact the hull insurance matters of the ten vessels

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including M.V. “Chenglu 15” with People’s Insurance Company of China Co., Ltd. Zhoushan Branch (hereinafter referred to as PICC Zhoushan), which meant that the Plaintiff itself had confirmed that the policy with PICC Guangdong had delete lapsed and searched for other insurer. Evidence 4: Shanghai Chuangyuan Law Firm had lettered on October 29, 2013 to prove that the Plaintiff confirmed that “on June 21, 2013, the insurer had canceled the contract for the reason of failure to pay the second installment of premium before June 15, 2013”. The Defendant PICC Guangdong also submitted the material of relevant law, reference case, legal opinion letter, but some of which was irrelevant to the ascertainment of the case fact, thus were not adopted as the evidence for cross-examining and attesting. The Plaintiff Chenzhou Group held that (1) the Plaintiff admitted the authenticity of evidence 1 the policy did not have the content of special agreement and specific payment, actually there was indeed no special agreement clause at that time; the notify party stated on the endorsement was Chenglu Company, not the Plaintiff, and as the assured, the Plaintiff Chenzhou Group never received such endorsement; (2) as for evidence 2 the “instruction of fact” and attachments issued by Noah Broker, the Plaintiff admitted the authenticity of that, but the email was not notarized, of which the authenticity could not be identified; Noah Broker and the Defendant were related interest parties, so the statement of it was merely a subject judgment, and the so-called clause of “failure to pay the premium would result in the lapse of the contract” never existed at the time when contacting emails, so the factum probandum could not be proved. Furthermore, the broker only went in for general inquiry, it was broadly authorized and could be canceled at any time, thus only the policy should be regarded as the criterion; the endorsement was issued on July 3, 2013, the broker claimed that it had received the canceled policy on June 21, 2013, this was self-contradictory because actually the Defendant did not transmit to the Plaintiff until December 9, 2013 informing the contract had been canceled. (3) Evidence 3 the three notarization all reflected merely the process of price inquiry, but all the email correspondence were not an effective and binding offer. The price inquiry between Noah Broker and PICC Zhoushan in July and August 2013 was for the insurance matter in the next annual insurance, as the broker market was comparatively active, so Noah Broker was inquiring for its interest and was stopped by Chenzhou Company later, and actually the ten vessels were not covered by any insurance in other company in the remaining insurance period, which meant that the Plaintiff confirmed in heart that the ten vessels were continuously in the insurance period of PICC Guangdong; (4) the Plaintiff admitted the authenticity of evidence 1 the lawyer’s letter but did not admit its purpose of proof, the lawyer’s letter showed that Lishen Company had supervised the Defendant to perform its obligation, the matter discussed did not change neither affirm the fact of the case. Huarong Company cross-examined the evidence and held that: (1) it had no objection to the authenticity of evidence 1 (except the endorsement), 3, 4, but had objection to the “three natures” of the endorsement in evidence 1. The issued time of the endorsement was on July 3, 2013, and was contradictory to the delivery time

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of June 20 and 21, 2013 in evidence 2, which was suspected of forgery, unilateral production, and had no effect of evidence. The endorsement itself specified that “this endorsement shall be attached to the original insurance policy to use, and cannot be used alone”, PICC Guangdong used it alone as a notification to the termination of the contract, whose form was illegal; (2) the endorsement informed the applicant, and did not notify the insured from the beginning to the end, indicating that even if the Defendant had the right to terminate the contract, it had never exercised the termination of the contract. Huarong Company had objection to the legality and relevancy of the policy, the content of “applicant declaration” was false and was a standard term made by the insurer unilaterally. It could not prove that the insurer had fulfilled the obligation of explanation and there was no negotiation process of “special agreement” and “payment agreement” ever existing. The Annex to the policy was the Panama ship temporary demise charter certificate, the recorded ship owner was actually the second ship owner in the domestic demise charter, the bottom right corner of the certificate had the demise charter registration number, which could fully verify that Huarong Company was the registered ship owner. Huarong Company had objection to the “three natures” of evidence 2 Noah broker’s Fact Statement and the Annex. Fact Statement was witness testimony. It was not signed by the agent who issued the testimony and did not appear in court to answer questions, so its authenticity cannot be identified. The attached email was not notarized, so the evidence did not meet the formal requirements, and Huarong Company could not confirm its authenticity. The broker only played the role of communication, did not have the right of making decisions, it could not represent the insurer to perform obligations of explanation and instruction. And the delivery time of endorsement in Fact Statement was conflict with the time it issued. As an insurance broker, Noah collected the Defendant’s high commission and worked for the Defendant, and it was not the agent of Chenzhou Group; (3) evidence 3 the materials from Zhoushan Notary Office had no relevancy to the case, only reflect the inquiry process, and ultimately have no result. Evidence 4 the lawyer’s letter only stated that the Defendant claimed it had sent a notice of cancellation, which could not be seen that the Plaintiff has confirmed the insurance contract had been canceled. The Third Party Huarong Company submitted the following evidence to the court: Evidence 1: leaseback goods transfer agreement; Evidence 2: financial leasing contracts and supplementary agreements, to prove that on October 28, 2010, Huarong Company and Chenzhou Group signed two agreements and agreed that Chenzhou Group would transfer M.V. “Chenglu 15” to Huarong Company by the price of 62,380,000 RMB and then chartered back to Chenzhou Group in the way of financial leasing. According to the charter party, Chenzhou Group should be responsible for covering the hull insurance of the chartered ship and paying the premium; Evidence 3: ownership certificate and demise charter registration certificate of M.V. “Chenglu 15”;

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Evidence 4: sub-charter application and demise charter nationality certificate, to prove that after the signing of the charter party, the ownership of M.V. “Chenglu” had been registered to Huarong Company and had taken the demise charter certificate. In September 2012, to meet the requirements for the procedures of hanging Panama flag, Huarong Company agreed to Chenzhou Group to transfer M.V. “Chenglu 15” to Lishen Company in the way of demise charter; Evidence 5: Civil Judgment of (2013) Yong Hai Fa Shang Chu Zi No.132 from the court; Evidence 6: settlement agreement; Evidence 7: Implementation Status Reports, to prove that on June 18, 2013, the court judged that Chenzhou Group constituted a breach of the charter party and should pay the hire and liquidated damages of overdue payment totaling RMB50,126,941.3 to Huarong Company within 10 days from the date of the decision. As the total amount of the claims had exceeded the insured amount 39 million yuan, Huarong Company was entitled to receive all the insurance indemnity. In the enforcement of the case No.132 decision, Huarong Company and Chenzhou Group signed the settlement agreement on December 10, 2013 to confirm that because during the charter period of Chenzhou Group, M.V. “Chenglu 15” had sunk and been deemed as total loss, Chenzhou Group agreed that once it got the compensation from the insurance companies or P&I Club due to the ship sinking accident, Huarong Company as the ship owner and the first beneficiary had right to enjoy the priority of compensation, the amount of compensation should offset Chenzhou Group’s due corresponding payable hire amount. The Plaintiff Chenzhou Group had no objection to the above evidence. The Defendant PICC Guangdong cross-examined the evidence and held that it had no objection to the authenticity of the above evidence, but had objection to the relevancy and proved content. (1) Evidences 1, 2 proved that after transferring the ownership of M.V. “Chenglu 15” to Huarong Company, Chenzhou Group only had the right to use the vessel, so it did not have insurance interests; (2) Huarong Company as the ship owner and beneficiary, was not the insured of the insurance contract, neither the party in this insurance contract; (3) in evidence 6, the agreement between Huarong Company and Chenzhou Group on how to deal with insurance claims also showed that Huarong Company had no right to directly ask the Defendant to pay the insurance benefits. The meaning as the first beneficiary was only that after the insured got the insurance compensation from the insurance company according to the insurance contract, it should enjoy the priority of this compensation from the insured. As for the above evidence submitted by the parties, the court holds that (1) the evidence submitted by the Plaintiff Chenzhou Group, the Defendant had no objection to the authenticity of evidences 1, 2, 4, 8–12, 14, the court confirms it; (2) for evidence 3 the registration information of Chenglu Company, although it had been formed outside the territory without the notarization and certification procedures, PICC Guangdong had recorded Chenglu Company as the insured, which indicated that she recognized the subject of Chenglu Company, the court

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confirms it; (3) for evidences 5 and 13 the classification certificate, although the issued time was November 17, 2013, but its record showed that it was inspected on the latest date of July 31, 2013, to maintain the class, the class declaration was the origin, the court confirms it. Evidence 6 the ship ownership certificate specified the previous ownership status of M.V. “Chenglu 15”, the court confirms it; (4) evidence 7 the description of the covering situation issued by Chenglu Company was only the applicant’s unilateral statement. Its statement shall be combined with other evidence to be recognized comprehensively. The Defendant PICC Guangdong’s insurance policy (including the special list), the insurance applications and annex in evidence 1, evidence 3, evidence 4 and the evidence provided by the Third Party Huarong Company, the parties have no objection to the authenticity, the court confirms it; (5) but the endorsement in the evidence 1 and evidence 2 Fact Statement and annex issued by Noah Broker provided by the Defendant, were made unilaterally. The authenticity and content shall be combined with the facts recognized by the court and valid evidence to be confirmed comprehensively. The contents shall be subject to the written documents signed by the parties. With regard to the second issue of this case, on the occurrence of the insurance accident in this case and the fact that the sister ship of M.V. “Chenglu 15” was arrested, the Plaintiff Chenzhou Group submitted the following evidence to the court: Evidence 15: notarized and verified Accident Facts Confirmation from South Korea Puxiang Marine Police Department; Evidence 16: photos of damaged ships and breakwaters; Evidence 17: insurer wreck notice and the letter of accident progress (with express shipping certificate) sent by Chenzhou Group; Evidence 18: M.V. “Chenglu 15” wreck removal contract (with the mandatory wreck removal order released by Puxiang Local Ocean Harbor Office on October 28, 2013), salvage payment vouchers. Evidences 15–18 purported to prove that on October 15, 2013, M.V. “Chenglu 15” dragged anchored due to a strong wind, collided with the breakwater and sank due to the ship breaking. The Plaintiff reported to the insurer for requiring the emergency disposal on October 22,, 2013; according to the mandatory wreck removal order released by Puxiang Local Ocean Harbor Office, the Plaintiff and South Korea Fuhai Shipping Co., Ltd. signed an agreement of wreck removal and maritime technical service (no cue, no pay) on January 15, 2014. After the completion of wreck removal, the ship owner paid a salvage fee of 190,000 yuan. Evidence 19: decision of arresting vessel from South Korea Daqiu Local Court Puxiang Court Branch; Evidence 20: nationality certificate of M.V. “Chenglu 21”; Evidence 21: letter to Chinese Consulate in Korea sent by crew of the arrested M.V. “Chenglu 21”. Evidences 19–21 purported to prove that as the insurer did not pay the breakwaters repair costs, the Korean court arrested M.V. “Chenglu21” which was the sister ship of M.V. “Chenglu 15” until now. The ship faced the risk of being auctioned, and the crew on board was in a tough condition.

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In terms of this controversial focus, Huarong Company provided the court with evidence 8, the documents that M.V. “Chenglu 15” was arrested by the South Korea Court and the ship ownership certificate, demise charter registration certificate to prove that M.V. “Chenglu 21” arrested by South Korea Court was owned by Huarong Company and was chartered to Chenzhou Group. The Defendant PICC Guangdong cross-examined that (1) evidence 15, no objection to the authenticity of the form, but the statement of a certificate of the accident itself should not be the evidence, actually neither the investigation report of the maritime administration authority. It could not be used to identify the accident was caused by the collision or meteorological reasons like storming; (2) evidence 17, the Defendant did receive the report in 7 days after the accident, this fact could indirectly prove that the Plaintiff itself deemed that the policy had been invalid. If the insured considered that the policy was valid, it should immediately inform the insurer after the accident. As the insured notified the insurer in 7 days after the accident, the insurer lost the first opportunity to identify the cause of the accident, for example, whether the ship was seaworthy, whether seaworthiness had causation to the accident and so on; (3) evidence 18, the wreck removal contract only had the original text, without original annex; the payment voucher was just a copy of the e-mail, and its authenticity was not recognized; (4) the authenticity of the rest of the evidence was not recognized, nor the fact that M.V. “Chenglu 15” sunk. The court holds that: in terms of the evidence submitted by the Plaintiff Chenzhou Group, (1) the Defendant PICC Guangdong had no objection to the authenticity of the form of evidence 15, and the evidence was notarized and certified, the form was legal, the Defendant did not provide the contrary evidence, the court confirms it; (2) evidence 16 and evidence 18 was the originals, which could confirm with evidence 15 mutually, so it also could be confirmed; (3) evidence 17, the Defendant had no objection, the court confirms it; (4) evidences 19–21 and evidence 8 provided by Huarong Company can be confirmed by each other, the court confirms it. With regard to the third issue toward the economic losses caused by the involved insurance accident: the Plaintiff Chenzhou Group had submitted evidence to prove that it suffered two economic losses, one was the breakwater repairing costs at the price of WON299,750 as per the preliminary valuation of the price offer. But according to the Korean law, if M.V. “Chenglu 15” could enjoy the limitation of liability, the limited amount should be 149,647 SDR. As the breakwater has not been repaired at present, the case of application for Limitation of Maritime Liability Fund in South Korea Court had no progress information, so the loss could not be determined at present, the relevant evidence should not be investigated temporarily. The other loss was that the Plaintiff claimed that as the ship owner did not repair the breakwater in time, the loss caused by the arrest of the sister ship M.V. “Chenglu 21” was USD4,000 per day, which was 220 days for USD880,000. But as the Plaintiff has withdrawn the claim, so the relevant evidence of the loss should not be identified.

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According to the above identified evidence and court investigations, the court identifies the following facts: M.V. “Chenglu 15” was a steel bulk ship, the original port of registry was China Zhoushan, total length was 140.19 m, 20 m wide, 10.5 m deep, 8461 gross tons, and was registered to be owned by Chenzhou Group after the ship was completed on September 11, 2008. On October 28, 2010, Chenzhou Group and Huarong Company signed a leaseback goods transfer agreement and a financial leasing contract, and transferred M.V. “Chenglu 15” to Huarong Company at the price of RMB62.38 million and chartered it back to Chenzhou Group. In addition to paying the hire on time, Chenzhou Group also had the obligation to properly keep and use the leased property, otherwise it should indemnify all losses resulting from the leased property; Chenzhou Group was responsible for the personal injury or property damage caused by the leased property. Chenzhou Group handled insurance matters in the local insurance company, and afforded the insurance expenses. According to the total amount of the leased property, Chenzhou Group insured hull insurance (all risks), 1/4 additional risks and fuel oil pollution insurance. The insured or beneficiary was Huarong Company. In the event of an insurance accident, insurance compensation was sufficient to offset all due, undue and other payable, the excess after offsetting shall be transferred by Huarong Company to Chenzhou Group. If the compensation was not sufficient to offset, the insufficient part shall be made up by Chenzhou Group. If the fail of compensation was due to Chenzhou Group, the accident losses shall be born by Chenzhou Group. On the same day, the two parties dealt with transferring procedures of M.V. “Chenglu 15”, the ownership of this ship was registered to Huarong Company, and in the same year on November 23 handled the demise charter registration; later through the application from Chenzhou Group, the ship sub-chartered to Lishen Company. They handled the demise sub-charter procedures, and Chenglu Company was the actual ship manager. On January 31, 2013, Huarong Company filed a litigation to the court, requiring Chenzhou Company and other guarantors to bear the liability of breaching the contract in the reason that Chenzhou Group did not pay hire on time. On June 18, 2013, the court made the judgment of first instance, requiring Chenzhou Group, within 10 days after the decision entered into effect, paid Huarong Company hire, liquidated damages of overdue payment, nominal prices, attorney fees totaling RMB50,126,941.3, and the other guarantors should bear Joint and several guarantee responsibility. On December 10, 2013, in the process of enforcement by the court, the parties achieved the execution settlement, and agreed the money was returned by Chenzhou Group on installment, and clarified that M.V. “Chenglu 15” had sunk and been deemed as total loss during the charter period. Chenzhou Group agreed that once getting the compensation from the insurance companies or P&I Club due to the ship sinking accident, Huarong Company as the ship owner and the first beneficiary had right to enjoy the priority of compensation, the amount of compensation shall offset the corresponding hire.

Chenzhou Shipping Group Co., Ltd. v. People’s Insurance Company …

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On March 7, 2013, Chenglu Company as the applicant, covered ten ships including M.V. “Chenglu 15” from PICC Guangdong through Noah Broker. Chenglu Company filled out the insurance application on each ship. The insurance application involved shows that the ship owner was Chenzhou Group, the applicant was Chenglu Company, and the insured were three: Chenzhou Group as the ship owner, Chenzhou Group as the operator, Lishen Company as the demise charterer. The manager was Chenglu Company; the name of the ship was M.V. “Chenglu 15”, the insured value was RMB39 million, the insured amount was RMB39 million, no trading limits. Types of insurance according to the PICC Hull Insurance Clause (2009) was all risks, the insurance period of insurance company was from 0:00 am on March 8, 2013 to 24:00 pm on March 7, 2014. Applicant’s Statement on the insurance application printed that the insurer had provided the applicant with a detailed description of the clauses and made an explicit statement on the clause relieving the insurer from liability (including but not limited to exclusion of liability, liability of applicant and the insured, compensation process and other matters), as well as contents of payment agreements and special agreement in the insurance contract. The applicant had fully understood and accepted the above contents, and agreed to regard them as the basis for the establishment of the insurance contract, and Purchased this insurance voluntarily. Insurance Sales Confirmation printed that the applicant insured the ship with People’s Property Insurance Company, PICC Guangdong against hull insurance. Confirming the following events, the name of the property and casualty salesman was WANG Chunfu, License No.CX00122503, who had explained to me in detail the contents of the insurance clauses and clearly stated the clause relieving the insurer from liability. But the inscription on the insurance application was only affixed Chenglu Company’s seal, the property and casualty salesman, insurance agency institution salesman License No. and insurance broker agency institutions seal all had no signature or seal. On the next day, Shipping Insurance Operation Center of People’s Insurance Company of China (hereinafter referred to as PICC Shipping Center) sent a notice of premium to Chenzhou Group, including all premium in the whole year 14.406 billion yuan of ten ships including M.V. “Chenglu 15” in this case, required payment as soon as possible, and indicated that the insurance policy started to be insured only after the premium had been paid. On March 10, 2013, PICC Shipping Center issued an insurance policy No. PCAA2013AX940000000801, indicating that the applicant was Chenglu Company, the insured was Chenzhou Group, the name of the ship was M.V. “Chenglu 15”, the ship gross tonnage was 8,461 tons, port of registry was Panama, and the insured amount and the insured value was RMB39 million, the period of insurance was from 12:00 on March 11, 2013 to 12:00 on March 11, 2014. The special agreed endorsement attached to the insurance policy stated that “the insured was Chenzhou Group as the ship owner, Lishen Company was a demise charterer, Chenglu Company was the management company; the insurance clause was underwriting People’s Property Insurance Company of China Hull Insurance Against All Risks Clause (2009), the first beneficiary was Huarong Company; the deductible amount for each accident was RMB60,000 or 10% of the loss,

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whichever was higher, and the franchise of total loss was 10%; the premium should be paid in four installments: the first installment should be paid before March 11, 2013, the second installment should be paid before June 15, 2013, the third installment should be paid before September 15, 2013, and the fourth installment should be paid before December 15, 2013. Failing to pay the premium according to the policy would result in the lapse of the insurance policy. In order to ensure to get insurance coverage timely, please pay the premium as soon as possible”. On March 19, 2013, PICC Shipping Center once again sent a notice of receivable premium to Chenzhou Group, including the first installment 360,150 RMB in all premium in the whole year in the amount of RMB14.406 billion of ten ships including M.V. “Chenglu 15” involved, required payment as soon as possible, and stated that the first installment RMB360,150 should be paid before March 11, 2013, the second installment RMB360,150 should be paid before June 15, 2013, the third installment RMB360,150 should be paid before September 15, 2013, the fourth installment RMB360,150 should be paid before December 15, 2013; the remarks stated that the Company should not be responsible for any claims caused by the above policy, if the premium was not paid in XX days after the policy had been issued, but the number of days in the blank was not filled in. After Chenzhou Group paid the first installment RMB360,150, PICC Shipping Center issued the corresponding amount of premium invoice on March 21, 2013, which stated that the payer was Chenzhou Group. On July 3, 2013, PICC Guangdong issued an insurance endorsement, stating that “due to the failure to pay the premium before June 15, 2013 according to the contract, the policy (PCAA2013AX940000000801 Chenglu 15) had been lapsed. According to the payment of first installment, the insurance period was from March 11, 2013 to June 10, 2013. Therefore, the policy was canceled from June 11, 2013, and our company no longer assume any compensation liability. According to the statement of PICC Guangdong, it had notified Noah Broker to cancel the insurance contract by e-mail on June 20, 2013, and on the next day, transferred the written text of the insurance endorsement through Noah Broker to Chenzhou Group, but Chenzhou Group denied such fact. On October 14, 2013, after M.V. “Chenglu 15” loaded and unloaded in the South Korea Puxiang New Port, it was ready to go to Japan. But due to the bad weather, it anchored and waited in No.19 Anchorage of Puxiang Port. At about 15:40 on October 15, the ship reported that she had dragged anchor to the harbor control room of Puxiang Local Ocean Harbor Office. At about 17:46, the vessel stern hit the north breakwater of the Yingri Bay. The ship broke into the water. At about 20:16, it sank. Only part of the ship bow mast and part of the deck crane delete “were” exposed to the sea surface; 8 crew members of the 20 ones were rescued, 11 dying in the sea, one missing. Chinese news media reported the accident in this case specially, Chenzhou Group under the coordination of Chinese Embassy and Consulate in South Korea and Zhoushan People’s Government, made the emergency treatment of the crew casualties at first. On October 22, Chenzhou Group reported the case to PICC Guangdong, formally notified the shipwreck in written and required to handle the ship claims matters as early as possible. After a refusal, Shanghai Chuangyuan Law

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Firm sent a lawyer’s letter to PICC Guangdong on October 29, 2013, considered that the insurer had no reason to terminate the contract because the insured did not pay the second installment of premium before June 15, 2013, and once again asked its staff to deal with the shipwreck of M.V. “Chenglu 15”. On December 6, 2013, Chenzhou Group transferred the remaining three premium 134,550 RMB of M.V. “Chenlu 15” to the PICC Shipping Center account. On December 9 PICC Guangdong returned the premium in the reason that the policy involved was lapsed and cancelled on June 16, 2013. On the next day, Chenzhou Group wrote a letter to resolutely disapproving the policy was lapsed and canceled. On December 13, the remaining premium was remitted to the PICC Shipping Center again. According to the mandatory wreck removal order released by Puxiang Local Ocean Harbor Office, on January 15, 2014, Chenzhou Group and South Korea Fuhai Shipping Co., Ltd. signed an agreement of wreck removal and maritime technical service (no cue, no pay), appointing the latter one to remove the wreck of M.V. “Chenlu 15”. After the completion of wreck removal, the ship owner paid a salvage fee of RMB190,000 on January 15, 2014. As the north breakwater in South Korea Puxiang Port was damaged in this collision, on April 10, 2014, South Korea Daqiu Local Court Puxiang Court Branch for the reason that the creditor, Republic of Korea, made a claim of 2.9975 billion WOM for the loss caused by the damage to breakwater and applied for arresting the ship, and arrested M.V. “Chenglu 21” which was owned by Huangrong Company and demise chartered to Chenzhou Group. The ship had been arrested and had not been released so far. The court holds that Chenglu Company, as the insurant, had covered M.V. “Chenglu 15” against ship insurance with PICC Guangdong, and paid some premiums according to the contract. The Defendant, PICC Guangdong, issued the policy. The ship insurance contract of M.V. “Chenglu 15” was established and valid. The issues of the dispute in this case exist as follows: 1. The parties of the ship insurance contract and the legal status of the parties involved The insurer of the insurance contract of M.V. “Chenglu 15” was the Defendant, PICC Guangdong. With respect to the insureds, the records of the insurance slip and the policy were different: according to the insurance slip, the insureds were Chenzhou Group as the shipowner, Chenzhou Group as the operator and Lishen Company as the bareboat charterer; while according to the insurance policy, the insured was Chenzhou Group as the shipowner, Lishen Company as the bareboat charterer and Chenglu Company as the management company. As the records of the insured in the insurance slip and the policy involved were inconsistent. According to the Interpretation of the Supreme People’s Court on Several Issues concerning the Application of the Insurance Law of the People’s Republic of China (II), if the insurance slip is inconsistent with the insurance policy or other insurance certificates, the insurance slip shall prevail. So the insured in this case should be identified as Chenzhou Group as the shipowner and operator, Lishen Company as the bareboat charterer.

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According to Article 118 of the Insurance Law of the People’s Republic of China, insurance brokers shall be institutions which, based on the interests of insurance applicants, provide intermediary services for insurance applicants and insurers to enter into insurance contracts, and charge commissions according to law. Noah broker, as the insurance broker of the insurance business involved, played a role in providing intermediary services for insurance applicants and insurers, and could not be simply regarded as the universal agent of insurance applicants or insurers who had right to sign or receive insurance slips and other important documents on behalf of insurance applicants. As the insurance slip involved was signed or sealed by Chenglu Company but not Noah Broker. The terms of the insurance contract, the termination of the insurance contract and so on shall be subject to the signature or confirmation of insurance applicants and insurers themselves but not confirmation or acceptance of Noah Broker. The Defendant PICC Guangdong argued that in the insurance contract involved, Chenzhou Group was not the shipowner of M.V. “Chenglu 15”, the other two insureds, Lishen Company and Chenglu Company were also not the shipowner. They had no insurable interest in the subject matter insured. Therefore, the policy should be confirmed as invalid. Huarong Company was listed as the first beneficiary in the policy. But the policy neither stated the concept of the first beneficiary, nor stated that the first beneficiary could directly enjoy the claim to insurance benefits against the insurers. So Huarong Company had no contractual and legal base to claim insurance benefits against the insurers directly. The court believes that the insureds Chenzhou Group and Lishen Company were not shipowners of M.V. “Chenglu 15”. But they were financial leasing lessees of the vessel and had been the actual managers, controllers and operators of the vessel. According to its financial leasing contract with the lessor Huarong Company, Chenzhou Group has the obligation of keeping and using the leased property properly. Otherwise, it shall compensate all the losses suffered by the leased property. Chenzhou Group is responsible for the personal injury or property damage caused by the leased property, and is responsible for handling the ship insurance. In case of insured incident, if the insurance compensation is sufficient to offset all the due, undue and other payable fees, Huarong Company shall transfer the surplus payment to Chenzhou Group after offsetting. If not enough to offset, the lack of part shall be complemented by Chenzhou Group. If the settlement of claims fails because of Chenzhou Group, the loss shall be born by Chenzhou Group. Therefore, Chenzhou Group and Lishen Company have legally recognized interests in M.V. “Chenglu 15”. PICC Guangdong’s ground of defense that the insureds had no insurable interests in the vessel is insufficient and the court shall not support it. Huarong Company is listed as the first beneficiary in the policy. Although the concept of the beneficiary is only stipulated in the personal insurance relationship, the Defendant PICC Guangdong, as a professional insurer, has introduced the concept and recorded it on the policy. It shall be regarded as that PICC Guangdong has recognized Huarong Company’s legal status in the property insurance contractual relationship involved. Recognize the involved insurer set the right of claiming the insurance benefit as the subject of the pledge of rights of Huarong Company. When

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an insured accident occurred, the creditor Huarong Company may exercise its pledge of the right to claim for the insurance benefits involved and receive the insurance premium with priority. It has also been confirmed in the settlement agreement of the financial lease agreement signed by Huarong Company and Chenzhou Group. In this case, Chenzhou Group also expressly agreed that if it obtained the payment of insurance indemnity by the Defendant PICC Guangdong, the payment should be paid directly to Huarong Company. Therefore, Huarong Company has the right to claim to obtain insurance indemnities directly in the case. 2. Whether the insured incident occurred in this case The Defendant PICC Guangdong did not approve that M.V. “Chenglu 15” had ever been in an accident and the vessel sank. The court thinks that it has been widely reported that M.V. “Chenglu 15” sank at Puxiang Port in South Korea on October 15, 2013 because of hull fracture caused by collision with the breakwater when dragging anchor in the storms and caused heavy casualties. As the incident waters is in South Korean waters, it is impossible for the Chinese maritime authorities to issue a maritime report. The notarized proofs of the accident and the scene photos of the South Korean Marine Police provided by the Plaintiff currently have been able to prove that the accident occurred and the reason is encountering the wild weather of “northeast wind 20–24 m/s (9), wave up to 5–6 m high (Sea heaps up and foam begins to streak—Moderately high waves with breaking crests forming spindrifts), 100% rain. M.V. “Chenglu 15” sank due to the collision with the breakwater when encountering huge waves and winds and the wreck of the vessel has been cleared in accordance with the requirements of the local port authorities. PICC Guangdong did not recognize the above facts but it has not provided the corresponding counter-evidence. So the court concludes that M.V. “Chenglu 15” sank and wreckage of the vessel has been cleared and it constitutes total loss due to the reason that the vessel “suffered other natural disaster”, “stranded, collided, touched any fixed or floating objects or other objects or other maritime disasters” listed in the back of the policy, with bad weather as proximate cause. The total loss occurred in the insurance period from March 7, 2013 to March 7, 2014 and shall be regarded as the incident within the scope of liability of insurers. 3. Whether there was an agreement that “the insurance policy will automatically lapse once the payment of premium is overdue” between both parties when insured The Defendant, PICC Guangdong, thought that the clause “failure to pay premiums as stipulated in the policy will make the policy void” specified in the special agreement list of the policy involved was the true meaning of the parties. It did not violate mandatory provisions of law and shall be legally valid. The clause was the condition agreed by the parties to terminate the contract, when the condition was met, the party with the termination right may terminate the contract. The Plaintiff Chenzhou Group and the Third Party Huarong Company held that there was the clause “failure to pay premiums as stipulated in the policy will make the policy void” in the special agreement list of the policy involved but not in insurance

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slip. The insurer added this clause in the policy by themselves and they did not take initiative to explain the inconsistency between the insurance slip and the policy. The applicant also did not agree with the clause afterwards. The clause shall be null and void. In addition, according to relevant provisions of the Supreme People’s Court, after the commencement of the insurance liability, the insurer claimed to terminate the contract due to the insured’s failure to pay insurance premium, the people’s court shall not support. The court holds that although the Defendant stated that both parties had agreed on the payment of premiums in four installments in the course of the insurance negotiation through the Noah Broker and there were words “the insurance will automatically terminate once the payment of premium is overdue” after the premium payment arrangement. But there is no evidence to prove that the applicant has confirmed the clause. There were no clauses concerning premium payment arrangement and consequences of non-payment of premium but only the description “the insurer has made a clear statement to the applicant on the payment and special agreement in the insurance contract” in the column of applicant’s statement in the insurance slip signed by the applicant on March 7, 2013. But the insurer cannot prove that clauses the payment agreement and special agreement have been attached to the insurance slip. Moreover, before the issuance of the policy, the insurer asked Chenzhou Group to pay all premiums of ten vessels including M.V. “Chenglu 15” amounted to RMB1,440,600 in Notice of Premiums issued by the insurer to the applicant on March 8, 2013. The insurer indicated that “the policy comes into effect only after the payment of the premium”. There was neither a requirement to pay the premium in installments nor the clause of “the insurance will automatically terminate once the payment of premium is overdue”, which means that the insurer himself did not approve existence of the clause before March 8, 2013. There was only the indication about each specific amount of four installments of the premium payment and no words as “the insurance will automatically terminate once the payment of premium is overdue” in the notice of premiums re-sent by the insurer on March 19, 2013. There were words of “failure to pay the premium according to the policy will result in lapse of the policy, please pay the premium as soon as possible to ensure timely access to insurance protection” after the arrangement of the premium paid in four installments in the policy issued by PICC Guangdong on March 10, 2013. Thus, in the written official documents sent to the applicant and the insured, there are only relevant descriptions about the clause “overdue payment will result in lapse of the policy” in the policy. It is not the specific rights and obligations clause of which the content is “the insurance will automatically be terminated or invalid if any one installment of insurance premium is overdue” as the Defendant said but description of “failure to pay the premium according to the policy will result in lapse of the policy, please pay the premium as soon as possible to ensure timely access to insurance protection”. In this description, “will result in lapse of the policy” can also be understood as “may, will lead to lapse of the policy”, rather than “be automatically invalid and canceled”. Whether the insurer will send a notice of premium and whether the payment grace period will be granted after the deadline are unclear. And from the words following behind

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“please pay the premium as soon as possible to ensure timely access to insurance protection”, the statement is more likely to be a courtesy prompt for payment rather than a clear restrictive clause setting rights, obligations and liabilities. As the relevant law clearly stipulates that if the insurance slip is inconsistent with the insurance policy, the insurance slip shall prevail. And there is no clause of “the insurance will automatically terminate once the payment of premium is overdue”. Therefore, the court believes that the clause cannot be identified as existing in the insurance contract. 4. Whether the insurance contract involved has been terminated PICC Guangdong believed that it issued notices of overdue premiums and canceling the policy and sent an endorsement to Noah broker on June 21, 2013. Chenzhou Group had no objection after receiving and did not put forward the lawsuit of objection on termination of the contract within the statutory period of three months. It had commissioned Noah broker to the consult and negotiate the terms of contract with other insurance companies and informed PICC Guangdong after a lapse of seven days after the accident, which indicates that it is clearly aware that the insurance contract has delete terminated. So PICC Guangdong shall not bear insurance liability for sinking accident of the vessel involved. Chenzhou Group and Huarong Company think that, according to Article 20 of the Insurance Law, to amend an insurance contract, the insurer shall endorse the insurance policy or any other insurance certificate or affix an endorsement slip thereto. So the endorsement slip is the statutory way to modify an insurance contract rather than the form of terminating the insurance contract. The insurer has no right to terminate the contract, even if he has the right, it is invalid to notice by the form of approval slip. And Noah Broker said that it sent the approval slip to terminate the contract on June 21, 2013. But in fact the approval slip was issued on July 3, which indicates that the insurer has never sent a valid notice of termination to the insured. So the insurance contract continues to be valid. PICC Guangdong has no legal basis to refuse to bear the liability for compensation. The court holds that the Insurance Law of the People’s Republic of China stipulates that the approval slip is a form to change the insurance contract instead of the form of canceling the insurance contract. The endorsement slip could not be used alone, but must be attached to the original of the insurance policy as proof of the change of the insurance contract terms. The involved approval slip issued by PICC Guangdong also records the “the approval slip and the original insurance policy must be used at the same time”. So sending the approval slip alone as a separate sent as a form of canceling the contract does not match with its own records. In this case, the approval slip was issued on July 3, 2013. The Defendant said he had sent the approval slip to the insured on June 21, which is clearly inconsistent with the facts. The termination of insurance contract is important and has a significant impact on rights and obligations of the parties. In respect of such an important legal document, it is far fetched for the Defendant to explain as clerical errors. The Defendant’s own statements about the time of invalidation or cancellation of the policy were also inconsistent, claiming to be June 11 in the approval

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slip issued on July 3, 2013, and June 16 in the letter on December 9. More importantly, as aforesaid, if the insurance slip is inconsistent with the insurance policy, the insurance slip shall prevail. According to the records of insurance slip, the insureds of this case should be identified as Chenzhou Group as the shipowner and operator, Lishen Company as the bareboat charterer; Chenglu Company is only the applicant, not the insured. According to Article 216 of the Maritime Code of the People’s Republic of China, a contract of marine insurance is a contract whereby the insurer undertakes, as agreed, to indemnify the loss to the subject matter insured and the liability of the insured caused by perils covered by the insurance against the payment of an insurance premium by the insured. Therefore, the person who is responsible for the payment of insurance premium in this case is the insured, not the applicant. Even if the approval slip issued by PICC Guangdong on July 3, 2013 is real and effective, the title of the approval slip means sending to the applicant Chenglu Company, rather than the insureds Chenzhou Group and Lishen Company who have obligation to pay the insurance premium. Even if as the Defendant alleged, it has sent the approval slip of terminating the insurance contract to the applicant Chenglu Company who is also recorded as the insured in the policy, so the notice of termination shall have the same effect for all insureds. The court holds that even if Chenglu Company is recorded as the insured in the policy was, but the insureds recorded in the policy are Chenglu Company, Chenzhou Group and Lishen Company. It should be said that the three insureds all have insured interest in subject matter involved. The situation cannot be excluded that one of the insured does not pay premiums, but other insureds will pay. Therefore, since Chenzhou Group, Chenglu Company and Lishen Company are listed as the insureds in the policy, the three insured all have obligation to pay the insurance premium. So the insurer also has the duty to inform all three insureds when sending the notice to terminate the contract. In summary, the Defendant has no sufficient evidence and reasons for its defense that it has delivered the notice to terminate the insurance contract legally. The court shall not adopt it. PICC Guangdong also argued that the Plaintiff Chenzhou Group did not raise objection after receiving the approval slip of terminating the contract, and has begun seeking other insurance companies in July and August 2013, which states that Chenzhou Group itself approved the fact that the policy involved had been invalidated. The court holds that the Defendant PICC Guangdong has not yet provided the exact evidence to prove that it has served the notice of terminating the contract to the three insureds listed in the insurance slip. Although the lawyer’s letter sent by Shanghai Chuangyuan Law Firm to the insurer on October 29, 2013 describes that “the two sides can confirm the following facts”, in the second point “the insurer terminated the contract on June 21, 2013 on the ground that the insured failed to pay the second installment of premium before 15 June 2013”. This description shall be construed as a statement of the insurer’s unilateral opinion, and does not represent that the insured has accepted the fact that the contract has been terminated, as described in point 3 of that section, “at night of October 15, 2013, affected by the cold air, M.V. “Chenglu 15” repeated colliding the breakwater outside the Puxiang Port and the vessel broke … …”, and other statements, nor

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does it mean that the Defendant insurer has accepted the fact that the vessel had an accident and sank. As for the fact that Chenzhou Group inquired through the Noah broker and other insurance brokers in July and August 2013, can also be understood as the inquiry for the insurance of next year. And in fact until the insurance period of 2013 had expired, the ten vessels including M.V. “Chenglu 15” did not apply for insurance and sign contracts at any other insurance companies. Therefore, the Defendant PICC Guangdong has no sufficient evidence and reasons for its defense that the insured has inquired which can be regarded as accepting the fact of the termination of the contract. The court shall not adopt it. In summary, the court holds that the insurance contract of M.V. “Chenglu 15” involved is established and legally valid. The applicant is Chenglu Company. The insured who have the obligation to pay the premium are Chenzhou Group and Lishen Company. The insurer is PICC Guangdong. There is no clause that “the insurance policy will automatically be invalid if any one installment of insurance premium is not paid” in the ship insurance contract. Even if there is such a clause, the insurer has not effectively served the notice of terminating the contract to the insureds, Chenzhou Group and Lishen Company, who have the obligation to pay the premium. M.V. “Chenglu 15” sank and caused total loss due to hull fracture resulted from collision with the breakwater when encountering bad weather in Poxiang, South Korea, which shall be regarded as the insured incident occurred during the insurance period, the insurer shall compensate at the full insured amount. Interest on the above sums shall also be paid from the date that the insurer expressly inform Chenzhou Group the refusal of the claim on December 9, 2013. According to the agreement that the first beneficiary of the policy is Huarong Company and the opinion of Chenzhou Group, the insurance indemnity can be paid directly to Huarong Company. Although there are records about deductible in the policy, the Defendant PICC Guangdong does not raise the defense. And the deductible clause is only recorded in the specific list of agreement of the policy, but not shown in the insurance slip. Based on the same reason with the clause that “the insurance policy will automatically be invalid if the insurance premium is overdue”, the court shall not affirm the deductible clause. Because the Plaintiff’s claim that damage to the breakwater of Puxiang Port in South Korea caused by the vessel has not yet begun to repair due to foreign factors and other reasons, whether the limitation of liability for maritime claims establishes and the loss for detention caused by seizure of M.V. “Chenglu 21” all cannot be determined currently. According to Article 153 of the Civil Procedure Law of the People’s Republic of China, if some of the facts in a case being tried by the people’s court are already evident, the court may pass judgment on that part of the case first. The court will make a judgment on the part of establishment of the ship insurance contract and compensation of the ship’s total loss insurance first. The fee for the repair of the breakwater and other related economic losses shall be settled in another case after determining the amount. In summary, according to Article 216, Article 227, Article 237, Article 238 of the Maritime Code of the People’s Republic of China, Article 1 of the Provisions of the Supreme People’s Court on Several Issues concerning the Trial of Cases of Marine Insurance Disputes, Article 14.1 of the Interpretation of the Supreme People’s Court

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on Several Issues Concerning the Application of the Insurance Law of the People’s Republic of China (II), Article 153 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: The Defendant China People’s Property Insurance Co., Ltd. Guangdong Branch shall pay the Plaintiff Chenzhou Shipbuilding Group Co., Ltd.’s M.V. “Chenglu 15” total loss insurance indemnity in the amount of RMB39 million, and pay the interest calculated based on the benchmark interest rate of the People’s Bank of China over the same period from December 9, 2013 until the date of performance of the judgment; and the aforesaid amount shall be directly paid to the Third Party Huarong Financial Leasing Co., Ltd. If the obligations of monetary payment are not performed within the period specified in this judgment, the interest on the debt shall be doubled in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in the amount of RMB228,750 (charged according to the part of pre-judgment), shall be born by the Defendant China People’s Property Insurance Co., Ltd. Guangdong Branch. If dissatisfied with this judgment, any party shall within fifteen days as of the service of this judgment, submit an appeal to the court, with duplicates in the number of the opposing parties, so as to make an appeal before the Zhejiang High People’s Court [Court acceptance fee in the amount of RMB228,750 for appeal (the specific amount shall be determined by the Zhejiang High People’s Court, and the excess amount shall be refunded) shall be submitted in advance upon the filing of the appeal. Section: non-tax revenue settlement households of Finance Department of Zhejiang Province. Bank Name: Hangzhou West Lake Branch, Agricultural Bank of China. Account Number: 19000101040006575401001. If it is not paid within seven days after the expiration of the appeal period, the case shall be automatically withdrawn]. Presiding Judge: CHEN Xiaoming Judge: ZHANG Huagang Acting Judge: SHAN Yajuan August 20, 2015 Acting Clerk: ZHU Danying

Appendix: Relevant Laws 1. Maritime Code of the People’s Republic of China Article 216 A contract of marine insurance is a contract whereby the insurer undertakes, as agreed, to indemnify the loss to the subject matter insured and the liability of the insured caused by perils covered by the insurance against the payment of an insurance premium by the insured.

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The covered perils referred to in the preceding paragraph mean any maritime perils agreed upon between the insurer and the insured, including perils occurring in inland rivers or on land which is related to a maritime adventure. Article 227 Unless otherwise agreed in the contract, neither the insurer nor the insured may terminate the contract after the commencement of the insurance liability. Where the insurance contract provides that the contract may be terminated after the commencement of the liability, and the insured demands the termination of the contract, the insurer shall have the right to the premium payable from the day of the commencement of the insurance liability to the day of termination of the contract and refund the remaining portion. If it is the insurer who demands the termination of the contract, the unexpired premium from the day of the termination of the contract to the day of the expiration of the period of insurance shall be refunded to the insured. Article 237 The insurer shall indemnify the insured promptly after the loss from a peril insured against has occurred. Article 238 The insurer’s indemnification for the loss from the peril insured against shall be limited to the insured amount. Where the insured amount is lower than the insured value, the insurer shall indemnify in the proportion that the insured amount bears to the insured value. 2. Insurance Law of the People’s Republic of China Article 12 A personal insurance applicant shall have an insurable interest in the insurant when entering into an insurance contract. The insurant in property insurance shall have an insurable interest in the subject matter insured when an insured incident occurs. Personal insurance shall be a type of insurance which takes the life and body of human beings as the subject matter insured. Property insurance shall be a type of insurance which takes property and interests related thereto as the subject matter insured. An insurant means a person whose property, life or body is covered by an insurance contract and who is entitled to claim the insurance money. An insurance applicant may be an insurant. An insurable interest refer to a legally recognized interest owned by an insurance applicant or insurant in the subject matter insured. 3. Provisions of the Supreme People’s Court on Several Issues Concerning the Trial of Cases of Marine Insurance Disputes Article 1 Where there is no stipulation in the Maritime Code, the relevant provisions of the Insurance Law shall apply; if there is no stipulation in the Maritime Code or Insurance Law, the relevant provisions of the Contract Law and other relevant laws shall apply.

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4. Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of the Insurance Law of the People’s Republic of China (2) Article 14 Where the contents described in the insurance contract are inconsistent, it shall be determined in accordance with the following rules: (1) If the insurance slip is inconsistent with the insurance policy or other insurance certificates, the insurance slip shall prevail. But the inconsistency was described by the insurer and agreed by the insured, the contents of the insurance policy signed by the insured or other insurance certificate shall prevail; (2) Non - standard terms are inconsistent with format terms, non-standard terms shall prevail; (3) If the time recorded in the insurance certificates is different, the ones which form in the latter shall prevail; (4) If the insurance certificates exist in both handwriting and print forms, the contents of handwritten parts signed and sealed by both sides shall prevail. 5. Civil Procedure Law of the People’s Republic of China Article 153 If some of the facts in a case being tried by the people’s court are already evident, the court may pass judgment on that part of the case first.

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Zhejiang High People’s Court Civil Judgment Chenzhou Shipping Group Co., Ltd. v. People’s Insurance Company of China Co., Ltd. Guangdong Branch (2015) Zhe Hai Zhong Zi No.240 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 67. Cause(s) of Action 230. Dispute over marine insurance contract on the sea or sea-connected waters. Headnote Affirming lower court decision that the Plaintiff insured was entitled to recover damages from the Defendant insurer for total loss of insured vessel; pre-contractual conduct of the Plaintiff’s insurance broker could not be imputed to the Plaintiff without express authorization on its part. Summary The Plaintiff, a ship finance lessee, succeeded at first instance in recovering damages from the Defendant insurer for total loss of the insured ship. The Defendant appealed, arguing that the court of first instance erred in fixing the content of the insurance policy and incorrectly put the burden of proof in the matter of total loss on the underwriter. The Defendant-Appellant argued that the Plaintiff-Respondent should be held responsible for its insurance broker’s conduct, and that the insurance contract had been terminated according to the “automatic termination” clause in contract. The Plaintiff-Respondent counter-argued that its insurance broker’s enquiry before the formation of a contract should not be imputed to it and the “automatic termination” clause was not expressly stipulated in any agreement. Hence, the Plaintiff-Respondent asserted that the contract was valid at the time of the occurrence of the insured accident. The appeal court held that the Plaintiff’s insurance broker’s conduct should not be imputed to the Plaintiff without the Plaintiff’s direct authorization and accordingly the special agreement between the Plaintiff’s insurance broker and the underwriter was null and void. The appeal court further rejected the Defendant-Appellant’s other two grounds and affirmed the judgment of first instance.

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Judgment The Appellant (the Defendant of first instance): People’s Insurance Company of China Co., Ltd. Guangdong Branch Domicile: Room 303 and 305, PICC Mansion, Guangzhou Avenue, Yuexiu District, Guangzhou City, Guangdong, China. Legal representative: GUO Wenge, general manager. Agent ad litem: WU Yongmin, lawyer of Zhejiang Zeda Law Firm. Agent ad litem: REN Yanbing, lawyer of Guangdong Hengfu Law Firm. The Respondent (the Plaintiff of first instance): Chenzhou Shipping Group Co., Ltd. Domicile: Huimin Bridge Village, Lin Cheng Street, Dinghai District, Zhoushan City, Zhejiang, China. Legal representative: WU Jingguo, chairman. Agent ad litem: WAN Renshan, lawyer of Shanghai Chuangyuan Law Firm. The Respondent (the Third Party of first instance): Huarong Financial Leasing Co., Ltd. Domicile: Floor 6 & 7, World Trade Mansion, No. 122 Shuguang Road, Xihu District, Hangzhou City, Zhejiang, China. Legal representative: LI Peng, chairman. Agent ad litem: CHEN Bo, lawyer of Zhejiang Hightac Law Firm. Agent ad litem: YANG Liping, lawyer of Zhejiang Hightac Law Firm. The Appellant, People’s Insurance Company of China Co., Ltd. Guangdong Branch (hereinafter referred to as PICC Guangdong), refused to accept (2014) Yong Hai Fa Shang Chu Zi No.318 Civil Judgment made by Ningbo Maritime Court, and lodged an appeal to the court, regarding the dispute arising from the marine insurance contract with Chenzhou Shipping Group Co., Ltd. (hereinafter referred to as Chenzhou Group) and Huarong Financial Leasing Co., Ltd. (hereinafter referred to as Huarong Company). After accepting this case on September 24, 2015, the court formed a collegiate panel and held a hearing in public on October 30. Agents ad litem, WU Yongmin and REN Yanbing, authorized by the Appellant PICC Guangdong, agent ad litem WAN Renshan authorized by the Respondent Chenzhou Group, agents ad litem CHEN Bo and YANG Liping authorized by the Respondent Huarong Company, participated the hearing and made their arguments. Because of the complexity of the case, with the approval of the President of the court, the case trial time limit is extended for three months. The case has been concluded. Chenzhou Group alleged during the first instance: In March 2013, Hong Kong Chenglu International Ship Management Co., Ltd. (hereinafter referred to as Chenglu Company) insured in PICC Guangdong for M.V. “Chenglu 15”. PICC Guangdong accepted the insurance and issued Policy with PICC2013AX940000000801. The insurance liability started at 1200 on March 11, 2013 ended at 1200 on March 11, 2014. The insurance was against all risks, and the

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insurance value was 39 million yuan, the premium paid in four installments. In the evening of October 14, 2013, M.V. “Chenglu 15” anchored in Pohang Korea outer anchorage because of the strong wind after unloading. At 1540 on 15 level strong wind hit, the ship anchored to a breakwater and collided with it for many times which caused the ship body cracked and the bottom broken and finally the ship sank. This accident resulted in 10 crews died, 1 crew was missing, and caused damage to the breakwater. Chenzhou Group held that the accident belonged to the scope of insurance liability, so asked the court to judge that PICC Guangdong should indemnify the total loss of the ship for 39,000,000 yuan and related interests (calculating from November 15, 2013 to the actual payment date, according to the People’s Bank of China enterprise loan interest rates over the same period), and the loss of the breakwater for 9,000,000 yuan. In the trial, Chenzhou Group changed the second claim to 2,997,500,000 won requested by South Korean authorities. If M.V. “Chenglu 15” would enjoy the limitation of liability for maritime claims in the Korean court, the indemnity should be calculated by the limitation of liability of SDR1,496,487 (about 13,924,512 yuan). Besides, because of the damage of breakwater, another ship called M.V. “Chenglu 15” in the ownership of Chenzhou Group was seized by the South Korean Court, so Chenzhou Group also asked the court to judge that PICC Guangdong should indemnify the operating losses for M.V. “Chenglu 15” was seized for USD880,0000 (about 54,120,000 yuan). But Chenzhou Group recalled the last claim before the end of the investigation. PICC Guangdong replied in the first instance: (1) the involved ship belonged to Huarong Company, Chenzhou Group was only the charterer and not the owner of the ship, so the Plaintiff was not qualified; (2) the three insured Chenzhou Group, Lishen International Shipping Group Ltd. (hereinafter referred to as Lishen Company) and Chenglu Company stated in the policy and special agreement list were only the charterer, the bareboat charterer and the management company, and were not the owner of the ship. Therefore, the insurance contract was invalid because the insured had no insurance interest; (3) when insured, Chenzhou Group had been transferred the possession of the ship but did not inform PICC Guangdong, still claimed the owner of the ship, so in this case, the insurance contract could not be established; (4) Chenzhou Group and Chenglu Company commissioned T&Z Insurance Consultants (Shanghai) Co., Ltd. (hereinafter referred to as T&Z Company) consulted with PICC Guangdong about the involved ship, agreed on the insurance premium payment by installments. The special agreement list also stipulated that the premium would be paid in four installments. Failure to meet the premiums would result in the failure of the policy. The special agreement should be legal and valid, according to this agreement the second period of premium should be paid before June 15, 2013, but Chenzhou Group did not pay it on time, so PICC Guangdong issued a notice of cancellation to T&Z Company on June 20, T&Z Company received the notice and informed Chenzhou Group that PICC Guangdong canceled the insurance contract in the form of insurance endorsement by e-mail. Chenzhou Group had no objection about the policy had been cancelled and invalid, no longer paid the remaining premium and did not prosecute within the statutory period of three months stipulated in the Contract Law

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after received the endorsement. Whereas the insurance contract in June 2013 had been canceled and the insurance contract had been lifted, so Chenzhou Group should not bear any responsibility caused by the accident; (5) so far, Chenzhou Group had not provided valid evidence to prove its economic losses, and the amount of losses was clearly unreasonable. So Chenzhou Group’s claims should be rejected. Huarong Company in the first instance stated that: the subject matter of the insurance policy M.V. “Chenglu 15” was the lease under the contract for financial lease between Huarong Company and Chenzhou Group. Huarong Company was the registered-owner. According to the lease contract, Chenzhou Group was obliged to insure the ship’s hull insurance and pay the premium. The involved insurance policy stated that Chenzhou Group was the insured and Huarong Company was the first beneficiary. Chenzhou Group had repeatedly applied to PICC Guangdong for delaying in payment of the second installment premium because of the shipping market operating losses after the payment of the first installment premium. And paid the premium timely after the insurance accident, so the insurance contract involved was still valid when the insurance accident happened. Huarong Company as the registered-owner of M.V. “Chenglu 15” and the first beneficiary of the insurance contract had legal interests with the results of this case, so it was entitled to participate the case. The accident of the vessel occurred during the insurance period, it should be presumed to be the total loss, PICC Guangdong should pay to Huarong Company directly in accordance with the amount of insurance. In addition, because of the M.V. “Chenglu 15” collided the South Korean breakwater, resulting the seizure of M.V. “Chenglu 21”, which was the sister vessel belonged to Huarong Company and finance leased by Chenzhou Group, in Korea. If the vessel was took a judicial auction, Huarong Company’s losses should be paid by PICC Guangdong directly, so it requested the court to judge that PICC Guangdong should compensate Huarong Company 39 million yuan and the corresponding interest (since November 15, 2013 by the People’s Bank of China the same period the loan interest rate was calculated to the date of payment) for the total loss of M.V. “Chenglu 15” and 9 million yuan for the damage due to repairing the breakwater. During the trial, Huarong Company changed the second aforesaid claim that the amount should be calculated according to the limitation amount of M.V. “Chenglu 15” about 1,496,487 SDR (RMB13,924,512 yuan). According to the statement of Huarong Company, Chenzhou Group believed that Huarong Company was the first beneficiary of the policy involved. Chenzhou Group agreed PICC Guangdong to pay all the insurance indemnity to Huarong Company But PICC Guangdong held that according to the provisions of Maritime Code and Insurance Law, beneficiary was the concept that only existed in life insurance contracts. In the relationship of property insurance contract, the parties were only the insured and the insurer and only the insured had the right to claim the right. The beneficiary was not a party to the property insurance contract, so Huarong Company had no right to sue PICC Guangdong. The court of first instance found that M.V. “Chenglu 15” was a steel bulk vessel of 140.19 m long, 20 m wide, 10.5 m deep, 8,461 gross tonnages. Its original port

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was Zhoushan, China. After it was completed in 11th September, 2008, it was registered belonging to Chenzhou Group. Chenzhou Group and Huarong Company signed a leaseback goods transfer agreement and financial leasing contract on October 28, 2010, they stipulated that transferred the possession of M.V. “Chenglu 15” to Huarong Company at 62.38 million yuan, and then rent back to Chenzhou Group for use. Chenzhou Group should not only pay the rent but also bear the obligation to use and take care of the lease item properly, otherwise it should compensate all the losses caused by the lease item, including the personal injuries or property damages. Chenzhou Group should take on the insurance matters in the local company and pay the premium including the hull insurance (all risks cover-hull) according to the total amount of the insured ship, a quarter of additional liability insurance and fuel oil risk. The insured or beneficiary should be Huarong Company When the insurance incidents occurred, if the insurance compensation was sufficient to charge against all the amounts due or overdue and other payables, the extra compensation should be transferred to Chenzhou Group by Huarong Company If the compensation was not enough, the insufficient section should be supplied by Chenzhou Group. If the settlement of claims failed due to Chenzhou Group, Chenzhou Group should take the responsibility of the accident. On the same day, the two parties handled the transfer procedures of M.V. “Chenglu 15”, which registering the ownership belonged to Huarong Company and on November 23 of the same year, they conducted the bareboat charter registration. Then M.V. “Chenglu 15” was sub-chartered to Lishen Company by the application of Chenzhou Group and conducted charter rental procedures. Chenglu Company was the actual management of the vessel. On January 31, 2013, Huarong Company sued to Ningbo Maritime Court claiming Chenzhou Group and other guarantors to take the liability for breach of contract because of Chenzhou Group did not pay the rent. On June 18, 2013, the court made the judgment of first instance, asking Chenzhou Group to pay total fees 50,126,941.3 yuan to Huarong Company including rent, overdue liquidated damages, nominal price and attorney fees since the judgment came into effect within ten days. And the rest of guarantors undertake joint guarantee responsibility. On December 10, 2013, the parties reached a settlement during the enforcement of the case in Ningbo Maritime Court. They agreed Chenzhou Group to return the owed money by stages. And made it clearly that the involved M.V. “Chenglu 15” had been sank and presumed of total loss during the lease. Chenzhou Group agreed that once it got the compensation from the insurance company or the P&I Club for the ship sinking accident, Huarong Company would have priority to get the indemnity as the owner of the ship and the first beneficiary. And the amount of compensation could charge against the corresponding rent. On March 7, 2013, Chenglu Company, as the insured, insured ten vessels in total including M.V. “Chenglu 15” to PICC Guangdong through T&Z Company Chenglu Company wrote the insurance slip for each vessel. And the involved slip showed that the owner of the vessel was Chenzhou Group, the insured person was Chenglu Company and the insured were: Chenzhou Group as owner, Chenzhou Group as operator, Lishen Company as bareboat charterer. The vessel named M.V.

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“Chenglu 15”, the insurance value was 39 million yuan, the insurance amount was 39 million yuan. There was no limited range of navigation. The insured risk was All Risks in accordance with the PICC Ocean Shipping Insurance Terms (2009 version). The insured period was from 8:00 pm on March 8, 2013 to 24:00 on March 7, 2014. The insurance applicant’s statement on the slip was that “the insurer provided me with details of the terms and conditions in which the liability of the insurer was exempted (including but not limited to exclusion of liability, treatment of claim and other matters, etc.). And made it clear to me about the payment agreement and the special agreement under this insurance contract. I have fully understood and accept the above terms, I agree to write this insurance contract voluntary on this basis.” In Insurance Sales Confirmation column it printed that “I insure to People’s Insurance Company of China Co., Ltd. Guangdong Branch for this vessel for Hull Insurance. I confirm the following matters: the name of the property sales staff is WANG Chunfu, professional license number is CX00122503. He has explained to me the details of the relevant insurance terms, and clearly explain the exclusion clauses.” But on the slip only stamped the seal of Chenglu Company”. Property sales staff, insurance agency sales staff, occupation certificate number and insurance agency seal were nobody sign and seal. On the next day, the People’s Insurance Company Shipping Insurance Operations Center (hereinafter referred to as PICC Shipping Center) sent a notice of premium to Chenzhou Group, requiring Chenzhou Group to pay the ten vessels’ annual premium including M.V. “Chenglu 15” 1,440,600 yuan. It was also required to pay as soon as possible and indicated that the policy would come into effect after paying the premium. On March 10, 2013, PICC Shipping Center issued a policy with a number of PCAA2013AX940000000801, specifying that the insured was Chenglu Company, the insured was Chenzhou Group, the vessel named M.V. “Chenglu 15”, the total tonnage was 8,461, the home port was Panama, the insurance value and amount were 39 million yuan and the insurance period was from 12:00 on March 11, 2013 to 12:00 on March 11, 2014. It was specified in the special agreed list attached to the policy that: “the insured is Chenzhou Group as the owner, Lishen Company as bareboat charterer, Chenglu Company as manager; the insurance terms are People’s Insurance Company of China Limited for Shipping Insurance All Risks (2009 version), the first beneficiary is Huarong Company; the deductible franchise for each accident is 60,000 yuan or 10% of the amount of losses, whichever is higher, the total loss irrespective of percentage is 10%; the premium would be paid in four installments; the first installment would be paid before March 11, 2013; the second installment would be paid before June 15, 2013; the third premium would be paid before September 15, 2013; the forth premium would be paid before December 15, 2013. If you do not pay the premium by agreement, the policy will invalid. In order to ensure that you can be protected by the insurance timely, please pay the premium as soon as possible.” On March 19, 2013, PICC Shipping Center sent a notice of premium to Chenzhou Group once again, requiring Chenzhou Group to pay the first installment premium of ten vessels including M.V. “Chenglu 15” totally 360,150 yuan as soon as possible. It was specified that the first installment 360,150 yuan would be paid

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before March 11, 2013; the second installment 360,150 yuan would be paid before June 15, 2013; the third premium 360,150 yuan would be paid before September 15, 2013; the forth premium would be paid before December 15, 2013. Remarks column said that “if you do not pay the premium during the policy issued within days from the date of counting, we will take no responsibility of any claim under the policy.” But the blanks did not fill in the specific number of days. After Chenzhou Group paid the first installment premium of 360,150 yuan, PICC Shipping Center issued a corresponding amount insurance invoice on March 21, 2013, indicating that the payer was Chenzhou Group. On July 3, 2013, PICC Guangdong issued an insurance endorsement, indicating that the insured was Chenglu Company, approved as “because of the policy (PCAA2013AX940000000801 Chenglu 15) did not pay the premium before June 15, 2013, the policy had been expired. The insurance period was from March 11, 2013 to June 10, 2013, discounting by the first installment premium paid. Therefore, the policy had been canceled since June 11, 2013, our company would take no liability of the claim.” According to PICC Guangdong, it notified T&Z Company that the contract had been canceled on June 20, 2013 by e-mail and transferred the insurance endorsement to Chenzhou Group by T&Z Company But Chenzhou Group denied this. On October 14, 2013, M.V. “Chenglu 15” was ready to go to Japan after loading and unloading in South Korea Pohang Newport, but due to the bad weather it had to anchored waiting in Pohang Port anchor. On October 15, at about 15:40, the vessel reported to the Pohang Local Marine Harbor Control Office Harbor Control Room that they had dragging. At about 17:46, the stern of the vessel collided the north breakwater of Yeongilman resulting the hull broken and water came in. At about 20:16, the vessel sank and only the part of the bow and part of the deck loading and unloading crane exposed to the sea; 8 crew members were rescued, 11 crew were killed by sea and 1 missing. Chinese news media gave the accident a special report, Chenzhou Group took the emergency management at once with the help of embassy and consulate stationed in Korea and Zhoushan City People’s Government. On October 22, Chenzhou Group reported to PICC Guangdong, formally informed the shipwreck accident and required to handle the claims of the vessel early. After being rejected, Shanghai Chuangyuan Law Firm sent a solicitor letter to PICC Guangdong on October 29, 2013, they deemed that it was unreasonable to terminate the contract on the grounds that the insured did not pay the second installment premium on June 15, 2013. And it asked the company to deal with the accident once again. On December 6, 2013, Chenzhou Group remitted the remaining three premiums 134,550 yuan of M.V. “Chenglu 15” into PICC Shipping Center’s account. On December 9, PICC Guangdong returned the premium on the grounds that the policy was suspended and canceled on June 16, 2013. Chenzhou Group denied this strongly in its response letter on next day and remitted the remaining premium to PICC Shipping Center once again on December 13. On January 15, 2014, Chenzhou Group entered into a wreck clearance and maritime technical service agreement with South Korean Fuhai Shipping Co., Ltd. (no cure no pay), according to Mandatory Wreck Removal Order issued by the

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Pohang Local Marine Harbor Office in Korea, they commissioned Fuhai Company to clear the wreck of M.V. “Chenglu 15”. After the wreck removal project was completed, the shipowner had paid salvage of USD190,000 on July 14, 2014. On April 10, 2014, Pohang Branch Court of Korea Daegu District Court seized M.V. “Chenglu 21” which belonged to Huarong Company and used by Chenzhou Group for the reason that the Republic of Korea as creditor had made a claim for compensation 2,997,500,000 WON for damage caused by the destruction of the breakwater and the application for arrest the vessel. The vessel had not been released. The court of first instance held that Chenglu Company as the policy holder insured to PICC Guangdong on M.V. “Chenglu 15” and paid part of the premium, PICC Guangdong signed a policy, so the insurance contract established and valid. The focus of dispute in this case exist in the following areas: 1. The main party of the vessel insurance contract and the legal status of the parties involved The insured of M.V. “Chenglu 15” was PICC Guangdong. As for the insured, the record on the insurance slip was defer from the insurance policy: according to the slip record, the insured was Chenzhou Group as the owner, Chenzhou Group as the operator, Lishen Company as the bareboat charterer; but according to the policy record, the insureds was Chenzhou Group as the owner, Lishen Company as the bareboat charterer, Chenglu Company as the operator. In this case, because of the record on the insurance slip was defer from the insurance policy, according to the stipulation of the Interpretation of the Supreme People’s Court on Several Issues concerning Application of the Insurance Law of the People’s Republic of China (II), in the event that the record on the insurance slip was defer from the insurance policy, the slip should prevail. Therefore, in this case the insureds were Chenzhou Group as the owner and the operator, Lishen Company as the bareboat charterer. According to Article 118 of the Insurance Law of the People’s Republic of China, insurance brokers should be institutions which, based on the interests of insurance applicants, provide intermediary services for insurance applicants and insurers to enter into insurance contracts, and charge commissions according to law. In this case, T&Z Company as the broker, its role was to provide intermediary services for insurance applicants and insurers but could not simply be regarded as the insurance applicants or the insureds’sole agent who with the right to sign or accept the insurance slip on behalf of the insurance applicants. Just as the involved slip was signed or sealed by Chenglu Company rather than T&Z Company. The terms of the insurance contract, the termination of the insurance contract should be prevail by the insurer or insured’s own signature or confirmation, rather than the T&Z Company’s confirmation or acceptance. PICC Guangdong argued that: in this case, Chenzhou Group was not the owner of the M.V. “Chenglu 15”, the other two insureds Lishen Company and Chenglu Company were not the owner. They had no interests on the subject matter, so the policy should be confirmed invalid; Huarong Company was the first beneficiary in the policy, but the policy did not specify the concept of the first beneficiary and the

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right to claim the insurance benefits to insurers, so Huarong Company claimed the compensation directly to the insurer without the contract and legal basis. Hereto, the court of first instance held that the insureds Chenzhou Group and Lishen Company were not the owners of M.V. “Chenglu 15”, but the financial leasing lessee, had been actual managing, controlling and operating the vessel. According to the financial leasing contract with leaser Huarong Company, Chenzhou Group had the obligation to properly take care and use the lease item, otherwise it should compensate for all losses caused by the lease; Chenzhou Group took the liability for the personal injuries and property damages caused by the lease. Chenzhou Group was responsible for handling ship insurance. When the insurance incidents occurred, if the insurance compensation was sufficient to charge against all the amounts due or overdue and other payables, the extra compensation should be transferred to Chenzhou Group by Huarong Company. If the compensation was not enough, the insufficient section should be supplied by Chenzhou Group. If the settlement of claims failed due to Chenzhou Group, Chenzhou Group should take the responsibility of the accident. Therefore, Chenzhou Group and Lishen Company had the legal interests on M.V. “Chenglu 15”. The court of first instance did not support the defense by PICC Guangdong that the insureds lack of insurance benefits. Huarong Company as the first beneficiary in the policy could be regarded that it had the recognized legal status in this property insurance contract relationship on the grounds that PICC Guangdong, as a professional insurer, introduced the concept and recorded on the policy, although the concept of beneficiary only existed in personal insurance relationship. That was the rights pledge which the insurance claimed as the subject set to Huarong Company by the involved insureds was recognized. When insurance accident occurred, the creditor Huarong Company could exercise its right to claim and receive insurance money priority. This was also confirmed by the pacification agreement on enforcement of capital lease between Huarong Company and Chenzhou Group. In the case, Chenzhou Group also expressly agreed that the compensation should be paid directly to Huarong Company, if it was paid by PICC Guangdong. Therefore, Huarong Company in this case had the right to directly claim the insurance indemnity. 2. Whether there was an insurance accident in this case PICC Guangdong did not recognize that there was an accident on M.V. “Chenglu 15” and the vessel had sunk. The court of first instance held that there was a wide range of news reported on M.V. “Chenglu 15” sank and heavy casualties due to storms at Pohang Port on October 15, 2013 which causing the vessel dragged and collided the breakwater. Due to the accident happened in the waters of Korea, it was impossible to issue a maritime report by our maritime authorities. The notarized certification of the notarized certification and the photographs of the incident provided by Chenzhou Group were able to prove the accident caused by strongly severe weather which “northeast wind 20–24 m/s (force nine), waves 5–6 m high (rough sea—very rough sea), 100% raining”. M.V. “Chenglu 15” collided with breakwater and sank for the strong wind and waves. They had cleared the wreckage according to the requirements of the local port authorities. PICC Guangdong did not

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recognize the above facts, but did not provide the corresponding evidence, so the court of first instance held that M.V. “Chenglu 15” had sank and the wreckage of the vessel had been removed. It coincided with the back terms listed on the policy that when the vessel suffering total loss caused by “other natural disasters”, “stranded, bumped, collided with any fixed or floating objects or other objects or other maritime disasters”, the bad weather would be proximate cause. The accident happened during the insurance period March 7, 2013 to March 7, 2014, so the insurer should take the liability. 3. Whether there was an agreement between the parties that “overdue payment of the premium will lead to policy invalid automatically” PICC Guangdong held that the clause was legal and valid for that was true meaning of the parties and did not violate the mandatory provisions of the law. The clause specified in the special agreed list attached to the policy was the condition to terminate contract agreed by the parties, which the content was that “not pay the premium in accordance with the policy agreed by parties will lead to policy invalid”. Once the condition was met, the party with the termination right would be entitled to terminate the contract. But Chenzhou Group and the Third Party Huarong Company held that the clause “failure to pay the premium will lead to policy invalid” should be invalid for it was only specified in the special agreed list but not in the insurance slip, the clause was added by the insurer unilateral. The insurer did not state the difference between the slip and the policy actively and the insured did not agree this clause after that. In addition, according to the relevant provisions of the Supreme People’s Court, if the insurer required to terminate the contract on the grounds that the assured did not pay the premium after the start of insurance liability, the court should not support it. The court of first instance held that although PICC Guangdong claimed that during the process of insurance consultation with T&Z Company, the two parties had agreed to pay the premium in four installments, and after the payment of premium arrangements there was the words that “fail to pay the premium, insurance policy will be automatically terminated”, but there was no evidence to prove that the insured had been confirmed the term. On March 7, 2013, there was no premium payment arrangements or the terms ruled the consequences of failing to pay the premium in the insurance slip signed by insured. There was only a description in the insured statement column that “the insurer has made a clear explain about the contents of payment agreements and special agreements in the insurance contract”. But the insurer could not prove that the payment agreements and special agreements had been written in the insurance slip. Moreover, the insurer required Chenzhou Group to pay all the premium of ten vessels 1,440,600 yuan including M.V. “Chenglu 15” written in Notice of Receivable Premiums before the issuance of the policy on March 8, 2013. The notice also specified that “only the premium is paid, the policy would come to effect”. It neither required to pay the premium by installment, nor wrote the clause that “fail to pay the premium, insurance policy will be automatically terminated”, so that meant the insurers themselves did not endorse the existence of the clause until March 8, 2013. On March 19, 2013, the insurer

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reissued the notice of receivable premium which only specified the premium should paid in four installments, and words about “fail to pay the premium, insurance policy will be automatically terminated”. The words that “if you do not pay the premium by agreement, the policy will invalid. In order to ensure that you can be protected by the insurance timely, please pay the premium as soon as possible” only specified after the premium paid in four installments arrangements on the policy issued by PICC Guangdong on March 10, 2013. Thus it could be seen that the words about “fail to pay the premium, insurance policy will be automatically terminated” only specified in the policy among the written documents sent to the insurance applicants and the insureds. Besides, the words were not as PICC Guangdong said that “fail to pay any period of the premium, insurance policy will be automatically terminated” which ruled the rights and obligations very clearly, but only “if you do not pay the premium by agreement, the policy will invalid. In order to ensure that you can be protected by the insurance timely, please pay the premium as soon as possible”. In this description, “the policy will be invalid” could also be understood as “possible or will lead to policy invalid”, rather than “invalid and terminate automatically”. Whether the insurer would send Premium Reminder Notice or give the period of grace was unclear if they found premium unpaid. The after words “in order to ensure that you can be protected by the insurance timely, please pay the premium as soon as possible” seemed more likely a polite reminder for payment rather than a restrictive clause to set the rights, obligations and liabilities with a clear will. The relevant law stipulated that: in the event that the record on the insurance slip was defer from the insurance policy, the slip should prevail. Therefore, the court of first instance held that the provisions did not exist in the insurance contract. 4. Whether the insurance contract had been terminated PICC Guangdong held that it issued a notice of premium overdue and cancellation of the policy and submitted an endorsement on June 6, 2013. The documents were submitted to Chenzhou Group, it had no objection and did not raise a lawsuit of the termination objection within the three months of statutory period. They not only entrusted T&Z Company to inquire and negotiate the terms of the contract with other insurance companies, but also informed to PICC Guangdong in seven days later after the accident occurred. All the actions indicate that Chenzhou Group awarded clearly the insurance contract had been terminated. Therefore, PICC Guangdong should not take the insurance liability for the ship’s sunken accident. But Chenzhou Group and Huarong Company held that: according to Article 20 of the Insurance Law of the People’s Republic of China, to modify an insurance contract, the insurer should endorse the insurance policy or any other insurance certificate or attach an approval slip thereto, or the insurance applicant and insurer should enter into a written agreement on the modification. Therefore, the endorsement was a legal approach to modify the contract rather than a form to terminate the contract. The insurer had no right to terminate the contract, even if they had, in the form of a notice was also invalid; and T&Z Company said that the insurer issued an endorsement to terminate the contract on June 21, 2013, but the

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actual endorsement was issued on July 3. That meany that the insurer had never sent an effective notice of terminating the insurance contract. So the contract continued to be effective, PICC Guangdong refused to take the liability without the lawful grounds. The court of first instance held that: the Insurance Law of the People’s Republic of China stipulated that the endorsement was a legal approach to modify the contract rather than a form to terminate the contract. The endorsement could not use alone; it must attach to the original slip to prove there was a modify of the insurance contract. The involved endorsement itself recorded that “this endorsement must be used with the original policy at the same time”. Therefore, regarding the endorsement as a form to terminate the contract did not match its records. In this case, the endorsement was issued on July 3, 2013. But PICC Guangdong claimed the endorsement was issued on June 21. It was not in accordance with the facts clearly. Terminate the contract is significant which will influence the rights and obligations of the parties. It was forced that PICC Guangdong explained this inconformity by clerical error on such important legal documents. The statements gave by PICC Guangdong on the time of policy invalid or terminate were different. In the endorsement issued on July 3, 2013, the time was June 11, but in the letter issued on December 9, the time was June 16. More importantly, as mentioned above, in the event that the record on the insurance slip was defer from the insurance policy, the slip should prevail. According to the records on the slip, in this case the insureds should be identified as follows: Chenzhou Group as the owner and operator of the ship; Lishen Company as the bareboat charterer; Chenglu Company as the insurance applicant, rather than the insured. According to Article 216 of the Maritime Code of the People’s Republic of China, a contract of marine insurance was a contract whereby the insurer undertook, as agreed, to indemnify the loss to the subject matter insured and the liability of the insured caused by perils covered by the insurance against the payment of an insurance premium by the insured. Therefore, in this case the obligation to pay the premium belonged to the insured, rather than the insurance applicant. The endorsement issued by PICC Guangdong on July 3, 2013 was true and valid, although its headline was sent to the applicant Chenglu Company rather than the insured Chenzhou Group and Lishen Company who had the obligation to pay premium. PICC Guangdong claimed that it had sent the endorsement to the applicant Chenglu Company, and Chenglu Company was also recorded as the insured in the policy. Therefore, the notice of termination had the same effectiveness for all insureds. The court of first instance held that even Chenglu Company was recorded as insured in the policy, but Chenglu Company and Lishen Company were also recorded as insureds in the policy. It should be said that all the three insureds have insurance interests on the subject matter of insurance, it could not rule out the situation that one of the insureds did not pay the premium, but other insureds would pay. Therefore, since the policy recorded Chenzhou Group, Chenglu Company, Lishen Company as the insureds, then all the three insureds had the obligation to pay premium, so that it was the insurer’s obligation to inform all three insureds when sends the notice of termination. In summary, the defense that PICC

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Guangdong had delivered the termination notice legally to the insureds had not been adopted by the court of first instance in respect of lacking evidence and reasons. PICC Guangdong also argued that: Chenzhou Group did not raise any objection after receiving the insurance endorsement for terminating the contract and had already started to look for other insurance companies in July and August 2013, indicating that Chenzhou Group accepted the policy had been invalid. The court of first instance held that PICC Guangdong had not yet provided the exact evidence that it had sent the notice of terminating the contract to the insureds listed on the insurance slip. Shanghai Chuangyuan Law Firm sent a lawyer’s letter to PICC Guangdong on October 29, 2013. The letter said that: “the two parties can confirm the following facts: … (B) On June 21, 2013, the insurer terminated the contract on the grounds that the insured did not pay the second installment premium on June 15, 2013.” The description could be understood as a statement of the insurer’s unilateral opinion, but did not mean that the insured had accepted the fact that the termination of the contract. Besides, it did not mean that the insurer had accepted the fact that the ship had been sank according to the description in “(C) In the evening of October 15, 2013, M.V. ‘Chenglu 15’ affected by cold air, colliding with the breakwater outside of Pohang Oort repeatedly, the vessel broke … …”. As for the facts that Chenzhou Group inquired through T&Z Company in July and August 2013, which could also be understood as the insured inquiry for the next insurance year. And in fact, the ten vessels including M.V. “Chenglu 15” had not insured by other insurance companies until the end of insurance period of 2013. Therefore, the defense given by PICC Guangdong that the insured had accepted to terminate the contract by the action of inquiring had not been adopted by the court of first instance in respect of lacking evidence and reasons. In summary, the court of first instance held that: the involved vessel insurance contract about M.V. “Chenglu 15” was established and legal and valid, the insurance applicant was Chenglu Company, the insured with the obligation to pay the premium was Chenzhou Group and Lishen Company, the insurer was PICC Guangdong. There was no clause ruled that “fail to pay any period of the premium, insurance policy will be automatically terminated” in the insurance contract. Even if such provision existed, the insurer had not effectively sent the notice of terminating the contract to the insured Chenzhou Group and Lishen Company who had the obligation to pay the premium. Because of the bad weather at Korea Pohang, M.V. “Chenglu 15” suffered total loss for colliding with the breakwater and the hull broken. This accident was occurred in the period of insurance, so the full amount of insurance should be paid by insurer. Interests on the above amount should also be paid, calculating from the date December 9, 2013, when the insurer expressly informed Chenzhou Group to rejection. According to the agreement that Huarong Company was the first beneficiary and the advice of Chenzhou Company in the policy, the insurance indemnity could be paid directly to Huarong Company. Although there was a record about deductible amount in the policy, PICC Guangdong did not raise the defense. And the deductible terms only recorded in the special agreed list but not in the insurance policy, the court of first instance did not

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recognize it based on the same reasons with the clause about “fail to pay the premium, insurance policy will be automatically terminated”. Chenzhou Group claimed that the damage caused by the ship in the Port of Korea Pohang had not begun to repair for the reason of foreign elements. So it was also hard to determine whether the limitation of maritime liability was established and the loss for detention caused by M.V. “Chenglu 21”’s arrest. According to Article 153 of the Civil Procedure Law of the People’s Republic of China, “where a portion of the facts of a case tried by a people’s court has been ascertained, the people’s court may first enter a judgment regarding such facts”, the court of first instance only made a first decision on the establishment of the ship insurance contract and the total loss indemnity of the ship. The costs of repairing the breakwater and other related economic losses could be resolved by the other case after the number was determined. In summary, according to Article 216, Article 227, Article 237, Article 238 of the Maritime Code of the People’s Republic of China, Article 1 of the Provisions of the Supreme People’s Court on Several Issues concerning the Trial of Cases of Marine Insurance Disputes, Article 14 Paragraph 1 of the Interpretation of the Supreme People’s Court on Several Issues concerning Application of the Insurance Law of the People’s Republic of China (II) and Article 153 of the Civil Procedure Law of the People’s Republic of China, the court of first instance made a judgment on August 20, 2015: PICC Guangdong should pay the total loss insurance indemnity on M.V. “Chenglu 15” 39 million yuan to Chenzhou Group and the interests from the date December 9, 2013 to the date of performance determined by the judgment, calculating by the benchmark lending rate for the same period of People’s Bank. The above amounts should be directly paid to the Third Party Huarong Company. PICC Guangdong did not agree with the judgment by the court of first instance and appealed to the court that: Firstly, the process to confirm the insurance contract of court of first instance was error. PICC Guangdong held that its emails with T&Z Company could prove the signing process of the insurance contract in this case, including: on December 25, 2012, T&Z Company contacted with PICC Guangdong by email and said it was entrusted by Chenzhou Group and Chenglu Company, as an exclusive insurance broker, so that the hull insurance matters including M.V. “Chenglu 15” were at its sole discretion. During December 26, 2012 to March 6, 2013, T&Z Company sent emails many times with PICC Guangdong to confirm that “premiums are divided into four installments. Fail to pay the premium, insurance policy will be automatically terminated.” On March 12, 2013, T&Z Company informed PICC Guangdong that some policy information needed to be changed, including: the period of the insurance should be modified from 12:00 on March 11, 2013 to 12:00 on March 11, 2014; to change the information of bareboat renter and to add the information of management company. PICC Guangdong required T&Z Company to confirm the final information at the same time, including: “premiums are divided into four installments. Fail to pay the premium, insurance policy will be automatically

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terminated. In order to ensure that you can be protected by the insurance timely, please pay the premium as soon as possible. The insureds are Chenzhou Group as the owner, Lishen Company as the bareboat renter and Chenglu Company as the management company.” T&Z Company immediately replied that “owner confirmed the information without mistakes, please issue the original policy.” According to the process of entering the contract, the above policy (issued on March 7, 2013) was not isolated, the following agreed contents which negotiated by T&Z Company and PICC Guangdong were modified the contents of the policy. According to the aforesaid facts, although the policy of this case showed the issue time was March 10, 2013, but its actual issue time was March 12, 2013. Secondly, T&Z Company on behalf of the insured to discuss the insurance conditions with PICC Guangdong, the actions including sign and accept the relevant mail, insurance terms and endorsement were valid according to the law. According to the relevant provisions of the Insurance Law of People’s Republic of China and Provisions on the Supervision of Insurance Brokerage Institutions, the insurance brokerage company on behalf of the applicant and the insured to discuss the conditions with the insurer, it had the right to sign and accept the relevant documents. The engagement letter issued by Chenzhou Group and Chenglu Company to T&Z Company stated that: “our company Chenzhou Group/Chenglu Company, as the owner/manager company of M.V. ‘Chenglu 15’ confirmed that we entrusted T&Z Company as our exclusive insurance broker to handle the above matters about the vessel hull insurance since December 25, 2012. This entrust revoked all the appointments issued before and would be valid until canceled in written. T&Z Company was authorized to deal with all the insurance matters of the ship in accordance with international practice.” According to the engagement letter, it was valid that T&Z Company on behalf of Chenzhou Group and Chenglu Company to receive and send mails and letters with PICC Guangdong. In the practice of insurance, if there was an insurance broker, then all the insurance terms agreed between the insurance company and insurance broker were directly bound to all applicants and insureds. As for the notice of insurance matters, if the insurance company informed the insurance broker that was equally to inform the applicants and insureds and any person designated in the policy. The judgment of first instance was error which held that the terms of the insurance contract and the termination of the insurance contract should be subject to the signing or confirmation of the applicants and insureds, rather than T&Z Company. Thirdly, “fail to pay the premium, insurance policy will be terminated” was a part of the insurance contract in this case. The “insurance conditions and special agreement” column of the policy recorded that: “see the details in special agreed list”. The insured risks, insurance terms to the applicant, the payment of premium, first beneficiary, etc., were not recorded in the front of the policy but in the special agreed list. “Fail to pay the premium, insurance policy will be terminated” was the result of negotiating between T&Z Company who on behalf of Chenzhou Group and PICC Guangdong. The first instance judged that “fail to pay the premium, insurance policy will be automatically terminated” did not exist in the insurance contract was wrong. According to Article 14 Sub-paragraph 1 of the Interpretation

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(II) of the Supreme People’s Court on Several Issues concerning Application of the Insurance Law of the People’s Republic of China (II), in the event that the record on the insurance slip was defer from the insurance policy, the slip shall prevail. But if the defer situation was stated by insurer and agreed by applicant, the policy or other insurance vouchers signed by the applicant shall be prevail. The judgment of first instance fragmented this legal provision, only referred to the first half of the provision, while ignoring the latter part. Although the contents of the special agreed list was inconsistent with the insurance policy, but confirmed by T&Z Company and Chenzhou Group. So according to the above provisions it should be prevailed by special agreed list. Fourthly, the insurance contract had invalid in accordance with the law and PICC Guangdong had informed the insured effectively that the policy was invalid and canceled. “Fail to pay the premium, insurance policy will be terminated” stipulated in the special agreed list belonged to the condition attach to the contract. The stipulation was valid according to the law, and its substance means was that “fail to pay the premium, insurance policy will be automatically terminated”. The insured did not pay the second installment premium in accordance with the agreement of the policy, resulting in the automatic invalidation of the policy. In this case, PICC Guangdong was not required to notify the insured that the policy had been invalid, but PICC Guangdong still informed the insured in three ways. PICC Guangdong informed T&Z Company by e-mail at 17:14 on June 20, 2013 that “the above policy (including this policy) had been invalid because the insured did not pay premiums before June 15, 2013 as they agreed. Our company officially notified your company/the insured that the above policy had been canceled and we would not take any liability since June 16, 2013.” T&Z Company transmitted the notice to Chenzhou Group. On June 21, 2013, PICC Guangdong sent the notice of terminating the policy to T&Z Company by e-mail once again. T&Z Company transmitted Chenzhou Group that “your company just paid a part of the premium of ten vessels Hull Risks, the insurance period was from March 11, 2013 to June 10, 2013. According to the premium paid by your company, the policy should be canceled from June 11, 2013.” Chenzhou Group not only had no objection after receiving the e-mail, nor paid the second installment premium. Besides the notices sent by e-mail on June 20 and 21, 2013, PICC Guangdong also sent the original terminated policy and vessel insurance endorsement which stated the policy had been terminated to T&Z Company. T&Z Company received the documents and sent to Chenzhou Group face to face. Chenzhou Group did not object to the policy had been invalid and terminated after receiving the e-mails and original endorsement, nor paid the premiums. In summary, PICC Guangdong informed the insured that the policy had been invalid and terminated in three ways: the first way was through e-mail; the second way was through mail and attachments (endorsement); the third way was mail the original endorsement. Chenzhou Group confirmed that it had received the e-mails and endorsement on June 21, 2013. The actions indicated that the policy had been invalid and terminated. In this case, the endorsement was legal and valid, and the Insurance Law did not stipulate that the endorsement could not be used to

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terminate the contract. If the law did not prohibit it, it should be permitted to use. Although the endorsement stated that “the endorsement must be attached to the original policy, it is invalid to use it alone”, but because of the contents of the endorsement was to terminate insurance policy, rather than modify the insurance contract, so the endorsement did not need to be attached to the original policy. Moreover, the original policy was in the hands of the insured, it was impossible for PICC Guangdong to stick the endorsement to the original policy. The insured was only Chenglu Company stated in the endorsement, but it was equally effective for the other two insureds Chenzhou Group and Lishen Company As mentioned above, the insureds in this case were three companies recorded in the special agreed list that: Chenzhou Group, Lishen Company and Chenglu Company, rather than Chenzhou Group and Lishen Company recorded in insurance slip. Article 216 of the Maritime Code of the People’s Republic of China stipulated that “a contract of marine insurance is a contract whereby the insurer undertakes, as agreed, to indemnify the loss to the subject matter insured and the liability of the insured caused by perils covered by the insurance against the payment of an insurance premium by the insured.” Although the Maritime Code of the People’s Republic of China did not give the concept of the “insurance applicant”, but the insured of the Maritime Code of the People’s Republic of China was the person who made the contract and paid the premium to the insurer. The insured stipulated in the Maritime Code of the People’s Republic of China was at the same position with the insurance applicant stipulated in the Insurance Law of the People’s Republic of China. Article 10 of the Insurance Law of the People’s Republic of China stipulated that: “an insurance contract means an agreement under which the insurance applicant and insurer agree upon the insurance rights and obligations. An insurance applicant means a person who enters into an insurance contract with an insurer and performs the obligation of paying an insurance premium under the insurance contract.” Article 20 of this law also stipulated that: “the insurance applicant and insurer in an insurance contract may modify the contents of the contract upon negotiations.” The above provisions showed that the insurance applicant was the only person entitled to consult with the insurer to enter and modify the insurance contract. The insured recorded on the endorsement was only Chenglu Company, but it was also valid for the other two insured persons, the reasons were as follows: firstly, Chenglu Company was the insurance applicant, also the insured of the Maritime Code of the People’s Republic of China, who the only person entitled to consult with the insurer to enter and modify the insurance contract. The insurer based on the policy just and only sent the endorsement of terminating the policy to insurance applicant (insured). Secondly, the endorsement as a part of the contract was a proof which recorded the failure and termination of the contract. The explanations on the endorsement should not be isolated and fragmented, but be combined with the entire insurance contract. The endorsement was directed at the three insured persons included in the policy: Chenzhou Group, Lishen Company and Chenglu Company. The judgment of first instance held that the termination notice should be sent to the three insureds is wrong. The judgment of first instance belonged to subjective speculation which said that “it cannot rule out the situation

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that one of the insureds does not pay the premium, but other insureds will pay”. There was no one in this case to pay the second installment premium. The insurance endorsement actually issued on June 21, 2013. It was only a clerical error to recorded as “July 3, 2013”. Fifthly, in this case, the special agreement that “fail to pay the premium, insurance policy will be terminated” belonged to the situation which stipulated in Article 93 Paragraph 2 of the Contract Law of the People’s Republic of China that “the parties can make an agreement on the conditions to terminate the contract by any party”, so the contract had been terminated effectively. PICC Guangdong informed the insured that the policy had been invalid and terminated in three ways: the first way was through e-mail; the second way was through mail and attachments (endorsement); the third way was mail the original endorsement. As long as one of the three ways delivered to Chenzhou Group and Chenglu Company, the contract would be terminated effectively, let alone the three ways were all delivered. Article 24 of the Interpretation of the Supreme People’s Court on Several Issues concerning Application of the Contract Law of the People’s Republic of China (II) stipulated that: “where the parties have dissents in respect of rescission of contract or debt offsetting as stipulated in Article 96 and 99 of the Contract Law, but put forth such dissents and bring a suit with the people’s court upon the expiration of the specified dissent period, the people’s court shall not affirm; in case there is no dissent period as specified by the parties, and the suit is filed with the people’s court three months after receiving the notice of rescission of contract or debt offsetting, the people’s court shall not uphold.” In June 2013, Chenzhou Group did not object to the policy had been invalid and terminated after receiving the e-mails and original endorsement, nor paid the premiums. To October 15, 2013, M.V. “Chenglu 15” sunk and Chenzhou Group did not prosecute PICC Guangdong. Chenzhou Group sued PICC Guangdong until February 25, 2014, it had been more than three months. Therefore, Chenzhou Group did not prosecute within the statutory period, the court should not support it. The judgment of first instance did not make any confirmation about the pleading which was submitted by PICC Guangdong that Chenzhou Group and other insureds did not make any claim against the termination of the contract within three months. The action belonged to deliberately avoided or important omission. The judgment of first instance on the identity of the company, the cause of the accident and the determination of the total loss of the vessel, the determination of the payment of premiums and the determination of the deductible were wrong, adopting evidence used double standards. Firstly, the insurance contract was the result of negotiating for many times between PICC Guangdong and T&Z Company who was the sole representative of Chenzhou Group and Chenglu Company. All the contents of this policy, especially the special agreed list, which raised by Chenzhou Group and Chenglu Company through T&Z Company were written after negotiating with PICC Guangdong. Chenglu Company should be identified as the insured. Secondly, the Korean Marine Police Accident Certificate based by the judgment of first instance stated that: “this certificate cannot be used for assurance or evidence” and it also recorded in the “Event Summary” column that the content in this column was for declaration, but not investigated by South Korea maritime authorities, so it

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could not be used as proof. Chenzhou Group thought the accident belonged to the insurance accident, but did not consider whether there was ship seaworthiness, shipowner’s negligence, ship defects and other exclusions. Chenzhou Group reported to PICC Guangdong in seven days later after the accident happened when the best time to investigate the real reason for the accident had been lost. The judgment of first instance held that one of the basis of the accident was “there was a wide range of news reports”, but did not see the news reports. Moreover, news reports could not be used as the direct evidence of the fact according to the years of judicial practice. The judgment of first instance did not require Chenzhou Group to provide the Korean official investigation report, but asked PICC Guangdong to provide the opposite evidence violated the rules of evidence. Chenzhou Group did not provide valid evidence to prove that M.V. “Chenglu 15” occurred total loss, but the judgment of first instance held that M.V. “Chenglu 15” occurred total loss. Thirdly, Chenzhou Group paid premium for M.V. “Chenglu 15” on December 6, 2013, but PICC Guangdong returned it on December 9 and Chenzhou Group paid again on December 13. But the judgment of first instance for the follow-up facts did not identify. In fact, PICC Guangdong returned the premium once again on December 16 and Chenzhou Group did not arrange payment again. Therefore, the determination of facts was false and unclear made by judgment of first instance. According to the process of the insurance, Chenzhou Group was insured ten vessels at a time, M.V. “Chenglu 15” just one of them. Chenzhou Group paid the first installment of the ten vessels, but they did not pay the follow-up premium even after the accident. The policy was invalid and terminated totally caused by the failure to pay the premium. Fourthly, as stated above, the special agreed list of policy was lawful and valid. The deductible was recorded in the special agreed list so it was also an effective agreement. Fifthly, PICC Guangdong holds that the court of first instance obviously favored the Respondent when they determinate the relevant process to enter the contract, for they did not affirm the evidence which was benefit to PICC Guangdong. In summary, PICC Guangdong held that the judgment of first instance was false and request to revoke it. it required to change the original judgment to reject all the claims of Chenzhou Group and Chenzhou Group should bear all the costs of litigation. Chenzhou Group replied in the second instance: Firstly, it was not appropriate to regard the emails which in the process of inquiry and did not become the ultimate condition as the acts on behalf of the insurance applicant. Even if the broker had the right to inquiry the insurance rate, but in the event that the applicant had submitted an insurance policy which clearly recorded the conditions to insure the vessels, the applicant’s true meaning should be prevail. It was totally wrong to regard the acts of T&Z Company could represent Chenzhou Group and Chenglu Company, which was claimed by PICC Guangdong. Secondly, Chenzhou Group and Chenglu Company issued a letter of attorney to the insurance intermediary company T&Z Company But the letter did not record the specific authorization, it was just a general commission. PICC Guangdong also

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knew that the role of T&Z Company was only an intermediary company. Its rights were to communicate and convey the information, but no rights to make the final decision on the insurance conditions, and no rights to accept or sign the important notice and documents on behalf of the insured. T&Z Company in a dual identity for PICC Guangdong also pay commission to it. The court of first instance held that T&Z Company could not replace or totally represent the insured was right. Thirdly, “fail to pay the premium, insurance policy will be automatically terminated” was obviously a clause which was differ between insurance slip and policy. And there was no evidence to show that PICC Guangdong had done the duty of explanation or asked the agreement of the applicant. According to the Article 14 Sub-paragraph 1 of the Interpretation (II) of the Supreme People’s Court on Several Issues concerning Application of the Insurance Law of the People’s Republic of China (II), the slip should prevail. Therefore, the clause “fail to pay the premium, insurance policy will be automatically terminated” should not be judged to exist in the insurance contract. Fourthly, the insurance contract in this case was still valid at least when the accident happened on December 10, 2013. According to Article 227 of the Maritime Code of the People’s Republic of China that “unless otherwise agreed in the contract, neither the insurer nor the insured may terminate the contract after the commencement of the insurance liability”; Article 5 of the Provisions of the Supreme People’s Court on Several Issues concerning the Trial of Cases of Marine Insurance Disputes that “if the insurers require to terminate the contract in the reason of the insureds did not pay the premium after the commencement of insurance liability, the people’s court will not support”. Therefore, unless the two parties of the insurance contract had made a clear agreement that granting the insurer to terminate the contract when the premium was not paid in time, otherwise the insurer could not cancel the insurance contract by the reason of the premium was not paid in time. The clause “fail to pay any period of the premium, insurance policy will be automatically terminated” which was insisted and advocated by PICC Guangdong was unilaterally printed by PICC Guangdong, so it was not a term agreed by the two parties. The insurance contract of M.V. “Chenglu 15” did not give the insurer rights to terminate the insurance contract when the insured failed to pay the premium in time. According to the evidence, it was until December 2013 that PICC Guangdong informed Chenzhou Group in written to terminate the contract. Fifthly, PICC Guangdong did not effectively notify Chenzhou Group that the insurance policy had been terminated before the accident happened. Although PICC Guangdong advocated that it had been notified Chenzhou Group to terminate the contract on June 21, 2013, but the effective notice of the termination issued on July 3, 2013, more than ten days later. It was obviously not logical. So PICC Guangdong could not claim that it had terminated he insurance contract on June 21, 2013. T&Z Company had a dual identity, but its testimony did not through the cross-examination and court audit, the court should not accept it. The proposition of PICC Guangdong that it had informed the insured to terminate the contract through three ways based on the assertion of T&Z Company was lack of factual basis. And

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according to the evidence, PICC Guangdong stated the contact address and means of communication of Chenzhou Group in the first page of policy, but informed Chenzhou Group in written on December 9, 2013 when the accident had happened. Before the notice to terminate the contract, the two parties were still bound by the contract. That meant PICC Guangdong was still liable for the accident before the termination of the contract. The claim of PICC Guangdong that Chenzhou Group had accepted the termination of the policy by means of inquiring in August 2013 was lack of facts basis. Sixthly, the clause “fail to pay any period of the premium, insurance policy will be automatically terminated” printed by PICC Guangdong was not a term agreed by the two parties and was not incorporated into the insurance contract effectively, so PICC Guangdong had no right to terminate the insurance contract “in accordance with the contract”. Besides, PICC Guangdong did not inform Chenzhou Group to terminate the contract before the accident. As for the notice referred to by PICC Guangdong, as mentioned above, the court of first instance not supported it. Because the evidence form of testimony and PICC Guangdong did not apply for a cross-examination in the court upon the witnesses. Therefore, there was no effective evidence to prove the notice they claimed. In this case, the letter dated December 9, 2013 and the reply issued by Chenzhou Group on December 10, 2013 could prove that the notice time was December 9, 2013. It was no more than three months that Chenzhou Group filed an insurance contract suit to the court on February 25, 2014. In this case, the clause “fail to pay any period of the premium, insurance policy will be automatically terminated” was not a valid agreement, and Chenzhou Group failed to pay the premiums did not meet other agreed or statutory right to terminate a contract, so PICC Guangdong had no right to terminate contract, the contract existed effectively. Chenzhou Group did not pay premiums possibly because that it no longer received the follow-up premium notice. Combined with the first period of overdue payment of premiums, it was reasonably to believe that PICC Guangdong agreed to give a certain grace period for the payment of premiums. Seventhly, combined with the facts of insurance confirmation, the facts of premium payments, the legal status of Chenglu Company and Chenzhou Group, there was no mistakes that the court did not regard Chenglu Company as the insured. On March 7, 2013, the insured Chenglu Company sealed on the insurance policy making its status clear as an insured. PICC Guangdong accepted the policy and set up an insurance contract. So Chenglu Company should be identified as the applicant and the insured was only Chenzhou Group recorded on the first page of insurance policy. Afterwards, PICC Guangdong issued a notice of premiums payable to Chenzhou Group, which also stipulated that the insured was Chenzhou Group. Therefore, PICC Guangdong and Chenzhou Group both regarded Chenzhou Group as the insured in respects of the coverage of insurance and notice of insurance premiums and the payment of premiums. Chenglu Company was the manager of the vessel, but Chenzhou Group was the owner who with the complete right to possess and operate the vessel. Chenzhou Group had a complete right to control and dispose M.V. “Chenglu 15”, so it was legitimate to regard it as the insured.

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Eighthly, the accident suffered by M.V. “Chenglu 15” was clearly belonged to insurance coverage. It was well known that because of the bad weather at Korea Pohang, M.V. “Chenglu 15” suffered total loss for colliding with the breakwater and the hull broken. After the accident, CCTV reported at once on October 16, 2013. The declare on the incident and the Chinese crew salvage treatment gave by the Deputy Consul of Busan ZHAO Dawei was also reported. Because the government at all levels urged Chenzhou Group to deal with casualties of family members, so it formed a group in charge of one death crew, there was totally 11 groups. Chenzhou Group notified PICC Guangdong and asked its emergency treatment were due to the requirement of the government to consider the death of the crew. South Korean Marine Police Department was the investigation agency of the maritime accident in Korea, its accident certification was notarized and could reflect the nature and cause of the accident objectively. According to the contents of the certificate, M.V. “Chenglu 15” could not leave the port due to the strong wind, and then collided with the north breakwater of Yeongilman resulting the hull broken. According to the terms of the insurance, the fact was in the scope of insurance liability. The claims given by PICC Guangdong that Chenzhou Group failed to investigate the reasons and there was no evidence to identify the cause of the accident was no basis. Ninthly, deductible amount was printed on the policy by PICC Guangdong itself, it was invalid for PICC Guangdong did not perform the obligation to explain. Besides, the PICC Ocean Shipping Insurance Terms (2009 version) stated that the total loss would not deduct the deductible amount. It was a reasonable judgment made by the court according to the law and the agreement that deductible amount should not be deducted. According to Article 9 of the Interpretation of the Supreme People’s Court on Several Issues concerning Application of the Insurance Law of the People’s Republic of China (II) and Article 17 Paragraph 2 of the Insurance Law of the People’s Republic of China, the deductible is a clause to exempt the insurer from the liability in the insurer contract, the insurer shall sufficiently warm the insurance applicant of those clauses in the insurance application form, the insurance policy or any other insurance certificate, and expressly explain the contents of those clauses to the insurance applicant in written or verbally. If the insurer failed to make a warning or express explanation thereof, those clauses should not be effective. In summary, Chenzhou Group held that the affirmation of the facts was clear and the application of the laws was correct which made by judgment of first instance. The facts and reasons appealed by PICC Guangdong were no legal and factual basis. So it asked the court of second instance to dismiss the appeal and affirm the original judgment. Huarong Company argued in the second instance: Firstly, the insurance contract had been set up and came into effect on March 8, 2013. The issuance of insurance policy was a fact to perform the insurance contract. The clause “fail to pay the premium in accordance with the policy will lead to policy terminated” was a standard term added by PICC Guangdong itself on the

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special agreed list of the policy which was seriously impaired the rights of the applicant and the insured. PICC Guangdong repeatedly admitted in the first instance trial, appeal petition and the second instance trial that: “on March 8, the policy formed in the underwriting system”. According to the provisions of the CIRC on the prudential underwriting, insurance companies must experience the multiple and classified preposition procedure during the process of the underwriting. Only if all the procedures were passed, the policy would form in the underwriting system. This confirmed the fact that the insurance contract was established on March 8. In accordance with Article 13 of the Insurance Law of the People’s Republic of China: after the establishment of the insurance contract, the insurer shall issue an insurance policy or any other insurance certificate to the insurance applicant in a timely manner. The issuance of a policy was an act to perform the insurance contract by the insurer, it would not affect the fact that the insurance contract had been established in accordance with the law. The judgment of first instance according to the written record of the inscription time judged that PICC Guangdong issued the policy on March 10. That coincided with the insurance period calculating from March 11, so the identification was correct. After the establishment of the insurance contract, the mails between PICC Guangdong and T&Z Company could not modify the insurance contract. Firstly, during the second trial, PICC Guangdong stated that the policy on March 10 was anti-dated on March 19, which was neither in accordance with the law, nor provide any basis of observing the regulations. And there was no effective evidence to prove the fact. So it should be identified as illegal operation, free explanation and self-contradictory act by PICC Guangdong. According to the e-mail evidence notarized by PICC Guangdong, Chenzhou Group and Huarong Company were only recognized the authenticity of the e-mail form, but not recognized the authenticity of its content and the relevancy. The clause “fail to pay the premium in accordance with the policy will lead to policy terminated” was a standard term added by PICC Guangdong itself on the special agreed list of the policy which was seriously impaired the rights of the applicant and the insured. Article 6 and 7 of PICC Ocean Shipping Insurance Terms (2009 version) which signed and sealed by Chenglu Company stated that overdue payment of premiums was not a condition to terminate the contract, on the contrary, the insured could pay the insurance premium after the accident and the insurer should claim settlement. Obviously, the clause “fail to pay the premium in accordance with the policy will lead to policy terminated” deprived the applicant and the insured’s right to pay premiums, and PICC Guangdong had never made a clear statement or warning to the applicant and the insured on this severe consequence. All those facts were indicating that the clause “fail to pay the premium in accordance with the policy will lead to policy terminated” was a standard term in which the insurer was unilaterally enacted and reused. So the clause should invalid according to Article 40 of the Contract Law of the People’s Republic of China. Secondly, the clause “fail to pay the premium in accordance with the policy will lead to policy terminated” differed from the policy signed by Chenglu Company. PICC Guangdong did not perform the obligation to describe it clearly and ask the permission. According to the Article 14 Sub-paragraph 1 of the Interpretation of the

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Supreme People’s Court on Several Issues concerning Application of the Insurance Law of the People’s Republic of China (II), it should be invalid. The clause “fail to pay the premium in accordance with the policy will lead to policy terminated” only existed in the special agreed list which delivered from PICC Guangdong to Chenzhou Group on March 19. This was different from PICC Ocean Shipping Insurance Terms (2009 version) which signed and sealed by Chenglu Company. The concept, content and legal consequences of the clause “fail to pay the premium in accordance with the policy will lead to policy terminated” were not explained in a way that ordinary person could understand by PICC Guangdong. And the insured did not sign to confirm, so it should be invalid. Article 17 of the Insurance Law of the People’s Republic of China, the deductible was a clause to exempt the insurer from the liability in the insurer contract, the insurer should sufficiently warm the insurance applicant of those clauses in the insurance application form, the insurance policy or any other insurance certificate, and expressly explain the contents of those clauses to the insurance applicant in written or verbally. If the insurer failed to make a warning or express explanation thereof, those clauses should not be effective. PICC Guangdong modified the content of PICC Ocean Shipping Insurance Terms (2009 version) that the premium could be repaid after the accident to “fail to pay the premium in accordance with the policy will lead to policy terminated”, which was not agreed by the applicant and insured. Thirdly, T&Z Company was an insurance intermediary. It could not on behalf of the applicant and the insured to confirm, change the contract or sign the important documents as an independent intermediary. The legal status of insurance brokers was the insurance intermediaries at first, the independent status of its intermediary and the legal status of agents in the civil agency system had a fundamental conflict, which determined that T&Z Company could not be the agent of the applicant and the insured. According to Article 8 of the Anti-Unfair Competition Law of the People’s Republic of China and related interpretations, the right to legally obtain the commission can only be an independent intermediary who matches the transaction. Otherwise, it was a commercial bribery to give the other staff or agent commission. Chenzhou Group’s entrustment book was issued for T&Z Company to provide insurance intermediary services. Based on the professionalism and prudential requirements of the insurance company, PICC Guangdong should not regard it as a clear power of attorney. Article 116 of the Insurance Law of the People’s Republic of China stated that: “in the insurance business operation, insurance companies and their staff shall be prohibited from: 4. giving or promising to give any insurance premium kickback or benefit other than those agreed upon in the insurance contract to an insurance applicant, insurant or beneficiary”. PICC Guangdong advocated that T&Z Company was the agent of the applicant, then the act of payment was equal to gave kickback to the applicant, so it was illegal. The contents of the intermediary service were to communicate and transmission. The intermediary was only a channel for information to flow. The means of confirmation and modifications should be made by the applicant and the insured. The documents about the performance and termination should be directly signed by the applicant and the insured. PICC Guangdong had sent the original policy, notice of

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premium to receive on March 8 and notice of premium to receive on March 19 to Chenzhou Group directly, indicating that there were no obstacles for PICC Guangdong to contact with Chenzhou Group directly. Fourthly, the clause “fail to pay the premium in accordance with the policy will lead to policy terminated” did not have the effect on the applicant and the insured. PICC Guangdong had no right to terminate the contract and did not delivery the notice effectively. Even if there was the clause “fail to pay the premium in accordance with the policy will lead to policy terminated”, PICC Guangdong had waived it in the process of the performance to say the least. In the process of the actual payment of premiums by Chenzhou Group, PICC Guangdong did not perform the clause “fail to pay the premium in accordance with the policy will lead to policy terminated”. The premium paid by Chenzhou Group on March 11, 2013 was refunded for no reason. On March 19, the first installment premium was repaid after receiving the premium notice. The payment on 19th March was valid, but it was over 8 days from the recorded date, but PICC Guangdong did not advocate the invalid of the policy. On the one hand, it indicated that the clause “fail to pay the premium in accordance with the policy will lead to policy terminated” was invalid, on the other hand even if there was the clause “fail to pay the premium in accordance with the policy will lead to policy terminated”, it was also a waiver. In June 2013, PICC Guangdong did not urge the applicant and the insured to pay the second installment premium, nor delivered the effective notice of termination. In the stage of trial, PICC Guangdong also clearly answered that it did not urge the applicant and the insured to pay the second installment premium. Therefore, in fact, Chenzhou Group had no acknowledgement on the existence and the consequence of the clause “fail to pay the premium in accordance with the policy will lead to policy terminated”. PICC Guangdong had not been delivered the notice to terminate the contract until Chenzhou Group filed a lawsuit to the court. So the insurance contract continued to be effective. The solicitor letter issued by WAN Renshan on October 29, 2013, had not been authorized by Chenzhou Group. PICC Guangdong was fully aware it and did not recognize the efficacy of the solicitor letter. The statement in solicitor letter that “on June 21, 2013, the insurer terminated the contract on the grounds that the insured did not pay the second installment premium on June 15, 2013” did not meet the objective facts, so it was not a self-admission of facts. Even if the applicant and the insured received the notice of cancellation, but clause “fail to pay the premium in accordance with the policy will lead to policy terminated” was not included in the insurance contract, so PICC Guangdong was not entitled to issue a notice of cancellation. Fifthly, Chenzhou Group had the insurance interests on M.V. “Chenglu 15”. And the insurance interests were not the reasons for the appeal of PICC Guangdong. It beyond the scope of the second trial. M.V. “Chenglu 15” was financed by Huarong Company in 2010 to Chenzhou Group. The vessel financial leasing was not a real bareboat charter, but an act that the lessor provided the financial and the lessee paid the rent. If the overdue payments of rent to a certain extent, the lessor could be based on Article 248 of the Contract Law of People’s Republic of China and Article 22 of the Rules of the Supreme People’s Court on

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Several Issues concerning the Trial of Cases Involving the Disputes Over Financial Leasing Contract that the lessor could require to withdrawal the vessel and claim the indemnity. When the total loss happened to the ship, the lessee could not return the ship to the lessor to compensate the loss, so the lessor should bear the relevant liability for damage. So in the relationship of vessel financial leasing, the lessee had the insurance benefits on the leased ship. PICC Guangdong did not appeal on the basis of Chenzhou Group without the insurance interests. Therefore, this matter had exceeded the appeal period and did not belong to the scope of the second trial according to the law. So it should not be heard. Sixthly, the deductible amount was also the content added by PICC Guangdong itself in the special agreed list that should be invalid. According to Article 9 of the Interpretation of the Supreme People’s Court on Several Issues concerning Application of the Insurance Law of the People’s Republic of China (II) and Article 17 Paragraph 2 of the Insurance Law of the People’s Republic of China, the deductible is a clause to exempt the insurer from the liability in the insurer contract, the insurer should sufficiently warm the insurance applicant of those clauses in the insurance application form, the insurance policy or any other insurance certificate, and expressly explain the contents of those clauses to the insurance applicant in written or verbally. If the insurer fails to make a warning or express explanation thereof, those clauses shall not be effective. In this case, Article 3, Article 6, Article 7 of PICC Ocean Shipping Insurance Terms (2009 version) apply to the insurance policy had made a clearly rule about the deductible amount, contract cancellation, premiums and refunds. PICC Guangdong added the deductible amount by itself in the special agreed list and could not prove that it had performed the inform obligation to the applicant or given a gripping warning in any way. So the agreement on the deductible in the special agreed list did not have legal effect. Seventhly, the cause and nature of the accident were in the scope of insurance coverage. It was well known that because of the bad weather at Korea Pohang, M. V. “Chenglu 15” suffered total loss for colliding with the breakwater and the hull broken. After the accident, the news media including the CCTV reported it widely. Chenzhou Group was busy to deal with casualties of the crew family with the assistance of all levels of government and claimed to PICC Guangdong within 7 days. PICC Guangdong said that Chenzhou Group was purely irresponsible and lazy to fulfill their obligations for they claimed in this time had caused the loss of evidence. South Korean Accident Certificate could not be issued within few days for the wreck salvage work was protracted. According to Article 22 Paragraph 1 of the Insurance Law of the People’s Republic of China that “after an insured incident occurs, the insurance applicant, insurant or beneficiary claiming indemnity or insurance money against the insurer under the insurance contract shall provide the insurer with available certificates and materials related to the determination of the nature, cause, degree of damage, etc. of the incident.” In this case, the documents including the accident certificate issued by Korea Marine Police Department provided by Chenzhou Group were notarized, so they were able to reflect the nature and the reason of the accident objectively. The news including the text and video

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provided by Chenzhou Group could be a visual reflection of the bad weather when the incident happened. There was not only a violent storm, but also monstrous waves, just like disaster. Chenzhou Group had completed the burden of proof for the cause of the accident. In summary, Huarong Company held the decision of the first instance was clear, the application of the law was correct, and requests the court of second instance to maintain the original judgment and dismiss the appeal of PICC Guangdong. In the second instance, Huarong Company and PICC Guangdong did not presented new evidence materials, Chenzhou Group submitted a CCTV reports about this ship-sinking case in the form of CD as new evidence material, to prove that M. V. “Chenglu15” suffered the bad weather and sank in somewhere Korea on October 15, 2013. It was a well-known fact that the accident was reported in CCTV news broadcast, thus PICC Guangdong should also pay attention to it. PICC Guangdong made a cross-examination that Chenzhou Group did not provide a new evidence because CCTV reports had already existed before the first instance. PICC Guangdong had no objection to the authenticity but the relevancy, legality of the evidence. The news only reported the involved Panama ships sank in Korea, but did not mention M.V. “Chenglu 15”. Moreover, it was the obligation of the insured to inform the insurer after suffering the loss. The news reports could not exempt the insured from its obligation to inform. Huarong Company had no objection of the authenticity, relevancy and legality of the evidence in its cross-examination. It held that the news was objective and realistic. The court considers that the authenticity of the evidence is recognized by all the parties, and the court of first instance investigated those according to the evidence in the case. Therefore, the court recognizes that the evidence is redundant. After the trial, the facts identified by the court are in accordance with the facts found in the first instance. The court also found that it was agreed in the clauses of the PICC Ocean Shipping Insurance Terms (2009 version) that: 3. deductible amount … This Article did not apply to the ship’s total loss claim and the reasonable costs incurred for the inspection of the bottom of the ship after stranding. … 7. Premium and refund. (a) Regular insurance: all premiums should be paid in the underwriting. If the insurer agrees that the premium may also be paid in installments, but if the insured has incurred a total loss during the period of the insurance, unpaid premiums should be paid immediately … 10. Claims and compensation. (b) Total loss. (ii) If the insured ship’s track information is not heard more than two months after the date it is expected to arrive at the port of destination, it should be regarded as the actual total loss, and should be compensated according to the amount of insurance indemnity. According to PICC Guangdong’s appeal and reasons, Chenzhou Group and Huarong Company’s reply, the court summarizes the issues are as follows: 1. Whether the insurance contract contains “not to pay premium in accordance with the policy agreed will lead to policy invalid” clause and the terms about the deductible amount

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The court holds that in this case the legal status of T&Z Company should be clarified firstly, which directly relates to whether the legal consequences of the behavior between T&Z Company and PICC Guangdong can be directly attributable to Chenzhou Group. According to Article 118 of the Insurance Law of the People’s Republic of China, the insurance brokerage firm is an intermediary institution providing intermediary services for the insured and the insurance company to establish an insurance contract based on the interests of the insured. In the case, the Letter of Attorney issued by Chenzhou Group and Chenglu Company to T&Z Company stated that: “our company, Chenzhou Group/Chenglu Company, as the owner/manager company of M.V. “Chenglu 15”, confirms that we commissioned T&Z Company as our exclusive insurance broker to deal with the above ship’s hull insurance matters from December 25, 2012. Therefore, all the appointments issued before the commission are invalid, and the commission will be valid until it is revoked in written. T&Z Company is authorized to handle all of the insurance matters of the ship in accordance with international practice.” According to the contents of the above letter of attorney, Chenzhou Group and Chenglu Company did not authorize T&Z Company as its agent clearly. T&Z Company was authorized to deal with the ship’s insurance matters with the identity of the insurance broker. T&Z Company was not directly authorized to represent Chenzhou Group to sign or receive important documents such as insurance policy. Therefore, the reasons PICC Guangdong advocated that T&Z Company as the agent of Chenzhou Group and Chenglu Company who can accept the insurance materials of the insured and all the insurance terms reached by PICC Guangdong and T&Z Company can directly constrain Chenzhou Group, Chenglu Company are not match the facts, the court does not support it. The establishment and change of the insurance contract relationship in this case shall be subject to the documents signed among PICC Guangdong and Chenzhou Group, Chenglu Company. According to Article 14 Sub-paragraph 1 of the Interpretation of the Supreme People’s Court on Several Issues concerning Application of the Insurance Law of the People’s Republic of China (II) that in the event that the record on the insurance slip is defer from the insurance policy, the slip shall prevail. But if the defer situation was stated by insurer and agreed by applicant, the policy or other insurance vouchers signed by the applicant shall be prevail. In this case, the clause “fail to pay the premium in accordance with the agreement, insurance policy will be terminated” in the special agreed list is opposite to Article 7 “if the insurer agrees, the premium can also be paid in installments, but if the total loss happened to the insured ship within the insurance period, the unpaid premium shall be immediately paid off” in PICC Ocean Insurance Terms (2009 version). There was no seal of insurance salespeople, insurance intermediary salespeople and insurance intermediaries in the confirmation of the sale issues of the insurance slip, and PICC Guangdong had failed to prove that it had performed the obligation to make a special instruction for the terms of the special agreed list. Although PICC Guangdong claimed that the content of the special agreed list inconsistent with the insurance slip had been agreed by T&Z Company and Chenzhou Group, the signature of Chenzhou Group on the insurance policy and the special agreed list does

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not mean its acceptance of the content differed from the insurance slip. The action still could not exempt PICC Guangdong from performing the obligation to make a special explanation for exception clause which benefited to itself. Therefore, the court holds that the clause “fail to pay the premium in accordance with the agreement, insurance policy will be terminated” does not exist in the insurance contract in this case, and that according to this the court of first instance found the term “fail to pay the premium, insurance policy will be terminated” in the special agreed list was invalid are not inappropriate. Similarly, in this case, the agreement on the deductible amount is also inconsistent with Article 3 of PICC Ocean Shipping Insurance Terms (2009 version), and PICC Guangdong has failed to prove that it has performed its obligations and the insured have agreed. Therefore, the agreement on the deductible in this case shall be subject to the terms of the insurance policy. 2. Whether the insurance contract has been terminated As mentioned earlier, the clause “fail to pay the premium in accordance with the agreement, insurance policy will be terminated” does not exist in the insurance contract in this case, therefore, it is necessary to examine whether there are other conditions in which the contract can be terminated. In accordance with the Article 227 of the Maritime Code of the People’s Republic of China, the insured and the insurer shall not terminate the contract after the insurance liability has been established unless otherwise agreed by the contract. Article 5 of the Provisions of the Supreme People’s Court on Several Issues concerning the Trial of Cases of Marine Insurance Disputes that “if the insurers require to terminate the contract in the reason of the insureds did not pay the premium after the commencement of insurance liability, the people’s court will not support”. The court holds that in the situation that PICC Guangdong and Chenzhou Group and Chenglu Company did not explicitly agreed not to pay the premium was the reason of the termination of the contract, PICC Guangdong cannot terminate the contract with the reason of failure to pay the premium. In addition to this, there does not exist other conditions to terminate the contract by agreement or legislation. Therefore, the insurance contract was not terminated. 3. Whether the accident occurred The court holds that according to the notarized accident certificate of the South Korean Marine Police Department provided by Chenzhou Group in the first instance and the photos on spot and other evidence, that the accident occurred has been sufficiently proved. Although PICC Guangdong thought that M.V. “Chenglu 15” did not sink, it did not provide evidence of the existence of the ship. Moreover, according to Article 10 of PICC Ocean Shipping Insurance Terms (2009 Edition), if there is no trace of the insured ship more than two months after the time that is expected to arrive at the port of destination, it shall be regarded as the actual total loss, and shall be given the amount of insurance compensation. In this case, it is more than two months that M.V. “Chenglu 15” has not been heard, which is also in accordance with the agreement between the two parties about the conditions of

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being presumed as the total loss. Therefore, the reasons for the appeal of PICC Guangdong do not match the fact, so the court does not support it. In addition, PICC Guangdong had returned the premium paid by Chenzhou Group on December 16, 2013, but did not submit any evidence in the proof period to prove that, therefore the court did not recognize it. In summary, the reasons for the appeal of PICC Guangdong cannot be established, so the court does not support it. Chenzhou Group as the bareboat charterer of the ship involved has the benefits which are recognized by law. The facts recognized by the original judgment are clear and the application of law is correct. In accordance with Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance case in amount of 228,750 yuan, shall be paid by the Appellant PICC Guangdong. The judgment is final. Presiding Judgment: WANG Jianfang Acting Judge: CHU Ningyu Acting Judge: TONG Xin March 7, 2016 Clerk: DING Lin

Beihai Maritime Court Civil Judgment China Pacific Property Insurance Co., Ltd. Shipping Insurance Operation Center v. NYK Bulk Carrier (Korea) Co., Ltd. (2013) Hai Shang Chu Zi No.129 Related Case(s) None. Cause(s) of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote Carrier held liable for damage to a cargo of soybeans as a result of a collision; although the cargo was not initially damaged in the collision, the carrier failed to take adequate treatment measures to preserve the cargo. Summary The Defendant carrier was ordered to pay damages to the Plaintiff cargo owner for its negligence causing the destruction of several tons of soybean product. The soybeans were not initially affected by a collision affecting the carrying vessel, but the Defendant failed to take adequate treatment measures for the affected, but not ruined, soybean product. It failed to make the corresponding plan of losses with the Plaintiff and relative interested parties. The Defendant argued that it was not liable for the loss of soybean under Article 51 of the Maritime Code of the People’s Republic of China, however the court found that the Defendant did not fulfill the burden of proof required by the article. The Defendant was held liable and negligent for the treatment and destruction of cargo after a collision.

Judgment The Plaintiff: China Pacific Property Insurance Co., Ltd. Shipping Insurance Operation Center Legal representative: TANG Ruiping, person in charge. Agent ad litem: LIU Yan, Shanghai Liuyan Law Firm. Agent ad litem: MA Yuewen, Shanghai Liuyan Law Firm.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_5

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The Defendant: NYK Bulk Carrier (Korea) Co., Ltd. Domicile: Namdaemun Road 5th Street, Yonsei Mansion Floor 22. Legal representative: CHEOL-SOONJANG, proprieter. Agent ad litem: YANG Wengui, Beijing Hai Tong & Partners Law Firm. Agent ad litem: TONG Mei, Beijing Hai Tong & Partners Law Firm. With respect to the case arising from dispute over contract of carriage of goods by sea, the Plaintiff China Pacific Property Insurance Co., Ltd. Shipping Insurance Operation Center (hereinafter referred to as CPIC Operation Center) filed an action against the Defendant NYK Bulk Carrier (Korea) Co., Ltd. (hereinafter referred to as NYK Company) before the court. After entertaining this case on October 8, 2013, the court organized a collegiate panel and held a hearing in public on October 20, 2015. LIU Yan and MA Yuewen, agents ad litem of the Plaintiff CPIC Operation Center, TONG Mei, agent ad litem of the Defendant NYK Company, appeared in court to attend the hearing. Now the case has been concluded. The Plaintiff alleged that, on May 23, 2013, the 59,707.158-ton soybean imported by COFCO Oils (Qinzhou) Co., Ltd. was loaded on M.V. “ORIENTALPIONEER” from Paranagua Port in Brazil to Qinzhou Port in China. On July 2, 2013, M.V. “ORIENTALPIONEER” collided with M.V. “ATLANTICHERO” in Singapore and the hull was damaged. The party of M.V. “ORIENTALPIONEER” discharged all the cargoes in the 6th hatch to dispose in Singapore and formally informed COFCO Oils (Qinzhou) Co., Ltd. that there were 1,877.95 tons of sound cargoes and 6,276.72 tons of water damaged cargoes and part of the cargoes were total lost. Concerning to the disposal situation of the above cargoes in Singapore, under the urging of COFCO Oils (Qinzhou) Co., Ltd., the Defendant informed that the highest quote of the buyer of the 1,877 tons of sound cargoes discharged from the 6th hatch was USD253,395. Because the proposed disposal price of the above 1,877 tons of sound cargoes was far below the import invoice price USD589 per ton and the price of the Singapore market, therefore COFCO Oils (Qinzhou) Co., Ltd. asked the Defendant to give clarification. In September, the Defendant replied that the above quote was withdrawn. The buyer who was found again by the Defendant also withdraw the quote. Afterward, the Defendant claimed that all the cargoes were destroyed. On September 4, M.V. “ORIENTALPIONEER” shipped the remainder cargoes and arrived at the destination port Qinzhou Port. After opening the hatch, it was found that part of the cargoes carried by ship were damaged. After assessment, the amount of damage of the cargoes arrived at Qinzhou Port was RMB4,089,009.99. This part of damage was caused by negligence in care for cargoes of the Defendant and the Defendant should bear the compensation liability. To protect the legitimate rights and interests of the Plaintiff, the Plaintiff requested the court that: (1) the Defendant should compensate the Plaintiff for economic losses RMB4,089,009.99 and USD2,954,606.59 and interests (the interests calculated according to the loan interest rate stipulated by the People’s Bank of China in the corresponding period from September 4, 2013 to the date of the effective judgment); (2) the litigation fees concerning to this case (including the attachment fee prior to lawsuit and the litigation fee) should be born by the Defendant.

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The Defendant argued that: (1) the relevant fact of this case: on May 23, 2013, M.V. “ORIENTALPIONEER” which belonged to the Defendant loaded bulk Brazil soybean in sum of 59,707.158 tons at Paranagua Port in Brazil. Thereinto the 6th hatch loaded 8,760.953 tons of cargoes and shipped to Qinzhou Port in China. At 0530 on July 2, M.V. “ORIENTALPIONEER” collided with M.V. “ATLANTICHERO” in Singapore. This accident led to the damage of the starboard of the 6th hatch hull, the leakage of fuel oil and the damage of the cargoes in the 6th hatch. Maritime and Port Authority of Singapore (MPA) instructed the shipowner to fix the damage. According to the advice of the salvager, the soybean after soaking would ferment and release H2S gas which may reach the lethal level. The salvager advised to take removing actions for cargoes in the 6th hatch to ensure the common safety of the vessel and cargoes. On July 5, the Singaporean lawyer (from Rajah & Tann Asia Law Firm) sent letter to the Plaintiff to notify that the vessel met with collision accident and caused the influence of part cargoes on board and hoped the Plaintiff to assign surveyor to inspect the influenced cargoes. On July 11, according to the advice of salvager, the shipowner began to discharge cargoes in 6th hatch. Because the collision position was near the 7th hatch, the 7th hatch was inspected as well. At the same time, the shipowner ventilated the cargoes in the 1st to 5th hatch. On July 16, the Plaintiff and consignee authorized lawyer LIU Yan to send email to the lawyer of the shipowner in Singapore (from Ince & Co Law Firm), claiming that it was committed by the Plaintiff and consignee to inform the surveyor of the Plaintiff to inspect the damaged cargoes in the 6th hatch and the condition of cargoes in the 7th hatch was uncertain and ask the ship side provide relevant documents. At the same day, Ince & Co Law Firm replied to request the Plaintiff to provide the evaluation of the cargoes damage by its surveyor. On July 23, Ince & Co Law Firm sent emails to lawyer LIU Yan and informed that part of cargoes in the 6th hatch was discharged to barge in which there were 1,877.95 tons of sound cargoes, 6,276.72 tons of water damaged cargoes and the amount of cargoes stained with oil was uncertain. Considering that the reforwarding and transshipment fee were large, Ince & Co Law Firm advised to discharge cargoes at the place in question to resell or dispose to reduce losses. The ship side was finding buyer and requested the cargo interests to ascertain discharging cargoes in the 6th hatch at the place in question to resell or dispose. From July 24 to July 31, Ince & Co Law Firm and Rajah & Tann Asia Law Firm sent emails to lawyer LIU Yan respectively to request the cargo interests ascertain the disposal and resale for the cargoes discharged from the 6th hatch. Rajah & Tann Asia Law Firm explained the documents required by the cargo interests one by one as well. Lawyer LIU Yan replied to insist on asking the ship side to provide documents required by the cargo interests, only in this way can the Plaintiff agree to dispose the cargoes. From July 26 to 27, the Defendant sent inquiry sheets for reselling and disposing the cargoes discharged from the 6th hatch to six company respectively including SALVEX. On August 20, Rajah & Tann Asia Law Firm sent emails to lawyer LIU Yan to inform that the ship side tried their best to get the relevant documents. And considering that the barge hire was continually increasing, the ship side requested the cargo interests to make confirmation for disposing the discharged cargoes in the 6th hatch in Singapore, otherwise the ship side would dispose cargoes on behalf of the

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cargo interests. At the same time, Rajah & Tann Asia Law Firm informed the cargo interests the contact information of four companies being contacted with the ship side who were interested in the cargoes and informed the cargo interests that they could contact with these four companies. At 2040 on August 2, Rajah & Tann Asia Law Firm sent emails to lawyer LIU Yan, because the cargo interests did not confirm before 5 pm, the ship side would dispose cargoes in the 6th hatch. On August 6, after contacting with each company and assessing the quotes of these companies, the Defendant assigned SALVEX to make an inquiry for the resale of the cargoes discharged from the 6th hatch. On August 15, SALVEX made quotation for the 1,877 tons of sound cargoes, being USD253,395. On August 15, the ship side fumigated the remainder 1st to 5th hatch and the 7th hatch. From August 16 to 19, the Defendant contacted with SALVEX to communicate the details of quote. On August 19, SALVEX made a clarification for the details of the Defendant inquiring the quote and requested the Defendant to confirm the quote as soon as possible so that the buyer had enough time to arrange warehouses and cargo handling operation. On August 19, Rajah & Tann Asia Law Firm sent emails to lawyer LIU Yan to inform that the quote made by SALVEX for the 1,877 tons of sound cargoes discharged from the 6th hatch was USD253,395 and asked if the cargo interests accept the quote. On August 20, the Defendant made an inquiry to local companies for the disposal of the water damaged cargoes. From August 21 to 28, the Defendant further contacted with SALVEX for the details of the quote of sound cargoes and at the same time contacted local companies for the disposal of the water damaged cargoes and got the quote of disposal fee. On August 24, lawyer LIU Yan sent emails to Rajah & Tann Asia Law Firm and considered that the quote of sound cargoes was far below the value of cargoes and asked the Defendant to provide a guarantee of USD3,700,000. On August 26, the Defendant contacted a Malaysian buyer again to make a quotation for the sound cargoes discharged from the 6th hatch, being 292,999.7 Ringgit or 88,787.79 dollar. On August 27, SALVEX confirmed that the quote again for the 1,877 tons of sound cargoes discharged from the 6th hatch, being USD253,395. On August 29, SALVEX informed the Defendant that it was known from the buyer that there were no available warehouses and the environmental department would probably not allow the cargoes discharged from the 6th hatch to enter and the quote was canceled. On August 30, the Malaysian buyer informed the Defendant that agricultural department in Malaysia did not authorize importing soybean from Brazil. The quote was canceled. On September 2, Rajah & Tann Asia Law Firm sent emails to lawyer LIU Yan to inform that the quote was canceled because there were no storage capacities. Another Malaysian buyer being contacted with the ship side canceled the quote because of the restriction of Malaysian competent authorities for the cargoes as well. Considering that the fee of discharged cargoes increased and the Malaysian competent authorities restricted the ship side to dispose cargoes before September 17, the ship side had to dispose all the cargoes. From August 21 to September 6, Maritime and Port Authority of Singapore (MPA) urged the Defendant to dispose the cargoes discharged from the 6th hatch and required the Defendant to provide guarantees and finished the disposal of

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cargoes before September 9. From August 27 to September 4, M.V. “ORIENTALPIONEER” loaded cargoes in the remainder 1st to 5th and 7th hatch and set sail from Singapore and arrived in Qinzhou on September 4. At 1900 on September 3, M.V. “ORIENTALPIONEER” reached the port of COFCO at Qinzhou Port properly. At 2045 that night, each party examined the cargoes in the 1st to 5th and 7th hatch, in which the cargoes in the 1st to 5th hatch had a normal appearance and the top of the cargoes in the 7th hatch was found phenomenon of slight color changing and mildewing and the smell was normal. After negotiation, each party agreed to pick, choose, separate and discharge cargoes in the 7th hatch. On September 8, the cargoes discharge was finished. The slight color changing and oil contamination cargoes picked from the 7th hatch was stored in the dock warehouses, in which about 400 tons of cargoes had the phenomenon of turning maroon and mildewing and about 910 tons of cargoes appeared normally but the cargo interests claimed that the heat damaged rate exceeded the standard and 32.22 tons of cargoes was caked, watered and oil contaminated. During this period, from September 10 to November 5, Rajah & Tann Asia Law Firm contacted with Maritime and Port Authority of Singapore (MPA) for the disposal of cargoes discharged from the 6th hatch and got the extension of maturity. On September 18, the Defendant signed the Cargo Disposal Contract with SINGAPORESALVAGEENGINEERS (SSE) for the cargoes discharged from the 6th hatch, but SSE canceled the contract on October 7 because Indonesia did not allow entry of the cargoes during the process of performing the contract. On October 18, the Defendant signed Cargoes Disposal and Sales Contract with Y&YMARITIMEMANAGEMENT&CONSULTANCY for the cargoes discharged from the 6th hatch. The cargoes discharged from the 6th hatch were finally disposed on October 5. 1. The Defendant should not bear the liability for compensation for the damage of cargoes in the 6th hatch. As the facts illustrated above, the cargoes in question in the 6th hatch was damaged and discharged to dispose in Singapore and it was caused by the collision of M.V. “ORIENTALPIONEER” and M.V. “ATLANTICHERO” in Singapore. According to the Sea Protest of the captain, the 6th hatch of the ship was pierced in the collision accident and the cargoes in this hatch was influenced. At the same time, according to the underwater inspection of the salvager, the collision led to damage of the fuel oil tank linked with the 6th hatch and cargoes was found in the broken fuel oil tank. The water level of the bilge well was rising and the collision damage area was near the 7th hatch. Because the soybean cargoes loaded was organic soybean and it would ferment and release H2S gas which may reach the lethal level once it contacted with water. According to the instruction of Maritime and Port Authority of Singapore (MPA) and the salvage advice of the salvager, the Defendant discharged all the cargoes in the 6th hatch to ensure the common safety of the ship and cargoes. After the accident happened and during the process of disposing the cargoes in the 6th hatch, the Defendant informed the Plaintiff in time and actively found buyers to resell and dispose the cargoes discharged from the 6th

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hatch. The Defendant had fulfilled its obligation of properly and carefully loading, handling, stowing, carrying, keeping, caring for and discharging the goods carried. According to Article 51 of the Maritime Code of the People’s Republic of China, the carrier should not be liable for the loss of or damage to the goods occurred during the period of carrier’s responsibility arising or resulting from any of the following causes: (1) fault of the Master, crew members, pilot or servant of the carrier in the navigation or management of the ship. In this case, that the ship happened collision accident belonged to the exception of liability. Therefore, the Defendant should not bear the liability for compensation for the damage of cargoes in the 6th hatch. 2. The Defendant should not bear the liability for compensation for the heat damage of the 1st to 5th and the 7th hatch. According to the survey report and expert report of the surveyors committed by the Defendant and the experts of soybean for the cargoes discharged from the 1st to 5th and the 7th hatch, the water content of part of the cargoes in the 1st to 5th and the 7th hatch reached 13–14% when the cargoes was loaded. And the safe storage period of the 13% water content soybean was 30 to over 80 days when its temperature was about 16–27 centigrade. In this case, because of the collision accident happened in Singapore, to handle the accident, discharge the cargoes and repair the ship, M.V. “ORIENTALPIONEER” stayed in Singapore for 57 days from July 2, 2013 to August 27, 2013 and it led to the voyage extension and the whole voyage amounted to 101 days (from May 23, 2013 to September 4, 2013). According to the opinions of surveyors and experts, the heat damage of part of the cargoes was caused by the fact that the water content of soybean cargoes was too high and the voyage extended because of the collision accident. Even so, the Defendant strictly obeyed the requirement of the fumigation surveyor at the loading port and the charterer to ventilate the hatch and care for cargoes in the whole voyage including the period of staying and repairing in Singapore after the collision accident happened. The fact that all the cargoes in the 1st to 5th and most of the cargoes in the 7th hatch was sound when discharged at Qinzhou Port indicated that the Defendant had fulfilled its obligation of properly and carefully loading, handling, stowing, carrying, keeping, caring for and discharging the goods carried. According to Article 51 of the Maritime Code of the People’s Republic of China, the carrier should not be liable for the loss of or damage to the goods occurred during the period of carrier’s responsibility arising or resulting from any of the following causes: (1) fault of the Master, crew members, pilot or servant of the carrier in the navigation or management of the ship; (2) nature or inherent vice of the goods. According to the above provision of the Maritime Code of the People’s Republic of China, the Defendant should not bear the liability for compensation for the heat damage caused by the over-high water content cargoes and the voyage extension because of the collision accident. 3. The claim that the Plaintiff demanded compensation for the liability for compensation for the damage of cargoes in the 6th hatch discharged in Singapore

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and the heat damage of cargoes in the 1st to 5th and the 7th hatch discharged at Qinzhou Port lacked evidence to prove. M.V. “ORIENTALPIONEER” arrived at the discharging port Qinzhou Port on September 4, 2013 and representatives and surveyors of each parties opened the hatch and inspected the cargoes in the 1st to 5th and the 7th hatch that day. Representatives and surveyors of each party confirmed that cargoes in the 1st to 5th hatch was in good condition and part of the cargoes in the 7th hatch had the phenomenon of slightly color changing and mildewing. At the same time, according to Quality Certificate issued by the surveyor committed by the cargo interests Qinzhou Entry-Exit Inspection and Quarantine Bureau and Cargo Inspection Report issued by the surveyor committed by the Defendant Guangzhou Yangcheng Maritime Service Company, in the 50,946.205 tons of cargoes in the 1st to 5th and the 7th hatch, 49,579.56 tons of cargoes had a normal appearance. Only a small part of the cargoes discharged from the 7th hatch was damaged in which the cargoes with abnormal appearance and partial red was 1,310.82 tons and the oil stained cargoes was 32.22 tons. In other words, the damaged cargoes was just part of the cargoes in the 7th hatch and its weight was 1,343.04 tons. Certificate on Damaged Cargoes issued by China Certification & Inspection Group Guangxi Co., Ltd. submitted by the Plaintiff considered that cargoes in the 1st to 5th and the 7th hatch was totally heat damaged and the loss summed up to RMB4,089,009.99, including 32.22 tons of oil stained soybean loss, the disposal fee RMB234,016.53, the fee of N-hexane increasing, power consumption increasing and oil yield loss generated in the process of oil manufacture caused by the 1,310.82-ton severely heat damaged cargoes and 49,579.56 tons of slightly heat damaged cargoes RMB1,039,976.57, the fee of refining loss, ortho-phosphoric acid increasing, clay increasing and steam increasing generated in the process of refining RMB1,097,404.71, the losses of soybean meal price and oil price RMB1,692,407.18. But in Certificate on Damaged Cargoes, there were not any basis of calculating such a high price and there were even not any relevant production and sales data and documents to prove the authenticity of the losses claimed above. According to Expert Opinions concerning to the case that M. V. “ORIENTALPIONEER” claimed that it suffered heat damaged in the transportation process issued by the Cereal Quality Supervision and Testing Center, Ministry of Agriculture (hereinafter referred to as the Expert Opinion), for the 49,579.56 tons of soybean in normal appearance when discharged, there was not any evidence to indicate that these cargoes got heat damaged during the transportation process. Though the heat-damaged kernel rate determined by Qinzhou Entry-Exit Inspection and Quarantine Bureau was 7.71%, this data was not enough to indicate that this part of soybean was heat damaged in the condition that the data of heat-damaged kernel rate at the loading port lacked and the detection of the sense organ for the heat-damaged kernel rate existed relatively large errors. For the 1,310.82 tons of cargoes with abnormal appearance and partial red discharged from the 7th hatch, Qinzhou Entry-Exit Inspection and Quarantine Bureau and General Standard Technical Service Co., Ltd (SGS) took samples to inspect respectively and the result of heat-damaged kernel rate were 42.03% and 25% respectively, existing

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17.03% differ. According to Expert Opinion, the heat-damaged kernel of soybean was an index to sense organ and the inspection in the laboratory existed relatively large errors, and the inspection result of Qinzhou Entry-Exit Inspection and Quarantine Bureau was on the high side. The heat-damaged kernel rate was between 25 and 42%. For the losses caused by the heat damaged soybean, according to Expert Opinion, the heat damaged soybean would not have influence on the rough oil yield and soybean meal yield, but it would have influence on the quality of the rough oil and further the yield of refined oil (that is to say saponification loss) and the cost of refining oil (that was to say, the quantity of caustic soda should be extra added). The soybean meal produced by the severely heat damaged soybean would influence the com-modification of the soybean meal. The various data of damage given by Certificate on Damaged Cargoes issued by China Certification & Inspection Group Guangxi Co., Ltd. lacked scientific calculating basis. According to the process flow of soybean producing oil and the difference of the process flow between the heat damaged soybean and the normal soybean, refining 1,310.82 tons of heat damaged soybean needed to add the quantity of caustic soda, the loss of rough oil and the sale loss of soybean meal, reaching RMB180,968.48. In summary, the Defendant should not bear the liability for compensation for the damage of cargoes in the 6th hatch discharged in Singapore and the heat damage loss of the 1st to 5th and the 7th hatch discharged at the Qinzhou Port. According to the facts of this case, the heat damaged cargoes was only limited to the 1,310.82 tons of cargoes in the 7th hatch. The claim of the Plaintiff that all the cargoes in the 1st to 5th and the 7th hatch was heat damaged lacked factual and scientific basis. The Plaintiff submitted the evidence and the cross examination opinions of the Defendant and the court confirmed as follows: Evidence 1. B/L and the translation, to prove that the cargoes in question was accepted for carriage by the Defendant and the Defendant signed and issued the No.01–09 clean on board B/L in which stated that the loading port was Paranagua Port, Brazil and the discharging port was China and the carrying vessel was M. V.“ORIENTALPIONEER” and the notify party was COFCO Oils (Qinzhou) Co., Ltd. and the amount of cargoes under the B/L summed up to 59,707.158 tons. The Defendant had no objection to the authenticity, legality and relevancy of this evidence. The court confirms the authenticity and probative force of this evidence and it can be used as the evidence of this case. Evidence 2. Contract of sale of goods and the translation, ANEC Standard Contract and translation, to prove that: (1) COFCO Oils (Qinzhou) Co., Ltd. bought the cargoes in question from China Agri-Industries Holdings Limited; (2) the specification stipulated in the contract: the oil content was 18.5%, but 1% non-reciprocal tolerance could be allowed, and each part which did not reach 1% would be calculated in proportion. Other specifications accorded to Article 41 Paragraph 2 of ANEC Standard Contract; (3) Article 2 of ANEC41 Standard Contract stipulated that: the oil content was basically 18.5% (AOCSAc3-44), 1%

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non-reciprocal tolerance allowed, and each part which did not reach 1% would be calculated in proportion, and any variation should take the buyer as the beneficiary; the damaged soybean was basically 8% and the maximum 8.5% allowed non-reciprocal subsidy 2:1, and each part should be calculated in proportion in which the maximum of heat burned particle 4% (the maximum of burn damaged 1%) and the maximum of mildewing 6% and so on; (4) the price of cargoes stipulated in the contract: 589 dollars/MT CNFFO1SB Qinzhou,China; (5) the amount stipulated in the contract: 60,000 MT, ± 10% of the ship side’s choice. The Defendant had no objection to the authenticity, legality and relevancy of this evidence, but considered that this evidence could not prove the actual quality of the cargoes in the loading port. The court considers that the Defendant had no objection to the authenticity of this evidence and just had objection to the content to be proved. Therefore the court confirms the authenticity of this evidence, for the probative force of it, the court will give a comprehensive identification by combining all the evidence in this case. Evidence 3. Invoice and the translation, to prove that the cargoes in question summed up to 59,707.158 tons and the price was 589 dollars/ton CNF Qinzhou, China, and the total value was 35,167,516.06 dollars. The Defendant had no objection to the authenticity, legality and relevancy of this evidence. The court confirms the authenticity and probative force of it and considers that it can be used as the evidence of this case. Evidence 4. Certificate of weight at the loading port, to prove that the weight of the cargoes carried on board at the loading port was 59,707.158 ton and it was accordance with the amount on the B/L. Evidence 5. Certificate of quality at the loading port, to prove that the cargoes carried on board at the loading port met the requirement. Evidence 6. Certificate of quality at the loading port, to prove that the cargoes carried on board at the loading port met the requirement. For the above evidence 4 to evidence 6, the Defendant had objection to its authenticity, but considered that the evidence was formed oversea and should be notarized to confirm its authenticity, and the Defendant did not accept the content proved. The court considers that the three evidence was formed in Brazil and did not get through the notarial procedure. According to Article 11 Paragraph 1 of Several Provisions of the Supreme People’s Court on Evidence in Civil Procedures, “if the evidence submitted by the parties concerned is formed beyond the territory of the People’s Republic of China, the evidence shall be subject to the certification of the notarization organ of the country concerned and shall be authenticated by the embassy of the People’s Republic of China stationed in the said country, or shall be subject to the certification formalities as provided in the relevant treaties concluded

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between the People’s Republic of China and the said country”, the court did not accept. Evidence 7. Correspondence and translation, to prove that after the ship collided, M.V. “ORIENTALPIONEER” informed the cargo interests and the other side of collision M.V. “ATLANTICHERO” after inspection, and the damage of cargoes was limited to the 6th hatch, and according to this fact, it forbade the Plaintiff and the other ship to inspect the cargo condition of other hatches except the 6th hatch. On July 23, 2013, the lawyer of the Defendant INCE informed that the amount and condition of the cargoes discharged and being about to be discharged and the value of the sound cargoes was as follows: (1) The sound cargoes was about 1,877 tons and the price of cargoes was 500 dollars/ton; (2) the amount of cargoes damaged by the sea water was 5,190 tons and was advised to be sold locally; (3) the amount of cargoes stained by oil was to be confirmed and the cargoes needed to be discharged. If the cargoes had no value, it had to be dumped in Singapore; because the other side of collision M. V. “ATLANTICHERO” just bear the liability for the compensation of the damage of cargoes caused by the collision. The Plaintiff repeatedly verificated with the Defendant whether the damage of cargoes just limited to the cargoes in the 6th hatch as the Defendant informed. The lawyer of the Defendant RAJAH&TANN (in the email on August 2) clearly confirmed that the damage caused by the collision just limited to the cargoes in the 6th hatch and it was unnecessary to inspect the cargoes in other hatches; (4) the lawyer of Ince & Co Law Firm asked the Plaintiff that if it agreed the ship side to dispose cargoes in the 6th hatch in Singapore (in the email on July 23). The Plaintiff acquired the requirements of handling import licensing from Qinzhou Customs for the condition informed by the ship side and immediately replied that the Plaintiff agreed the ship owner to dispose cargoes in the 6th hatch in Singapore, but the ship side must provide the relevant documents and certificates for handling the customs clearance and quarantine required by the destination port Qinzhou Port because of the lightening in Singapore (in the email on July 24). Afterwards, the Defendant replied the ship side that it did not have the obligation to provide these certificates via the lawyer of Rajah & Tann Asia Law Firm. Until it consulted the lawyer of Shanghai Kai-Rong Law firm, it agreed to provide the relevant documents on August 14 and it sent the relevant documents to the Plaintiff in the form of email attachments; (5) after the ship left Singapore, the lawyer of the Defendant RAJAH&TANN provided the Plaintiff the Cargo Certificate of the cargoes discharged in Singapore including the inspection report of the amount and condition of cargoes in which included the inspection report of ISA (ISA report can be seen in evidence 8 of the Plaintiff); (6) the Plaintiff repeatedly sent letters to urge the disposal condition of the cargoes; (7) the Defendant replied that it received a net quotation of the sound cargoes in the 6th hatch via SALVEX on August 19 in sum of 253,395 dollars; (8) on August 24, because the drafted scrap value to be disposed significantly differed from the value of the cargoes when it was discharged to barges as the

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Defendant informed, the Plaintiff asked for reasons; (9) on September 2, the ship side informed that the quotation of SALVEX was cancelled and the cargoes would be disposed (destructed) and it would inform the Plaintiff the relevant condition and reasons, but afterwards there were not any replies; (10) the Plaintiff sent letters to the Defendant, doubting that the Defendant concealed the reason for the total loss disposal of cargoes and required the Defendant to arrange inspection and carried out jointly inspection with the Plaintiff for the current condition of the cargoes (in the email on September 6). The Defendant refused and replied to inspect respectively; (11) the inspection of the Plaintiff informed that the cargoes was deteriorative and had no value because of not accepting care. The Plaintiff informed the Defendant the condition above (in the email on September 9); (12) the Defendant replied that it would submit the discoveries of the surveyor, but it did not inform afterward. Overall, the Plaintiff considered that the cargoes discharged in Singapore was disposed as total loss by the Defendant and it was all caused by the fact that the Defendant did not take care of the cargoes discharged to barges, making the cargoes expose to the air and deteriorate. The expanding loss compensation should be born by the Defendant. The Defendant accepted the authenticity of this part of evidence and the repeated part of the evidence it submitted. For the other parts, because there were not any notarial verification procedures, the Defendant did not accept the authenticity and legality of it and had objection to the content to be proved. The court considers that this part of evidence did not get through the notarial verification procedure, and according to the legal regulations above, the court will not confirm this part of evidence. Evidence 8. Certificate of cargo reduction issued by ISA and the translation, to prove the survey report issued by the surveyor committed by the Defendant. This report was provided by the Singaporean lawyer of the Defendant by email on September 2 after the ship left Singapore, the content to be proved as follows: (1) because M.V. “ORIENTALPIONEER” collided with M.V. “ATLANTICHERO” on July 2 and the cargoes in the 6th hatch was soaked in sea water and fuel oil, the surveyor inspected and witnessed the soybean discharged from the 6th hatch in Singapore; (2) the soybean in the 6th hatch was all discharged in Singapore from July 11 to August 7 and the condition and amount of the cargoes discharged was as follows: it was estimated that there was 485.209 tons of cargoes dropping in the sea, 1,877.950 tons of dry and sound cargoes discharged on M.V. “EWANFALCON”, 6,376.720 tons of water damaged cargoes discharged to four barges, 115.618 tons of destructed oil-stained cargoes; (3) the survey result was provided by the Defendant in the form of survey report after M.V. “ORIENTALPIONEER” left Singapore. Therefore, the damage of cargo, under any circumstances, should just limit to the damage of cargo as depicted above. The Defendant had no objection to the authenticity, legality and relevancy of this evidence, but considered that the third point of the evidence list was different with

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the content of this case and it just depicted the fact of discharging cargoes and it could not prove that the damage of cargo was limited to the 6th hatch. The court considers that this evidence was the report issued by ISA committed by the Defendant in Singapore and the Defendant had no objection to the authenticity, legality and relevancy of this evidence. The court confirms the authenticity of this evidence, for the probative force of it, the court will have an overall defination combining with all the evidence in this case. Evidence 9. Report of SEAWISE and the translation, to prove that: 1) The Defendant clearly informed that the collision just had an influence on the cargoes in the 6th hatch, therefore the inspection of SEAWISE was just allowed and limited to the 6th hatch; (2) all the cargoes in the 6th hatch was discharged in Singapore from July 11, 2013 to August 6, 2013, by inspection, the condition of all the cargoes discharged from the 6th hatch in Singapore was as follows: (1) There were 485.209 tons of cargoes dropping in the sea; (2) The amount of sound cargoes discharged to the barge M.V. “EWANFALCON” was 1,877.95 tons; (3) The water damaged cargoes discharged to four barges was 6,276.720 ton; (4) The amount of the oil-stained cargoes discharged to the cargo boxes and the oil-stained cargoes discharged to ISO storage tank and oil-stained water and soybean was 115.680 tons. 2) All the oil-stained cargoes possibly had no value and the cargoes of sound and dry appearance on the M.V. “EWANFALCON” should not undertake any actual loss of value and the water damaged cargoes should had partial scrap value. The above survey result of the cargoes in the 6th hatch was in accord with the ISA survey result provided by the Defendant, therefore the damage of cargo caused by the collision should just limit to the above damage of cargo. 3) On August 16, the surveyor got on board of the barges stored soybean again and found that: (1) The soybean on “KIMHENG2378”, “QUEEN101” and “HALONGBAY2301” seriously deteriorated and did not have scrap value; (2) The cargoes on the barge “EWANFALCON” was covered by paulin, but the paulin of some areas was blow over and the cargoes was exposed. The cargoes on the surface in these area was watered, color changed and mildewed; (3) All the cargoes on the barges seriously deteriorated because the cargoes was exposed to the weather circumstance for a long time; and (4) Afterwards, the ship side claimed that it received the quotation for the 1,877.95 tons of cargoes on M.V. “EDWANFALCON” and the price was 253,395 dollars. Afterwards the ship side claimed that this quotation was withdrawn.

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4) On September 5, the surveyor found that the condition of the cargoes was terrible and the stink can be smelt from a long distance. The surveyor considered that the cargoes had no value. 5) All the cargoes discharged from the 6th hatch in Singapore was disposed as total loss by the Defendant and it was caused by the fact that the Defendant did not fulfill the obligation of caring for cargoes. The expanded loss caused by the fault of the Defendant should be born by the Defendant. The Defendant had objection to the authenticity and content to be proved of this evidence. It was acquired overseas and needed notarial verification to prove its authenticity. The court holds that it was formed overseas and it was not notarized. It did not have authenticity, therefore the court did not accept it. Evidence 10. Weight inspection certificate issued by Qinzhou Entry-Exit Inspection and Quarantine Bureau, to prove that the amount of cargoes arrived at the destination port Qinzhou Port was 50,922.6 tons. Evidence 11. Quality certificate issued by Qinzhou Entry-Exit Inspection and Quarantine Bureau, to prove that the cargoes arrived at the destination port Qinzhou Port was damaged and the condition and amount of damage of cargoes was as follows: (1) There were 49,579.56 tons of soybean with sound appearance and the rate of heat damaged particle was 7.71%; (2) There were 1,310.82 tons of soybean with abnormal appearance and partial red color and the proportion of heat damage was 42.03%; (3) There were 32.22 tons of oil-stained soybean and it could not be used for processing and it was incinerated and destructed; and (4) The content of heat damaged particle exceeded the limited requirement of Soybean (GB1352-2009). The final product of soybean shall be labeled transgenic label. The Defendant had no objection to the authenticity of the above evidence 10 and 11, but had objection to the content to be proved. The court considers that there two evidence was legal inspection certificates and the Defendant had no evidence to the contrary to overcome the content to be proved of these certificates. The court confirms the authenticity and probative force of the evidence and considers that it can be used as the evidence of this case. Evidence 12. Certificate on Damaged Cargoes, to prove that China Certification & Inspection Group Guangxi Co., Ltd. carried damage inspection for the cargoes arrived at Qinzhou Port: there were 1,310.82 tons of cargoes which did not be stained by the fuel oil but was seriously heat damaged; there were 32.22 tons of oil-stained cargoes; other cargoes was slightly heat damaged and the rate of heat damaged particle was 7.71% and the weight was 49,579.56 tons. These damaged cargoes totally lost RMB4,089,009.99 and the damage of cargo happened before discharging.

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The Plaintiff considered that evidence 10 to 12 jointly proved that damage of cargo was found when arriving at the destination port and this part of cargoes had no relevancy to the collision. It was the liability for compensation which should be born by the Defendant. The Defendant had no objection to the authenticity of evidence 12, but had objection to the content to be proved. The court considers that this evidence was legal inspection certificate and the Defendant had no evidence to the contrary to overcome the content to be proved of these certificates. The court confirms the authenticity and probative force of this evidence and considers that it can be used as the evidence of this case. Evidence 13. Assessment report of Ejoy, to prove that: (1) the amount of cargoes which was delivered to the consignee by the Defendant was 50,922.6 tons. Thereinto, there was 32.22 tons of oil-stained cargoes (destructed) and 1,310.82 tons of seriously heat damaged cargoes. Other 49,579.56 tons of cargoes had normal appearance but was totally heat damaged; (2) the reason of damage of cargo: the damage of cargoes delivered in Qinzhou was caused by the negligence of caring for cargoes of the ship side and it had no relevancy to the ship collision accident; (3) the amount of loss caused by this accident was RMB4,063,805.03 (not including inspection fee RMB25,205). The Defendant had no objection to the authenticity of this evidence, but had objection to the content to be proved. The court considers that the Defendant had no objection to the authenticity of it, just had objection to the contents to be proved. Therefore the court confirms its authenticity, for its probative force, it will be confirmed by the court combining with all the evidence of this case. Evidence 14. Insurance policy, to prove that the Plaintiff was the insurer of the cargoes in question and COFCO Oils (Qinzhou) Co., Ltd. was the insured. Evidence 15. Payment voucher of the insurance proceeds, to prove that the Plaintiff paid the insured COFCO Oils (Qinzhou) Co., Ltd. all the insurance proceeds for the damage of cargoes under the insurance policy in question in sum of RMB39,261,604.59. Evidence 16. Letter of subrogation, to prove that COFCO Oils (Qinzhou) Co., Ltd. accepted the compensation and agreed not to claim for any compensation for this accident and delivered, transferred and subrogated all the rights and remedies of COFCO Oils (Qinzhou) Co., Ltd. for the cargoes in question and vested all the rights to the Plaintiff. The Defendant had no objection to the authenticity, legality and relevancy of the above evidence 14 to 16. The court confirms the authenticity and probative force of evidence 14 to 16 and considers that it can be used as the evidence of this case. The Defendant submitted the evidence and the cross-examination opinions of the Plaintiff and the court confirms as follows:

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Evidence 1 to 13, was respectively as follows: the Particulars of Ship, the Certificate of nationality, the Classification Certificate, the Safety Management Certificate, the Certificate Of Compliance, the Cargo Ship Safety Construction Certificate, the Cargo Ship Safety Equipment Certificate, the Cargo Ship Safety Radio Certificate, the International Load Lines Certificate, the International Tonnage Certificate, the International Air Pollution Prevention Certificate, the Minimum Safe Manning Document, the International Oil Pollution Prevention Certificate, to prove the condition of M.V. “ORIENTALPIONEER” and that the ship owner NYKBULKSHIP (KOREA) CO.LTD inspected, cleaned and dried all the hatches making it suitable for loading bulk soybean and the ship was seaworthy. The Plaintiff considered that the above 13 evidence was copies and there was not any original copies to verify, therefore the Plaintiff had objection to the authenticity. The court considers that the above evidence 1 to 13 was the relevant shipping documents, if the original copies of these certificates were submitted to the court, it would had influence on the normal operation of the ship, therefore it belonged to the situation of Article 70 of Civil Procedure Law of the People’s Republic of China “any document submitted as evidence shall be the original one. Physical evidence shall also be original. If it is truly difficult to present the original document or physical evidence, then duplicates, photographs, copies, or extracts of the original evidence may be admitted”. At the same time, this part of certificates were affixed the ship seal, therefore the court confirmed the authenticity of it. Evidence 14 to 15. Crew list and the Hatch Clean and Inspection Report, to prove that the ship was seaworthy. The Plaintiff considered that the evidence was duplicates and there was not original copies to verify, therefore the Plaintiff had objection to the authenticity and legality of it. The court considers that evidence 14 and 15 was the crew list and the Hatch Clean and Inspection Report and the boarding time of some crews was later than the time of departure from Brazil, for example, the boarding time of master and the chief officer were respectively August 18, 2013 and September 30, 2013, but the time of departure from Brazil was May 27, 2013, therefore this evidence cannot prove the fact of this case and there were not any original copies to verify. The court did not confirm the probative force of it. For evidence 15 of the Defendant, it was the voucher of cleaning and inspecting the hatches when the cargoes in question loaded on board, but it was not the necessary certificate carried on board. Now the Plaintiff did not submit the original copies to verify, therefore the court did not confirm this evidence. Evidence 16. Custody Plan of this voyage, to prove that the 1st to the 7th hatch load totally loaded 59,707.158 tons of cargoes and the 6th hatch loaded 8,760.953 tons. Evidence 17. Cargo Manifest of this voyage, to prove the recorded content of the shipment B/L of this voyage: the number of B/L, the shipper, the consignee, the notify party, the description of cargoes and the amount.

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Evidence 18. Certificate of Fumigation, to prove that all the cargoes and hatches were fumigated by aluminum phosphate and the time of fumigation was 15 days. Evidence 19. Hatch Quarantine and Inspection Report, to prove that all the loading place was quarantined and inspected and met the quarantine requirements of Ministry of agriculture of Brazil. Evidence 20. Voyage and ventilation instruction of the charterer, to prove that this voyage was time charter trip for the charterer China National Chartering Co., Ltd. The charterer instructed to ventilate the hatches when weather permitted and according to the instruction of the charterer the master started ventilating at 0800 to 1700 on June 7. Evidence 21. Deck Logbook of M.V. “ORIENTALPIONEER” on July 2, August 26 and September 4, to prove that this ship collided with M.V. “ATLANTICHERO” at 0530 on July 2. After disposing the collision accident and temporary repairing, the ship left Singapore and sailed to Qinzhou on August 26 and arrived at Qinzhou on September 4. The voyage was extended because of the collision. Since the date that the cargoes loaded on board (May 30) to the date that the ship arrived at Qinzhou and started discharging (September 4), all the voyage summed up to 105 days. Evidence 22. Salvage Plan of the salvager SVITZER, to prove that the position of the starboard of the 6th hatch near the 7th hatch was damaged, the fuel oil tank which was the same as the hatch was broken and began to spill oil and inlet water. Maritime and Port Authority of Singapore (MPA) instructed the shipowner to fix the damage. The soybean after soaking would ferment and release H2S gas which may reach the lethal level. The salvager advised to take removing actions for cargoes in the 6th hatch. Evidence 23. Sea Protest, to prove that M.V. “ORIENTALPIONEER” collided with M.V. “ATLANTICHERO” in Singapore at 0530 on July 2. This accident led to the damage of starboard of the 6th hatch hull, the fuel oil leakage and the damage of cargo. All the cargoes in the 6th hatch was influenced and discharged so that the ship can be repaired. Evidence 24. Certificate of Quantity Reduction, to prove that 485.209 tons of soybean of the cargoes in the 6th hatch dropped in the sea and 6,276.720 tons of cargoes were watered and 115.618 tons of cargoes was oil stained. Sound and watered cargoes was discharged to the barges in Singapore from July 11 to August 7 so that the ship could be temporarily repaired and the remainder cargoes on board was 50,946.205 tons. Evidence 25. Certificate of Disposal of Oil-stained Cargoes, to prove that the oil-stained cargoes was disposed. Evidence 26. Certificate of Fumigation, to prove that the cargoes in the 1st, 2nd, 3rd, 4th, 5th and 7th hatch were fumigated again in Singapore. Evidence 27. Seaworthiness Certificate of ship temporary repair, to prove that the hull was damaged in the accident and advised to be repaired. To finish the loading voyage, the ship was temporarily repaired in Singapore and it was permanently repaired after arriving at the destination port. After temporary repair, the

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surveyor inspected the ship and considered that this ship was suitable for continuing the voyage to Qinzhou. Evidence 28. Correspondence of the Singaporean lawyer of the ship owner and the lawyer of the cargo interests for the disposal of cargoes, to prove that after the collision accident happened the ship owner discharged the influenced cargoes in the 6th hatch to the barges for the common safety of the ship and cargoes and took measures to minimize loss and immediately informed the cargo interests to offer a proposal of reselling and disposing the cargoes. But for the suggestion of reselling and disposing the cargo interests did not confirm tardily, the quotation was finally canceled and the ship owner had to dispose all the cargoes in the 6th hatch. The Plaintiff considered that the above evidence 16 to 28 was duplicates and there was not original copies to verify, therefore the Plaintiff had objection to the authenticity of it. The court considers that, for the above evidence 16 to 29 of the Defendant, it did not belong to the necessary certificates carried on board but the relevant documents and correspondence aiming at this voyage. Whether the original copies of these evidence was carried on board did not have influence on the normal operation, therefore the Defendant had to provide the original copies according to the provisions of law and the original copies shall get through the verification of the Plaintiff and the court for the authenticity. Until now the Defendant did not submit the original copies to verify and perform the notarial and certificated procedures for the evidence forming overseas. The court does not confirm the authenticity of this evidence. Evidence 29. Documents of the ship side contacting with the buyers to resell and dispose the cargoes, to prove that the ship side tried its best to reduce the loss and had no faults for the reasonable disposal of the cargoes. Evidence 30. Correspondence of the ship side and Maritime and Port Authority of Singapore (MPA), to prove that Maritime and Port Authority of Singapore (MPA) required the ship side to dispose the cargoes as soon as possible and the ship side finished disposal on November 5, 2013. The Plaintiff had no objection to the authenticity of evidence 29 and 30 of the Defendant, but considered that the content to be proved was contrary to the fact. The court confirms the formal authenticity of these two evidence, but the evidence was formed overseas and there was not any notarial procedures, therefore the court does not accept the evidence. Evidence 31. Survey report of Guangzhou Yangcheng Maritime Service Company for the condition of soybean discharged from M.V. “ORIENTALPIONEER” at the quay of COFCO, Qinzhou Port, to prove that it inspected the discharging of the ship and the condition of the cargoes from September 4, 2013 to September 24, 2013. The 1st to the 5th and the 7th hatch loaded 50,946.205 tons of cargoes (soybean) and discharged it when arriving at Qinzhou Port. The condition of appearance of the cargoes in the 1st to the 5th hatch was sound. The 1,310.82-ton cargoes in the 7th hatch was found color changed and was discharged. Therein, a heap of 400 ton cargoes was

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slight maroon and a small part had the appearance of slightly mildewing, but there was not obvious odor. Therein, a heap of 910 ton cargoes had normal appearance, but the heat loss rate exceeded the standard. Moreover it was found that the 32.22 tons of cargoes in the 7th hatch was watered and oil stained. The watered and oil stained cargoes was caused by the pressed leakage of the ballast water tank and the oil tubes of the oil tank because of the collision. The heat damaged cargoes was caused by the fact that the cargoes contained more water volume and the voyage was expanded. The Plaintiff had no objection to the authenticity, legality and relevancy of this evidence, but had objection to the content to be proved and considered that it was wrong to consider the oil leakage of the oil tubes caused by the collision as the reason of damage of the cargoes. After finding the damage of cargoes, it informed M.V. “ORIENTALPIONEER” and M.V. “ORIENTALPIONEER” informed the other side of the collision M.V. “ATLANTICHERO” and this ship also assigned surveyor to have a joint inspection. But it was found that the oil tube was far away from the cargoes and it could not be polluted, the pollution was caused by the reason of itself and at the same time this report did not assess the loss. The court confirms the authenticity of this evidence, for its probative force, the court will confirm combing with all the evidence in this case. Evidence 32. Survey report of General Standard Technical Service Co., Ltd. (SGS), to prove that it sampled and inspected the 400 tons of cargoes and the 910 tons of cargoes respectively from September 18 to September 21 and the rate of heat damage was 25%. The Plaintiff had no objection to the authenticity of this evidence, but had objection to the content to be proved. The court confirms the authenticity of this evidence and considers that it can be used as the evidence of this case, for its probative force, the court will confirm combing with all the evidence in this case. Evidence 33. Expert Opinion issued by the Cereal Quality Supervision and Testing Center, Ministry of Agriculture, to prove that the fact that the soybean of this ship contained more water volume and the time of sea voyage was long made the imported soybean on board heat damaged in the process of transporting. When discharging, the 49,579.56 tons of soybean had normal appearance. There was not measured data of heat damaged particle when this part of soybean was loaded and there was not any evidence to prove that this part of cargoes was heat damaged during the process of transporting. The sensory index of the heat damaged particle of soybean existed larger error and the survey result of the rate of heat damage for the 1,310.82 tons of soybean with abnormal appearance issued by CIQ and SGS respectively had a 17.03% difference. The survey result of CIQ was on the high side. The rate of heat damage of the 1,310.82 tons of soybean with abnormal appearance and partial red color discharged from the 7th hatch was between 25 and 42%. The heat damaged soybean would not have influence on the rough oil yield and soybean meal yield, but it would have influence on the cost of refining oil (that is to say, the quantity of caustic soda shall be extra added and the saponification

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loss would exist) and the commodification of the soybean meal. To refining this part of soybean needed extra 1,155.08 kg caustic soda and the saponification loss caused by the caustic soda refining was 8,422.45 kg oil. The loss of the soybean meal yield equaled to the amount of 23,175.30 kg soybean meal. The total loss was RMB180,968.48. If calculating the loss caused by the rate of heat damage 7/71% of 49,579.56 ton soybean with normal appearance, extra 1,462.09 kg caustic soda would be needed and the saponification loss caused by the caustic soda refining was 10,661.07 kg oil. The amount of loss was RMB111,728.12. The Plaintiff had no objection to the formal authenticity of evidence 33, but had objection to the content to be proved and considered that this testing center did not have the qualification of testing. The damage survey issued by this expert was not objective and the conclusion confirmed by CIQ was unclear. The court considers that, the testing center which issued this survey report was not a legal testing center and the surveyor should also clear that this testing center cannot make a damage survey. The inspecting process of this report did not have the process of on-the-spot sampling inspection, just came to an expert opinion according to inspecting some data provided by the Defendant after the cargoes had an accident and after the major part of a year (May, 2014). This opinion belongs to a technical analysis opinion and had conflict with the conclusion of the on-the-spot legal inspection of this case, therefore the court does not confirm the effect of this evidence. Evidence 34-1. Photos of the 6th hatch (when in Singapore), to prove the condition of the water damaged cargoes in the 6th hatch and the keeping of the cargoes discharged from the 6th hatch. The Plaintiff had objection to the authenticity, legality and relevancy of this group of photos. The court considers that, according to the opinion of the Plaintiff, this group of photos were taken in the sea area of Singapore and were from overseas and did not get through the notarial verification and it was unclear that these photos were taken at what time under and what circumstances and by whom. Therefore the court does not accept this evidence. The 6th part of evidence of the Defendant: the factual report issued by the maritime consultant and the salvager of the cargoes in the 6th hatch discharged in Singapore (the submission time: April 2016). Evidence 34. Factual report of the maritime consultant LOC, to prove that: (1) this collision accident caused the No.1 oil tank which stretched across the 6th and 7th hatch leaked and the bulkhead became deformed. The 6th hatch inlet water and the cargoes was leaked and stained by fuel oil and watered; (2) the hatch inlet water and under the circumstance of tropical climate, the cargoes began to damp, expand, decay and release poison gas H2S. The salvager advised to discharge the cargoes in the 6th hatch to ensure the common safety of the ship and cargoes and advised to temporary repair; (3) on July 6, the 6th hatch was opened and inspected and it was found that the soybean loss was large and backside of the starboard had a

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big hole and the surface of cargoes was fallen down and the cargoes on the surface with sound appearance was likely to be polluted by the gas which was resolved by the cargoes; (4) on July 11, the maritime consultant got on board again to inspect the cargoes and found the amount of cargoes significantly reduced. The color of cargoes darkened and it could be seen that the surface of cargoes had gray soybean grain and something like wheat bran. The smell in the hatch was strong and the condition of the cargoes on the surface changed. The surveyors of all the parties were discussing the plans for cleaning the cargoes; (5) in the afternoon of July 11, the cargoes in the 6th hatch began to be discharged. The salvager used paulin to cover the cargoes which was discharged to barges and fastened with sandbags. At the same time, the salvager repaired the damaged hull; (6) on July 23, the maritime consultant got on board again and the clearance of cargoes still continued. The color of cargoes was significantly different and the rotten smell of the cargoes can be smelt and the cargoes in the bottom of the hatch was caked; (7) in the 6th hatch which had oil-stained and sea water polluted cargoes, the rot must happen and the produced gas was likely to do harm to human body. The best choice was to discharge the cargoes from the ship. Evidence 35. Factual report of the business manager of the salvager SVITZER, to prove that: (1) after the collision happened, SVITZER accepted the commission of the ship owner and P&I club and took salvage measures. The salvage went on under the urge, requirement and supervision of Maritime and Port Authority of Singapore (MPA); (2) the ship owner and salvagers tried their best to find ships to load the cargoes discharged from the 6th hatch, but it was difficult to find a barge or a cargo ship with appropriate size and proper equipment. Maritime and Port Authority of Singapore (MPA) continuously put pressure to require to discharge the cargoes in the 6th hatch and clean the oil pollution. On July 4, the salvager found available tugs and barges; (3) on July 11, the tugs and barges arrived on the scene. Under the common witness of the surveyors of all the parties, the cargoes in the 6th hatch began to be discharged. When the hatch was opened, it was found that one corner of the starboard of the hatch had a stretch of hollow. The surveyor of the consignor considered that about 350 ton cargoes was undamaged cargoes. After the discussion of the surveyors of all the parties, the discharge began and the salvager separated and protected cargoes as far as possible and put waterproof cloth on the deck of the barges to avoid the cargoes being sprinkled. The salvager covered the discharged cargoes with paulins and sandbags; (4) the consignor had no objection and advice to the way of discharging and the protective measures of the cargoes. The surveyor of cargoes supervised the process of discharging and did not offer different advice; (5) the oil-stained and watered cargoes was carried away and disposed and the oil-stained cargoes was carried away and incinerated. The watered cargoes discharged to the barge “QUEEN101” and “KimHeng2378”, if no one wanted to buy the cargoes, it had to be transported to the offshore landfill appointed by the Ministry of Environment. Evidence 36. General average adjustment report and the Chinese translation of it, to prove that, on April 17, 2015, the general average adjuster issued the general average adjustment report for this accident: (1) the fee of repairing ship, discharging

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in Singapore, hiring the barges and tugs to load the cargoes in the 6th hatch after the collision accident was listed in the general average and the cargo interests shall share 4,915,963.82 dollar; (2) the fee caused by discharging the cargoes and the continuing fee of hiring the barges and tugs and disposing the cargoes in the 6th hatch after M.V. “ORIENTALPIONEER” left Singapore were not listed in the general average. The seventh part of the evidence (evidence 37–38, the submission time: April 2016): for the part which should be born by the cargo interests but did not list in the general average, the storage fee of the cargoes in the 6th hatch and the fee of hiring barges and tugs and disposing in sum of 2,072,829.89 dollar, the Defendant claimed to offset. Evidence 37. Expense documents of hiring barges and tugs for the cargoes in the 6th hatch discharged in Singapore, to prove that: (1) the hire of the barge “EwanFalcon” and the tug “TropicalSuccess” from August 27, 2013 to September 15, 2013 and the redelivery inspection fee summed up to 190,593.63 Singapore dollar; (2) the hire of the barge “HailongBay2301” and the tug “CapitolT1601” from August 27, 2013 to September 15, 2013 was 160,000 Singapore dollar; (3) the hire of the charter party of the barge “Queen101” and the tug “May101”from August 27, 2013 to September 15, 2013 was 240,000 Singapore dollar; (4) the hire of the charter party of the barge “KimHeng2378” and the tug “PengiunSwift” was 160,000 Singapore dollar. The above fee approximately amounted to 676,330.26 dollar in sum and it was not listed in the general average. It should be born by the cargo interests and the Defendant claimed to offset. Evidence 38. Agreement of disposing the cargoes and the expense document, to prove that, NYK Bulk ship (Korea) Co., Ltd. represented the ship owner to conclude the disposal agreement with Y&Y Maritime Management & Consultancy Sdn Bhdd and stipulated that the disposal fee of the cargoes was 1,700,000 Singapore dollar (approximately amounting to 1,396,499.63 dollar). The Defendant paid the disposal fee. This fee was not listed in the general average and should be born by the cargo interests. It should be offset in this case. The Plaintiff considered that evidence 34–38 of the Defendant belonged to the evidence material which was overdue provided, therefore it disagreed to cross-examine. The reason was that this case opened a court session on October 20, 2015 and the Plaintiff and the Defendant both appeared in court and participated the trial, according to the provision of Article 34 of Several Provisions of the Supreme People’s Court on Evidence in Civil Procedures “the parties concerned shall submit evidential materials to the People’s Court within the time period for producing evidence; in case any party fails to submit evidence during this time period shall be deemed as giving up the right to produce evidence. The evidential materials submitted by the parties concerned beyond the time period shall not be cross-examined during the court hearing of the People’s Court, unless both parties agree to have the evidence cross-examined” and Article 42 of Several Provisions of the Supreme People’s Court on Evidence in Civil Procedures “where any party concerned

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submits new evidence in the first instance hearing, such evidence shall be submitted prior to the start of the first instance hearing or prior to the holding of a session.” Under the premise which did not have an influence on the above, the Plaintiff submitted opinions as follows: The Plaintiff did not accept the authenticity, legality and relevancy of evidence 34, the reasons were as follows: (1) according to the readme of this document, the issuer accepted the commission of Yoshida & Partners to provide relevant opinion for the salvage (it can be seen in the first paragraph). But Yoshida & Partners was the Japanese attorney of the Defendant and the analogous advisory opinion shall be submitted in the time limit for adducing evidence or prior to the holding of a session under any circumstance. Besides, the issuer of this evidence was a Singaporean individual and the identity of him was unclear. This report did not have a notarial verification and did not have legal effect in form; (2) the content in question had no relevancy with the lawsuit of the Plaintiff. According to the readme of this document, for the relevant opinion for the salvage (in the first paragraph), it claimed to have the identity of supervising the salvage of this ship (it can be seen in the ninth paragraph), it had no relevancy with the lawsuit of this case. The prosecuted content of this case which was relevant with the damage of cargo in Singapore was that the Defendant informed the Plaintiff that some cargoes were total loss and some were watered and some were sound after the Plaintiff discharged the cargoes in the 6th hatch to different barges according to different condition. In the end, the Defendant informed the Plaintiff that all the cargoes were total loss and asked the Plaintiff for a big amount of barge fee in turn. The dispute of this case was that the Defendant did not perform the obligation for the watered and sound cargoes discharged to the barges and it caused the total loss. For the enlargement of losses, the ship owner shall bear all the indemnity liability for the Plaintiff. However the issuer of this document claimed himself that his last boarding time was on August 3, 2013 and did not know any follow-up from then on (it could be seen in the twenty-fourth paragraph). But according to the ISA inspection report provided by the Defendant to the Plaintiff (it could be seen in evidence 24: the Certificate of Quantity Reduction), the cargoes were separated and discharged to the barges on August 7, 2013. Therefore, the declared content of the issuer of this declaration had no relevancy with this case. The Plaintiff did not accept the authenticity, legality and relevancy of evidence 35, the reasons were as follows: (1) The Plaintiff did not accept the form of this evidence. This evidence was the personal signature and the authenticity of identity cannot be approved and it did not have the notarial verification; (2) from the content, the issuer was Svitzer Salvage Asia Pte. Ltd. and it issued the reasonable explain of collecting fees. It disagreed to reduce charges for the ship owner of the Defendant (it can be seen in the first and forty-ninth paragraph). Because of this identity, it was the interested person and the testimony itself did not have legal effect; (3) the content of testimony had no relevancy with the fact in contention of this case. This testimony wanted to explain that Svitzer signed contract with the ship

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owner and what kind of fees was provided by Svitzer. It was reasonable to collect fees from the ship owner (the Defendant). From the testimony, the work of Svitzer was finished on August 7, 2013 and debated with the Defendant for the four barges and tugs which loaded the cargoes in the 6th hatch (it can be seen in the forty-sixth paragraph). Svitzer did not participate the disposal and sale of the cargoes (it can be seen in the forty-seventh paragraph); (4) according to this description, Svitzer did not perform any duties for the cargoes on the barges after August 7 and they just took responsibility for discharging the cargoes in the 6th hatch to these barges. But hereinafter the ship owner did not take any administration for the cargoes and the cargoes were out of control. The Plaintiff did not accept the authenticity, legality and relevancy of evidence 36, the reasons were as follows: (1) for this adjustment report, RichardsHoggLindley (RHL) did not objectively adjust according to regular procedures and just issued according to the opinion of the surveyor of ISA, but the identity of ISA introduced by the ship owner was the surveyor representing all the interest parties of general average. In fact, ISA was just the surveyor which accepted the unilateral commission of the ship side, so this adjustment report was clearly refused by the Plaintiff and the opposite collision party; (2) for the storage fee of the cargoes in the 6th hatch and the fee of barges, tugs and disposal RMB2,072,829.89 claimed by the Defendant, which should be born by the cargo interest and did not calculate into the general average, the Defendant claimed to offset. According to this statement of the Defendant, even the adjuster of the Defendant considered that the fee of barges was obviously unreasonable and deducted part of this fee. Under any circumstance, if the Defendant considered that it had the right to claim for compensation, it should indict separately and it had no right to offset (the Plaintiff was regardless to the establishment of the indemnity claim of the Defendant for the time being). The Plaintiff did not accept the authenticity, legality and relevancy of evidence 37 and 38, the reasons were as follows: (1) the evidence was formed overseas and it did not have notarial verification. It was formally illegal; (2) the evidence did not have any relevancy with this case. For the storage fee of the cargoes in the 6th hatch hiring barges and tugs 676,330.26 dollar and the disposal fee approximately amounting to 1,396,499.63 dollar claimed by the Defendant, which should be born by the cargo interest and did not calculate into the general average, the Defendant claimed to offset. Under any circumstance, if the Defendant considered that it had the right to claim for compensation, it should indict separately and it had no right to offset (the Plaintiff was regardless to the establishment of the indemnity claim of the Defendant for the time being). At the same time, evidence 34 to 38 had no relevancy with the litigation content of this case. For the amount and loss of this part of evidence concerning to this case, the Defendant also applied for arbitration in London and it was totally overlapped. The court considers that, evidence 34 to 38 was formed overseas and did not have notarial verification. This part of evidence did not had original copies to verify. Therefore, the court does not confirm the competence of evidence.

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Evidence 39. Compensation Elimination Notice, to prove that the Defendant delivered the Compensation Elimination Notice to the Plaintiff through emails and express on April 13, 2016. For evidence 39, the Plaintiff considered that the fee to be offset by the Defendant was arbitrated in London and at the same time it lodged a complaint to the Beihai Maritime Court and the case number was the No.103 and No.173 of this year. Therefore, this evidence had no relevancy with this case and it should not be offset and the Defendant did not have right to offset. The court considers that the Plaintiff had no objection to the authenticity of this evidence, just had objection to the content to be proved. The court confirms the authenticity of it, for the probative force of it, the court will give a comprehensive identification by combining all the evidence in this case. The court investigates and ascertains that: On May 17, 2013, COFCO Oils (Qinzhou) Co., Ltd. (buyer) signed the sale contract with China Agri-Industries Holdings Limited (seller) and stipulated that the oil content was 18.5%, but 1% non-reciprocal tolerance could be allowed, and each part which did not reach 1% would be calculated in proportion. Other specifications accorded to Article 41 Paragraph 2 of ANEC Standard Contract. The price was 589 dollars/ton CNF Qinzhou. The contract had other stipulations. On May 23, the 59,707.158-ton Brazil soybean stipulated in the contract above was loaded on M.V. “ORIENTALPIONEER” owned by the Defendant, and WILSONSONSAGENCIAMARITIMALTDA represented the master to sign the No.01, No.02, No.03, No.04, No.05, No.06, No.07, No.08, No.09 clean B/L. On the same day, COFCO Oils (Qinzhou) Co., Ltd. insured the cargoes above with the Plaintiff. The amount of the insured cargoes was 59,707.158 tons and the insured amount was RMB239,800,387. On May 27, M.V. “ORIENTALPIONEER” set sail at Paranagua Port and sailed to Qinzhou Port. At 0530 on July 2, M.V. “ORIENTALPIONEER” collided with M.V. “ATLANTICHERO” in Singapore and this accident led to the damage of the starboard of the 6th hatch hull, the leakage of fuel oil and the damage of the cargoes in the 6th hatch. Maritime and Port Authority of Singapore (MPA) instructed the shipowner to fix the damage to make sure the common safety of the ship and the cargoes. By the consent of both parties, the Defendant discharged the damaged cargoes in the 6th hatch in Singapore and resold. On July 11, according to the advice of the salvager, the Defendant began to sort the cargoes in the 6th hatch and it finished discharging on August 7. Because the collided position was near the 7th hatch, the cargoes in the 7th hatch was inspected. On August 19, the Defendant informed the Plaintiff that, for the sound 1,877.950 tons of soybean discharged from the 6th hatch, the highest quotation of the buyer was 253,395 dollar. The Plaintiff considered that this quotation was far below the import invoice price 589 dollar/ton, therefore the Plaintiff asked the Defendant to give explanation.

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On August 27, M.V. “ORIENTALPIONEER” loaded the remainder cargoes in the 1st to 5th and the 7th hatch and set sail to Qinzhou Port from Singapore. On August 29 (the inspection time was from July 11 to August 7), the Certificate of Quantity Reduction issued by (Singapore) ISA confirmed that, the condition and quantity of the cargoes discharged from the 6th hatch was as follow: 1. it was estimated that 489.209 tons of cargoes dropped into the sea; 2. the dry/sound cargoes were 1,877.950 tons; 3. the sea water damaged cargoes which were discharged to four barges were 6,276.720 tons; 4. the destructed oil-stained cargoes were 115.618 tons. The remainder cargoes on board were 50,946.205 tons. The Plaintiff and the Defendant had no objection to the above data. On September 2, the Defendant informed the Plaintiff that the above quotation (253,395 dollar) was withdrawn by the buyer and other buyers also withdrew the quotations. Because the cargoes deteriorated and the reasons of weather and environment, now the Maritime and Port Authority of Singapore (MPA) instructed the Defendant to destruct the above cargoes before September 9. Afterwards, on November 5, the cargoes discharged from the 6th hatch were all destructed. At about 1900 on September 3, M.V. “ORIENTALPIONEER” arrived at the destination port Qinzhou Port and called at the harbor of COFCO of Qinzhou Port. Afterwards the consignee and the ship side jointly inspected the cargoes on board and found that the appearance of cargoes in the 1st to 5th hatch was normal and a small part of the top of the cargoes in the 7th hatch had the phenomenon of color changing and mildewing. After negotiation, they decided to sort and discharge the cargoes in the 7th hatch. On September 4, M.V. “ORIENTALPIONEER” began to discharge cargoes and the discharging was finished on September 8. On September 13, Qinzhou Entry-Exit Inspection and Quarantine Bureau issued weight certificate to confirm that M.V. “ORIENTALPIONEER” transported soybean in question in sum of 50,922.6 tons to Qinzhou Port. At the same time, the Quality Certificate issued by this bureau confirmed that the cargoes damage condition and amount were as follows: (1) There were 49,579.56 tons of soybean with normal appearance and the heat damaged particle was 7.71% and the moisture content was 12.06% and the crude fat was 20.57% and the crude protein was 35.32%. (2) There were 1,310.82 tons of soybean with normal appearance and partial red color and the heat damage was 42.03% and the moisture content was 12.82% and the crude fat was 20.68% and the crude protein was 35.32%. (3) There were 32.22 tons of oil-stained cargoes and it could not be processed and used and it was destructed. (4) The content of heat damaged particle exceeded the limited requirements of the Soybean (GB1352-2009). The final products of soybean need to be label the identification of transgenosis.

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On November 5, the cargoes discharged from the 6th hatch finished destruction in Singapore. On August 28, 2014 (the survey date: from September 4 to November 29), the China Certification & Inspection (Group) Guangxi Co., Ltd. (CCIC) inspected the above soybean which were discharged from M.V. “ORIENTALPIONEER” to Qinzhou Port and issued No.450714080592–05,004 Certificate of Loss, this certificate stated clearly that: 1. the condition of ship and cargoes: the 1st to 5th and the 7th hatch of M.V. “ORIENTALPIONEER” all loaded soybean and the 6th hatch was no-load; 2. the on board inspect situation: the surveyor of CCIC met the requirements of the consignee COFCO Oils (Qinzhou) Co., Ltd. and boarded M.V. “ORIENTALPIONEER” at 0930 on September 6 and it inspected the 7th hatch together with the surveyor of Qinzhou Entry-Exit Inspection and Quarantine Bureau, the representative of Ejoy Insurance Surveyors & Adjusters Co., Ltd., the surveyor of the Plaintiff and the chief officer of M.V. “ORIENTALPIONEER”. After inspection, the damaged cargoes had obvious phenomenon of caking and the thickness was unclear and most changed to ocher. At 0700 on September 8, it boarded and found that the cargoes in the right bottom of the 7th hatch near the engine room had significant oil-stained signs and were black; 3. the confirmation of the weight of the damaged cargoes (after agreeing by all the parties, measuring by the weighing apparatus): there were 1,310.82 tons of cargoes which were not oil-stained but were seriously heat damaged (the heat damage rate was 42.03%); there were oil-stain cargoes 32.22 tons; other cargoes were slightly heat damaged and the heat damaged particle was 7.71% and the weight was 49,579.56 tons (these three items summed up to 50,922.6 ton); 4. the estimate of losses of the cargoes with residual value: according to the SN/T2388.1–2009 Rules for inspection and identification of import cargoes with residual value, inspecting and confirming the losses or the extent of the reducing even disappearing of use efficiency, combining with the commodity use condition and disposal cost, the estimate of losses of the cargoes with residual value was as follows: (1) the loss of the oil-stained 32.22 tons of soybean was RMB234,016.53 (in which the damage of cargoes was RMB129,404.39, the 6-ton coal for incineration was RMB3888, the storage and transport cost was RMB75,886.14, the survey fee was RMB24,838); (2) the additional processing fee of the seriously heat damaged 1,310.82 ton cargoes and the slightly heat damaged 49,579.56 ton cargoes in the process of oil manufacture was RMB1,039,976.57 (in which the fee of using N-hexane was RMB462,825, the additional power consumption was RMB104,264.02, the loss of oil yield was RMB472,887.55; (3) the additional processing fee of the seriously damaged 1,310.82 tons of cargoes and the slightly heat damaged 49,579.56 tons of cargoes in process of refining was RMB1,097,404.71 (in which the refining loss was RMB724,446.4, the additional fee of orthophosphoric acid was RMB22,944, the additional fee of caustic soda was RMB68,521, the additional fee of clay was RMB239,535.8, the additional fee of vapor was RMB41,957.31); (4) the losses of the seriously heat damaged 1,310.82 tons of cargoes and the slightly heat damaged 49,579.56 ton cargoes in the sale section was RMB1,692,407.18. (in which the cut-rate price loss of the produced soybean meal was RMB1,094,067.18, the

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cut-rate price loss of the produced oil was RMB598,340); (5) the survey fee of CCIC was RMB25,205; (6) the total loss was RMB4,089,009.99; 5. the conclusion: (1) the damage of cargoes happened before the discharging; (2) combined with the data above, the total loss of these damaged cargoes was RMB4,089,009.99. It was found in addition that, the content of the stipulated “other specifications accorded to Article 41 Paragraph 2 of ANEC Standard Contract” in the Soybean Sale Contract in question was: 2. (according to evidence 30 of the Plaintiff) the weight/ qualification: Brazil soybean, the crop: the oil content was basically 18.5% (AOCSAc3-44), 1% non-reciprocal tolerance allowed, and each part which did not reach 1% would be calculated in proportion, and any variation should take the buyer as the beneficiary; the maximum moisture was 14%. It is found out that, on December 3, the Plaintiff compensated COFCO Oils (Qinzhou) Co., Ltd. RMB39,236,399.59 because of the cargo damage in question and got the right of subrogation. It applied to subrogate COFCO Oils (Qinzhou) Co., Ltd. to join the suit on November 5, 2014. Afterwards, the court judged according to law and agreed that the Plaintiff subrogated COFCO Oils (Qinzhou) Co., Ltd. to join the suit. The Defendant had no objection to all of these. It is found out that, because the sale contract in question was CNF Qinzhou 589 dollar/ton. For the convenience of calculating, the Plaintiff and the Defendant both agreed to calculate the amount of each item and integrate to calculate in dollar according to the currency of dollar and renminbi conversion standard on August 28, 2014 of Certificate of Damaged Cargoes issued by China Certification & Inspection (Group) Guangxi Co., Ltd. (CCIC). After investigating, the currency of renminbi and dollar was one dollar against 6.1638 yuan. It is found out that, on April 20,2016, the Defendant as the Plaintiff instituted an action arising from dispute over a contract of carriage of goods by sea (the case number: 2016 Gui 72 Min Chu No.103) against COFCO Oils (Qinzhou) Co., Ltd. and China Pacific Property Insurance Co., Ltd. Shipping Insurance Operation Center (the Plaintiff of this case) to the court. The claim of this case was: 1. COFCO Oils (Qinzhou) Co., Ltd. and China Pacific Property Insurance Co., Ltd. Shipping Insurance Operation Center should pay the Plaintiff the losses and expenses and so on, in sum of 2,072,829.89 dollar and the interests; 2. the litigation fees of this case should be born by the Defendant. The claimed amount of that case was the same as the amount and evidence which the Defendant wanted to offset in this case, both were 2,072,829.89 dollar. The court holds that: This case is the dispute over contract of carriage of goods by sea and the destination port and port of arrival both were Qinzhou Port and it was under the jurisdiction of the court, therefore the court has jurisdiction. Because the Defendant was the company registered in Korea and this case belonged to the contract dispute of foreign-related factors. According to Article 3 of the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China, “the parties may explicitly choose the laws applicable to foreign-related civil relations in accordance with the provisions of law”, therefore two parties shall explicitly apply to the applicable law of this case. In court trial the Plaintiff and the Defendant both

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claimed to apply the law of People’s Republic of China, therefore this case apply the law of People’s Republic of China as the lex cause. Synthesizing the opinions of both parties, the issues of dispute are that: 1. whether the cargoes in the 6th hatch had the expanded losses, if the cargoes had, how to confirm the amount, and if the Defendant shall bear indemnity liability and to what extent shall the Defendant bear the indemnity liability; 2. how to confirm the losses of the 1st to 5th and the 7th hatch and the if the Defendant shall bear indemnity liability for the losses. 1. The problem concerning to the losses of cargoes in the 6th hatch discharged in Singapore. (1) If there were expanded losses. The court holds that, on July 2, 2013 M.V. “ORIENTALPIONEER” of the Defendant collided with M.V. “ATLANTICHERO”. From July 11 to August 7, the Defendant began to sort and discharge the cargoes in the 6th hatch. Singaporean ISA also inspected on the spot and got the conclusion confirmed by the Plaintiff and the Defendant: the dry/sound cargoes was 1,877.950 tons and the sea water damaged cargoes discharged to four barges was 6,276.720 tons and other cargoes was constructive total loss. At that time, the moisture content of 6,276.720 tons of soybean was about 30 to 35% (the moisture content at the time of boarding was 13 to 14%), the density of soybean increased to 1.0 to 1.3 ton/cubic meter. In this process, the Defendant took charge of managing the discharged cargoes and sought buyers to sell these cargoes at the same time. On August 19, the Defendant informed the Plaintiff that, for the sound 1,877.950 tons of soybean discharged from the 6th hatch, the highest quotation of the buyers was 253,395 dollar. The Plaintiff considered that this quotation was far below the import invoice price 589 dollar/ton and asked the Defendant to give an explanation. On September 2, the Defendant informed the Plaintiff that, because of the cargoes mildewing and reasons of weather, environment and so on, now Maritime and Port Authority of Singapore (MPA) instructed the Defendant to destruct the cargoes above before September 9. As an eligible and careful shipper, for the managed water damaged cargoes, shall promptly inform the Plaintiff and the relevant interest parties the change of the quality of cargoes and the relevant treatment measures. But in this case, when the Plaintiff considered the quotation was far below on August 19, the Defendant did not give an explanation and take treatment measures which was beneficial to itself. Even until September 2 the quotation was withdrawn and it was required by Maritime and Port Authority of Singapore (MPA) to destruct the above cargoes, it did not make the corresponding plan of losses with the Plaintiff and the relevant interest parties, therefore it had negligence in care for cargo. If following the statement of the Defendant, the thought of it when discharging the cargoes in the 6th hatch was, if the cargoes can be sold, it will sell the cargoes, if the cargoes cannot be sold, it will destruct the cargoes. Even so the Defendant had the burden of proof to prove that it negotiated with the Plaintiff and the other side of the collision M.V. “ATLANTICHERO” for this item and got the confirmation of all

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parties. But it was inconsistent with the fact that at that time the Defendant paid huge fees for sorting, discharging and keeping, therefore the actions of the Defendant did not correspond with its words. The Defendant did not offer evidence to prove that it performed completed and efficient obligation of caring for cargoes discharged from the 6th hatch. According to Article 64 Paragraph 1 of Civil Procedure Law of the People’s Republic of China “a party shall have the responsibility to provide evidence in support of its own propositions”, and Article 90 of Interpretation of the Supreme People’s Court Concerning the Application of the Civil Procedure Law of the People’s Republic of China “a party shall provide evidence to support its claims based on the facts it claimed or the facts used for rebutting the claims of the other parties, except as otherwise provided by law. Before making a judgment, if any party fails to submit the evidence, or, if the evidence submitted by the party is not sufficient to prove the allegation, the party having the burden of proof shall bear the ensuing adverse consequence”. The court does not support the allegation of performing the obligation of caring for cargoes. Concerning to the problem that the Plaintiff considered that the sound and partial water damaged soybean was finally total loss was because of the nature of cargoes and the mismanagement of the salvager it committed to keep the cargoes, the Plaintiff shall also provide evidence to prove or separately claim to its salvager it committed. (2) Concerning to the confirmation of the amount of the expanded cargo damage in the 6th hatch. The court holds that the cargoes discharged from the 6th hatch was as follows: the sound/dry cargoes was 1,877.95 tons; the water damaged cargoes discharged to four barges was 6,276.72 tons. Finally all of these cargoes was total loss and produced huge destruction and disposal fee. As is illustrated above, the Defendant shall bear the liability of poor management of cargoes. Concerning to the amount of losses, the Plaintiff appealed to calculate amount according to the contract price in question, the Defendant had no objection to this, just had objection to if the cargoes had residual value and the bearing of liability. The calculation of the amount of 1,877.95 ton dry/ sound cargoes by the court was 589 dollar/ton * 1,877.95 ton = 1,106,112.55 dollar. Concerning to the residual value of the 6,276.72 ton sea water damaged soybean, because at that time all the parties did not issue survey on damage to cargo for these soybean (inferring from the common sense, that these soybean was planned to be sold, therefore these soybean had residual value). According to the Singaporean ISA report confirmed by both parties, the condition of these 6,276.72 tons of soybean was that the moisture content was about 30% to 35% (the moisture content was about 12% to 14% when loading on board) and the density of soybean increased to 1.0/1,3 ton/cubic meter. According to the evidence of this case and combing with the inspection report of two parties, the court decides that then residual value of the 6,276.72 ton soybean in the 6th hatch discharged to barges was 30%, that was 589 dollar/ton * 6,276.72 ton * 30% = 1,109,096.42 dollar, therefore the Defendant shall bear 30% liability for 6,276.72 tons of soybean. Conversely, if the Defendant considered that the 6,276.72 ton sea water damaged soybean did not have residual value

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at first, it shall inform all the parties and destructed these soybean together with the 115.618 tons of oil-stain soybean when discharging in order to avoid barge storage fee, and shall calculate this loss into the loss of collision and informed all the interest parties and conducted average adjustment. These cargoes was not destruct but was positively sorted and separated, and the Defendant sought buyers, it also indicated that these cargoes had residual value. (3) Concerning to who bore the expanded losses of the 6th hatch. The Defendant considered that, even though there were expanded losses, the Defendant can apply Article 51 Paragraph 1 of Maritime Code of the People’s Republic of China and was entitled to exonerate from the liability for compensation. The court holds that, the appealed problem of the Plaintiff was who shall bear the liability for the sound soybean which was discharged from the 6th hatch and loaded on the barges and not influenced by the collision and the partial water damaged soybean. The total loss of these cargoes happened on the barges committed and managed by the Defendant and did not happen on M.V. “ORIENTALPIONEER”, but the stipulated ship of Article 51 Paragraph 1 Sub-paragraph 1 of the Maritime Code of the People’s Republic of China clearly referred to M.V. “ORIENTALPIONEER” in this case, therefore the Defendant cannot apply Article 51 Paragraph 1 Sub-paragraph 1 of the Maritime Code of the People’s Republic of China “the carrier shall not be liable for the loss of or damage to the goods occurred during the period of carrier's responsibility arising or resulting from any of the following causes: (1) fault of the Master, crew members, pilot or servant of the carrier in the navigation or management of the ship” to exonerate from the liability, therefore the court will not support this rebuttal of the Defendant. Furthermore, according to Article 51 Paragraph 2 of the Maritime Code of the People’s Republic of China “the carrier who is entitled to exoneration from the liability for compensation as provided for in the preceding paragraph shall, with the exception of the causes given in Sub-paragraph 2, bear the burden of proof”, even though the Defendant claimed to exonerate from the liability, it shall also fulfill the burden of proof. But the Defendant did not provide evidence to prove that, after the cargoes in the 6th hatch was discharged to barges, the fault of the Master, crew members, pilot or servant of the carrier in the navigation or management of the ship caused the expanded loses of cargoes. Therefore the Defendant shall bear the indemnity liability for the losses above. Overall, according to Article 60 Paragraph 1 of Contract Law of the People’s Republic of China “the parties shall fully perform their respective obligations in accordance with the contract” and Article 107 of the Contract Law of the People’s Republic of China “if a party fails to perform its obligations under a contract, or rendered non-conforming performance, it shall bear the liabilities for breach of contract by specific performance, cure of non-conforming performance or payment of damages, etc.”, the Defendant had the fault for the expanded losses of the 1,877.95 tons of sound/dry cargoes discharged to the barges and the 6,276.72 tons of water damaged cargoes and shall bear the indemnity liability. The amount of losses was 2,215,208.97 dollar (589 dollar/ton * 1,877.95 ton + 589 dollar/ton * 6,276.720 ton * 30%).

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2. Concerning to how to confirm the losses of the cargoes in the 1st to 5th and the 7th hatch after the ship arrived at Qinzhou Port and who shall bear the losses. (1) Concerning to the amount of losses. The court holds that, as the statutory inspection authority, Qinzhou Entry-Exit Inspection and Quarantine Bureau issued Certificate of Weight to confirm that the soybean in question shipped by M.V. “ORIENTALPIONEER” to Qinzhou Port summed up to 50,922.6 tons. At the same time, Certificate of Quality issued by this bureau confirmed that, the condition and amount of the damaged cargoes was as follows: there was 1,310.82 tons of cargoes which did not be stained by the fuel oil but was seriously heat damaged; there was 32.22 tons of oil-stained cargoes; other cargoes was slightly heat damaged and the rate of heat damaged particle was 7.71% and the weight was 49,579.56 tons. China Certification & Inspection (Group) Guangxi Co., Ltd. (hereinafter referred to as CCIC) confirmed that the total loss of these damaged cargoes was RMB4,089,009.99. The Defendant did not have sufficient evidence to reverse the above legal conclusion and the court confirms that the losses of the cargoes in the 1st to 5th hatch and the 7th hatch after the ship arrived at Qinzhou Port was RMB4,089,009.99. As for the fact that the Defendant considered that the amount of cargo damage identified by CCIC was too high and submitted Expert Opinion concerning to the case that M.V. “ORIENTALPIONEER” claimed that it suffered heat damaged in the transportation process issued by the Cereal Quality Supervision and Testing Center, Ministry of Agriculture, the court holds that Expert Opinion was just query for the expert conclusion of CCIC in the angle of theoretical analysis, but it is not an expert conclusion based on the actual inspection of the cargoes in question arrived at the port, and this center did not have the qualification of identifying damaged, therefore the court will not accept this opinion. (2) Concerning to who shall bear the liability of the above loss. Concerning to the above loss, the Defendant considered that it was caused by the collision and shall apply Article 51 Paragraph 1 Sub-paragraph 1 and Sub-paragraph 9 of the Maritime Code of the People’s Republic of China “the carrier shall not be liable for the loss of or damage to the goods occurred during the period of carrier’s responsibility arising or resulting from any of the following causes: (1) fault of the Master, crew members, pilot or servant of the carrier in the navigation or management of the ship; (9) nature or inherent vice of the goods”, therefore the shipper shall be exonerated from the liability. The court holds that, the Plaintiff signed clean B/L, so it had the obligation to transport the cargoes intact to the destination port stipulated in the B/L, or it shall bear the indemnity liability. Concerning to the loss of the cargoes, it shall be confirmed jointly by the two parties or there was not any adverse evidence to deny the expert conclusion. The Defendant claimed to exonerate the liability according to Article 51 of the Maritime Code of the People’s Republic of China, but according to Article 51 Paragraph 2 of the Maritime Code of the People’s Republic of China “the carrier who is entitled to exoneration from the liability for compensation as provided for in the preceding paragraph shall, with the exception of the causes given in

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Sub-paragraph 2, bear the burden of proof”. The Defendant shall bear the burden of proof to prove that the loss of the cargoes in question was caused by the negligence in care for the ship and the quality defect of the cargoes, but the Defendant did not provide evidence of this part and conversely signed clean B/L. Therefore for the allegation of this item, the court will not support. Overall, according to Article 107 of the Contract Law of the People’s Republic of China, “if a party fails to perform its obligations under a contract, or its performance fails to satisfy the terms of the contract, it shall bear the liabilities for breach of contract such as to continue to perform its obligations, to take remedial measures, or to compensate for losses”, the Defendant did not transport the cargoes in question intact to the destination port as stipulated and shall bear the liabilities for breach of contract. It shall compensate the Plaintiff the cargo losses of the 1st to 5th and the 7th hatch RMB4,089,009.99, and according to the currency of dollar and renminbi conversion standard on August 28, one dollar against 6.1638 yuan, the losses shall be 663,391.09 dollars. 3. Concerning to the Defendant claimed to offset the corresponding fee with the Plaintiff after the trial. On August 26, 2016, the Defendant provided evidence 39 to the court and asked to perform the right of offset. The contents of this evidence are as follows: on April 13, 2016, the Defendant delivered Notice of Offset to the representative of the Plaintiff by emails and expresses. The opinions of the representative of the Plaintiff at that time and on August 26 were both that the fee to be offset was arbitrated in London and it filed an action to the Beihai Maritime Court and the case number were No.103 and No.107. Therefore the evidence was irrelevant to this case and the fee shall not be offset and the Defendant did not have the right of offset. The court holds that, the fee to be offset by the Defendant was the amount of storage fee and disposal fee which were paid to the salvager in Singapore but were not calculated into the general average. The amount was the same as the claimed amount and evidence of the case arising from dispute over a contract of carriage of goods by sea, in which the Plaintiff NYK Bulk Carrier (Korea) Co., Ltd. (the Defendant of this case) filed an action against the Defendants COFCO Oils (Qinzhou) Co., Ltd. and China Pacific Property Insurance Co., Ltd. Shipping Insurance Operation Center (the Plaintiff of this case) before the court (the case number: (2016) Gui 72 Min Chu No.103). The amount were both 2,072,829.89 dollars. The court holds that, the claim of offsetting of the Defendant belonged to repetitive suit. At the same time, the items and amount to be offset by the Defendant were different from the type and quality of subject matters of this case and the Plaintiff did not agree to offset. The offset of the Defendant did not accord with Article 99 of the Contract Law of the People’s Republic of China “where the parties are liable to one another for obligations that are due, and if the type and nature of the subject matter of such obligations are the same, any party may offset its own obligation against the obligation of the other party, except unless such offset is not allowed according to the laws and regulations or cannot be made given the nature of the contract” and the court will not support this claim.

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In conclusion, the Defendant shall compensate the Plaintiff the losses of cargoes in sum of 2,878,600.06 dollars (2,215,208.97 dollars + 66,391.09 dollars). According to Article 60, Article 99, Article 107 and Article 113 of the Contract Law of the People’s Republic of China, Article 51 of the Maritime Code of the People’s Republic of China, Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, Article 3 of the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China and Article 90 of the Interpretation of the Supreme People’s Court concerning the Application of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: 1. The Defendant NYK Bulk Carrier (Korea) Co., Ltd. shall compensate the Plaintiff China Pacific Property Insurance Co., Ltd. Shipping Insurance Operation Center for various economic losses in sum of RMB2,878,600.06 and the interest (the interest shall calculate from September 4 to the confirmed payment date of the effective court decision according to the loan interest rate stipulated by the People’s Bank of China in the corresponding period); 2. Reject other claims filed by the Plaintiff China Pacific Property Insurance Co., Ltd. Shipping Insurance Operation Center. Court acceptance fee in amount of RMB169,592 and the costs of preservation RMB5,000 in sum of RMB174,592, the Plaintiff China Pacific Property Insurance Co., Ltd. Shipping Insurance Operation Center shall bear RMB51,392 and the Defendant NYK Bulk Carrier (Korea) Co., Ltd. shall bear RMB123,200. For the debt of this case, the obligator shall perform the debt in 10 days since the date of entry into force of this case, the interest of debt during the period of delayed performance should be doubled. The obligee can apply the court to apply for the implementation within two years since the last day of the performing period stipulated in the effective court judgment. In event of dissatisfaction with this judgment, the Plaintiff China Pacific Property Insurance Co., Ltd. Shipping Insurance Operation Center can submit petition for appeal and its copies according to the number of parties and lodge an appeal to the Guangxi Zhuang Autonomous Region High People’s Court within 15 day upon service of this judgment and the Defendant NYK Bulk Carrier (Korea) Co., Ltd. can appeal within 30 days. And they should pay the appeal cost in advance to Guangxi Zhuang Autonomous Region High People’s Court within 7 days before the expiration of the appeal period (payee: Guangxi Zhuang Autonomous Region High People’s Court; account number: 20XXX77; bank of deposit: Nanning Wanxiang Branch of Agriculture Bank of China). If overdue, the appeal will be withdrawn automatically. Presiding Judgment: WANG Mingsheng Acting Judge: WEI Xuling People’s Juror: WU Dong September 20, 2016 Clerk: ZHAI Jianyao

Wuhan Maritime Court Civil Judgment Chongqing Wanzhou Yangjiang Shipping Co., Ltd. et al. v. Chongqing Sanyi Logistics Co., Ltd. (2015) Wu Hai Fa Shang Zi No.01209 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 167. Cause(s) of Action 213(2). Dispute over bareboat charter party. Headnote The Plaintiff finance lessor held to be entitled to recover underpaid lease fees, dismissing the Defendant lessee’s counterclaim that it was entitled to withhold payment because it had renovated leased vessel; the court held that the Defendant was obliged by long-term lease contract to renovate vessel. Summary The Plaintiff, Yangjiang Shipping Co., leased out vessel to the Defendant, Sanyi for RMB430,000 yuan per year. The Defendant only paid RMB150,000 and refused to pay the remainder of the lease rate. The Plaintiff sued the Defendant for RMB830,000 in unpaid rent and asserted that the Defendant be charged RMB2 million in penalty and be assigned court fees. The second Plaintiff, LI Shengyong, and claimed related to the party were dismissed as it was not a true party to the contract. The Defendant asserted its own counterclaim, stating that it did not pay rent because it had spent RMB1.2 million in renovation of the vessel and asserted that it was owed compensation for the necessary renovations and compulsory renovations. The court held that the lease agreement, determined the process by which the vessel was to be renovated and that the Defendant did not follow procedure. Additionally, the court determined that as a long term lease, the Defendant was liable for the renovations and that compulsory regulatory renovations must be born by the Defendant. The court also determined that the penalty contained within the contract was too much and should be limited to 30% of the unpaid rent, or RMB249,000, to be in accordance with the law. Court acceptance fee was assigned to the Defendant in half, as the case was decided in summary judgment.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_6

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Judgment The Plaintiff (the counterclaim Defendant): Chongqing Wanzhou Yangjiang Shipping Co., Ltd. Domicile: Room B1, Floor 15, No.136, Taibai Road, Wanzhou District, Chongqing. Organization Code: 73981438-7. Legal representative: LI Yangjiang, chairman. Agent ad litem: WANG Lei, staff of the company. Agent ad litem: ZHENG Zhenhui, lawyer of Chongqing Zhenping Law Firm. The Plaintiff (the counterclaim Defendant): LI Shengyong Male, Han, born on October 25, 1977, Living in Fengjie, Chongqing. Agent ad litem: ZHENG Zhenhui, lawyer of Chongqing Zhenping Law Firm. The Defendant (the counterclaim Plaintiff): Chongqing Sanyi Logistics Co., Ltd. Domicile: Room 1&2, Floor 9, No.65, Part 8, East Xinhua Road, Fuling District, Chongqing. Organization Code: 71161027-8. Legal representative: CHEN Ping, chairman. Agent ad litem: ZHANG Siqiang, lawyer of Chongqing Baijun Law Firm. On 18 August 2015, the Plaintiffs (the counterclaim Defendants) LI Shengyong and Chongqing Wanzhou Yangjiang Shipping Co., Ltd. (hereinafter referred to as Yangjiang Company) sued Chongqing Sanyi Logistics Co., Ltd. (hereinafter referred to as Sanyi Company) to the court in inspect of the dispute over bareboat charter contract. As this case is a maritime contract dispute, Chongqing Fuling District where Sanyi Company is located is in the jurisdiction of the court, according to Article 24 of the Civil Procedure Law of the People’s Republic of China and Article 2 of Notice of the Supreme People’s Court on Adjustment of the Jurisdiction and the Scope of Cases Entertained by Dalian, Wuhan and Beihai maritime Courts, the court has the jurisdiction over the case. After the case was accepted on August 21, the summary procedure was applied according to law, and was the solely tried by Agent Judge JIANG Zhangpeng. In the process of the case, Sanyi Company filed counterclaim. After accepting this case, the court combined the above two cases in accordance with the law. On October 26, the court held a hearing in public, and WANG Lei, agent ad litem of Yangjiang Company, ZHANG Zhenhui, co-agent ad litem of WANG Lei and LI Shengyong, and agent ad litem of Sanyi Company, ZHANG Siqiang, attended the hearing. During the trial of the case, the parties agreed to preside over the mediation, but because of the great differences, the mediation failed. The case has now been concluded. The Plaintiffs (the counterclaim Defendants) Yangjiang Company and LI Shengyong claimed that on March 17, 2006 Yangjiang Company and Sanyi

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Company (formerly call Fuling District Sanyi Co., Ltd.) signed M.V. JIANG NIU 66 Charter Party, agreeing that Yangjiang Company would bareboat charter M.V. JIANG NIU 66 to Sanyi Company for a long term. The term of rent was up to the time when the ship was scrapped, and the rent was RMB430 thousand yuan per year (hereinafter called RMB). At the same time, the two sides agreed on the mode of payment of rent and the manner of liability for breach of contract. On August 31, 2006, LI Shengyong obtained the ownership of M.V. JIANG NIU 66 in accordance with the law and changed the name of the ship to M.V. HONG SHENG 806. According to the three parties’ negotiation, the relevant rights and obligations under the contract of M.V. JIANG NIU 66 were still enjoyed and undertaken by Yangjiang Company. In accordance with the contract, during the period from April 1, 2013 to July 30, 2015, Sanyi Company should pay the rent RMB980 thousand. After repeatedly demanding, Sanyi Company only paid Yangjiang Company RMB150 thousand on August 13, 2014, with the balance unpaid. Yangjiang Company and LI Shengyong jointly claimed the court that: 1. Sanyi Company should immediately pay Yangjiang Company the rent RMB830 thousand, and bear the penalty of RMB2 million; 2. the litigation fees should be born by Sanyi Company. The Defendant (the counterclaim Plaintiff) Sanyi Company argued that the charter party of the involved ship between Sanyi Company and Yangjiang Company was true. Sanyi Company did not break the contract. The unpaid rent RMB830 thousand was used to offset the renovation cost RMB1.2 million owed by Yangjiang Company. Therefore, Sanyi Company did not need to pay any additional rent. The Plaintiff (the counterclaim Defendant) Yangjiang Company and LI Shengyong provided the court the following evidence: First group: organization code certificate, business license, a copy of identity card, business registration information, M.V. HONG SHENG 806 registration certificate, intends to prove that: the parties in this case the eligibility of the subject of litigation. The above evidence was used to prove that the parties in this case are suitable lawsuit subject. Sanyi Company had no objection to this group of evidence. The validity of this group of evidence was accepted by the court. Second group: M.V. JIANG NIU 66 Charter Party, on M.V. JIANG NIU 66 Supplement Charter Party, M.V. JIANG NIU 66 Charter Party, on M.V. JIANG NIU 66 (now M.V. HONG SHENG 806) Supplement Charter Party. The above evidence was used to prove that Sanyi Company owed Yangjiang Company RMB830 thousand. Sanyi Company had no objection to the authenticity of the above evidence. However, according to the contract, the prophase technical renovation cost should be born by Sanyi Company. But the technical renovation cost was proposed by Sanyi Company during the lease period and shall be undertaken by Yangjiang Company. The expenses agreed in the leasing agreement after handing over the ship refers to the cost during the leasing period, excluding the renovation cost. The authenticity of the above evidence is confirmed by the court. As for the purpose of proof, the court will combine other evidence to elaborate in the later part of the article.

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Third group: receipt and bank transfer certificate with each in two copies. The above evidence was used to prove that Sanyi Company paid part of the ship rent. Sanyi Company held that the authenticity of the copy of the evidence was not approved. But by July 30, 2015, Sanyi had rent RMB830 thousand unpaid. The court holds that the authenticity of the above copies shall not be confirmed, but the amount owed by Sanyi Company shall be confirmed. Fourth group: notice of payment again and a piece of express sheet. The evidence was used to prove that Yangjiang Company secured rent from Sanyi Company on February 13, 2015. Sanyi Company held that it did not receive the notice. The court holds that the authenticity of the group of evidence should be affirmed, but only a piece of express sheet cannot prove that Sanyi Company has received the notice. The Defendant (the counterclaim Plaintiff) provided the court with following evidence: First group: expenses account, to prove that replacement cost RMB393,330 was paid for the involved marine diesel engine. Yangjiang Company and LI Shengyong had no objection to the authenticity of the evidence but held that the fee should be born by Sanyi Company. The authenticity of the evidence is confirmed by the court. Second group: the rectification notice of the ship operation inspection, Chongqing Ship Inspection Bureau on the implementation of the dangerous goods ship quality rectification notice and annex, Fu Chuan Jian Fa (2013) No.2, the plan report on rectification issued by Chongqing Sanyi logistics Co., Ltd. The evidence was used to prove that M.V. HONG SHENG 806 was rectified compulsorily, otherwise the ship would not be working. Yangjiang Company and LI Shengyong held that the rectification notice of the ship operation inspection was a copy one whose authenticity was not recognized. They confirmed the authenticity of other materials. Even if the ship needed to be rectified, Sanyi Company should inform Yangjiang Company and LI Shengyong about the rectification, otherwise the transformation without permission would not be recognized. In accordance with the contract, the expenses should be born by Sanyi Company. The court holds that Sanyi Company submitted the rectification notice of the operation inspection stamped by Chongqing Ship Inspection Bureau Fuling Ship Inspection Bureau (hereinafter referred to as the Fuling Ship Inspection Bureau) the court shall confirm its authenticity and confirm the authenticity of other evidence. Whether the evidence can reach the purposed approval, the court will analysis comprehensively combined with other evidence in later text. Third group: expenses account and the attached invoice and accessories of Sanyi Company of October 9, 2013, December 10, 2013, December 12, 2013. The evidence was used to prove that Sanyi Company carried out rectification for M.V. HONG SHENG 806 according to the requirements of ship inspection department and spent RMB828,593.45. Yangjiang Company and LI Shengyong confirmed the authenticity of the expenses account and the attachment on October 9, 2013 and December 10, 2013, but did not confirm the authenticity of the expenses account and the attachment of December 12, 2013. Additionally, this group of evidence

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could not prove that the cost was used to rectify the involved ship. The court holds that the above evidence is all original documents and confirms the authenticity. Fourth group: inland ship inspection certificate book and related ship certificate, to prove that Sanyi Company replaced the main engine for the ship involved. Yangjiang Company and LI Shengyong confirmed the authenticity of the group of evidence. Sanyi Company never claimed the cost. The authenticity of the evidence is confirmed by the court. Fifth group: Chang Hai Tong Hang (2015) No.117, to prove that the ship involved must be rectified, otherwise it could not operate normally. Yangjiang Company and LI Shengyong had no objection to the authenticity of the evidence, but the document had nothing to do with the case, because the time of implementation was inconsistent with the time of ship rectification. The court confirms the authenticity of the evidence. Sixth group: the proof of payment that could prove that the involved ship was rectified from grade 3 oil tanker to grade 1 oil tanker was a copy one which can prove that Sanyi Company spent RMB1.9 million rectifying the ship involved from grade 3 to grade one. Yangjiang Company and LI Shengyong did not confirm the authenticity of the evidence. Additionally, according to the agreement, the fee should be born Sanyi Company. The court holds that the evidence of this group is a copy one, so the authenticity of this group is not confirmed. The Defendant (the counterclaim Plaintiff) Sanyi Company claimed that after signing the charter party with Yangjiang Company in respect of M.V. JIANG NIU 66, two companies agreed that Sanyi Company should undertake the renovation cost of rectifying the involved ship from grade 3 oil tanker to grade 1 oil tanker. Sanyi Company would also undertake the all types cost, fees, maintenance fees, inspection fees and taxes after the delivery of the ship. During the contract period, as M.V. JIANG NIU 66 provided by Yangjiang Company was an old ship equipped with a main engine of only 404 kilowatts which was not enough to meet the daily need and also was not worth repairing, Sanyi Company, after communicating with two counterclaim defendants, replaced the old main engine with a 600 kw one in November 2011, generating fee RMB393,330. In June 2013, Chongqing Ship Inspection Bureau of Chongqing issued compulsive rectification notice to all hazardous vessels. After communicating with all parties, Sanyi Company spent RMB828,593.45 rectifying the ship. Sanyi Company held that the above costs did not belong to the category of the cost undertaken by Sanyi Company agreed in the charter party. It should be undertaken by Yangjiang Company. After deducting RMB830 thousand, Yangjiang Company and LI Shengyong should jointly pay Sanyi Company RMB391,923.45. Sanyi Company claimed the court to that Yangjiang Company and LI Shengyong should jointly pay main engine replacement costs and ship compulsive rectification costs RMB391,923.45 yuan, and bear the costs of litigation. The Plaintiff (the counterclaim Defendant) Yangjiang Company and LI Shengyong argued that in accordance with the contract, the renovation cost of ship and rectification costs should be born by Sanyi Company because Sanyi Company

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never advocated that fee from Yangjiang Company and LI Shengyong before litigating. The court will not repeatedly list the evidence against the counterclaim and principal claim submitted by Sanyi Company, Yangjiang Company and LI Shengyong. The court finds out that: On March 17, 2006, Yangjiang Company and Fuling District Sanyi Co., Ltd. (hereinafter referred to as Fuling Sanyi Company) signed M.V. JIAGN NIU 66 Charter Party agreeing that Yangjiang Company would charter M.V. JIANG NIU 66 to Fuling Sanyi Company with the rent of RMB430 thousand per year. The term was from the time when Yangjiang Company delivered the ship to the technical innovation factory which was specified by Fuling Sanyi Company, removing three months of modification, to the age limit according to the national regulation. After the ship renovation was completed and put into use, Sanyi Company should pay Yangjiang Company rent RMB215 thousand at the beginning of the month every half year, with a daily overdue 1% pay for overdue penalty. M.V. JIANG NIU 66 was original grade 3 oil tanker which should be technically renovated to grade 1 oil tanker according to the national standard drawing. The full cost of renovation required should be born by Fuling Sanyi Company. After the delivery of the ship, all expenses incurred (operating costs, fees, maintenance fees, inspection fees, taxes, etc.) should be undertaken by Fuling Sanyi Company. After the delivery of the ship, the safety responsibility, all accidents or other causes of loss and management risk shall be undertaken by Fuling Sanyi Company and the business benefits should also be enjoyed by Sanyi Company. Fuling Sanyi Company should ensure good ship maintenance and make sure that the ship will not be scrapped in a specified period of service life. Any ship mortgage or renovation, sublease must be approved by Yangjiang Company and a supplementary agreement should be signed in written. As for the benefit from the national regulated ship scrapping, Yangjiang Company accounted for 60% and Fuling Sanyi Company accounted for 40%. If one party broke the contract, including Fuling Sanyi Company did not pay the rent for more than 3 months, it should pay the penalty to the other party RMB2 million. Matters not covered by this agreement should be settled through consultation between the two parties. If the negotiation failed, the contract should be handled in accordance with the provisions of the Contract Law of the People’s Republic of China. After the agreement was signed, Yangjiang Company delivered the ship, Fuling Sanyi Company rebuilt the ship in accordance with the contract, renovating the ship from grade 3 oil tanker to grade 1 oil tanker. During the period of the implementation of M.V. JIANG NIU 66 Charter Party, Fuling Sanyi Company changed its name to Chongqing Sanyi Logistics (Group) Co., Ltd. On December 30, 2009, Chongqing Sanyi Logistics (Group) Co., Ltd. signed M.V. JIANG NIU 66 Supplement Charter Party with Yangjiang Company and LI Shengyong confirming that three parties signed this agreement on the base of M.V. JIANG NIU 66 Charter Agreement. M.V. JIANG NIU 66 was renamed M. V. HONG SHENG 806 with registered title holder of LI Shengyong and the actual title holder of Yangjiang Company. LI Shengyong allowed Yangjiang Company instead of him to sign the protocol with Chongqing Sanyi logistics (Group) Co.,

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Ltd. and allowed Yangjiang Company to bear the obligations of the shipowner. LI Shengyong entrusted Chongqing Sanyi logistics (Group) Co., Ltd. to pay the rent to Yangjiang Company, as the rent had been paid to LI Shengyong. LI Shengyong allowed Yangjiang Company to enjoy other rights indefinitely and unconditionally enjoy and exercise. From October 9, 2010 to the end of November, Chongqing Sanyi logistics (Group) Co., Ltd. replaced two diesel engines of M.V. JIANG NIU 66 with the total expenditure of RMB393,330. In April 2013, Chongqing Sanyi logistics (Group) Co., Ltd. changed its name to Sanyi Company. In May, Maritime Safety Administration Wuhan Ship Inspection Management Office of the People’s Republic of China carried out chemical tanker ship quality inspection activities, and issued a notice on the ship inspection quality rectification of 828 ocean ship to the Chongqing Ship Inspection Bureau. On June 26, Chongqing Fuling Ship Inspection Bureau sent notices to the area of dangerous goods shipping related units, requiring all units to rectify and inspect the ships, formulate corrective measures and planned to ensure the completion of the rectification and inspection work before September 2013. From October 9, 2013 to middle December, Sanyi Company embarked on M.V. HONG SHENG 806 for rectification and maintenance with total expenses RMB828,593.45. On October 23, 2013, Sanyi Company submitted the plan report on the ship rectification of Chongqing Sanyi logistics Limited by Share Ltd to Chongqing Fuling Ship Inspection Bureau saying that M.V. HONG SHENG 806 had been rectified and passed the test, but other part of the ship was still in rectification. On June 12, 12 2014, Yangjiang Company, LI Shengyong Sanyi Company signed M.V. JIANG NIU 66 Supplement Charter Party (now M.V. HONG SHENG 806) confirming that the registered ship ownership was LI Shengyong and the actual holder was Yangjiang Company. M.V. JIANG NIU 66 Supplement Charter Party signed on December 30, 2009 was for the convenience of ship registration but not the true thought of the three parties. Three parties finally reached an agreement that M.V. JIANG NIU 66 Charter Party signed on March 17, 2006 would be carried out. Additionally: During the period from 1 April 2013 to 30 July 2015, Sanyi Company should pay the rent RMB 980. Sanyi Company paid Yangjiang Company RMB150 rent on 13 August 2014 with the remaining rent unpaid. The court holds: This case is the disputer over bareboat charter party. According to M.V. JIANG NIU 66 Suppelemtn Charter Party (now M.V. HONG SHENG 806) signed by Yangjiang Company, Sanyi Company and LI Shengyong on June 12, 2014, it can be confirmed that Sanyi Company and Yangjiang Company would implement obligation and undertake responsibility according to M.V. JIANG NIU 66 Charter Party signed on March 17, 2006. The agreement expresses the true intention of Yangjiang Company and Sanyi Company. It is legitimate and effective and does not break the provisions of laws and administrative regulations of the mandatory. LI Shengyong is not the subject of the lease agreement, does not enjoy rights and does not assume the obligations under the contract. The actual holder of M.V. HONG SHENG 806 is Yangjiang Company who has the right to charge rent rather

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than LI Shengyong. LI Shengyong has no right to claim rent and penalty, because he is not the plaintiff of the case. The request for litigation shall be rejected. At the same time, Sanyi Company does not have the right to ask LI Shengyong to fulfill the obligations under the contract. As to the counterclaim requested by San Yi, the court shall reject. As the contract subject of the M.V. JIANG NIU 66 Charter Party, Yangjiang Company and Sanyi Company should implement their obligation in accordance with the agreement. If violating the agreement, they should bear the corresponding liability for breach of contract. As the lessee of the involved ship, Sanyi Company should pay Yangjiang Company the rent in time in accordance with the contract and should bear the liability for breach of contract for overdue payment. According to the facts found, from April 1, 2013 to July 30, 2015, Sanyi Company should pay the rent RMB980 thousand, but the actual payment of the rent is only RMB150 thousand with arrears of rent RMB830 thousand. It is legal for Yangjiang Company to request Sanyi Company to pay this part of the money, the court shall support. According to the agreement, if the charterer failed to pay the rent beyond three months, it should pay RMB2 million penalty to the other which Sanyi Company thought too high and should be reduced. The court holds that: according to Article 29 of the Interpretation of the Supreme People’s Court on Several Issues concerning Application of the Guaranty Law of the People’s Republic of China, the penalty settled by Yangjiang Company and Sanyi Company is far higher than the rent 30% of RMB800 thousand defaulted by Sanyi Company, which belongs to the situation of overtop penalty. Whereas the fact that the company has not submitted a defense against it, the court has adjusted the penalty to 30% of the unpaid rent, RMB249 thousand. The penalty beyond the sum of funds advocated by Yangjiang Company is not supported by the court. As for the replacement cost of the main engine during the period of the chartering time of M.V. HONG SHENG 806, Sanyi Company held that it should be undertaken by Yangjiang Company. It held that the ship involved was in a long term charter, so the term of the lease shall be determined when the ship has to be scrapped in accordance with time stipulated by the state. According to the agreement, all the expenses after the delivery of the ship including the cost of operation and maintenance fees would be undertaken by Sanyi Company, alterations must be approved by Yangjiang Company, and a supplementary charter party should be signed in written. Sanyi Company claimed that the replacement of the main engine was due to the serious shortage of power and incompatibility, which could not meet the daily needs and always caused engine damages. But in the trial, Sanyi Company did not provide any evidence to prove the claims. The company took over the ship in 2006 but replaced the main engine at the end of 2010. It is after four years’ running that Sanyi Company asked Yangjiang Company to undertake the replacement cost because of the shortage of power and incompatibility. It is far fetched. Even if the main engine should be replaced because of the long service life, it is Sanyi Company that should undertake the cost which was generated during the operation time. Moreover, Sanyi Company did not replace the main engine according to the agreement signed with Yangjiang Company. For this reason, Yangjiang Company did not need to pay the cost. In summary, the proposal that

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Sanyi Company requested Yangjiang Company to undertake the replacement cost is lack of evidence, so the court shall not support. As to the problem that who should undertake the compulsive rectification cost claimed by Sanyi Company generated during 2013, the court holds that it should be undertaken by Sanyi Company and the reasons are as follows. 1. From Yi Chuan Jian Fa (2013) No.4 issued by the Chongqing Ship Inspection Bureau, the ship inspection, rectification activities since May 2013 were carried out for the purpose of investigating quality defects of the dangerous goods ships including the ship involved, but not for the rectification cost required by the ship inspection department in order to improve ship technology and inspection standard. 2. The rectification project stated in the rectification notice of the ship inspection and operation issued by Fuling Ship Inspection Bureau mainly proposed opinions on the aspects of fire prevention facilities, lifesaving facilities, alarm facilities and driving performance, which did not mean that ship inspection department compulsively required Sanyi Company to take corrective measures to raise ship technology and inspection standard. The normal operation and maintenance cost generated during the ship operation shall be born by Sanyi Company in accordance with the agreement. 3. According to the agreement, it was Sanyi Company that should rectify the originally grade 3 oil tanker to grade 1oil tanker and be responsible for repair and maintenance lease period. Therefore, during the lease period, Sanyi Company should take the obligation to keep the ship in grade 1 oil tanker which is airworthy and suitable to be inspected and also should undertake the resulting costs. 4. Sanyi Company claimed its input rectification costs amounted to about RMB800,000, but it did not provide evidence in the rectification of the ship and did not consult with Yangjiang Company in the process of rebuilding. Yangjiang also did not participate in the ship rectification, so the objectivity, rationality and necessity of the cost is unconvincing and acceptable. In summary, Sanyi Company’s requirement that Yangjiang Company should undertake the cost is lack of factual and legal basis. The court shall not support. In summary, the requirement that Yangjiang Company asked Sanyi Company to pay the arrears of the rent proved true and shall be supported by the court. The penalty claimed by Yangjiang Company is too high, so the court should adjust according to law. Counterclaim proposed by Sanyi Company is lack of basis, so the court shall reject. According to Article 60 Paragraph 1, Article 107, Article 114 Paragraph 2 and Paragraph 3, Article 220 and Article 226 of the Contract Law of the People’s Republic of China, Article 29 of Interpretation of the Supreme People’s Court on Several Issues concerning Application of the Contract Law of the People’s Republic of China (II), Article 64 Paragraph 1 and Article 142 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: 1. The Defendant (the counterclaim Plaintiff) Chongqing Sanyi Logistic Co., Ltd. shall pay the Plaintiff (the counterclaim Defendant) Chongqing Wanzhou Yangjiang Shipping Co., Ltd. the rent RMB830 thousand and penalty RMB249 thousand within 10 days since this judgment comes to effect;

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2. Reject other claims of the Plaintiff (the counterclaim Defendant) Chongqing Wanzhou Yangjiang Shipping Co., Ltd.; 3. Reject the claims of the Plaintiff (the counterclaim Defendant) LI Shengyong against the Defendant (the counterclaim Plaintiff) Chongqing Sanyi Logistics Co., Ltd.; 4. Reject counterclaims of the Defendant (the counterclaim Plaintiff) Chongqing Sanyi Logistics Co., Ltd. If the money is not paid by the time specified in the judgment, double interests during the debt default should be paid in accordance with the Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB29,440 shall be charge in half (RMB14,720) due to the application of summary procedure, with RMB5,612 to be undertaken by the Plaintiffs (the counterclaim Defendants) Chongqing Wanzhou Yangjiang Shipping Co., Ltd. and LI Shengyong, and RMB9,108 shall be undertaken by the Defendant (the counterclaim Plaintiff) Chongqing Sanyi Logistics Co., Ltd. Court acceptance fee of counterclaim fee in amount of RMB7,178, shall be charged in half (RMB3,589) due to the application of summary procedure shall be undertaken by the Defendant (the counterclaim Plaintiff) Chongqing Sanyi Logistics Co., Ltd. If the judgment is not satisfied, two copies of the original appeal form may be submitted to the court within fifteen days from the date of serving the judgment, and copies of the appeal in accordance with the number of opposite parties shall be submitted to the Hubei High People’s Court. The Appellant should pay the litigation fee according to the refused amount regulated in the Article 13 Paragraph 1 of Approach to Pay the Litigation Cost. Remittance payee: financial account of non tax revenue of Hubei Provincial Finance Department. Account number: 05  69-1, Bank of accounts: East Lake branch of Agricultural Bank of China Wuhan Branch. If the payer makes payment by bank transfer or bank exchange, the number (102001) of Hubei High People’s Court or Hubei High People’s Court should be marked in the use column of bank’s certificate. If the Appellant does not pay the litigation cost in advance within 7 days after the expiration of appeal period, the appeal will be automatically withdrawn. Acting Judge: JIANG Zhangpeng March 30, 2016 Clerk: YANG Hongbo

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Hubei High People’s Court Civil Judgment Chongqing Wanzhou Yangjiang Shipping Co., Ltd. et al. v. Chongqing Sanyi Logistics Co., Ltd. (2016) E Min Zhong No.1014 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 157. Cause(s) of Action 213.(2) Dispute over bareboat charter party. Headnote Affirming lower court judgment holding that the Plaintiff finance lessor entitled to recover underpaid lease fees, dismissing the Defendant lessee’s counterclaim that it was entitled to withhold payment because it had renovated leased vessel; the court held that the Defendant was obliged by long-term lease contract to renovate vessel. Summary The Plaintiff shipowner chartered a vessel to the Defendant charterer under a bareboat charter party and received only partial hire, because the Defendant claimed that the Plaintiff was responsible for vessel repairs. The Plaintiff sued the Defendant for unpaid hire and exemplary damages. The trial court held that the bareboat charter party determined the process by which the vessel was to be repaired and that the Defendant did not follow the agreed procedure. Based on the charter party, the Defendant was responsible for repairs. The Plaintiff appealed. The appeal court affirmed the lower court’s judgment, holding that because the ship was already delivered to the Defendant, the Defendant should be liable for the cost according to the bareboat charter party between the parties.

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Judgment The Appellant (the Defendant of first instance and counterclaim Plaintiff): Chongqing Sanyi logistics Co., Ltd. Domicile: Room 1 & 2, Floor 9, No.65, Part 8, East Xinghua Road, Fuling District, Chongqing. Organization Code: 71161027-8. Legal representative: CHEN Ping, chairman of the company. Agent ad litem: ZHANG Siqiang, lawyer of Chongqing Baijun Law Firm. The Respondent (the Plaintiff of first instance, the counterclaim Defendant): Chongqing Wanzhou Yangjiang Shipping Co., Ltd. Domicile: Room B1, Floor 15, No.136, Taibai Road, Wanzhou District, Chongqing. Organization Code: 73981438-7. Legal representative: LI Yangjiang, chairman. Agent ad litem: WANG Lei, staff of the company. Agent ad litem: ZHENG Zhenhui, lawyer of Chongqing Zhenping Law Firm. The Respondent (the Plaintiff of first instance, the counterclaim Defendant): LI Shengyong Male, Han, born on October 25, 1977, living in Fengjie, Chongqing. Agent ad litem: ZHANG Zhenhui, lawyer of Chongqing Zhenping Law Firm. The Appellant Chongqing Sanyi logistics Co., Ltd. (hereinafter referred to as the “Sanyi Company”) refused to accept (2015) Wu Hai Fa Shang Zi No.01209 Civil Judgment from Wuhan Maritime Court because of the dispute over bareboat charter party with the Respondent, Chongqing Wanzhou Yangjiang Shipping Co., Ltd. (hereinafter referred to as “Yangjiang Company”), and the Respondent, LI Shengyong, and it appealed to the court. After accepting the case on July 15, 2016, the court formed a collegiate panel in accordance with the law to hear the case. ZHANG Siqiang, agent ad litem of Sanyi Company, and ZHANG Zhenhui, joint agent ad litem of Yangjiang Company and LI Shengyong, participated in the litigation. Now the case has been concluded. Sanyi Company appealed that: 1. revoke the original judgment; 2. retry the case or reject all the claims of the Respondents lawfully, and change to judge that Yangjiang Company and LI Shengyong should jointly pay Sanyi Company RMB391,923.45, for replacement cost of main engine and the mandatory rectification cost of ship with deductible rent RMB830 thousand (all of the following are RMB); 3. the Respondents should bear all litigation costs in this case. Facts and reasons were as follows: Firstly, the facts ascertained by the court of first instance were wrong regarding the host replacement fee in 2010. In performing the bareboat charter party, the ship could not be seaworthy because of lacking of power. Sanyi Company replaced the

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host of M.V. “HONG SHENG 806” to improve the wheel power. The replacement fee of the host belonged to the cost of technical transformation, and did not belong to the repair and maintenance fees, which should be born by Yangjiang Company and LI Shengyong. The main reasons were as follows: 1. the replacement of the two diesel engine greatly improved the value of the ship and the fee beyond the scope of repair belonged to the technical cost; 2. the charter party stipulated that renovation costs born by Sanyi Company was limited to the transformation of three-class tanker into class-one tanker; 3. as the actual owner, the Respondents should bear the costs of ship technology. Secondly, with respect to the costs of compulsory rectification of ships in 2013, the fact ascertained by the court of first instance was incorrect. Notice of Ship Inspection and Rectification, Notice of the Implementation of the Dangerous Goods Ship Quality Rectification from Chongqing Ship Inspection Bureau and the relevant documents confirmed that the rectification was mandatory in 2013, and if the company did not rectify, M.V. HONG SHENG 806 could not work. The main reasons were as follows: 1. this cost should not be born by Sanyi Company stipulated in the bareboat charter party; 2. the bareboat charter party did not stipulate the rectification cost, but as the shipowner, the Appellant had obligation to protect the seaworthiness of the ship and bear the cost. Yangjiang argued in second instance: the court of first instance correctly recognized the cost of the replacement of the host machine and the cost of compulsory technical transformation, which should maintain it. Sanyi Company replaced two hosts after four-year bareboat charter, and never advocated the cost to Yangjiang Company after replacing the host, so the fee should be born by Sanyi Company. Even if the costs born by Yangjiang Company, Sanyi Company should put forward within two years. It should not be protected because the request exceeded the statute of limitations. Mandatory renovation cost was to adapt some relevant policies in the production process of Sanyi Company, and Sanyi Company never reported to Yangjiang Company after receiving the notice, so the cost should be born by Sanyi Company. LI Shengyong argued in second instance: the facts ascertained by the court of first instance were clear and the law was correct. The actual performers of the contract were Sanyi Company and Yangjiang Company. LI Shengyong was not involved in the bareboat charter party, and the original judgment should be affirmed in accordance with the law. Yangjiang Company and LI Shengyong claimed to the court of first instance that: on March 17, 2006, Yangjiang Company and the original Fuling Sanyi Co., Ltd., now renamed “Sanyi Company”, signed M.V. JIANG NIU 66 Charter Party, and agreed that: Yangjiang would charter M.V. JIANG NIU 66 to Sanyi Company and the chartering deadline was last to the ship scrapping; and the rent was 430 thousand yuan per year. At the same time, the two sides made an appointment on the mode of payment of rent and the manner of liability for breach of contract. On August 31, 2006, LI Shengyong obtained the ownership of M.V. JIANG NIU 66 in accordance with the law, and changed the name of vessel to M.V. HONG SHENG

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806. The three parties made an agreement that Yangjiang Company had the relevant rights and obligations under the contract of M.V. JIANG NIU 66. In accordance with the contract, during the period from April 1, 2013 to July 30, 2015, Sanyi Company should pay the rent about 980 thousand yuan, but Sanyi Company only paid 150 thousand yuan on August 13, 2014 after Yangjiang Company dunning for payment many times, and the rest had not been paid. Yangjiang Company and LI Shengyong jointly claimed the court of first instance that: 1. Sanyi Company should pay 830 thousand yuan to Yangjiang Company, and bear the penalty of 2 million yuan; 2. the litigation costs should be born by Sanyi Company. Sanyi Company counterclaimed to the original court that: after signing the charter party of M.V. JIANG NIU 66 with Yangjiang Company, they agreed that the renovation cost of transforming three-class tanker into first-class oil tanker should be born by Sanyi Company as well as the cost, using fees, maintenance fees, inspection fees and taxes after the delivery of the ship. In performing the contract, M.V. JIANG NIU 66 provided by Yangjiang Company belonged old ship, which was only equipped with a host of 404 kilowatts and did not meet the daily needs, and had little rehabilitation values. After having communication with Yangjiang Company and LI Shengyong, Sanyi Company equipped the ship with a 600 KW host in November 2011, incurring 393,330 yuan. In June 2013, the compulsory rectification notices issued by Ship Inspection Bureau of Chongqing were sent out to all hazardous vessels of Chongqing, and after communicating with the parties, Sanyi Company spent 828,593.45 yuan rectifying the ship. Sanyi Company thought that the above costs did not belong to the scope of the cost in charter party, which should not be born by Sanyi Company but Yangjiang Company. After deducting the rent of 830 thousand yuan, Yangjiang and LI Shengyong should jointly pay Sanyi Company 391,923.45yuan. The counterclaims of Sanyi Company in the court of first instance: Yangjiang Company and LI Shengyong should jointly pay Sanyi Company host replacement costs and ship compulsory rectification costs 391,923.45 yuan and bear the costs of litigation. The facts ascertained by the court of first instance: on March 17, 2006, Yangjiang Company and Fuling Sanyi Company (hereinafter referred to as Fuling Sanyi Company) signed M.V. JIANG NIU 66 Charter Party, and agreed that: “Yangjiang would charter M.V. JIANG NIU 66 to Fuling Sanyi Company and the rent was 430 thousand yuan per year; the begin date was from the day which Yangjiang Company delivered the ship to technology factory appointed by Fuling Sanyi Company except three-month modification time, and the final date was last to ship scrapping according to the provisions of the state; after technical innovation of the ship and putting it into use, it shall, pay Yangjiang Company half of the rent 215 thousand yuan every half a year at the beginning of the month, and charge 1% overdue pay for overdue penalty every day; M.V. JIANG NIU 66 was three class oil tanker, and should be transformed to first-class tanker in accordance with the national standard technical drawings, and the full cost of technology should be born by Fuling Sanyi Company; after delivering to Fuling Sanyi Company, all expenses incurred (operating costs, fees, use fees, maintenance fees, inspection fees, taxes, etc.) should be born by Fuling Sanyi Company; after the delivery of the ship, safety

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responsibility, all accidents or other causes of loss and business risk should be born by Fuling Sanyi Company, as well as operating efficiency of the right; Fuling Sanyi Company should keep good ship maintenance, and ensure the life of ship would no be scrapped within the prescribed period; if Fuling Sanyi Company mortgaged the ship for loan or renovated, subleased the ship, it must get permission from Yangjiang Company and signed a supplementary charter party in written; when the ship was scrapped according to the provisions of the state, Yangjiang Company should gain 60%, Fuling Sanyi Company should gain 40%; one party breaking contract including Fuling Sanyi Company did not pay the rent more than three months, the party should pay 2 million yuan; other matters not covered in this agreement should be settled through consultation between the two parties. If the negotiation failed, the contract should be handled in accordance with the Contract Law of the People’s Republic of China. After the above agreement signed, Yangjiang Company delivered the ship, and Fuling Sanyi Company rebuilt the ship in accordance with the contract, transforming three-class tanker into first-class tanker. In performing M.V. JIANG NIU 66 Charter Party, the name of Fuling Sanyi Company was changed “Chongqing Sanyi logistics (Group) Co., Ltd.” On December 30, 2009, Chongqing Sanyi logistics (Group) Co., Ltd. signed M.V. JIANG NIU 66 Supplement Charter Party with Yangjiang Company and LI Shengyong, and the three parties confirmed that: they sighed this agreement based on M.V.JIANG NIU 66 Charter Party; M.V. JIANG NIU 66 had been renamed M. V. HONG SHENG 806 and the registration of ownership was LI Shengyong while the actual ownership was Yangjiang Company; LI Shengyong agreed Yangjiang Company to represent him to sign the protocol with Chongqing Sanyi logistics (Group) Co., Ltd., and bore the obligations of the shipowner; LI Shengyong commissioned Chongqing Sanyi logistics (Group) Co., Ltd. to pay the rent for Yanyjiang Company, which was regarded as the rent had been paid to LI Shengyong; LI Shengyong agreed Yangjiang Company to enjoy other rights indefinitely and execute unconditionally in M.V. JIANG NIU 66 Charter Party. From October 9, 2010 to the end of November, Chongqing Sanyi logistics (Group) Co., Ltd. replaced two diesel engines of M.V. HONG SHENG 806, which costed 393,330 yuan. In April 2013, Chongqing Sanyi logistics (Group) Co., Ltd. was renamed to Sanyi Company. In May, the People’s Republic of China Maritime Safety Administration Wuhan Ship Inspection Management Office carried out ship quality inspection activities by using chemical, and issued a “notice on the ship inspection quality rectification 828 ocean ship to the Chongqing Ship Inspection Bureau”. On June 26, Chongqing Fuling Ship Inspection Bureau issued a notice to the areas of dangerous goods shipping related units, requiring all units to investigate all problems of the ships, formulate rectification measures and plans and finish all the rectification and inspection work before September 2013. From October 9, 2013 to mid of December, Sanyi Company rectified and maintained M.V. M.V. HONG SHENG 806, which costed 828,593.45 yuan totally. On October 23, 2013, Sanyi Company submitted plan report on the ship rectification of Chongqing Sanyi

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logistics Co., Ltd. to Chongqing Fuling Ship Inspection Bureau, and claimed that M.V. HONG SHENG 806 had rectified, and passed the test; the other ships in company were still in the rectification. On June 12, 2014, Yangjiang Company, LI Shengyong and Sanyi Company signed the M.V. JIANG NIU 66 Supplement Charter Party (now M.V. HONG SHENG 806),and confirmed that the registered ship ownership was LI Shengyong, and the actual ownership was Yangjiang Company; M.V. JIANG NIU 66 Supplement Charter Party signed on December 30, 2009 was to meet the need of registration of ships, which was not the true meaning of the three parties; the three parties made a final agreement that they executed M.V. JIANG NIU 66 Charter Party signed on March 17, 2006. The court of first instance found that: during the period from April 1, 2013 to July 30, 2015, Sanyi Company should pay the rent 980 thousand yuan. Sanyi Company paid 150 thousand yuan to Yangjiang Company on August 13, 2014, and the remaining rent had not been paid. The court of first instance held that: the case was the dispute over bareboat charter party. According to M.V. JIANG NIU 66 Supplement Charter Party (now M.V. HONG SHENG 806) signed by Yangjiang Company, LI Shengyong and Sanyi Company on June 12, 2014, it could confirm that the charter party including respective right and responsibility of shipowner and charterer of M.V. HONG SHENG 806 between Yangjiang Company and Sanyi Company belonged to M.V. JIANG NIU 66 Charter Party singed on March 17, 2006. The agreement was the true intention of Yangjiang Company and Sanyi Company, which did not violate the provisions of laws and administrative regulations of the mandatory and was established lawfully and effectively. LI Shengyong was not the main body of the lease agreement contract, so he did not enjoy rights and bare the obligations under the contract; the actual ownership of M.V. HONG SHENG 806 was Yangjiang Company, who had the right to charge rent of ship instead LI Shengyong. LI Shengyong had no right to claim rent and penalty to Sanyi Company and the court of first instance should reject its request. At the same time, Sanyi Company had no right to ask LI Shengyong to fulfill the obligations under the contract, so the court of first instance rejected the counterclaim of Sanyi Company. As the main body of M.V. JIANG NIU 66 Charter Party, Yangjiang Company and Sanyi Company should take their own obligations in accordance with the agreement, and they should bear the corresponding liability if violated contract. As the ship charterer, Sanyi Company should pay rent to Yangjiang Company timely according to the charter party and should bear the liability for violating the contract because of overdue payment. According to the facts found, from April 1, 2013 to July 30, 2015, Sanyi Company should pay the rent 980 thousand yuan, but the actual payment of the rent was only 150 thousand yuan, and rest rent was 830 thousand yuan. The request of Yangjiang Company that Sanyi Company should pay the rest rent according to the law, which should be supported by the court of first instance. According to the agreement, if the charterer failed to pay the rent within three months, it should pay 2 million yuan liquidated damages to the other

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party, and Sanyi Company thought that the penalty was too high, which should be reduced. The court of first instance held that, according to the Article 29 of the Interpretation of the Supreme People’s Court on Several Issues concerning the Application of the Contract Law of the People’s Republic of China (II), the penalty agreed by Yangjiang and Sanyi Company was far higher than 30% of the rent of 830 thousand yuan, which the amount of penal sum was too high. For Yangjiang Company did not submit a defense against the above request, the original court adjusted the penalty to the 30% of the unpaid rent according to the law, 249 thousand yuan. The original court did not support the amount of penalty beyond advocated by Yangjiang Company. As for the host replacement costs produced during the rent of M.V. HONG SHENG 806, Sanyi Company held that Yangjiang Company should bear. The original court held that the vessel involved was a long-term lease, and the final date of the lease was the time when the ship had to be scrapped in accordance with the provisions of the state. According to the agreement, all expenses including the cost of operation and maintenance fees should be born by Sanyi Company after the delivery of the ship, and Sanyi Company should get permission from Yangjiang Company if it wanted to modify the ships and signed a written supplementary agreement. Sanyi Company claimed that replacing host was due to a serious shortage of power of the original host that could not meet the daily needs, and caused frequent engine damages. But in the original trial, Sanyi Company did not provide any evidence to prove its claims, and Sanyi Company took over the ship in 2006, but the replacement of the host was at the end of 2010. After working for more than four years, it asked Yangjiang Company to bear the cost of replacing the host for the low power and adaption of the original host, which was implausible. What’s more, even if the original host needed to be replaced because of long using time, it belonged to the cost of the ship operations, which should be born by Sanyi Company according to the agreement. Moreover, Sanyi Company did not consult with Yangjiang Company when replacing the host according to the terms of the agreement, and Yangjiang Company could refuse to pay the costs by using this plea. In conclusion, Sanyi Company’s claim of asking Yangjiang Company to bear the fee of replacement lacked evidence, so the court of first instance should not support. The issue of which party should bare the forced rectification costs of the ship occurred during 2013 claimed by Sanyi Company, the original court found that the fee should be born by Sanyi Company. The reasons were as follow: 1. From [2013] No.4 Chongqing ship inspection issued by the Chongqing Ship Inspection Bureau, Since May 2013, ship inspection and ship rectification activities were aimed to investigate dangerous goods ship including the quality defect of involved ship, which was not to raise the ship technology and inspection standard as a result of the rectification costs. 2. From rectified project in “rectification notice on the operation of the ship inspection” issued by the Fuling Ship Inspection Bureau to Sanyi Company it mainly aimed to give some opinions on fire prevention facilities and lifesaving

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facilities, alarm facilities and driving performance and the existed other aspects of M.V.HONG SHENG 806, which could not reflect these rectified measures was taken compulsively by ship inspection division to improve the ship technical standards and inspection standards. The costs caused by above measures should be normal operation and maintenance costs produced during the operation of the ship, in accordance with the contract, which should be born by Sanyi Company. 3. The ship belonged to three-class tanker, transformed to the first-class tanker in order to conform to the standard, which should be born by Sanyi Company according to the agreement, as well as the maintenance of the ship during the rent period. Therefore, during the chartering period, the obligation of keeping the ship in first-class tanker standard of airworthiness and inspection should be born by Sanyi Company, and the resulting costs should be born by Sanyi Company. 4. Sanyi Company claimed its input rectification costs amounted to 800 thousand yuan, but it did not provide evidence that it had consulted with Yangjiang Company in the process of the rectification or transformation of the ship. Yangjiang did not participate in ship rectification either, so the fee’s objectivity, rationality and necessity was unconvincing and unacceptable. Above all, the claim that Sanyi Company required Yangjiang Company to undertake rectification costs, which was lack of factual basis and legal basis so that the court of first instance should not support. In summary, the request from Yangjiang Company to ask Sanyi Company to pay the rent had sufficient evidence, which the court of first instance supported; the penalty claimed by Yangjiang was too high, and the court of first instance adjusted it. Sanyi Company’s counterclaim was lack of evidence, so the court of first instance rejected it. According to Article 60 Paragraph 1, Article 107, Article 114 Paragraph 2 and Paragraph 3, Article 220, Article 226 of the Contract law of the People’s Republic of China, and Article 29 of the Interpretation of the Supreme People’s Court on Several Issues concerning the Application of the Contract law of the People’s Republic of China (II), and Article 64 Paragraph 1, Article 142 of the Civil Procedure Law of the People’s Republic of China, the judgment was as follows: 1. within ten days of the date of effect of this judgment, Sanyi Company should pay Yangjiang Company 830 thousand yuan for the rent and the penalty of 249 thousand yuan; 2. reject other claims of Yangjiang Company; 3. reject the claims of LI Shengyong against Sanyi Company; 4. reject the counterclaims of Sanyi Company. If it did not fulfill the responsibility of the payment within the period specified in the judgment, it should pay overdue interest in accordance with the provisions of the Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of 29,440 yuan, charged 14,720 yuan due to the application of summary procedure, 5,612 yuan should bear by Yangjiang Company and LI Shengyong, and Sanyi Company should beare 9,108 yuan. Court acceptance fee of counterclaim in amount of 7,178 yuan, charged 3,589 yuan due to the application of summary procedure, which should be born by Sanyi Company.

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During the second instance, Sanyi Company submitted two sets of evidence towards the appeal according to law. The court organized the parties to exchange evidence and cross-examination. Evidence one: Interim Provisions on Ship Navigation Safety Management between the Upper Reaches of the Yangtze River Fomian Beach and Jieshipan issued by the Yangtze River Maritime Safety Administration in 2012, to prove that original engine of M.V. HONG SHENG 806 could not meet the requirements of minimum technical power in the Yangtze River and Chuanjiang River, and Sanyi Company changing the host was to meet the minimum technical requirements. The cross-examination of Yangjiang Company and LI Shengyong: they had no objection on the authenticity and legality of the evidence, but the document had nothing to do with the case, which the association shall not be recognized. The confirmation opinions of the court: Yangjiang Company and LI Shengyong recognized the authenticity and legality of this evidence, so the court confirms it. Because Interim Provisions on Ship Navigation Safety Management between the Upper Reaches of the Yangtze River Fomian Beach and Jieshipan was issued in 2012, the cost of replacing the host claimed by Sanyi Company was produced from October 9, 2010 to the end of November. The provisions and the cost of changing host had no association, which was not used as the basis in the court. Evidence two: 1. Rectification Notice on Remaining Problem of Hazardous Chemicals Ship Technical Review in 2015 and 2016 in Chongqing Issued by Chongqing Ship Inspection and Bureau Fuling Ship Inspection Bureau on December 10, 2015, Emergency Notice on Chemical Tanker Technical Review of Chongqing Ship Inspection Bureau on February 6 2016, Notice on Rectification Issue of Technology Special Review of M.V. HONG SHENG 827, M.V. HONG SHENG 78, M.V. HONG SHENG 807, M.V. HONG SHENG 806 issued by Chongqing Fuling Ship Inspection Bureau on August 16, 2016, to prove that rectification again was required by Chongqing Ship Inspection Bureau, and M.V. HONG SHENG 806 was currently in rectification state; 2. Special Informed Letter of Sanyi Company on April 20, 2016, the postal certificate, Reply of Yangjiang Company on May 3, 2016, to prove that Sanyi Company had informed Yangjiang Company the rectification of M.V. HONG SHENG 806”. The cross-examination of Yangjiang Company and LI Shengyong: the above evidence was true and lawful, but the evidence was not relevant to the case. The confirmation opinions of the court: Yangjiang Company and LI Shengyong recognized the authenticity and legality of the evidence, and the court confirms it. The evidence indicates the facts that: M.V. HONG SHENG 806 was asked to rectify within deadline by ship inspection department in December 2015 and February, August 2016 because it did not meet the technical standards of hazardous chemicals ship, and Sanyi Company informed Yangjiang Company the rectification. Because the compulsory rectification costs claimed by Sanyi Company occurred in 2013, and the rectification demand from ship inspection department during 2015 and 2016 and the notice of Sanyi Company had no correlation with the cost of Sanyi Company, so the court should not put the evidence as the basis of a decision.

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The court finds out the facts of the first instance are true, which should be confirmed by the court. With respect to the disputes of two parties, the court makes the following analysis and confirmation with the relevant evidence of this case: Firstly, the issue whether the cost of host replacement in 2010 should be undertaken by Yangjiang Company. After investigation, Sanyi Company [including the company named Fuling Sanyi Company and Chongqing Sanyi logistics (Group) Co. Ltd.] singed a total of five copies of the contract with Yangjiang Company on the rent of M.V. HONG SHENG 806, including M.V.JIANG NIU 66 Charter Party on March 17, 2006, M.V. JIANG NIU 66 Charter Party on May 15, 2009 and M.V. JIANG NIU 66 Supplement Charter Party on May 15, 2009, M.V. JIANG NIU 66 on December 30, 2009 and M.V. JIANG NIU 66 Supplementary Charter Party (now M.V. HONG SHENG 806) on June 12, 2014. Among those contracts, M.V. JIANG NIU 66 Supplement Charter Party (now M.V. HONG SHENG 806) on June 12, 2014 agreed that the charter of M.V. HONG SHENG 806 followed the provisions of M. V. JIANG NIU 66 Charter Party on March 17, 2006. The agreement represented the true meaning of both parties and was legally valid. Therefore, in accordance with M.V. JIANG NIU 66 Charter Party on March 17, 2006, the court determines the rights and obligations of the two parties. After the signing of the charter party, Sanyi Company appealed that M.V. HONG SHENG 806 was not seaworthiness for the shortage of power. In order to improve the ship power, Sanyi Company replaced the host in 2010, and the cost belonged to technical expenses, which should be born by Yangjiang Company. The court holds when Sanyi Company chartered M.V. HONG SHENG 806 and transformed three-class tanker into first-class tanker according to agreement, the ship power should meet the basic requirements of seaworthiness. All the expenses caused by the transformation (including design fees, assessment fees, transformation fees, additional facilities and equipment purchase fees) should be born by Sanyi Company according to Article 5 of M.V. JIANG NIU 66 Charter Party on March 17, 2006. After Sanyi Company had chartered M.V. HONG SHENG 806 for 4 years, the replacement of the host ship was to maintain the normal operation of the ship, and the costs incurred belonged to the ship operating costs or maintenance costs rather than the technical fees claimed by Sanyi Company. According to Article 6 of M.V. JIANG NIU 66 Charter Party on March 17, 2006, all expenses incurred after the delivery of the vessel (operating costs, fees, use fees, maintenance fees, inspection fees, taxes, etc.) should be born by Sanyi Company. Therefore, the claim of Sanyi Company that the replacement cost of 393,330 yuan should be born by Yangjiang Company, shall not be supported by the court. Secondly, whether the cost of ship compulsory rectification during 2013 should be born by Yangjiang Company or not. As stated above, the subject who was responsibility for costs of the vessel’s compulsory rectification during the period of 2013 should be determined in accordance with M.V. JIANG NIU 66 Charter Party on March 17, 2006. Sanyi Company appealed that: the expenses was generated by the rectification

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requirements from ship inspection, and Yangjiang Company as the shipowner had obligation to protect the seaworthiness so the fee should be born by Yangjiang Company. The court holds that: Sanyi Company claimed in the original trial that the documents requiring M.V. HONG SHENG 806 to rectify compulsively were mainly including Notice on the Implementation of Rectification of Quality of Ship Inspection of Dangerous Goods Ship (inspection of Chongqing ship No.4 [2013]) issued by Chongqing Ship Inspection Bureau on June 18, 2013, Notice about Forwarding Notice on the Implementation of Rectification of Quality of Ship Inspection of Dangerous Goods Ship (inspection of Fu ship No.2 [2013]) issued by Chongqing Fuling Ship Inspection Bureau on June 26, 2016, and Notice on Inspection and Rectification of Operating Ship issued by Fuling Ship Inspection Bureau on August 22, 2013. All above documents showed that the ship inspection of M.V. HONG SHENG 806 was operating inspection, and required Sanyi Company to rectify the shortage of endangering the safe operation of the ships. The rectification did not force to improve ship technology and inspection standards, which did not belong to the scope of ship reconstruction, and the rectification costs should belong to the operation costs during the operation of the ship. According to Article 6 of M.V. JIANG NIU 66 Charter Party on March 17, 2006, all expenses incurred after the delivery of the vessel (operating costs, fees, use fees, maintenance fees, inspection fees, taxes, etc.) should be born by Sanyi Company. Therefore, the court does not support the appeal of Sanyi Company that the ship rectification costs occurred in 2013 should be born by Yangjiang Company. Thirdly, whether LI Shengyong should bear the joint liability or not. Sanyi Company appealed that LI Shengyong, as the registered owner of the ship, should pay Sanyi Company the host replacement costs in 2010 and the ship compulsory rectification costs in 2013 with Yangjiang Company. After investigation, M.V. JIANG NIU 66 Supplement Charter Party (now M.V. HONG SHENG 806) signed on June 12, 2014 was the last agreement of the charter of M.V. HONG SHENG 806 among Sanyi Company, Yangjiang Company and LI Shengyong. Article 4 in agreement stated that: “when moving the ship registry port of M.V. HONG SHENG 806 from Wanzhou Port to Fuling Port, the shipowner, Yangjiang Company was changed to LI Shengyong for sake of the convenience of changing the port of registry, but the real ownership was Yangjiang Company, and Article 4 in this agreement stated that: “Yangjiang Company and Sanyi Company finally reached an agreement and performed by M.V. JIANG NIU 66 Charter Party signed on March 17, 2006”. The court holds that: the voluntary agreement between Sanyi Company and Yangjiang Company on June 12, 2014 means that the tenant of M.V. HONG SHENG 806”was Sanyi Company, the shipowner was Yangjiang Company, the rights and obligations of the charter between two parties followed by M.V. JIANG NIU 66 Charter Party on March 17, 2006. LI Shengyong was not the subject of M.V.JIANG NIU 66 Charter Party signed on March 17, 2006, and did not enjoy contractual rights nor bear the corresponding contractual obligations. Therefore, the court shall not support the claims of Sanyi Company that LI Shengyong should bear relevant joint liability.

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In view of above all, Sanyi Company’s appeal cannot be established, which shall be dismissed; the facts ascertained by the judgment of first instance are clear and application of law is correct, which should be affirmed. In accordance with Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follow: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of 18,309 yuan, shall be born by Chongqing Sanyi logistics Co., Ltd. The judgment is final. Presiding Judgment: LU Yang Judge: LIN Xianghui Judge: YU Jun October 31, 2016 Clerk: CHEN Yinhua

Dalian Maritime Court Civil Judgment Dalian Beiyuan Ship Outfitting Engineering Co., Ltd. v. Liaoning Dongbao Group Ship Manufacturing Co., Ltd. (2015) Da Hai Shang Chu Zi No.00662 Related Case(s) None. Cause(s) of Action 207. Dispute over shipbuilding contract. Headnote The Defendant held obliged to pay outstanding amount due under three separate contracts relating to the construction of the same ship; the court rejected the Defendant’s argument that the three contracts should be treated separately, and aggregated the amounts due and part payments made. Summary The Plaintiff sued the Defendant for delay of payment and deferral in returning the risk deposit according to three contracts concerning the construction of the same ore ship. The Defendant asserted its first defense that the Plaintiff should not be allowed to bring the three contracts together to support its claim because their subject matter was starkly different. The Defendant alternatively argued that even if the issue of subject matter was solved, the Plaintiff only proved the existence of the first two contracts and failed to prove the existence of the third contract. Hence, the Defendant asked the court to reject the Plaintiff’s claims, on the ground that the Defendant had already paid the Plaintiff more than the amount required by the first two contracts. Declining the Defendant’s two defenses, the court found fully in favor of the Plaintiff. The court held that the three contracts here all belong to the same construction project and the Defendant’s obligation to pay should not be treated separately, since the two parties had not expressly stipulated the details of separate payments in advance and only the aggregate amount could be referred to. The court further held that the Plaintiff had sufficiently proved the existence of the third contract through evidence of signature by the Defendant’s employee on its behalf and the Defendant should bear the corresponding responsibilities.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_7

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Judgment The Plaintiff: Dalian Beiyuan Ship Outfitting Engineering Co., Ltd. Domicile: Ganjingzi District, Liaoning City, Dalian. Legal representative: HUANG Baojian, general manager of the company. Agent ad litem: CHEN Guoqiang, lawyer of Liaoning Guta Law Firm. The Defendant: Liaoning Dongbao Group Ship Manufacturing Co., Ltd. Domicile: Huludao Economic Development Zone, Liaoning. Legal representative: LI Baodong, chairman of the company. Agent ad litem: LI Liang, lawyer of Liaoning Daming Law Firm. With respect to the case arising from dispute over shipbuilding contract, the Plaintiff, Dalian Beiyuan Ship Outfitting Engineering Co., Ltd. (hereinafter referred to as Beiyuan Company), and the Defendant, Liaoning Dongbao Group Ship Manufacturing Co., Ltd. (hereinafter referred to as Dongbao Company) ship construction contract dispute case, the court entertained the case and constituted a trial bench according to law and held a hearing in public. Legal representative of the Plaintiff Beiyuan Company, HUANG Baojian, agent ad litem CHEN Guoqiang, and agent ad litem of the Defendant Dongbao Company, LI Liang, appeared in court and participated in the action. Now the case has been concluded. Beiyuan Company claimed that: Beiyuan Company and Dongbao Company respectively on September 16, 2010 and January 19, 2011 signed a M.V. 45000T-4#DWT Inside Equipping Engineering Contract, M.V. 388K-2# Ore Carrier Inside Equipping Engineering Contract and superstructure closure production project contract, and the total cost of the projects was RMB6,791,789.62. In addition, some projects were increased in the construction process and the cost of project was RMB474,001.7. The above amount totaled RMB7,265,791.32. But Dongbao Company actually paid RMB6,027,119.62 for the project, and still owed RMB1,238,671.7 to Beiyuan Company. Because the outstanding work of M.V. 388K-2# was actually done by Sea Company, Dongbao Company could deduct this amount directly in the project cost owed to Beiyuan Company, but Beiyuan Company did not recognize Dongbao Company’s claim that cost of outstanding work by Sea Company was RMB386,100.01, and only recognized RMB100,100.01. In summary, Dongbao Company owed RMB1,138,571.69 to Beiyuan Company after deducting the cost of outstanding work by Sea Company of RMB100,100.01. In addition, the security deposit totaling RMB300,000 that the company paid to Dongbao Company on May 25, 2011, and July 28, 2011 so far had not yet returned. Therefore Beiyuan Company requested the court that: firstly, Dongbao Company should pay arrears of project cost of RMB1,138,571.69 and interest rate calculated as the People’s Bank China benchmark interest rate from December 12, 2013 to the date of payment of loans; secondly, Dongbao Company should pay the liquidated damages of deferred payment of project cost of RMB339,589.48 calculated as 5% of the total project funds of RMB6,791,789.62;

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thirdly, Dongbao Company should return the risk of security deposit of RMB300,000. Dongbao Company argued that: firstly, the litigation procedure of Beiyuan Company was not legitimate. There were three parts of the contracts involved in the case listed in the complaint by Beiyuan Company, including M.V. 45000T-4#DWT Inside Equipping Engineering Contract, M.V. 388K-2# Ore Carrier Inside Equipping Engineering Contract and superstructure closure production project contract. Its prosecution content belonged to three independent contracts and the agreed subject matters were different, so they should not be heard in the same case; secondly, Beiyuan Company’s claim that Dongbao Company was in arrears with project payment was not based on fact. First of all, Beiyuan Company only proved the existence of two shipbuilding contract and failed to provide any evidence for superstructure closure production project; secondly, the total cost of two shipbuilding contract and the risk of mortgage totaled RMB5,859,000, and the amount of the project payment had been paid in full by Dongbao Company. Beiyuan Company did not provide any effective evidence to support its claim of the project payment procrastination in the case. Therefore, Dongbao Company requested court to reject the litigation claims of Beiyuan Company in accordance with the law. Beiyuan Company provided the following evidence to prove its claims: Evidence one M.V. 45000T-4#DWT Inside Equipping Engineering Contract and M.V. 388K-2# Ore Carrier Inside Equipping Engineering Contract. To prove that: firstly, the contract price including tax of M.V. 45000T-4#DWT Inside Equipping Engineering Contract was RMB2,808,000 (that excluding tax was RMB2,400,000), contract price of 388K-2# Ore Carrier Inside Equipping Engineering Contract was RMB3,159,000 (including tax). The total price including tax of two contracts was RMB5,967,000. Secondly, the Plaintiff and the Defendant specified the payment of the time and conditions, responsibility for the loss caused by rework, deferred payment of liability for breach of contract and calculation of liquidated damages in the contract; Evidence two Dongbao billing details. To prove that: price of section manufacturing project was RMB824,789.62. this amount was not included in the two contracts of the evidence one. According to evidence one, the total price of M.V. 45000T-4#DWT Inside Equipping Engineering Contract, M.V. 388K-2# Ore Carrier Inside Equipping Engineering Contract and superstructure closure production project contract was RMB6,791,789.62; Evidence three Cash Voucher on July 28, 2011. To prove that: MU Na was Dongbao Company’s financial staff; to prove that with the confirmation by MU Na, confirmed that Dongbao Company’s payment of RMB157,950, a 5% of advance payment under M.V. 388K-2# Ore Carrier Inside Equipping Engineering Contract on May 4, 2011 breached Article 10 Paragraph 2 Sub-paragraph 1 of this contract stipulating payment of 10% of advance payment for project and broke the contract; Evidence four Settlement Clearing Agreement. To prove that behavior of Dongbao Company stamping Settlement Clearing Agreement was its true meaning. Dongbao Company believed the contract amounted to RMB6,791,800 and Beiyuan

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Company’s invoice amount was RMB6,437,279.62. The invoice balance was RMB222,779.63 and the balance of invoice taxes was RMB32,369.69; interior works contracted by Beiyuan Company was completed before December 12, 2013. Dongbao Company admitted that it still owed RMB451,171.37 to Beiyuan Company, and that it breached contract; but Beiyuan Company did not confirm the payment of cash or cheques, deductions for bo ship, pre financial deductions, outstanding work of M.V. 2# by Haida, revision of notification and actual payment listed on Settlement Clearing Agreement, so the agreement was not signed and sealed; Evidence five Technical Notice, Construction Handling, Materials Substitution Notice and Beiyuan Company construction records. To prove that Technical Notice and Construction Handling, Materials Substitution Notice were additional operation instructions issued by Dongbao Company; M.V. 45000T-4#DWT Inside Equipping Engineering Contract and M.V. 388K-2# Ore Carrier Inside Equipping Engineering Contract added 756 operation projects, 506 of which were completed by Beiyuan Company. And work amount can be calculated on each notice. M.V. 45000T-4#DWT Inside Equipping Engineering Contract added 199 operation projects, 145 of which were completed by Beiyuan Company; M.V. 388K-2# Ore Carrier Inside Equipping Engineering Contract added 557 operation projects, 361 of which were completed by Beiyuan Company; construction records of Beiyuan Company were part of addition operation project recorded by Beiyuan Company in operation and were part of its completed 506 addition operation projects. The content was true; according to the Technical Notice and Construction Handling, Materials Substitution Notice, man- hour and sum of addition project can be calculated, totaling RMB474,001.7; Evidence six CITIC Bank online banking transfer business receipt and CITIC Bank online banking business receipt. To prove that Dongbao Company paid Beiyuan Company project cost of RMB243,541 and RMB40,000 respectively on January 30, 2014 and February 15, 2015 (the stamp date) and date intervals between two remittance amounted to 1 years. This broke Article 10 Paragraph 3 Sub-paragraph 1 of the Contract and constituted a breach of the contract; Evidence seven Room Key Handover Receipt. To be proved that: the inside equipping project of M.V. 388K-2# ore carrier was completed on March 3, 2012; Evidence eight 2 Cash Voucher. To prove that Dongbao Company received RMB30,000 and RMB270,000 of risk mortgage from Beiyuan Company on May 25, 2011 and July 28, 2011 respectively, totaling RMB300,000. Dongbao Company’s evidence questioning on the evidence of Beiyuan Company: there was no objection to the authenticity and legality, but there was objection to the association of the evidence one. The evidence could not prove the litigation claim of Beiyuan Company. The total price stated in the above two contracts did not conform with the total contract price advocated by Beiyuan Company. Dongbao Company had fulfilled payment of price stipulated in the contract and was in no arrears of Beiyuan Company and it did no break the contract; evidence two was not recognized. The evidence that only had signature of MU Na

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without the seal of the company or financial dedicated seal proved that its issued details did not belong to performance of their duties, and had nothing to do with Dongbao Company. The details did not indicate any specific contract that it referred to and cannot explain it was other additional items or oral agreement outside of the two written agreements in the evidence one claimed by Beiyuan Company; there was no objection to the evidence three. MU Na was Dongbao Company’s financial staff, but the evidence three can prove that company’s financial seal must be affixed when MU Na performed her duties on behalf of the company, while the act of signing by MU Na in evidence 2 was not a job behavior, so Dongbao Company did not recognize Dongbao Billing Details. Dongbao Company paid in full the project cost of Beiyuan Company strictly in accordance with the agreed price. In accordance with the contract, advance should be paid in ahead of the project, while Beiyuan Company reception of 5% of advance payment implied it accepted this method of payment. This was its true meaning and did not belong to the breach of contract; the evidence of four was not recognized. Settlement Clearing Agreement only had Dongbao Company’s seal without Beiyuan Company’s seal, and many clauses in the agreement were not recognized by Beiyuan Company. So the agreement should not be established, and had no legal effect and validity of evidence. The inscribed time of the agreement should neither be taken as the starting point of payment of liquidated damage nor be used to confirm the fact that Dongbao Company was in arrears with project cost; evidence five was not recognized, the evidence was not stamped with the seal of the company and other effective seal and certificate, so it cannot prove that the evidence was delivered to Beiyuan Company by Dongbao Company; according to two written contract in the evidence one, the project contract agreement was fixed, even if there was reduction, increment and modification, the payment shall be included in the price of fixed contract without supplementary contract. Beiyuan Company had no evidence to prove that there was increment and modification of the project under the two written contracts in evidence one; Dongbao Company did not request for cross examining evidence six, but it was presented in the trial as one of the evidence of payment; evidence seven was not recognized, the evidence was not stamped with effective seal of Dongbao Company; authenticity of evidence eight was recognized, but the payment deducted relevant deductions and the payment of the outstanding work from the total project price that Dongbao Company paid to Beiyuan Company had included risk mortgage of RMB300,000, and Dongbao Company should not pay for separately. The court’s confirmation opinion on the evidence of Beiyuan Company: evidence one M.V. 45000T-4#DWT Inside Equipping Engineering Contract, M.V. 388K-2# Ore Carrier Inside Equipping Engineering Contract were original with the seal of the company of the Plaintiff and the Defendant and the signature of attorney and Defendant recognized its authenticity and validity. The court admits the evidence; evidence two Dongbao Billing Details was original. Part of its printed form neither had official seal nor related personnel signature, but invoice breakdown of value that Beiyuan Company issued to Dongbao Company and Dongbao Company and relevant situation on the form of payment for involved project cost of Dalian Beiyuan Outfitting Engineering Co., Ltd. formed on December 26, 2015 issued by

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Dongbao Company are mutual supported. So the court recognizes the fact that Beiyuan Company issued an invoice of RMB6,437,279.62 to Dongbao Company. On the other, below the table was the handwritten note: through verification the amount of issued sectional manufacturing invoice had stood at RMB824,789.62, MU Na, 2013.11.19. Because MU Na was Dongbao Company’s financial staff, Dongbao Company recognized the signature of MU Na, and the fact that handwritten part was done by MU Na can be confirmed from her handwriting. The court admits the evidence. Given that Dongbao Company’s claim that contracts for construction projects totaled RMB6,791,800 in evidence four Settlement Agreement, it can be confirmed that sectional manufacturing project was implemented by Beiyuan Company and that it was a project independent from M.V. 45000T-4#DWT Inside Equipping Engineering Contract, M.V. 388K-2# Ore Carrier Inside Equipping Engineering Contract. Evidence three Cash Voucher were original and can prove that MU Na was Dongbao Company’s financial staff. Dongbao Company recognized it and the court admits. Evidence four Settlement Clearing Agreement was the original, the agreement was stamped with the seal of Dongbao Company and signed by its lawyer GAO Yang. Although Beiyuan Company did not recognize part of payment and not sign and seal, resulting in failure to reach an agreement, but it can be judged that Dongbao Company recognized all payments specified in the agreement. So the court recognizes the fact that: contracts for construction project totaled was RMB6,791,800, Beiyuan Company recognized, the difference of invoice was RMB222,779.63, the difference of invoice tax was RMB32,369.69, Beiyuan Company issued invoices was RMB6,437,279.62. In terms of the payment that was not recognized by Beiyuan Company, the court needs to judge it by combining other evidence; evidence five Technical Notice, Construction Handling, Materials Substitution Notice and Beiyuan Company construction records were photocopies, which neither included Dongbao Company’s seal and other valid seal or documents, nor other effective evidence to prove, the court does not admit it. Evidence six CITIC Bank online banking transfer business receipt and CITIC Bank online banking business receipt were copies, but Dongbao Company presented it in the trial as evidence of its payment. The court admits it; evidence seven Room Key Handover Receipt was copy without the valid seal of Dongbao Company. Although Beiyuan Company claimed that it was signed by Dongbao Company’s staff ZHOU Jian, Dongbao Company did not recognize that ZHOU Jian was its company’s staff and Beiyuan Company had no evidence to prove it. Therefore, the evidence was not accepted by the court. Evidence eight, Cash Voucher was original and Dongbao Company recognized. The court admits it. Dongbao Company provided the following evidence for the refusal of Beiyuan Company’s claim: Evidence 1 29 copies of payment voucher. To prove that: Dongbao Company had paid to Beiyuan Company RMB6,027,119.62, which did not constitute any breach of contract, there was no other right and obligation between the two sides; and.

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Evidence 2 10 copies of deduction certificate. To prove that the total amount of fines for Beiyuan Company was RMB114,818. The certificate one recorded RMB10,000, the certificate two recorded RMB9,720, certificate three recorded RMB22,240, Bo ship fine payment details of September recorded RMB500, certificate four and Bo ship heavy industry fines confirmation table of October 2011 recorded RMB5,345, two copies of Bo ship heavy industry fine confirmation table on October 12, 2012 recorded RMB10,591 and RMB41,182 respectively, Dongbao shipyard accommodation fees (October, November, December 2011) deduction statistics recorded RMB8,280, Bo ship Heavy Industry fine confirmation table records of November 2011 recorded RMB1,750, report on M.V. 388000T2 # project cost of outstanding work recorded RMB5,210. Beiyuan Company’s cross-examination to Dongbao Company: there was no objection to the authenticity, legality and relevancy of evidence and no objection to the total amount of the project that Dongbao Company paid to Beiyuan Company, Dongbao Company had actually paid RMB6,027,119.62; it recognized the deductions and fines signed by Beiyuan Company’s staff or confirmed by its seal in the evidence two. They were of RMB9,720 of receipt on August 29, 2011, RMB22,240 of accounting voucher on October 6, 2011, RMB5,345 of accounting voucher on November 30, 2011 RMB1,400 of Bo ship Heavy Industry Penalty Confirmation Form in November 2011, totaling RMB38,705; amount recorded in other documents recorded was made by Dongbao Company unilaterally, and there was no signature of Beiyuan Company personnel or company seal, so it did not recognize. The court’s confirmation and opinion on the evidence of Dongbao Company: evidence one payment voucher was the original, and was recognized by Beiyuan Company. the Court accepted it; evidence two deduction voucher was the original, the court admitted deduction and fines with Beiyuan Company’s seal or relevant personnel signature, and confirmed the amount of fines and deductions that involved Beiyuan Company. It included RMB9,720 of special receipt receipts on August 29, 2011, RMB22,240 of accounting voucher on October 6, 2011, RMB5,345 of accounting voucher on November 30, 2011, RMB1,400 of Bo ship heavy industry penalty confirmation form in November 2011, totaling RMB38,705; other records were made by Dongbao Company unilaterally. They were neither sealed by Beiyuan Company or signed by the relevant personnel, nor proved by other evidence, so the court does not accept it. Combined with the above evidence, the court finds out that: On September 16, 2010, Dongbao Company (Contract Party A) and Beiyuan Company (Contract Party B) signed M.V. 45000T-4 # DWT built-in engineering contract, the project price agreed in the contract was RMB2,400,000 (excluding 17% VAT), if the 17% value-added tax was included, the project price should be RMB2,808,000. On January 19, 2011, the two sides signed M.V. 388K-2 # ore ship built-in engineering contract, the project price agreed in the contract was RMB3,159,000 (including 17% VAT). The taxable price of the above projects was RMB5,967,000. From the period between August 31, 2010 to February 15, 2015,

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Dongbao Company paid a total of RMB6,027,119.62 to Beiyuan Company, including the project cost of RMB243,541 paid to Beiyuan Company on January 30, 2014 and the project cost of RMB 40,000 paid to Beiyuan Company on February 15, 2015. Beiyuan Company had issued involved contract invoice of RMB6,437,279.62 to Dongbao Company. On May 25, 2011, Beiyuan Company delivered a risk deposit of RMB30,000 to Dongbao Company. On July 28, 2011, Beiyuan Company delivered a risk deposit of RMB270,000 to Dongbao Company, totaling RMB300,000. The outstanding works in M.V. 388K-2# ore ship built engineering contract were completed by Sea Company. In the process of construction of the project involved, Dongbao Company had paid corresponding deductions and fines to Beiyuan Company since August 29, 2011. Dongbao billing details recorded that Beiyuan Company issued all invoices of the project involved for Dongbao Company, including the date, amount and corresponding project name on remarks column. The written part below the table in the evidence specified: through verification, RMB824,789.62 of the sub-production invoice had been issued, MU Na, 2013.11.19. MU Na was Dongbao Company’s financial staff. Dongbao Company issued to Beiyuan Company Clearing and Settlement Agreement with its Company’s seal and its signature of lawyer GAO Yang, and the inscription time of Dongbao Company was marked as December 12, 2013. The attached table states: Serial number Project Amount (yuan) Remarks 1 Total contract amount 6791800 All contracts 2 Remittance to the Beiyaun company 5243578.62 3 Pay cash or check 605298 4 Bo ship deduction 251200 Equipment charge 5 Pre-financial deduction 85548

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6 M.V. 2 # outstanding work of Sea Company 386100.01 388K-2 # 7 Change notice 60000 2 Ships Total (1–2-3–4 + 5–6 + 7). 451171.37 8 Actual payment 5763328.62 9 The issued invoiced by Beiyuan Company 6437279.62 17% VAT 10 Invoice balance 222779.63 11 Difference invoice tax 32369.69 Tax returns total 483541.06 Since only the contract amount, invoice balance, difference invoice tax, and the corresponding amount of invoice issued by Beiyuan Company, which are all listed in the attached table of the agreement, are approved by Beiyuan Company while the corresponding amount of money are excluded, Beiyuan Company did not sign and seal the agreement. It is otherwise found out that: according to, Article 10 Paragraph 3 in both 45000T-4#DWT Inside Equipping Engineering of Shipping Contract and 388K-2# Dredgers the Inside Equipping Engineering of Shipping Contract, payment should be line with the following requirements: firstly, after the enforcement of the contract, Party A (Dongbao Company) should pay the advance money to Party B (Beiyuan Company) within 30 days, and other payment should be paid to Party B within 30 days after the completion and acceptance of the corresponding work nodes. Secondly, Party A should pay Party B the corresponding construction payment based on inspection, and signature and approval according to the completed work nodes of Party B. Thirdly, Party B should issue the receipt and VAT invoices of the corresponding funds when every settlement was made. Article 11 Paragraph 1 of the Contract stipulates that in the process of concreted construction, if the party B suffer the rework loss due to Party A, Party A should assume the responsibility and the cost incurred shall be executed in accordance with related

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articles in the contract. Other consumption should be subject to the actual amount and the increase in cost would be settled in the final paragraph. Article 10 Paragraph 3 stipulates that in addition to force majeure stipulated by Article 15 in the contract, Party B should pay liquidated damages due to delayed delivery providing that Party B could not deliver on time. In the event of each day’s overdue delivery, Party B should pay liquidated damages calculated as 0.5% of the contract price, but the liquidated damages shall not exceed 5% of the contract price. If Party B failed to deliver the goods in accordance within the required dates under the contract and the delay of delivery was ascribed to Party A, Party B should have the right to request Party A to bear the economic losses incurred therefrom. In case of the deferred payment due to Party A, Party A should pay the liquidated damages to Party B calculated as 0.5% of the contract price, but the liquidated damages should not exceed 5% of the total contract price. As was stipulated in Article 12 Paragraph 4 the liability for breach of contract of either party should be subject to the written materials approved by both parties. On April 11, 2016, Beiyuan Company applied for the court about the outstanding work of 388K-2# Dredgers the Inside Equipping Engineering of Shipping and advising the project amount on its completion on letter of notice and its appraisal and evaluation. On June 30, 2016, Beiyuan Company also submitted to the cancellation of application of the above evaluation and appraisal for the reason that it would take a long time to complete the project of the disputed vessel and it had been put in service abroad, which led to identification difficulties. The above-mentioned facts had been proved by evidence including 5000T-4#DWT the Inside Equipping Engineering of Shipping Contract and 388K-2# Dredgers the Inside Equipping Engineering of Shipping Contract, DongBao invoice details, CITIC Bank Online Transfer Business Receipt, CITIC Business Receipt, Settlement and Clearing Agreement, and cash vouchers, remittance receipt, deduction documents as well as the statement of both parties, and all these facts has been cross-examined by court trial and can be recognized by the court. The court holds that: The case is the dispute over shipbuilding contract. As was stipulated in Article 8 of the Contract Law of the People’s Republic of China, contracts established according to law have legal binding effect on the parties concerned, and the parties shall fulfil their obligations in accordance with the contract. As is stipulated in Article 10, the parties enter into contracts in written, oral and other forms. In this case, the contract signed by the original plaintiff and the defendant on the basis of equal consultation is the true meaning of both parties, and the content does not violate the provisions of the law and is legally valid. Both parties shall fully and conscientiously fulfill the above contract and bear the rights, obligations and responsibilities under the said contract. Since Dongbao Company has completed the construction project in accordance with the contract, Dongbao Company shall pay the corresponding project price. The issues of the dispute between the Plaintiff and the Defendant in the case trial are represented as follows: firstly, on the legality issue of litigation procedures

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indicted by Beiyuan Company; secondly, on the confirmation and payment issue of the project price involved between two parties; thirdly, on the liability issue for breach of the contract; fourthly, on the issue of the restitution of risk-guaranty money. Firstly, on the legality issue of litigation procedures indicted by Beiyuan Company. Dongbao Company regarded that the 5000T-4#DWT the Inside Equipping Engineering of Shipping Contract and 388K-2# Dredgers the Inside Equipping Engineering of Shipping Contract as well as the superstructure fabrication in multi-sections and its closure engineering, are not performed in accordance with the certain one contract, and there is no evidence that Beiyuan Company can prove that Dongbao Company fulfilled the certain one contract, therefore, the three contracts belongs to three independent contracts, and should not be tried together in one case. The court holds that on the one hand, the contract in this case signed between Beiyuan Company and Dongbao Company involves a part of the construction of the relevant vessels, and it is not a whole construction project of the vessels. The construction contracts involved all includes simultaneous construction or crossed construction, and Dongbao Company also did not note the payment reasons when actually performing the payment obligations of construction price, and the payment amount of the construction is not in accordance with the payment amount corresponding to the timeline stipulated in the contract. In the trial, Beiyuan Company cannot make a detailed distinction regarding each contract corresponding to each construction payment Dongbao Company has paid, and Dongbao Company also cannot distinguish each construction money paid to Beiyuan Company should belong to the payment obligation under which contract. On the other hand, in consideration of the contract amount illustrated in Agreement on Settlement and Clearing both stamped with Dongbao Company’s seal which is issued to Beiyuan Company and signed by GAO Yang, the entrusted agent of Dongbao Company, the construction price paid to Beiyuan Company as well as the amount of money by issuing tax invoice, Dongbao Company has not paid respectively in accordance with the three contracts in terms of the payment of the construction price, instead, it has fulfilled the payment obligations of the construction price involved in the contract in this case as a whole. Therefore, it is not improper for the plaintiff to file a suit together. In order to find out the facts of the case, it is not illegal for the court to conduct a joint trial in the case that the object of the litigation is the same category and both the rights and obligations are the same. Secondly, on the confirmation and payment issue of the project price involved between two parties. With regard to the issues on confirmation of the contract price under 45000T-4#DWT the Inside Equipping Engineering of Shipping Contract and 388K-2# Dredgers the Inside Equipping Engineering of Shipping Contract, Dongbao Company believes that the construction price of the 45000T-4#DWT the Inside Equipping Engineering of Shipping contract is RMB2,400,000, and the construction price of the 388K-2# Dredgers the Inside Equipping Engineering of Shipping Contract is RMB3,159,000. The construction cost of the above project

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shall be RMB5,559,000, plus the RMB300,000 risk guaranty money that Beiyuan Company has paid to Dongbao Company, totaling RMB5,859,000. The court believes that 45000T-4#DWT the Inside Equipping Engineering of Shipping Contract signed by Dongbao Company and Beiyuan Company has clearly stipulated that the construction price is RMB 2,400,000 without a 17% value-added tax, however, in fact in the process of performing payment for the construction, Beiyuan Company all issued invoices including 17% VAT, with total amount reaching RMB6,437,279.62, The fact that the invoices includes 17% VAT also has been noted in the Settlement and Clearing Agreement, so the actual performed price in 45000T-4#DWT the Inside Equipping Engineering of Shipping Contract shall be confirmed in accordance with the price including taxation, which is RMB2,808,000 (RMB2,400,000 yuan plus the value-added tax which accounts for 17% of the price.) 388K-2# Dredgers the Inside Equipping Engineering of Shipping Contract stipulates the construction price is RMB3,159,000 including 17% VAT. Therefore, the tax-inclusive construction price in the contract involved shall be RMB5,967,000. In this regard, the court adds confirmation and the claim of Dongbao Company shall be sustained. On issue of the construction of the superstructure closing project in sections and its project cost, Dongbao Company held that Beiyuan Company had not issued any evidence about the Construction mentioned above, so it would not be recognized. The court believes that, first of all, MU Na, a financial officer in Dongbao Company, verified and confirmed that the behavior that Beiyuan Company issued tax invoice for Dongbao Company is to perform its working duties, which should be regarded as the corporation behavior. On November 19, 2013, MU Na has marked by handwriting below the table under the evidence of DongBao Billing Details: after verifying the projects in sections, it is found that invoice has opened RMB824,789.62, which can preliminarily demonstrate the objective existence of the superstructure closing project in sections and the amount of issued invoice; secondly, these two written contracts involved were signed on September 16, 2010 and January 19, 2011 respectively, but remittance documents submitted by Dongbao Company recorded that Dongbao Company began to pay the construction price to Beiyuan Company since August 31, 2010, prior to the effective date of the two written contract signed by both the plaintiff and defendant. And the remittance documents can prove that before 45000T-4#DWT the Inside Equipping Engineering of Shipping Contract and 388K-2# Dredgers the Inside Equipping Engineering of Shipping Contract were signed, Beiyuan Company had been performing other construction contracts of Dongbao Company; thirdly, Although the payment amount by cash or by cheque, the due additional project money, the deduction money of the closure project and deduction money of the vessel, which are all listed in Settlement Clearing Agreement, were not recognized, signed and sealed by Beiyuan Company, thus Settlement Clearing Agreement is binding upon both parties. However, the content of the agreement was proposed and confirmed with seal affixed by Dongbao Company, and accordingly it can be concluded that the content of this agreement is recognized by Dongbao Company, and the content

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was the expression of true meaning. Therefore, the construction price of RMB824,789.62 shall be confirmed and the proposal of Dongbao Company shall not be sustained. It can be further confirmed by the total contract price of RMB6,791,800 noted in the contract, that Beiyuan Company also performed the superstructure closing project in sections of RMB824,789.62, except the 45000T-4#DWT the Inside Equipping Engineering of Shipping Contract and 388K-2# Dredgers the Inside Equipping Engineering of Shipping Contract totaling RMB5,967,000. Although the construction price that Beiyuan Company believed is RMB6,791,789.62, it differs by RMB10.38 from the total contract price illustrated by Dongbao Company in Settlement and Clearing Agreement. In consideration of this, the court agrees the statement of Beiyuan Company: RMB6,791,789.62 is rounded to the integer of RMB6,791,800. On the issue of the addition and amendment of the contract involved. Beiyuan Company believed that Beiyuan Company began to work for additional operations based on the Technical Notice and Construction Processing, Materials Replacement Notice issued by Dongbao Company. The cost of additional work aggregates RMB474,001.7; The funds of RMB6,000 under Amendment Notice, which was recorded in the Settlement and Clearing Agreement issued by Dongbao Company with seal affixed, can prove that the additional work in these two written contract involved was completed by Beiyuan Company, therefore Dongbao Company should pay additional work cost of RMB474,001.7. Article 90 of the Interpretation of the Supreme People’s Court Concerning the Application of the Civil Procedure Law of the People’s Republic of China stipulates that the parties concerned shall provide evidence to prove the facts based on the facts of the claims made by themselves or to refute the facts on which the other party is based, except as otherwise provided for by the regulations. A party concerned shall be responsible for producing evidence to prove the facts on which his claim is based, or the facts he rebuts the opposite party’s claim unless the laws and regulations stipulate otherwise. The absence of evidence, or the insufficiency of evidence to prove the facts alleged by a party, shall operate to the disadvantage of the party who bears the burden of proof before the judgment is given. In this case, Technical Notice and Construction Handling and Materials Substitution Notice submitted by Beiyuan Company are all copies, without the company seal of Dongbao Company and other valid seals or vouchers. Under the circumstances where the additional event was not approved by Dongbao Company and Beiyuan Company has no other evidence to support its claim that the additional project has actually occurred and is executed under the instruction of Dongbao Company, the court does not support the claim that Beiyuan Company asked Dongbao Company to pay the cost money of the additional working of RMB47,4001.7, but the court confirms the funds of RMB6,000 under Amendment Notice which is recorded in Settlement and Clearing Agreement, and the funds shall be paid to Beiyuan Company by Dongbao Company. On the confirmation of the closing project and the deduction of vessel reworking. Dongbao Company believes that the closing project involved in the case is constructed by Sea Company with the construction price of RMB 386,100.01 and

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the construction price shall be deducted from the total construction price of the contract involved between Dongbao Company and Beiyuan Company. The deduction of the vessel shall be RMB251,200, and it also should be deducted from the total construction price. In this trial, Beiyuan Company approved the fact that the closing project in the contract involved has been finished by Sea Company and agreed that the fund could be deducted directly by Dongbao Company, but disagreed that the closing project price of Sea Company should bear RMB386,100.01 and only approved that the closing project money should be RMB100,100.01 which was calculated as 2 to 3% of the total contract price. The deduction of the vessel should be based on the actual deducting correspondence and account records. The court approves RMB38,705 on the penalty ticket with the company seal and signature of Beiyuan Company officials, and others are not recognized. Article 75 of the Several Provisions of the Supreme People’s Court on Evidence in Civil Procedures stipulates that if there is evidence that one party holds the evidence and refuses to provide it without reasonable causes, the claim may be presumed if the other party claims that the content of the evidence is unfavorable to the holder of the evidence. In this case, the closing project done by Sea Company is included in 388K-2# Dredgers the Inside Equipping Engineering of Shipping Contract and its construction price is paid in the total contract price, but the ongoing closing project is arranged by Dongbao Company itself. The vessel deduction is directly towards the correspondences and instructions given by Dongbao Company, then Dongbao Company shall punish or deduct targeting each construction party according to the correspondences, instructions and deductions causes of construction, but the vessel does not directly face and contact the specific construction parties. Accordingly, on April 13, 2016, when the court organized the Plaintiff and the Defendant to carry out the exchange of evidence, the court orders that Dongbao Company, the evidence holders, to submit the relevant contracts of 388K-2# Dredgers closing project, specific construction projects and the construction price, the closing project payment details as well as the relevant vouchers in actual vessel deduction, but the company is unable to provide these materials so far, so Dongbao Company should bear the unfavorable legal consequences, therefore, the court supports the proposition that the amount of closing project price involved shall be RMB100,100.01 and the deduction of the vessel rework shall be RMB38,705. In summary, the total contract price of three contracts signed between Beiyuan Company and Dongbao Company aggregates RMB6,791,789.62, the paid construction price by Dongbao Company is RMB6,027,119.62, the closing project involved is RMB100,100.01 yuan, the deduction of the vessel rework aggregates 38,705, the funds under the amendment notice is RMB60,000, therefore, the court recognizes Dongbao defaultsthe construction payment of Beiyuan Company: RMB6,791,789.62 yuan minus RMB6,027,119.62 yuan minus RMB100,100.01 yuan minus RMB38,705 yuan plus RMB60,000 yuan equals RMB685,864.99 yuan. Thirdly, on the issue of breach of contract. Beiyuan Company claimed that Article 12 Paragraph 3 of the two written contracts involved stipulated in consideration of the delayed payment caused by

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Party A, Party A should pay liquidated damages calculated as 0.5% of the contract price to Party B for each day’s delay, but the liquidated damages should not exceed 5% of the contract price. Dongbao Company involved three default facts: firstly, after the confirmation of MU Na, Dongbao Company only paid the advance payment of RMB157,950 which accounted for 5% under 388K-2# Dredgers the Inside Equipping Engineering of Shipping Contract, which violated the advance payment which should account for 10% as was stipulated the first event, Article 10 Paragraph 2. Therefore, Dongbao Company broke the contract. Secondly, Settlement and Clearing Agreement provided by Dongbao Company with seal affixed indicates that the inside engineering project undertaken by Beiyuan Company has been finished before December 12, 2013, and Dongbao Company admitted by itself that there is a defaulted construction price of RMB451,171.37, therefore, this working code can be regarded as a starting point of Dongbao Company’s breach of contract. Thirdly, Online Transfer Business Receipt of CITIC Bank and Online Business Receipt of CITIC Bank respectively proves that Dongbao Company paid the construction price of RMB243,541 on January 30, 2014 and RMB40,000 on February 15, 2015 to Beiyuan Company, and the interval time of these two remittance is one year, which breaches the stipulation in Article 10 Paragraph 3 Sub-paragraph 1 of the written contract involved, therefore, Dongbao Company breaks the contract. Therefore, Dongbao Company shall pay the liquidated damages of RMB339,589.48 (RMB6,791,789.62*5%). The court believes that the payment method and liability for breach has been stipulated in 45000T-4#DWT the Inside Equipping Engineering of Shipping Contract and 388K-2# Dredgers the Inside Equipping Engineering of Shipping Contract, Article 12 Paragraph 4 in both contract also stipulates that the liability for breach of either party shall be based in the written materials approved by both parties. While Beiyuan Company advocated the breach of Dongbao Company, but it did not provide written evidence of the breach fact that should be recognized by both parties, as a basis for investigating the breach of responsibility of Dongbao Company; In the trial, Beiyuan Company admitted the fact that Dongbao Company paid RMB6,027,119.62, and the payment amount exceeds the total price RMB5,967,000 of two written contract involved which was advocated by Beiyuan Company. Thirdly, the contract of construction making in sections is a verbal contract, and relevant liability for breach has not been stipulated. In the trial, Beiyuan Company confirmed that the company could not distinguish Dongbao Company’s each payment of the corresponding contract, and there is no evidence to prove the delinquent construction price of Dongbao Company is the construction price under two written contracts in which the liability for breach is stipulated. Therefore, the court does not support the claim about liquidated damages approved by Beiyuan Company. On the loss of interest. Article 107 of the Contract Law of the People’s Republic of China stipulates that when a party failed to perform or rendered non-conforming performance, it shall bear the liquidated liability such as continuing performing, taking remedial action or compensating for loss. It also has the right to claim compensation for the loss of interest on the basis of the amount owed and calculated

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as the benchmark interest rate for the same period of the People’s Bank of China. In consideration of Settlement and Clearing Agreement issued by Dongbao Company on December 12, 2012, it was not confirmed with signature by Beiyuan Company as a result of its disapprove of part of funds, but the agreement was issued after Dongbao Company’s settlement and confirmation. Whether Beiyuan Company approves the one of funds or not, shall not affect the confirmation of the starting date of the due construction price involved in the case. Therefore, it is objective to confirm the badging date specified in the agreement as the date when Dongbao Company should pay the construction price. The time for calculating of interest loss should be calculated from December 13, 2013 to the expiration of confirmed performance of this judgment. Dongbao Company paid Beiyuan Company the construction price of RMB243,541 and RMB40,000 on January 30, 2014 and February 15, 2015 respectively, so the interest loss should be calculated separately. From December 13, 2013 to January 29, 2014, the interest rate base is RMB969,405.99; from January 30, 2014 to February 14, 2015, the interest rate base is RMB725,864.99; from February 15, 2015 to the payment date confirmed in judgment, interest calculation base is RMB685,864.99. Fourthly, the return of the risk-guaranty money. Dongbao Company held that the total cost of two shipbuilding contract plus the risk-guaranty money aggregated only RMB5,859,000, but the actual money that Dongbao Company paid to Beiyuan Company reached RMB6,027,119.62, and Dongbao Company should not return the risk-guaranty money paid by Beiyuan Company. The court believes that the risk guaranty money is a kind of specific fund used to deal with Beiyuan Company’s arrears of wages for workers or to deal with production accidents during the process of construction. Dongbao Company charged Beiyuan Company a total of RMB300,000 in risk mortgages on May 25, 2011 and July 28, 2011. In the trial, Dongbao Company did not present evidence to prove that Beiyuan Company is in arrears with worker’s wages or the accident occurs in the construction process and that it has returned risk mortgage to Beiyuan Company. So Dongbao Company shall return RMB300,000 in mortgage risk to Beiyuan Company under the condition that it still owes Beiyuan Company the project cost. In summary, in accordance with Article 8, Article 107 of the Contract Law of the People’s Republic of China, Article 90 of the Interpretation of the Supreme People’s Court Concerning the Application of the Civil Procedure Law of the People’s Republic of China, Article 75 of the Several Provisions of the Supreme People’s Court on Evidence in Civil Procedures, the judgment is as follows: 1. The Defendant, Liaoning Dongbao Group Ship Manufacturing Co., Ltd., shall within ten days from the effective date, pay the Plaintiff, Dalian Beiyuan Ship Outfitting Engineering Co., Ltd., the project cost of RMB685,864.99 and a loss of interest (calculated in accordance with the loan interest rate stipulated by the People’s Bank of China for the corresponding period based on RMB969,405.99 from December 13, 2013 to January 29, 2014, RMB725,864.99 from January

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30, 2014 to February 14, 2015, based on 685,864.99 from February 15, 2015 to the deadline for performance established in decision); 2. The Defendant, Liaoning Dongbao Group Ship Manufacturing Co., Ltd., shall return the Plaintiff, Dalian Beiyuan Ship Outfitting Engineering Co., Ltd., the risk mortgage payment of RMB300,000 within ten days from the effective date; 3. Reject other claims of the Plaintiff, Dalian Beiyuan Ship Outfitting Engineering Co., Ltd. If the payment obligations are not fulfilled within the period specified in this judgment, the interest on the debts shall be doubled in accordance with Article 253 of Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB20,804 (the Plaintiff prepaid), RMB11,535 yuan shall be born by the Defendant, Liaoning Dongbao Group Ship Manufacturing Co., Ltd., and RMB9,269 shall be born by the Plaintiff, Dalian Beiyuan Ship Outfitting Engineering Co., Ltd. If the judgment is not satisfied, an appeal may be submitted to the court within fifteen days since the service of the judgment, and copies shall be submitted to the Liaoning High People’s Court according to the number of the party concerned. Presiding Judge: TANG Hong Acting Judge: GAO Shiqiang People’s Juror: YANG Fan June 25, 2016 Clerk: LV Xiaofan (Editor’s Note: After this judgment of first instance, the parties appealed and then petitioned to the Supreme People’s Court of the People’s Republic of China, which handed down the final judgment in 2018 to (i) confirm item 2 and item 3 of this judgment of first instance and (ii) alter item 1 to be that Liaoning Dongbao Group Ship Manufacturing Co., Ltd. shall pay Dalian Beiyuan Ship Outfitting Engineering Co., Ltd. the project cost of RMB399,865 and corresponding interest.)

Beihai Maritime Court Civil Judgment Fangchenggang Beibu Gulf Port Service Co., Ltd. v. Xinbao Resources Co., Ltd. et al. (2015) Hai Shang Chu Zi No.218 Related Case(s) None. Cause(s) of Action 221. Dispute over contract on custody of cargo in port. Headnote Judgment in default of appearance given against the Defendant cargo owner for failing to remove cargo of iron ore from the Plaintiff’s port, and failing to pay port fees; the Plaintiff’s port held entitled to exercise a lien over the cargo for the unpaid fees. Summary The Plaintiff, a port service company, sought to recover unpaid port operation fees and storage fees allegedly owed to it by the Defendant, which was the owner and consignee of the goods stored at the Plaintiff’s port. Such fees were stipulated in the Plaintiff’s contract signed with the Defendant’s agent, Sinotrans Liuzhou Company, to whom the court did not apportion any liability. The court found the Defendant failed to remove 29,999.66 tons of its iron ore from the Plaintiff’s port, and failed to pay the remaining fee balance owed. The Defendant did not appear, so the court entered a default judgment against it, holding it liable for the remainder of all unpaid fees. Further, the court adjudged that the Plaintiff could exercise a lien on the iron ore remaining in its port for the amount of unpaid fees. The court rejected the Plaintiff’s claim for liquidated damages, as the parties did not agree on the amount or means of liquidated damages in the contract. The court further apportioned the costs of this litigation between the Plaintiff and the Defendant Xinbao Company.

Judgment The Plaintiff: Fangchenggang Beibu Gulf Port Service Co., Ltd. Domicile: No.22, Youyi Avenue, Fangchenggang City, Guangxi Zhuang Autonomous Region, China. Legal representative: CHEN Silu, general manager. © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_8

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Agent ad litem: TANG Cheng, lawyer of Guangxi Tangcheng Law Firm. Agent ad litem: CHEN Yuanlian, lawyer of Guangxi Tangcheng Law Firm. The Defendant: Xinbao Resources Co., Ltd. Domicile: Rm.1318–19, Floor 13, Hollywood Commercial Center, No.610, Nathan Road, Kowloon, Hong Kong Special Administrative Region (HKSAR), China. Legal representative: LI Lai. The Defendant: Sinotrans Guangxi Liuzhou Co., Ltd. Legal representative: QING Jun, general manager. Agent ad litem: GUO Pan, lawyer of Guangxi Yinzheng Law Firm. Agent ad litem: HE Fuguo, lawyer of Guangxi Yinzheng Law Firm. The Third Party: Guangxi Lianyang International Trade Co., Ltd. Domicile: Rm.5013&5014, King's International Merchant Center, No.59, Jinhu Road, Qingxiu District, Nanning City, Guangxi Zhuang Autonomous Region, China. Legal representative: TONG Cheng, chairman. With respect to the case arising from the dispute over contract on safekeeping of cargo in port, the Plaintiff Fangchenggang Beibu Gulf Port Service Co., Ltd. (hereinafter referred to as “Fangchenggang Port Company”), brought a lawsuit against the Defendant Xinbao Resources Co., Ltd. (hereinafter referred to as “Xinbao Company”), the Defendant Sinotrans Guangxi Liuzhou Co., Ltd. (hereinafter referred to as “Sinotrans Liuzhou Company”), and the Third Party Guangxi Lianyang International Trade Co., Ltd. (hereinafter referred to as “Lianyang Company”). The court accepted the case on July 3, 2015, and formed a collegiate panel according to law and held a hearing in public on November 3. TANG Cheng and CHEN Yuanlian, agents ad litem of the Plaintiff Fangchenggang Port Company, GUO Pan and HE Fuguo, agents ad litem of the Defendant Sinotrans Lizhou Company, appeared in the court to attend the hearing. After the summons, the Defendant Xinbao Company and the Third Party Lianyang Company refused to appear in court without proper reason and the court entered a default judgment. Now the case has been concluded. The Plaintiff Fangchenggang Port Company alleged that: the Defendant Xinbao Company imported 41,000 tons of iron ore by Fangchenggang Port, the transshipment ship was M.V. “JUN BENFIT” (hereinafter referred as M.V. “JUNRUN”). The Defendant Sinotrans Liuzhou Company signed a port operation contract with the Plaintiff Fangchenggang Port Company and the outsider Guangxi Fanggang Logistics Co., Ltd. (hereinafter referred to as “Fanggang Logistics Company”). After signing the contract, the Plaintiff Fangchenggang Port Company fulfilled the corresponding contractual obligations in accordance with the contract. The Defendant Xinbao Company also authorized Sinotrans Guangxi Fangchenggang Company to take 11,001.54 tons of iron ore from the Plaintiff’s dock respectively on 2013 from November 2 to November 4, and the remaining 29,999.66 tons of iron ore had been stored so far. In the meantime, the Defendant Xinbao Company had only paid 728,678.56 yuan to the Plaintiff Fangchenggang Port Company through the Third

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Party Lianyang Company, and still had unpaid port operation fees and storage fees 9,051,008.46 yuan (tentative calculated to April 30, 2015). Although the parties had no agreement in the contract about the liquidated damages, but the contract involved stipulated that if one party defaulted and caused another party’s loss, the default party should compensate the other party. Because the Plaintiff Fangchenggang Port Company provided the port operation service in accordance with the contract, but the Defendant Xinbao Company and the Defendant Sinotrans Liuzhou Company did not pay the port fees and storage fees on time, so they should also bear the loss of interest due to default and should bear the corresponding liquidated damages. The Plaintiff Fangchenggang Port Company requested the court that: 1. the Defendant Xinbao Company and the Defendant Sinotrans Liuzhou Company should jointly pay 9,051,008.46 yuan to the Plaintiff Fangchenggang Port Company for the port operation fees and storage fees (the storage charges temporarily calculated to April 30, 2015, remaining port fees temporarily calculated to the date of completion of take delivery of cargoes) and liquidated damages of 660,723.60 yuan (by 2/10000 per day since April 29, 2014, temporarily calculated to April 30, 2015, remaining liquidated damages calculated to the day of actual payoff the port operation fees and storage fees); 2. based on aforesaid claims, the Plaintiff Fangchenggang Port Company should have the priority to be repaid of 29,999.66 tons of iron ore stored up in Fangchenggang Port; 3. the Defendant Xinbao Company and the Defendant Sinotrans Liuzhou Company should bear all the litigation expense. The Defendant Sinotrans Liuzhou Company argued that: 1. the Defendant Sinotrans Liuzhou Company had been entrusted by the Defendant Xinbao Company to signed the port operation contract with the Plaintiff Fangchenggang Port Company. According to relevant laws and regulations, the relevant legal consequences of the entrusted matter should be born by the Defendant Xinbao Company. As the Defendant Xinbao Company failed to settle the port fees and storage fees, and caused the litigation. According to the Contract Law of the People’s Republic of China (hereinafter referred to as “Contract Law”), the Plaintiff Fangchenggang Port Company had the right to choose the Defendant Xinbao Company and the Defendant Sinotrans Liuzhou Company as counterparts to claim. According to the facts and evidence, the Plaintiff had let the Defendant Xinbao Company deliver a batch of goods, and also accepted a part of the payment from the Defendant Xinbao Company, which proved that in this case, the Plaintiff Fangchenggang Port Company had chosen the Defendant Xinbao Company as the counterpart involved in the case to claim for the rights. Furthermore, the Defendant Xinbao Company was the defacto consignor and depositor, so the responsibility should be undertaken by the Defendant Xinbao Company. 2. Because the Defendant Xinbao Company did not pay the port fees, causing the port operation contract unable to be fullfiled, the Plaintiff Fangchenggang Port Company entitled to enforce the lien. Considering that the Port operation contract stipulated the contract term to December 31, 2013, the Plaintiff Fangchenggang Port Company should have exercised the lien to prevent the loss of storage charges from expanding. Because the Plaintiff Fangchenggang Port Company has not taken has not taken appropriate measures, causing the loss of storage charges to expand. The

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expanded part of the costs should be born by the Plaintiff Fangchenggang Port Company. 3. There was no agreement about the liquidated damages in the port operation contract, and the claim of the Plaintiff Fangchenggang Port Company for the liquidated damages had no factual basis and legal basis. In summary, requested the court to reject the Plaintiff’s claims. The Defendant Xinbao Company, the Third Party Lianyang Company did not make any reply or submit any evidence. The Plaintiff Fangchenggang Port Company submitted the following evidence to support its claims: Evidence 1: certification of incorporation, business registration certificate and enterprise basic information table, to prove the qualification of the two Defendants. Evidence 2: port operation contract, to prove the contractual port operation relationship between the Plaintiff Fangchenggang Port Company and the Defendant Sinotrans Liuzhou Company. Evidence 3: the entry-exit inspection and quarantine of the People’s Republic of China, bill of lading, delivery order, to prove the fact that the carried 4,100 tons of iron ore in M.V. JUNRUN belonged to the Defendant Xinbao Company, and for the Defendant Sinotrans Liuzhou Company’s request, the Plaintiff Fangchenggang Port Company had provided discharging, weighing, stockpiling and other port service, the Defendant Sinotrans Liuzhou Company should pay the corresponding port fees to the Plaintiff. Evidence 4: daily account of the goods’ import and export from the warehouse, to prove the facts that the 1,100 tons involved goods had been taken away, the Plaintiff Fangchenggang Port Company provided the port services for the involved goods, therefore the two Defendants should pay the corresponding port fees to the Plaintiff. Evidence 5: business receipt of ICBC, to prove the fact that the Third Party Lianyang Company on behalf of the two Defendants paid the port charges 450,000 yuan to the Plaintiff. Evidence 6: notice of pressing goods and port operation charges collection, to prove the fact that up until December 31, 2014, the Defendant Xinbao Company had stored approximately 29,999 tons of iron ore stockpiling in the Plaintiff Fangchenggang Port Company, and the fact that still owed port fees in the amount of 7,629,000 yuan incurred by the Defendant Xinbao Company’s cargo stockpiling. Evidence 7: letter of application for relief the port surcharge and storage fees of cargoes in M.V. JUNRUN, to prove the fact that Defendant Xinbao Company applied to the Plaintiff Fangchenggang Port Company for the reduction or exemption of port fees on the basis of the company’s loss. Evidence 8: letter regarding to demand for payment of arrears, to prove the fact that the Plaintiff Fangchenggang Port Company on March 4, 2015, sent a letter required the Defendant Xinbao Company to pay for the port fees in arrears once again. Evidence 9: specification of storage fees settlement, to prove the fact that there was 9,051,008.46 yuan port which was unpaid incurred by M.V. JUNRUN’s cargo at the Plaintiff Fangchenggang Port Company up until April 30, 2015 which was unpaid.

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The Defendant Sinotrans Liuzhou Company cross-examined the evidence, it had no objection to evidence 1 and evidence 2, excepting that the Defendant Sinotrans Liuzhou Company was entrusted by the Defendant Xinbao Company to sign a contract with the Plaintiff Fangchenggang Port Company and there was no agreement about the liquidated damages in the contract, it had no objection to evidence 3, excepting that it could be proved that the owner of the goods was the Defendant Xinbao Company, which had been known by the Plaintiff when signed the contract. There was no objection to evidence 4 and evidence 5, excepting that it was proved that the Plaintiff Fangchenggang Port Company had chosen the Defendant Xinbao Company as the counterpart of the port operation contract had no objection to the authenticity or relevancy of evidence 6, in June 2014, the Plaintiff Fangchenggang Port Company should know or already knew the damage to its right, but did not enforce the lien in time, therefore, for the expansion of the losses, the Plaintiff Fangchenggang Port Company should bear corresponding responsibility, therefore, no objection to the authenticity or relevancy of evidence 7 and evidence 8, excepting that Plaintiff Fangchenggang Port Company had chosen the Defendant Xinbao Company as the counterpart of the port operation contract, and the two parties had negotiated a settlement about the storage fees problem that the responsibilities for the storage fees problem should not be bored by the Defendant Sinotrans Liuzhou Company. There was an objection to the authenticity, legality or relevancy of evidence 9, without any organization seal, and the charging univalent were different from the agreement in the port operation contract, thus the specification was not recognized. The Defendant Sinotrans Liuzhou Company submitted the following evidence to support its defenses: Evidence 1: power of attorney, to prove that the Defendant Sinotrans Liuzhou Company had been commissioned by the Defendant Xinbao Company to sign the port operation contract, the Defendant Xinbao Company finally entrusted the Third Party Lianyang Company to pay the relevant port fees and storage fees, and the Plaintiff Fangchenggang Port Company also let the Defendant Xinbao Company to deliver the 11,000 tons cargo from storehouse according to the power of attorney. Evidence 2: import goods agency contract, to prove that the Defendant Sinotrans Liuzhou Company was appointed by Guangxi Lianygang Trade Co., Ltd. (hereinafter referred to as “Liangang Company”) for port shipping agency business, and the relevant port fees and storage fees should be paid by Liangang Company. Evidence 3: notice of change of business, to prove that now Liangang Company has changed its name to the Third Party Lianyang Company. Evidence 4: certification of authorization issued on June 28, 2013, to prove that the Defendant Xinbao Company entrusted DENG Hongming (the employee of the Defendant Sinotrans Liuzhou Company) to handle the related matters of the goods involved. The Plaintiff cross-examined, it had objection to the authenticity of evidence 1, because there was no original copy of the power of attorney, even if there was an original one, it could not show that the Defendant Sinotrans Liuzhou Company was

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just the client of the Defendant Xinbao Company in the involved contract, because the time of signing the involved contract was prior to the time of signing the power of attorney, and there was no agreement about the port operation fees should be paid by the Defendant Xinbao Company in the power of attorney. There was no objection to the authenticity of evidence 2, but it is irrelevant to this case. There was no objection to evidence 3. For evidence 4, there was no original to check, and its authenticity was not recognized. The Plaintiff Fangchenggang Port Company had not received the power of attorney, so such evidence only related to supervision and retention of goods and other matters, excepting the safekeeping of the goods. The court holds that: the Defendant Xinbao Company and the Third Party Lianyang Company refused to attend the court without proper reason after summons, which should be deemed as abandoning their rights of plea, burden of proof, cross-examination and other litigation rights. About evidence 1 submitted by the Plaintiff Fangchenggang Port Company and evidence 3 submitted by the Defendant Sinotrans Liuzhou Company, there was no objection between all parties, and the court confirms its authenticity, and took them as the basis for the facts found in this case. About evidence 2 to evidence 8 submitted by the Plaintiff Fangchenggang Port Company and evidence 2 submitted by the Defendant Sinotrans Liuzhou Company, all parties had no objection to its authenticity but had objection to the matter it proved, so the court confirms its authenticity and can be used as the basis of the facts of the case. The content of the disagreement shall be identified in the light of the evidence of the whole case. About evidence 9 submitted by the Plaintiff Fangchenggang Port Company, the Defendant Sinotrans Liuzhou Company had objection to its authenticity, the evidence was produced by the Plaintiff Fangchenggang Port Company unilaterally, and there were no other evidence to support it, so the court does not confirm its authenticity. As to evidence 1 and evidence 4 submitted by the Defendant Sinotrans Liuzhou Company, the Plaintiff Fangchenggang Port Company had objection to its authenticity, the Defendant Sinotrans Liuzhou Company failed to submit the original for verification and there was no other evidence to support it, so the court does not confirm its authenticity. The court identifies the facts as follows: On June 30, 2013, Liangang Company as the first party, the Defendant Sinotrans Liuzhou Company as the second party, signed an agreement of import goods agency (No.LG20130630) at Liuzhou. On June 28, 2013, Liangang Company imported bulk iron ore by bulk cargo ship from Fangchenggang Port, the name of the loading ship was M.V. JUNRUN, the number of the bill of lading was PUG/ FAN-02, the name of the cargo was iron ore (fine ore), and the quantity of cargo was 41,000 tons. The Defendant Sinotrans Liuzhou Company commissioned by Liangang Company for discharging, customs clearance and loading (by train, car or ship). Agreement as follows: expenses and the standard: 1. Port fees: (1) discharging-storage-loading train operation costs: fine ore, 28 yuan/ton. (2) Discharging-storage-loading car operation costs: fine ore, 25 yuan/ ton. (3) Discharging-storage-loading domestic trade ship operation costs: 15.40

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yuan/ton. (2) Port construction fees: 5.60yuan/ton. 3. Cargo discharging and loading ship to be weighing: 4 yuan/ton, cargo loading train to be weighing: 4 yuan/ton, cargo loading car to be weighing: 1 yuan/ton. 4. Storage fees: from the date of discharging, free for 30 days, 0.10 yuan/ton
day for storage fees from the thirty-first day, the good’s storage fees should be increased by 0.05 yuan/ton
day for every 30 days of delayed storage, and the maximum cap shall be 0.50 yuan/ ton
day. 5. Delivery of cargo from storage fees 14 yuan/bulk, door plugging fee of 0.61 yuan/ton. 6. The cost of customs clearance, cargo control, car, bulk shipping agent 5 yuan/ton. The contract was in effect from the signing date to December 31, 2013. Liangang Company and the Defendant Sinotrans Company confirmed in the contract, signed and sealed. 6. On July 1, 2013, the Plaintiff Fangchenggang Port Company and the Defendant Sinotrans Liuzhou Company as the second party and first party respectively, signed a port operation contract (contract number: HS12285) with the Third Party Fanggang Logistics Company, agreement as follows: 1. the Plaintiff Fangchenggang Port Company and Fanggang Logistics Company provided services such as discharging, storage, loading to the cargo of the Defendant Sinotrans Liuzhou Company. 2. The Defendant Sinotrans Liuzhou Company agreed to pay the port operation fees to the Plaintiff Fangchenggang Port Company in accordance with the estimate of the water gauge issued by the Fangcheng Commodity Inspection Authorities or the number of cargo discharging to be weighing (both the water gauge and the weighing is subject to weighing) or as following standards: (1) Discharging-storage-loading train operation costs: fine ore, 28 yuan/ton; lump ore, 33 yuan/ton; pellets, 36 yuan/ton; raw ore 39 yuan/ton. (2) Discharging-storage-loading car operation costs: fine ore, 25 yuan/ton; lump ore, 30 yuan/ton; pellets, 33 yuan/ton raw ore 36 yuan/ton. (3) Discharging-storage-loading domestic trade ship operation costs: fine ore, 15.40 yuan/ton; lump ore, 20.40 yuan/ton; pellets, 23.40 yuan/ton. The above cost items includes six expenses for discharging, turning, stacking, loading train or car or trans-domestic trade ship, port administration affairs and port facilities security fees. 3. By train to the direction of the goods shipped in the Nanning-Kunming Railway Port on the basis of the above charges with additional 1 yuan/ton. 4. If the goods were weighed, the Defendant Sinotrans Liuzhou Company should pay to cost of weighing to Fanggang Logistics Company: cargo, loading ship weighing or discharging ship weighing, 4 yuan/ton, loading train weighing 4 yuan/ton, loading car weighing 1 yuan/ton. 5. Custody demurrage: (the Defendant Sinotrans Liuzhou Company agreed to pay the demurrage by the actual number of delivery to the Plaintiff) since the date of discharge, 30 days free for the foreign trade ship, 10 days free for the domestic trade ship. 1st to 30th days of the extension would be charged at the rate of 0.10 yuan/ton per day, the 31st to 60th day according to 0.15 yuan/ton per day, 61st to 90th days would be charge at 0.20 yuan/ton per day, and so on. The maximum cap to 0.50 yuan/ton per day (open-air yard pile tarpaulin base deposit 0.25 yuan/ton per day). 6. Cargoes carriage by train, the Defendant Sinotrans Liuzhou Company should pay to the Railway Administration Center additionally for use of railway lines in the port and the fare collection and delivery fare of 2 yuan/ton.

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7. When deliver the cargo by train, the Plaintiff charge the Defendant Sinotrans Liuzhou Company the truck with the car, door and window (including binding material fee and non-ferrous metal mine material fee) of 14 yuan/card, about the bulk cargo to be loaded convertible, the Plaintiff by 0.61 yuan/ton to charge the door to spray plugging plastic foam or plugging the material and labor costs by 0.61 yuan/ ton. 8. The port operation costs to be cleared per boat, in batches. 9. The Defendant Sinotrans Liuzhou Company had trade relations in the port with the other party, when the right of the goods was changed, the Defendant Sinotrans Liuzhou Company agreed that the port operation fees, extended custody fees, and other related costs should be paid by the other party, the Plaintiff was not responsible for collection, this fee was collected by the Defendant Sinotrans Liuzhou Company and paid to the Plaintiff Fangchenggang Port Company, the Defendant Sinotrans Liuzhou Company agreed that the Plaintiff Fangchenggang Port Company could regard it as the sole contractor of the contracted costs. 10. Before the Defendant Sinotrans Liuzhou Company settled the port operation fees, storage fees, and other related costs agreed in the contract, the Plaintiff Fangchenggang Port Company had the lien on the goods with a corresponding value of the Defendant Sinotrans Liuzhou Company. 11. If one party’s economic loss was caused by another party’s breach of contract, the defaulting party should compensate the other party for the direct economic loss unless otherwise stipulated in this contract. The contract was valid from January 1, 2013 to December 31, 2013. It was confirmed, signed and sealed by the Plaintiff, the Defendant Sinotrans Liuzhou Company, and the Defendant Xinbao Company. On July 26, 2013, Fangchenggang Entry–Exit Inspection and Quarantine Bureau of the People’s Republic of China issued a report (No.450300113002025). In the report, the consignee was Sinotrans Guangxi Fangchenggang Eastern Sea Warehousing Logistics Co., Ltd., and the consigner was the Defendant Xinbao Company. The cargoes were iron ore, the quantity was 41000MT, mark and number were N/M, and the destination was Fangchenggang China, the place of departure was Malaysia, the arrival date was June 30, 2013, the date of discharge was July 6, 2013, and the transportation tools was M.V. JUN BENFIT. On August 13, Guangxi Jiecheng International Logistics Co., Ltd. issued bills of lading to the Plaintiff Fangchenggang Port Company. The contents were shown as below: please delivered the cargoes to the Defendant Xinbao Company, No. JT201307020, the name of the ship M.V. JUNRUN (JUN BENEFIT), call sign 3FYB7, voyage 1307, arrival date June 29, 2013; the number of bill of lading PGU/FAN-02, mark N/M, bulk cargo, named iron ore, 41,000 tons. The third party Lianyang Company paid 450,000 yuan to the Plaintiff Fangchenggang Port Company through bank transfer. The Plaintiff Fangchenggang Port Company issued the import and export account of cargoes on July 31, 2014, (No.FG/QR7508), the name JUNRUN/1307, the name of iron ore (powder), the owner was Sinotrans Guangxi Fangchenggang Company and the Defendant Xinbao Company, the number of commodity inspection was 44,001.20 tons; The Defendant Xinbao Company took delivery of goods 4,247.22 tons on November 2, 2013, 4,517.48 tons on November 3, 2013, 2,236.48 tons on November 4, 2013, 11,001.54 tons in total.

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The Plaintiff Fangchenggang Port Company sent a letter to the Defendant Sinotrans Liuzhou Company on December 10, the contents as follows: the Defendant Sinotrans Liuzhou Company represented the Defendant Xinbao Company to import the iron ore ship JUNRUN in June 2013. Up to this point, there were about 29,999 tons of iron ore had not leaving the warehouse. By the end of December 31, 2014, it was expected to incur 7,629,000 yuan fees, which included port operation fees and storage fees. Please urge the owner of the goods to speed up the batch of iron ore out of the warehouse and arranging the funds to pay for port fees and overdue fees. If the Defendant Sinotrans Liuzhou Company failed to pay the port operation fees and the storage fees etc. in the near future, neither fulfill the obligation of payment within 10 working days from the date of receiving the letter, the Plaintiff Fangchenggang Port Company was entitled to unilaterally authorize qualified evaluation agencies to assess the lien goods, and unilaterally authorize the auction agency to auction the lien assessed goods and had priority to get the port operation fees and storage fees be paid off from the proceeds from the auction. On February 27, 2015, the Defendant Xinbao Company sent a letter to the Plaintiff Fangchenggang Port Company’s business settlement center, which was named applying for cargoes’ port fees and storage fees reduction and exemption of M.V. JUNRUN, With the contents as follows: the reason that Xinbao Company failed to take delivery of the goods in time was that the imported price of the goods has reduced from 500 yuan/ton to 150 yuan/ton; The Defendant Xinbao Company hereby applied for taking the remaining goods after paying 2,300,000 yuan to the Plaintiff Fangchenggang Port Company. The Plaintiff Fangchenggang Port Company sent a letter to the Defendant Xinbao Company on March 4, with contents as follows: the Defendant Xinbao Company imported iron ore (the name of the vessel, JUNRUN) through Fangchenggang Port Company since June 2013. Up to March 3, 2015, the port operation fees were about 770 thousand yuan and storage fees were about 7,370,000 thousand yuan (financial payment should prevail), there were about a total of 8,140,000 yuan fees that has not been paid to the Plaintiff Fangchenggang Port Company. The Plaintiff asked the Defendant Xinbao Company to pay the owed port fees and take delivery of goods within 7 working days from the date of the letter. Otherwise, the Plaintiff would realize their rights and interests through legal approach. It is also ascertained that Liangang Company changed the name of the registration in the Guangxi Zhuang Autonomous Region Administration on July 16, 2013. After changing, its name was the Third Party Lianyang Company. The court holds that: This case is the dispute over contract on safekeeping of cargo in port. The Defendant Xinbao Company is a legal person in Hong Kong Special Administrative Region. So this dispute over the contract with Hong Kong involved. The Defendant Xinbao Company was served with a summons and refused to a appear before the court without justified reasons, therefore, it should be deemed that it consented to apply the laws of the People’s Republic of China, so the law of the People’s Republic of China shall be applied. From the comprehensive view of the Plaintiff and the Defendants, the issues in this case are that: 1. whether the two Defendants

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should share the responsibility to pay the cargo port operation fees and storage fees involved to Fangchenggang Port Company; 2. how to determine the amount of payment if they need to bear the responsibility to the Plaintiff Fangchenggang Port Company; 3. whether the liquidated damages that the Plaintiff Fangchenggang Port Company claimed should be supported; 4. whether the Plaintiff Fangchenggang Port Company has the lien on the goods involved. As to the first issue, firstly, according to Article 44 Paragraph 1 of the Contract Law, “the contract established according to law becomes effective upon its establishment”, the contract signed between the Plaintiff Fangchenggang Port Company and the Defendant Sinotrans Liuzhou Company indicated the expression of true intention of the two parties, and does not violate the relevant laws and regulations, thus it should be lawful and effective. Secondly, the Defendant Sinotrans Liuzhou Company argued that it was only the agent of the owner of the cargo involved, and the Defendant Fangchenggang Port Company should know the agency relationship between the Defendant Xinbao Company and the Defendant Sinotrans Liuzhou Company when entering into the contract. The Defendant Xinbao Company should bear the port fees involved. According to Article 5 of the Contract Law, “the parties shall adhere to the principle of fairness in deciding their respective rights and obligations”, Article 402, “where the agent, acting within the scope of authority granted by the principal, enter into a contract in its own name with a third party who is aware of the agency relationship between the principal and agent, the contract is directly binding upon the principal and such third party, except where there is conclusive evidence establishing that the contract is only binding upon the agent and such third party.” Above all, the Plaintiff Fangchenggang Port Company stated in the letter that the Defendant Sinotrans Liuzhou Company entrusted the Defendant Xinbao Company to import iron ore M.V. JUNRUN in Fangchenggang in June 2013 on the letter from the Defendant Fangchenggang Port Company to the Defendant Sinotrans Liuzhou Company. It indicates that the Plaintiff Fangchenggang Port Company knew that Sinotrans Liuzhou Company was an agent company. Next, according to the industry practice of cargo handling and safekeeping in the domestic port, all the port sectors sign contracts of cargo handling, storage and operation with agents, and they do not directly sign a contract of port cargo operations with the owners or importers. Appropriate transport documents should be submitted when goods entering the ports. So the Plaintiff Fangchenggang Port Company should know that the Defendant Sinotrans Liuzhou Company was the agent of goods involved before signing the contract. Finally, the contract entered by the Plaintiff Fangchenggang Port Company and the Defendant Sinotrans Liuzhou Company stipulated that if the Defendant Sinotrans Liuzhou Company had trade business relationship with a third party, the Plaintiff Fangchenggang Port Company should still regard the Defendant Sinotrans Liuzhou Company as the subject for collecting fees. But the ownership and the transfer rights of the goods involved belong to Xinbao Company. The Defendant Sinotrans Liuzhou Company did not have the ownership of the goods involved, and it is only a representative of the owner or the importer in the case, commissioned to loading, unloading, transshipment, customs clearance formalities of the goods involved and

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collecting appropriate fees. So, the assertion of the Plaintiff Fangchenggang Port Company that the Defendant Liuzhou Sinotrans Company and the Defendant Xinbao Company jointly the fees involved delete “together” contradicts to the principle of fairness. To sum up, the court holds that the contract of port operations directly bound the Plaintiff Fangchenggang Port Company and the Defendant Xinbao Company. Thirdly, the Defendant Xinbao Company had not indicated in the letter to the Plaintiff Fangchenggang Port Company that Xinbao Company failed to take delivery of the goods timely was due to the falling price. According to Article 107 of the Contract Law, “if a party fails to perform its obligations under a contract, or its performance fails to satisfy the terms of the contract, it shall bear the liabilities for breach of contract such as to continue to perform its obligations, to take remedial measures, or to compensate for losses”, the Plaintiff Fangchenggang Port Company fulfilled its obligation as stipulated in the contract. However, the Defendant Xindao Company as the owner of the goods and the counterparty of the contract in the case should perform the corresponding obligation of payment. The Defendant Xinbao Company has not paid the port operation fees and the storage fees yet to the Defendant Fangchenggang Port Company in accordance with the contract, and the behavior constitutes a breach of the contract. In summary, the court thinks that the Defendant Xinbao Company shall be under the obligation to pay the port operation fees and safekeeping fees. As to the second issue of the amount of the fees, the contract stipulated the method of calculating standard port operation fees and safekeeping fees. Fangchenggang Port Company urged that port operation fees were 25 yuan/ton. The total incurred port operation fees amount to 1,025,030 yuan (41,001.20 tons  25 yuan ton). Lianyang Company paid 450,000 yuan to Fangchenggang Port Company on behalf of Xinbao Company. Fangchenggang Port Company is still owed a balance of 575,030 yuan. Secondly, as to the amount of storage fees, the contract stipulated they should be calculated as follows: (1) the goods being discharged on June 30, 2013, safekeeping fees from June 30 to July 29 = 0; (2) from July 30 to August 28 = 123,003.60 yuan (calculated as 41,001.20 tons  30 days  0.10 yuan/ton day); (3) from August 29 to September 27 = 184,505.40 yuan (calculated as 41,001.20 tons  30 days  0.15 yuan/ton day); (4) from September 28 to October 27 = 246,007.20 yuan (calculated as 41,001.20 tons  30 days  0.20 yuan/ton day); (5) from October 28 to November 26 = 240,997.17 yuan {(calculated as 41,001.20 tons  5 days  0.25 yuan/ton day) + [(41,001.20 tons − 4,247.22 tons)  1 day  0.25 day/0.25 yuan/ ton day] + [(32,236.50 ton − 2,236.84 ton)  23 days  0.25 yuan/ton day]}; (6) from November 27 to December 26 = 269,996.94 yuan (29,999.66 tons  30 days  0.30 yuan/ton day); (7) from December 27 to January 25, 2014 = 314,996.43 yuan (29,999.66 tons  30 days  0.35 yuan/ton day); (8) from January 26 to February 24 = 359,995.92 yuan (29,999.66 tons  30 days  0.40 yuan/ton day); (9) from February 25 to March 26 = 404,995.41 yuan (29,999.66 tons  30 days 0.45 yuan/ton day); (10) from March 27 to April 30, 2015 = 5,999,932 yuan (29,999.66 tons  400 days  0.50 yuan/ton day); (11) from May 1 to the date of completion of taking delivery of the goods, calculating the charge rely on remaining goods by a base of 0.50 yuan/ton day; (12) the total of storage fees are 8,144,430.07

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yuan (123,003.60 yuan + 184,505.40 yuan + 246,007.20 yuan + 240,997.17 yuan + 269,996.94 yuan + 314,996.43 yuan + 359,995.92 yuan + 404,995.41 yuan + 5,999,932 yuan). The court holds that Xinbao Company should be liable for the payment of port operation fees of 575,030 yuan and safekeeping fees of 8,144,430.07 yuan to Fangchenggang Port Company, totaling 8,719,460.07 yuan, calculated to April 30, 2015, and 0.50 yuan/ton
day for each day the 29,999.66 tons of goods remained at Fangchenggang Port Company’s port. As to the third issue, according to Article 114 Paragraph 1 of the Contract Law, “the parties may agree that if one party breaches the contract, it shall pay a certain sum of liquidated damages to the other party in light of the circumstances of the breach, and may also agree on a method for the calculation of the amount of compensation for the damages incurred as a result of the breach.” Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China provides that, “a party shall have the responsibility to provide evidence in support of its own propositions.” Fangchenggang Port Company asked Xinbao Company to pay the liquidated damages. However, there was no agreement in the contract regarding liquidated damages or a method of calculation, should one party breach the contract. Fangchenggang Port Company failed to provide sufficient evidence to support its claim for liquidated damages. There is no factual or legal basis to support Fangchenggang Port Company’s claim for liquidated damages, and the court rejects this claim. As to the fourth and final issue, according to Article 230 Paragraph 1 of the Property Law of the People’s Republic of China, “when an obligor fails to pay off its due debts, the obligee may take a lien of the chattels that are owned by the obligor and lawfully occupied by the obligee, and has the right to seek preferred payments from such chattels.” According to Article 233, “where a property under lien is a divisible object, its value shall be equal to a number of debts”, because Xinbao Company failed to pay the port operation fees and safekeeping fees it owed to Fangchenggang Port Company, Fangchenggang Port Company can impose a lien on Xinbao Company’s 29,999.66 tons of iron ore that is still stockpiled on its yard. The scope of the lien exercised by Fangchenggang Port Company shall be within the value of the expenses owed by Xinbao Company. In summary, the Defendant Xinbao Company did not pay the corresponding cargo port operation fees and safekeeping fees, which means its act breached the contract. It should bear the responsibility to continue to pay the corresponding expenses. The Plaintiff Fangchenggang Port Company has the right to exercise the lien on the 29,999.66 tons of iron ore in the range of the value of Xinbao Company’s outstanding expenses. Part of the claims that the Plaintiff Fangchenggang Company proposed has a factual and legal basis, and the court supports them. According to Article 5, Article 107, Article 402 of the Contract Law of the People’s Republic of China, Article 230 Paragraph 1, Article 233 of the Property Law of the People’s Republic of China, Article 64 Paragraph 1, Article 144 of the Civil Procedure Law of the People’s Republic of China, “if a defendant, having been served with a summons, refuses to a appear in court without justified reasons, or if he withdraws during a court session without the permission of the court, the court may make a judgment by default”, the judgment is as follows:

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1. The Defendant Xinbao Resources Co., Ltd. shall pay the port operating fees and safekeeping fees 8,719,460.07 yuan to the Plaintiff Fangchenggang Beibu Gulf Port Service Co., Ltd. (the safekeeping fees shall be calculated until April 30, 2015, and the later storage fees shall be calculated to be 0.50 yuan/ton day based on the remaining goods until the date of completion of taking delivery of the goods of 29,999.66 tons); 2. The Defendant Xinbao Resources Co., Ltd. shall deposit 29,999.66 tons of iron ore on the Plaintiff Fangchenggang Beibu Gulf Port Service Co., Ltd., and the Plaintiff Fangchenggang Beibu Gulf Port Service Co., Ltd. has a lien on the part of an aforesaid first item with the corresponding value and has priority for compensation; 3. Reject other claims of the Plaintiff Fangchenggang Beibu Gulf Port Service Co., Ltd. Court acceptance fee in amount of 79,782 yuan, 7,978 yuan shall be born by the Plaintiff Fangchenggang Beibu Gulf Port Service Co., Ltd., and 71,804 yuan shall be born by the Defendant Xinbao Resources Co., Ltd. The obligor shall fulfill the debt of the case within 10 days as of the effective day of this Judgment, if he fails to fulfill its obligation within the time limit provided by this Judgment, the interest shall be double paid for the period of deferred payment. The obligee can apply to the court for enforcement within two years from the last day of the performance period that the effective judgment stipulated. If not satisfy with this Judgment, the Defendant Xinbao Resources Co., Ltd., shall within thirty days as of the service of this judgment, and other parties shall within fifteen days as of the service of this judgment, submit an appeal to the court, with copies in the number of the opposing parties, so as to make an appeal before the Guangxi Zhuang Autonomous Region High People’s Court, and pay the appeal acceptance fee within seven days after the period of appeal expires. (Name of account: Guangxi Zhuang Autonomous Region High People’s Court, number of account: 20–017,301,040,003,777, deposit bank: Wanxiang, Agricultural Bank of China Nanning Branch). If the application fails to be submitted upon the expiration date or fails to deferment the application, which is regarded as withdrawing the appeal automatically. Presiding Judge: SU Weilin Judge: SU Bin People’s Juror: PAN Xi February 6, 2016 Clerk: WEI Yuchen

Shanghai Maritime Court Civil Judgment Fairwind International Shipping Co., Ltd. v. Vertex Shipping Co., Ltd. (2015) Hu Hai Fa Hai Chu Zi No.73

Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 220. Cause(s) of Action 238. Dispute over maritime security. Headnote Time charterer held not liable for losses sustained by shipowner as a result of an application for a freezing order over shipowner’s assets, despite the fact that the freezing order was initially made over the assets of the wrong company, because shipowner’s evasiveness was the cause of the confusion. Summary The Plaintiff shipowner brought a claim against the Defendant for losses caused by the Defendant’s application for preservation of maritime claims, which resulted in the Plaintiff’s bank account being frozen. The Plaintiff and the Defendant contracted a time charter party where the Defendant was to charter the Plaintiff’s ship. During the performance of the charter party, demurrage occurred when the vessel refused to follow the Defendant’s navigational orders. As a result, the Defendant filed an application for preservation of maritime claims. However, the Defendant could not obtain the Plaintiff’s correct business registration address because this information was not disclosed in the charter party. Eventually, the Defendant found a company with an almost identical name that was registered in Hong Kong but owned by the same sole Shareholder. The Defendant filed the application using this address as the Plaintiff’s registration address. This resulted in the Plaintiff’s bank account being frozen, to which the Plaintiff responded by filing an objection to the claim preservation. After receiving this objection the Defendant learned the Plaintiff’s correct registration address and quickly re-filed its application using the correct information. Subsequently, the Plaintiff paid the requisite fees and filed suit against the Defendant, claiming that the target of the claim preservation was the Hong Kong Company and therefore the Plaintiff’s bank account was wrongfully frozen. It was held by the Shanghai Maritime Court that the target of the claim preservation was in fact the Plaintiff, and the Plaintiff’s failure to disclose their registration address resulted in the confusion that ensued, and any damages © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_9

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which resulted were not caused by the Defendant; thus, the Defendant was not found liable for the losses and the Plaintiff was required to pay all court acceptance fees in amount of RMB1,399.

Judgment The Plaintiff: Fairwind International Shipping Co., Ltd. Domicile: Palm Grove House, P.O.Box 438, Road Town, Tortola, British Virgin Islands. Legal representative: CHEN Baohua, chairman of the company. Agent ad litem: LIN Jiang, lawyer of Hisun & Co. Agent ad litem: WANG Ya’nan, lawyer of Hisun & Co. The Defendant: Vertex Shipping Co., Ltd. Domicile: 1001, (Kwang-11 Bldg., Mugyo-dong) 5, D adong-gi1, Jung-gu, Seoul, Korea. Legal representatives: Lee Yong Gu & Chang Ho Jin, directors of the company. Agent ad litem: PAN Rui, lawyer of Beijing Dentons (Shanghai) Law Office. Agent ad litem: LAO Jiagang, lawyer of Beijing Dentons (Shanghai) Law Office. The Plaintiff Fairwind International Shipping Co., Ltd. filed its claims arising from the preservation of maritime claims with the Defendant Vertex Shipping Co., Ltd. before the court on November 19, 2015. The court accepted this case on the same day, and formed a collegiate panel according to law. Evidence exchange was held on December 9, 2015, and the court held a hearing in public on March 2, 2016. Agents ad litem of the Plaintiff, LIN Jiang and WANG Ya’nan, agents ad litem of the Defendant, PAN Rui and LAO Jiagang, appeared in court to attend the hearing. The case has been concluded. The Plaintiff claimed that it was informed on July 24, 2015 that its bank deposit was frozen by the court due to the Defendant’s application for property preservation. However, the target of Defendant’s application for the property preservation was a Hong Kong company; such application nonetheless resulted in the freeze of the Plaintiff’s bank account. Since the Plaintiff bore no relation to the Defendant, and both parties were foreign companies, the Plaintiff had to employ Chinese lawyers to deal with this matter and submitted its Application for Objection to Enforcement. The court made its order to release the preservation on August 12. Therefore, the Plaintiff requested the court to hold the Defendant liable to compensate the Plaintiff for lawyer’s fees in aggregate amount of RMB50,000, loan interest losses of the bank deposit during the freeze period in amount of RMB3,957.36, indemnity for defamation in amount of RMB10,000, costs for notarization and legalization in foreign countries in amount of USD3,400, and court fees of this case.

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The Defendant contended that it concluded a charter party with the Plaintiff on November 6, 2014, and suffered economic losses due to the Plaintiff’s breach of contract, therefore, the Defendant filed the pre-litigation application for property preservation with the court and commenced arbitration against the Plaintiff in London. Considering that the Plaintiff did not reveal its registered address in the charter party and that the registration information of British Virgin Island companies was not open to the public, the Defendant could not timely obtain the Plaintiff correct address to satisfy the requirements for application for preservation. Meanwhile, the Defendant found out a company named “FAIRWIND INTERNATIONAL SHIPPING CO., LIMITED” (hereinafter “Fairwind HK”), whose name was very similar to the Plaintiff, and whose directors were exactly the same as the Plaintiff, therefore, the Defendant mistakenly submitted Fairwind HK’s address to the court as the Plaintiff’s address. The Plaintiff submitted its objection on the ground that it was not the target of the preservation after the court made its order to freeze Plaintiff’s bank deposit. Upon seeing the documents of the application for objection, the Defendant had only known of the correct registration address and then replaced its original application with another application for property preservation using the Plaintiff’s correct address, the court made its order accordingly to freeze the Plaintiff’s bank account again. Hence, the target of the preservation application was the Plaintiff, and the freeze of the Plaintiff’s bank account was therefore without fault and should not be obliged to make any compensation, moreover, the Plaintiff’s claims for lawyer’s fee, loan interest, and indemnity for defamation are groundless. Therefore, the Defendant requested the court to reject the Plaintiff’s claims. The Plaintiff’s evidence submitted in order to support of its claims, the Defendant’s opinions on evidence examination opinions and the court’s findings are as follows: 1. (2015) Hu Hai Fa Hai Bao Zi No.146 Civil Ruling, to prove that the Defendant intended to preserve Fairwind HK’s account but wrongfully preserved the Plaintiff’s bank account; 2. Application for Objection to Property Preservation, to prove that the Plaintiff submitted its application for objection due to the Defendant’s wrongful preservation; 3. (2015) Hu Hai Fa Hai Bao Zi No.146-1 Civil Ruling, to prove that the Defendant withdrew its preservation against the Plaintiff’s account; 4. Retainer agreement and invoice, to prove the Plaintiff’s reimbursements for attorney’s costs as a result of the Defendant’s wrongful preservation; 5. Calculation list for interest losses, to prove the Plaintiff’s interest losses due to the Defendant’s wrongful preservation; 6. Bill of Walkers Asia, to prove the Plaintiff’s reimbursements for notarization and legalization costs due to the Defendant’s wrongful preservation; 7. Fairwind HK’s website information, to prove that the shipowner in the charter party was Fairwind HK; 8. Fairwind HK’s charter party with its shipowner, to prove that it was Fairwind HK who concluded contract with the Defendant;

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9. Arbitration documents, to prove that the arbitration process commenced on June 2, 2015; 10. Email exchanges between Fairwind HK and the Defendant, to prove that the Defendant was aware of the charter party between Fairwind HK and its shipowner; 11. Petition documents, to prove that the Plaintiff had submitted its petition for review against the Defendant’s second application for preservation; and 12. Arbitration documents, to prove that Fairwind HK had applied for interlocutory award to the London tribunal. The Defendant had no objection to the authenticity, legality and relevancy of evidences 1–5, but the Defendant did not recognize the purposes. As to evidence 1, since the order dearly sets out that the Respondent was the Plaintiff, the target of the application was the Plaintiff, rather than Fairwind HK, and the frozen account was also the Plaintiff’s account, there existed no wrongful preservation. As to evidence 2, the Plaintiff’s application for objection could not prove wrongful preservation. As to evidence 3, since the reason why the Defendant withdrew its preservation was for the purpose of replacing the Plaintiff’s registration address and filing another application for preservation, and it was still the Plaintiff’s account that was frozen at this moment, there existed no wrongful preservation. As to evidence 4, since the preservation was not wrongful, the Plaintiff had no legal basis to claim lawyer’s fees; the Plaintiff failed to prove that it had actually paid the lawyer’s fees; the amount for such lawyer’s fees were unreasonable; moreover, the reimbursement of lawyer’s fees had nothing to do with the Defendant’s application for preservation. As to evidence 5, the Plaintiff failed to prove the existence of loan; moreover, the freeze of deposit had no impact on the acquisition of current interest, hence, the Plaintiff suffered no interest losses. As to evidence 6, this evidence was formed in foreign country and was not notarized nor legalized; the Plaintiff failed to provide any payment voucher, such a failure could not prove that it had made the payment; moreover, the Plaintiff could not prove such reimbursements were related to the Defendant’s application for preservation. The Defendant’s preservation was not wrongful and the Plaintiff’s claims had no legal basis, therefore, the Defendant did not recognize the authenticity, legality, relevancy or purposes of this evidence. As to evidence 7, the Defendant recognized its authenticity and legality, however, since there was no information of the vessel in the charter party on the website, the Defendant did not recognize its relevancy and purposes. As to evidence 8, since the Defendant was not a party to the charter party, the Defendant could not recognize its authenticity or legality, this charter party was irrelevant to this case. As to evidence 9, the Defendant recognized its authenticity and legality, however, since this email was only for the purpose of appointing arbitrators, rather than evidencing that an arbitration has been applied for, the Defendant did not recognize its relevancy and purposes; as to evidence 10, since it could not be proved that the relevant party of the email was Fairwind HK, the Defendant did not recognize its authenticity, legality or purposes. As to evidence 11, since the Defendant had never seen this document before, the Defendant could not recognize its authenticity; moreover,

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this evidence was irrelevant to this case. As to evidence 12, since this evidence had not been notarized nor legalized, the Defendant did not confirm its authenticity or legality, moreover, this evidence was irrelevant to this case. The court holds that since the Defendant had no objection to the authenticity, legality and relevancy of evidence 1–5, the effect of evidence of such evidence should be recognized. The target of the Defendant’s preservation is the Plaintiff rather than Fairwind HK, also, the account that was finally frozen is the Plaintiff’s account, therefore, evidence 1–3 could not prove that the Defendant is wrongful in applying for preservation. As to whether the Respondent should be responsible for its mistake in providing the Plaintiff’s registration address, the court leaves this issue to the reasoning part of this judgment. Evidence 4 retainer agreement was concluded between Fairwind HK and Hisun & Co., and had nothing to do with the Plaintiff, such evidence could not prove the actual payment and the necessity, reasonableness of the lawyer’s fees. Evidence 5 could not prove that the Plaintiff suffered loan interest losses. Based on the above, the court does not recognize the probative force of evidence 1–5, As to evidence 6, the court adopts the Defendant’s examination opinion. Evidences 7, 8 and 10 could not eliminate the fact there is a charter party relationship between the Plaintiff and the Defendant. Evidence 9 does not affect the Defendant’s right to apply for property preservation. The Plaintiff’s application in evidences 11 and 12 does not affect the trial of this case, the court does not recognize the relevancy, therefore, evidence 6–12’s effect of evidence and probative force cannot be recognized. The Defendant’s evidence submitted in order to support of its claims, the Plaintiff’s opinions on evidence and the courts findings are as follows: 1. The Defendant’s application for maritime claims preservation and evidence, to prove that since the Plaintiff breached the charter party in the course of performance, the Defendant was therefore entitled to maritime claims against the Plaintiff; the target of the preservation was the Plaintiff rather than Fairwind HK; 2. The Plaintiff’s invoices for hire, to prove that the target account of the Defendant’s application for preservation was the account which the Plaintiff used to collect the hire, the name of such account was exactly the same as the name of the Plaintiff; 3. (2015) Hu Hai Fa Hai Bao Zi No.156 Civil Ruling, to prove that to avoid confusion, the Defendant withdrew its original preservation application under (2015) Hu Hai Fa Hai Bao Zi No.146 when it found out that it provided a wrong registration address for the Plaintiff, and then filed another preservation application, which still froze the Plaintiff’s bank account; 4. Notice of results of property preservation, to prove that the court granted the Defendant’s preservation application and froze the Plaintiff’s bank account; 5. Fairwind HK’s annual return, to prove that the names of the Plaintiff and Fairwind HK looked very alike, and the sole shareholder was CHEN Baohua for both companies;

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6. Claim submissions, email exchanges between the tribunal and lawyers on both sides, and brief introduction of members of tribunals, to prove that the Defendant had applied to arbitrate the disputes which the property preservation proceedings concern on September 11, 2015. In the Plaintiff’s opinions on the evidence, it recognized the authenticity, legality and relevancy of the application for maritime claims preservation in evidence 1, but denied its purposes: the Plaintiff was in the opinion that the charter party was concluded between the Defendant and Fairwind HK, As to evidence 2, since it was formed in foreign country without notarization and legalization, the Plaintiff denied the authenticity and legality, it further stated that such invoices was formed during the Defendant’s performance of the contract with Fairwind HK and were irrelevant to this case. As to evidence 3, the Plaintiff recognized its authenticity, legality and relevancy, but it held that the Defendant’s second preservation was irrelevant to this case and therefore could not remedy losses caused by the first wrongful preservation. As to evidence 4, the Plaintiff recognized its authenticity, legality, relevancy and purposes. As to evidence 5, the Plaintiff recognized its authenticity and legality, but denied its relevancy by stating that it was irrelevant to this case since different companies had independent corporate personality, as well as independent rights and obligations, the mere fact that the names of companies were similar could not prove that they were the same companies. As to evidence 6, the Plaintiff recognized its authenticity and legality, but was of the view that the party to the arbitration was Fairwind HK, and that the commencement of the arbitration process should be from June 2, 2015 which was the date when the arbitrators were appointed and the counter party was informed. The court holds that as to evidence 1, since the Plaintiff recognized the authenticity, legality and relevancy of the application for maritime claims preservation, the effect of evidence should be recognized; the court does not recognize the other evidence, since they have not been tried by the arbitral tribunal, and the court holds that this evidence can only prove that the Defendant was intended to apply for maritime claim preservation against the Plaintiff and the Defendant provided prima facie evidence to prove the existence of a charter party between the Plaintiff and the Defendant, as to whether. The Plaintiff was in breach during the performance, it needed to be substantially tried by the arbitral tribunal, therefore, the court does not recognize the Plaintiff’s arguments. As to evidence 2, since it was not notarized nor legalized, the court does not recognize its authenticity, but this evidence can prove that it was the Plaintiff’s account that the Defendant was intended to preserve. As to evidence 3, since the Plaintiff recognized its authenticity, legality and relevancy, the effect of evidence should be recognized, this evidence is capable of evidencing the Defendant’s purposes of evidence, the probative force of such evidence should be recognized. As to evidence 4, since the Plaintiff recognized its authenticity, legality and relevancy, the court also recognizes this evidence. As to evidence 5, the Plaintiff recognized its authenticity and legality, the court holds that this evidence could prove that the names of the Plaintiff and Fairwind HK are very similar, and both companies have same shareholder, which is easily cause confusions to the

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Defendant, which is relevant to this case, and could reflect the Defendants purposes of evidence, therefore, the court recognizes the effect of evidence and probative force of this evidence. As to evidence 6, it can prove that the Defendant applied for arbitration in London with respect to charter party related property preservation disputes on September 11, 2015 the latest. The court finds the facts as follows: CHEN Baohua, a Chinese passport holder, established two companies in British Virgin Islands and Hong Kong respectively, the names of both companies to the public being while the English names are “FAIRWIND INTERNATIONAL SHIPPING CO., LTD.” for the former and “FAIRWIND INTERNATIONAL SHIPPING CO., LIMITED” for the latter. The former’s (namely the Plaintiff) registration address was Palm Grove House, P.O. Box 438, Road Town, Tortola, British Virgin Islands, and the latter’s (namely Fairwind HK) registration address was Rm 1203 Hua Fu Commercial Building, No.111 West Queen’s Road, Hong Kong. And the shareholder of both companies was CHEN Baohua, who was also the sole shareholder. On July 23, 2015, the Defendant submitted Application for Maritime Claims Preservation to the court in which it stated that the Defendant concluded a time charter party with the Plaintiff for M.V. “Izumi” of the Plaintiff. During the performance of the charter party, demurrage accrued as a result the vessels refusal of the Defendant’s navigation orders, it is for this reason that the Defendant applied for pre-litigation property preservation where it applied to freeze the Plaintiff’s bank deposit in amount of USD491,604.35, or to seal, attach other properties with equal values. Meanwhile, the Defendant submitted its charter party, payment records, hire calculation sheets with the Plaintiff (FAIRWIND INTERNATIONAL SHIPPING CO., LTD.) as prima facie evidence. Due to the reason that the Defendant had no access to the Plaintiff’s registration information, the Defendant only put the contact address in Shanghai which was Room 1205-08, Grand Ocean Tower, 1200 Pudong Avenue, Shanghai rather than the Plaintiff’s registration address in the application for property preservation. Afterwards, the Defendant found the registration information of Fairwind HK and mistakenly submitted Fairwind HK’s registration address as the Plaintiff’s registration to the court. On July 24, 2015, the court made (2015) Hu Hai Fa Bao Zi No.146 Civil Ruling, granting the Defendant’s pre-litigation application for property preservation, and freezing the Plaintiff’s deposit in its offshore business central account in Transportation Bank, however, this ruling mistakenly put the Plaintiff’s domicile as Hong Kong. On July 29, 2015, the Plaintiff filed objection to preservation with the court, in which it stated that the court granted the preservation of Fairwind HK domiciled in Hong Kong but ended up freezing the Plaintiff’s bank account, and such preservation was wrongful and should be removed. Subsequently, it submitted its notarized and legalized registration materials to the court and it was at this moment when the Defendant was aware of the Plaintiff’s correct registration address. On August 12, 2015, on one hand, the Defendant applied to remove the pre-litigation property preservation under (2015) Hu Hai Fa Hai Bao Zi No.146 by reason of claiming its rights by other means, on the other hand, the Defendant submitted the correct registration address to re-apply for pre-litigation property preservation

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against the Plaintiff. On the same day, the court ruled to remove the pre-litigation property preservation against the Plaintiff in (2015) Hu Hai Fa Hai Bao Zi No.146-1 Civil Ruling (in which the domicile was mistakenly put as Hong Kong), and granted the Defendant’s new pre-litigation property preservation in (2015) Hu Hai Fa Hai Bao Zi No.156 Civil Ruling (in which the Plaintiff’s domicile was British Virgin Islands) and the court still froze the Plaintiff’s deposit in its offshore business central account in Transportation Bank. Later on, the Defendant submitted evidence to prove that it had applied for arbitration in London with respect to charter party related property preservation disputes within 30 days of the preservation. The court holds that: This case is maritime claim preservation disputes arising from pre-litigation property preservation, and this case is foreign related since both the Plaintiff and the Defendant’s domiciles are in foreign countries. According to law, the parties could choose the applicable law to solve the disputes, and since both parties confirmed the application of Chinese law to solve the disputes in this case during the hearing, the court confirms that Chinese law is the applicable law to try the disputes in this case. In this case, the Defendant applied for pre-litigation property preservation against the Plaintiff with the court based on its charter party dispute with the Plaintiff. The Defendant’s submissions of prima facie evidence such as charter party with the Plaintiff as well as the security for maritime claim preservation are in accordance with relevant provisions in the Civil Procedure Law of People’s Republic of China and Special Maritime Procedure Law of the People’s Republic of China, the court is therefore correct in issuing the order to grant the preservation and to freeze the Plaintiff’s offshore bank account within China. The only issue is whether the Defendant should be liable for compensation for its mistake to submit Fairwind HK’s registration address as the Plaintiff’s registration address at the time of applying for preservation, which lead to the Plaintiff’s name and registration address do not match in the legal document? Firstly, the Plaintiff’s shareholder sets up two companies simultaneously with very similar names, which is indeed very confusing; under this circumstance, the Plaintiff did not clearly stipulate its information such as registration address when concluding contract with the Defendant, which caused the Defendant’s failure to timely obtain the Plaintiff’s registration address to correctly exercise its litigation rights, in this sense the Plaintiff is malicious. Secondly, even though the Defendant mistakenly provide the Plaintiff’s domicile, such mistake did not change the intention of the Defendant or the result of the property preservation against the Plaintiff. Thirdly, the Plaintiff failed to provide relevant evidence as to its alleged losses. Therefore, the Defendant should not be liable for liabilities. In summary, the Defendant mistakenly put the Plaintiff’s registration address at the time of application for property preservation due to the Plaintiff’s reasons, also, such mistake did not lead to the Plaintiff’s losses or the Plaintiff’s losses did not caused by such mistake, therefore, the court does not recognize the Plaintiff’s claims. According to Article 64 Paragraph 1, Article 100 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, and Article 12 and Article 15 of the Special Maritime Procedure Law of the People’s Republic of China, the ruling is as follows:

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Reject the claims of the Plaintiff FAIRWIND INTERNATIONAL SHIPPING CO., LTD. Court acceptance fee in amount of RMB1,399, shall be born by the Plaintiff FAIRWIND INTERNATIONAL SHIPPING CO., LTD. If not satisfy with this judgment, the Plaintiff and the Defendant can submit an appeal to the court within 30 days of the service of this judgment, with copy according to the number of the opposite party, and appealed to the Shanghai High People’s Court. Presiding Judgment: JI Gang Judge: XU Zhong Acting Judge: SHAN Dan March 15, 2016 Clerk: PAN Cen

Appendix: Relevant Laws 1. Civil Procedure Law of the People’s Republic of China Article 64 A party shall have the responsibility to provide evidence in support of its own propositions. Article 100 If the execution of a judgment becomes difficult or damage has been caused to the parties because of the acts of one party or for other reasons, the peopled court may, at the application of the other party, rule the adoption of measures for preservation of its property, order it to conduct or not to conduct certain acts. In the absence of such application, the people’s court may of itself, when necessary, order the adoption of measures for preservation. 2. Special Maritime Procedure Law of the People’s Republic of China Article 12 Preservation of maritime claims means compulsory measures taken by a maritime court on the application of a maritime claimant against the property of the person against whom a claim is made to ensure the realization of the claim of the maritime claimant. Article 15 A maritime claimant who applies for preservation of a maritime claim shall file the application in written with a maritime court. Such an application shall specify the particulars of the maritime claim, reasons therefor, subject-matter of the preservation and the amount of security required, and enclose the relevant evidence.

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Shanghai High People’s Court Civil Judgment Fairwind International Shipping Co., Ltd. v. Vertex Shipping Co., Ltd. (2016) Hu Min Zhong No.168 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 211. Cause(s) of Action 238. Dispute over maritime security. Headnote Affirming lower court decision that time charterer not liable for losses sustained by shipowner as a result of an application for a freezing order over shipowner’s assets, despite the fact that the freezing order was initially made over the assets of the wrong company, because shipowner’s evasiveness was the cause of the confusion. Summary The Plaintiff shipowner brought a claim against the Defendant for losses caused by the Defendant’s application for preservation of maritime claims, which resulted in the Plaintiff’s bank account being frozen. The Plaintiff and the Defendant contracted a time charter party where the Defendant was to charter the Plaintiff’s vessel. During the performance of the charter party, demurrage occurred when the vessel refused to follow the Defendant’s navigational orders. As a result, the Defendant filed an application for preservation of maritime claims. However, the Defendant could not obtain the Plaintiff’s correct business registration address because this information was not disclosed in the charter party. Eventually, the Defendant found a company with an almost identical name that was registered in Hong Kong but owned by the same sole shareholder. The Defendant filed the application using this address as the Plaintiff’s registration address. This resulted in the Plaintiff’s bank account being frozen, to which the Plaintiff filed an objection to the claim preservation. After receiving this objection the Defendant learned the Plaintiff’s correct registration address and quickly re-filed its application using the correct information. Subsequently, the Plaintiff paid the requisite fees and filed suit against Defendant. The first-instance Shanghai Maritime Court held that the Defendant was not liable for any damages that resulted from the Plaintiff’s bank account being frozen. The Plaintiff was ordered to pay all court fees resulting from the case of first instance in amount of RMB1,399. The Plaintiff appealed. It was held by the Shanghai High People’s Court that the original judgment should be affirmed, and the Plaintiff should pay all litigation fees resulting from the case of second instance in amount of RMB1,399.

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Judgment The Appellant (the Plaintiff of first instance): Fairwind International Shipping Co., Ltd. Domicile: Palm Grove House, P.O.Box 438, Road Town, Tortola, British Virgin Islands. Legal representative: CHEN Baohua, Chairman of the Company. Agent ad litem: LIN Jiang, lawyer of Hisun & Co. Agent ad litem: WANG Ya’nan, lawyer of Hisun & Co. The Respondent (the Defendant of first instance): Vertex Shipping Co., Ltd. Domicile: 1001, (Kuang-11 Bldg., Mugyo-dong) 5, Dadong-gil, Jung-gu, Seoul, Korea. Legal representative: Lee Yong Gu & Chang Ho Jin, directors of the Company. Agent ad litem: PAN Rui, lawyer of Sloma & Co. Agent ad litem: LAO Jiagang, lawyer of Sloma & Co. The Appellant FAIRWIND INTERNATIONAL SHIPPING CO., LTD. (hereinafter referred to as Fairwind Company) refused to accept (2015) Hu Hai Fa Hai Chu Zi No.73 Civil Judgment of Shanghai Maritime Court of the People’s Republic of China and lodged an appeal to the court arising from the preservation of maritime claims with the Respondent Vertex Shipping Co., Ltd. (hereinafter referred to as Vertex Company). After accepting this case on May 16, 2016, the court formed a tribunal according to law and held an open trial on September 7. Agents ad litem of Fairwind Company, LIN Jiang and WANG Ya’nan, and agents ad litem of Vertex Company, PAN Rui and LAO Jiagang, attended the hearing. The case has been concluded. Fairwind Company appealed that: 1. That Vertex Company applied for pre-litigation maritime property preservation was not in accordance with the condition for filing a case. The case-filing and judgment of the court of first instance belonged to erroneous application of the law. 2. Vertex Company should know that Fairwind Company was not the party to the charter party in question and it intended to preserve the property of FAIRWIND INTERNATIONAL SHIPPING CO., LIMITED (hereinafter referred to as “Fairwind HK”). The charter party in question was signed by Fairwind HK and Vertex Company. Fairwind Company had no relation to the charter party. Accordingly, Fairwind Company requested the court to reverse the original judgment and send back the suit or commute to support all the claims of Fairwind Company in the first instance according to law. Vertex Company contended that: 1. The target and object which were applied for preservation by Vertex Company were correct and the confirmed facts in first instance were correct. That Fairwind Company claimed that it was Fairwind HK who concluded a charter party with

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Vertex Company was wrong. The name of Fairwind HK was FAIRWIND INTERNATIONAL SHIPPING CO., LIMITED, but the shipowner in the charter party was FAIRWIND INTERNATIONAL SHIPPING CO., LTD. These were two different companies, therefore the shipowner of the charter party should be Fairwind Company but not Fairwind HK. The target which was applied for preservation by Vertex Company was Fairwind Company but not Fairwind HK throughout. The respondent listed in the application for preservation was FAIRWIND INTERNATIONAL SHIPPING CO., LTD. Vertex Company claimed the rights strictly according to the name of the shipowner in the charter party. After Fairwind Company raised an objection, Vertex Company reapplied for a second preservation. 2. Moreover, the regulations of English law concerning to arbitration procedure had no relation to this case. According to the Special Maritime Procedure Law of the People’s Republic of China and the Civil Procedure Law of the People’s Republic of China, the bank account and other properties can be applied for maritime claim preservation. 3. Fairwind Company and Fairwind HK were controlled by the same and only shareholder CHEN Baohua. The Chinese name of these two companies were exactly the same and the English name of these two companies were almost the same. It was easy to get confused. Furthermore, these two companies handled official business at the same place and they were actually one company. The procedure of the court of the original trial was correct and the confirmed facts were clear and the applied law was correct. Accordingly, Vertex Company requested the court to dismiss the appeal and affirm the original judgment. Fairwind Company appealed and claimed to the court of first instance that: it was informed on July 24, 2015 that its bank deposit was frozen by the court due to Vertex Company’s application for property preservation. However, the target of Vertex Company’s application for the property preservation was a Hong Kong company; such application nonetheless resulted in the freeze of Fairwind Company’s bank account. Since Fairwind Company had no relation to Vertex Company, and both parties were foreign companies, Fairwind Company had to employ Chinese lawyers to deal with this matter and submitted its Application for Objection to Enforcement. The court made its order to release the preservation on August 12. Therefore, Fairwind Company requested the court to hold Vertex Company liable to compensate Fairwind Company for attorney’s fees in amount of RMB50,000, loan interest losses of the bank deposit during the freeze period in amount of RMB3,957.36, indemnity for defamation in amount of RMB10,000, costs for notarization and legalization in foreign countries in amount of USD3,400, and court fees of this case. Vertex Company contended that: it concluded a charter party with Fairwind Company on November 6, 2014, and suffered economic losses due to Fairwind Company's breach of contract, therefore, Vertex Company filed the pre-litigation application for property preservation with the court and commenced arbitration against Fairwind Company in London. Considering that Fairwind Company did not reveal its registered address in the charter party and that the registration information

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of British Virgin Island companies is not open to the public, Vertex Company could not timely obtain Fairwind Company’s correct address to satisfy the requirements for application for preservation. Meanwhile, Vertex Company found out a company named “FAIRWIND INTERNATIONAL SHIPPING CO., LIMITED”, whose name was very similar to Fairwind Company, and whose director was exactly the same as Fairwind Company, therefore, Vertex Company mistakenly submitted Fairwind HK’s address to the court as Fairwind Company’s address. Fairwind Company submitted its objection on the ground that it was not the target of the preservation after the court made its order to freeze Fairwind Company’s bank deposit. Upon seeing the documents of the application for objection, Vertex Company had only known of the correct registration address and then replaced its original application with another application for property preservation using Fairwind Company’s correct address, the court made its order accordingly to freeze Fairwind Company’s bank account again. Hence, the target of the preservation application was Fairwind Company, and the freeze of Fairwind Company’s bank account was therefore without fault and should not be obliged to make any compensation, moreover, Fairwind Company’s claims for lawyer’s fee, loan interest, and indemnity for defamation were groundless. Therefore, Vertex Company requested to reject Fairwind Company’s claims. The court of first instance confirmed the facts that: CHEN Baohua, a Chinese passport holder, established two companies in British Virgin Islands and Hong Kong respectively, the names of both companies’ English names were “FAIRWIND INTERNATIONAL SHIPPING CO., LTD.” for the former and “FAIRWIND INTERNATIONAL SHIPPING CO., LIMITED” for the latter. The former’s (namely the Appellant of this case) registration address was Palm Grove House, P.O. Box 438, Road Town, Tortola, British Virgin Islands, and the latter’s (namely Fairwind HK) registration address was Room 1203 Hua Fu Commercial Building, No.111 West Queen’s Road, Hong Kong. And the shareholder of both companies was CHEN Baohua, who was also the one and only shareholder. On July 23, 2015, Vertex Company submitted its Application for Maritime Claims Preservation to the court of first instance in which it stated that Vertex Company concluded a time charter party with Fairwind Company for M.V. “Izumi” of Fairwind Company. During the performance of the charter party, demurrage accrued as a result of the vessel’s refusal of Vertex Company’s navigation orders, it was for this reason that Vertex Company applied for pre-litigation property preservation where it applied to freeze Fairwind Company’s bank deposit in amount of USD491,604.35, or to seal, attach other properties with equal values. Meanwhile, Vertex Company submitted its charter party, payment records, hire calculation sheets with Fairwind Company (FAIRWIND INTERNATIONAL SHIPPING CO., LTD.) as prima facie evidence. Due to the reason that Vertex Company had no access to Fairwind Company’s registration information, Vertex Company only put the contact address in Shanghai which was Room 1205-08, Grand Ocean Tower, Pudong Avenue No.1200, Shanghai rather than Fairwind Company's registration address in the application for property preservation. Afterwards, Vertex Company found the registration information of Fairwind HK

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and mistakenly submitted Fairwind HK's registration address as Fairwind Company's registration to the court of first instance. On July 24, 2015, the court of first instance made (2015) Hu Hai Fa Bao Zi No.146 Civil Ruling, granting Vertex Company’s pre-litigation application for property preservation, and freezing Fairwind Company’s deposit in its account of the offshore business center of Bank of Communications, however, this judgment mistakenly put Fairwind Company’s domicile as Hong Kong. On July 29, 2015, Fairwind Company filed an objection to preservation to the court of first instance, in which it stated that the granted domicile by the court of first instance for the preservation was in Fairwind HK of Hong Kong but the court ended up freezing Fairwind Company’s bank account, and such preservation is wrongful and should be removed. Subsequently, it submitted its notarized and legalized registration materials to the court of first instance and it was at this moment when Vertex Company was aware of Fairwind Company's correct registration address. On August 12, 2015, on the one hand, Vertex Company applied to remove the pre-litigation property preservation under (2015) Hu Hai Fa Hai Bao Zi No.146 by the reason of claiming its rights by other means, on the other hand, Vertex Company submitted the correct registration address to re-apply for pre-litigation property preservation against Fairwind Company. On the same day, the court of first instance ruled to remove the pre-litigation property preservation against Fairwind Company in the Civil Ruling of (2015) Hu Hai Fa Hai Bao Zi No.146-1 (in which the domicile was mistakenly put as Hong Kong), and granted Vertex Company’s new pre-litigation property preservation in the Civil Ruling of (2015) Hu Hai Fa Hai Bao Zi No.156 (in which Fairwind Company’s domicile was British Virgin Islands) and the court of first instance still froze Fairwind Company’s deposit in its account of offshore business center of Bank of Communications. Later on, Vertex Company submitted evidence to prove that it had applied for arbitration in London within 30 days after the preservation with respect to the charter party related. The court of first instance held that: This case was a maritime claim preservation dispute arising from pre-litigation property preservation, and this case was foreign related since both domiciles of Fairwind Company and Vertex Company were in foreign countries. According to law, the parties could choose the applicable law to solve the disputes, and since both parties confirmed the application of Chinese law to solve the disputes in this case during the hearing, the court of first instance confirmed that Chinese law was the applicable law to try the disputes in this case. In this case, Vertex Company applied for pre-litigation property preservation against Fairwind Company to the court based on its charter party dispute with Fairwind Company. Vertex Company’s submissions of prima facie evidence such as charter party with Fairwind Company as well as the security for maritime claim preservation are in accordance with the relevant provisions in the Civil Procedure Law of People’s Republic of China and the Special Maritime Procedure Law of People’s Republic of China, therefore the court of first instance was correct in issuing the order to grant the preservation and to freeze Fairwind Company’s offshore bank account in China. The only question was whether Vertex Company

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should be liable for compensation for its mistake of submitting Fairwind HK’s registration address as Fairwind Company’s registration address at the time of applying for preservation, which led to Fairwind Company’s name and registration address do not match in the legal document? Firstly, Fairwind Company’s shareholder set up two companies simultaneously with very similar names, which was indeed very confusing; under this circumstance, Fairwind Company did not clearly stipulate its information such as registration address when concluding contract with Vertex Company, which caused Vertex Company’s failure to timely obtain Fairwind Company’s registration address to correctly exercise its litigation rights, in this sense Fairwind Company was malicious. Secondly, even though Vertex Company mistakenly provided Fairwind Company’s domicile, such mistake did not change the intention of Vertex Company or the result of the property preservation against Fairwind Company. Thirdly, Fairwind Company failed to provide relevant evidence as to its alleged losses. Therefore, Vertex Company should not be liable for liabilities. In summary, Vertex Company mistakenly put Fairwind Company’s registration address at the time of application for property preservation due to Fairwind Company’s reasons, also, such mistake did not lead to Fairwind Company’s losses or Fairwind Company’s losses did not caused by such mistake, therefore, the court of first instance did not support Fairwind Company’s claims. According to Article 64 Paragraph 1 and Article 100 Paragraph 1 of the Civil Procedure Law of People’s Republic of China and Article 12 and 15 of the Special Maritime Procedure Law of People’s Republic of China, the judgment was as follows: reject the claims of Fairwind Company FAIRWIND INTERNATIONAL SHIPPING CO., LTD. Court acceptance fee in amount of RMB1,399, should be born by Fairwind Company FAIRWIND INTERNATIONAL SHIPPING CO., LTD. In the process of second instance of the court, the parties submitted evidence centered around the claims. The court organized the parties to have the evidence exchange and cross-examination. Fairwind Company submitted the evidence material as follows: Article 14 of Arbitration Act of the United Kingdom 1996 (the UK Arbitration Act), to prove that: according to Article 14 of this law, where the arbitrator or arbitrators were to be appointed by the parties, arbitral proceedings were commenced in respect of a matter when one party served on the other party or parties notice. In this case, the starting date of Vertex Company when it applied for arbitration in England was June 2, 2015, because on that date it appointed the arbitrator or arbitrators and informed Fairwind HK. Vertex Company confronted that: this evidence was not the new evidence in second instance and should not confirm the effectiveness of this evidence. This evidence was not notarized and authenticated and was not in accordance with the requirements of legal evidence form. The agents ad litem were not the specialists of English law and were not clearly aware of the understanding and application of the UK Arbitration Act and the provisions of relevant procedure of the UK Arbitration Act had no relevancy with this case. Therefore, it did not accept the authenticity, legality and relevancy of this evidence.

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The court considers that: this case is a maritime claim preservation dispute between two parties. The provisions of the UK Arbitration Act have no relevancy with this case. Therefore, the court will not accept the above evidence material. Vertex Company did not submit new evidence material. The court finds the facts as follows: The facts which were found by the court of first instance have evidence to prove and the parties did not submit effective evidence to reverse. The court confirms the facts which were found by the court of first instance. The court considers that: according to the provisions of the Special Maritime Procedure Law of the People’s Republic of China, maritime claims mean maritime courts, according to applications of maritime claimants, take compulsory preservation measures against property of persons against whom the claims are brought up in order to ensure the realization of such rights. Where maritime claimants apply for maritime claims, written applications shall be filed with maritime courts. Maritime claims, application reasons, objects subjected to preservation and amounts for guaranty shall be stated in applications. This case is the dispute arising from the charter party between Vertex Company and Fairwind Company. That Vertex Company applied for pre-litigation property preservation with the court of first instance and submitted prima facie evidence involving the charter party with Fairwind Company as well as the security for maritime claim preservation was in accordance with the legal regulations. That the court of first instance made the judgment of granting preservation was correct. According to the provisions of the Special Maritime Procedure Law of the People’s Republic of China, if an application for maritime preservation is wrongfully made by a maritime claimant, the claimant shall compensate the person against whom the application is made for any loss incurred from maritime preservation. It was general tort in the constitution of the responsibility and the constitutive requirements include fault, facts of damage, act and causal relationship. In this case, the respondent of the preservation which Vertex Company applied for was throughout Fairwind Company. Only Vertex Company mistakenly submitted Fairwind HK’s registration address as Fairwind Company’s registration to the court of first instance when it applied for preservation. The evidence in this case indicated that, Fairwind Company did not express its exact registration address to Vertex Company. However, the English names of Fairwind Company and Fairwind HK were “FAIRWIND INTERNATIONAL SHIPPING CO., LTD.” and “FAIRWIND INTERNATIONAL SHIPPING CO., LIMITED” respectively and the Chinese names of both companies are the same. The shareholder of these two companies was CHEN Baohua (the one and only shareholder). This circumstance is easy to get confused indeed. Therefore, Vertex Company cannot exactly provide the registration information of Fairwind Company and it did not constitute the fault in the general tort. The original trial is not improper. In summary, the appeal of Fairwind cannot be confirmed and shall be dismissed. The ruling of first instance confirmed the facts clearly and applied the right law and shall be affirmed. According to the Article 170 Paragraph 1 Sub-paragraph 1 and Article 175 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows:

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Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of RMB1,399, shall be born by the Appellant FAIRWIND INTERNATIONAL SHIPPING CO., LTD. The judgment is final. Presiding Judge: SUN Chenmin Judge: ZHANG Wen Acting Judge: XU Yijin January 18, 2017 Clerk: CHEN Xi

Appendix: Relevant Laws 1. Civil Procedure Law of the People’s Republic of China Article 170 After trying a case on appeal, the people’s court of second instance shall, in the light of the following situations, dispose of it accordingly: (1) If the facts were clearly ascertained and the law was correctly applied in the original judgment, the appeal shall be rejected in the form of judgment and the original judgment shall be affirmed. Article 175 The judgment and written order of the people’s court of second instance shall be final.

Qingdao Maritime Court Civil Judgment Foreign Economic and Technical Cooperation Co., Ltd. of China Changjiang National Shipping Group et al. v. China Construction Bank Co., Ltd. Qingdao Zhongshan Road Sub-branch (2013) Qing Hai Fa Shang Chu Zi No.945 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 243. Cause(s) of Action 234. Dispute over maritime security contract. Headnote The Plaintiff ship seller held to be entitled to recover on bank guarantee given for purchase price of two ships, despite the fact that name of beneficiary in the guarantee contract was differently stated than in the sale documents, because bank knew that documents were intended to refer to same company, also rejecting the Defendant bank’s argument that the Plaintiff’s first recourse should have been against defaulting purchasers. Summary The Defendant, Zhongshan Bank, guaranteed CIEC Shandong Company’s liability to pay for two vessels. CIEC Shandong breached its obligation to pay the Plaintiff for the two vessels. The Defendant refused to pay the Plaintiff, because the name of the beneficiary as stated in the guarantee contract differed from the Plaintiff’s name as stated in other documents relating to the sale. The Plaintiff sued the Defendant to enforce the guarantee. The court held that because the Defendant had actual knowledge that the Plaintiff’s name as stated in the guarantee contract was, despite the lack of conformity, referring to the same company as in the other documents, the Defendant was at fault in refusing to pay the Plaintiff and was liable for the amount claimed plus interest. The court rejected the Defendant’s argument that the Plaintiff should have begun by negotiating with or instituting an action against CIEC Shandong Company, as the applicant for the security contract, holding that under Chinese Guaranty Law, a plaintiff has the right to institute his action against the guarantor, and then the guarantor may recover from its debtor.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_10

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Judgment The Plaintiff: Foreign Economic and Technical Cooperation Co., Ltd. of China Changjiang National Shipping Group Domicile: 22nd Floor, of Zheng Xin Tower, No.26 Jianghan Road, Jiang’an District, Wuhan, Hubei. Legal representative: LI Wende, general manager. Agent ad litem: MA Yanhui, lawyer of Beijing King & Wood Mallesons. Agent ad litem: LIU Xiaowen, lawyer of Beijing King & Wood Mallesons (Qingdao). The Plaintiff: Changjiang Shipping Group Qingshan Shipyard Domicile: Shipyard Village, Industrial Port, Qingshan District, Wuhan, Hubei. Legal representative: XIE Qizhi, factory president. Agent ad litem: MA Yanhui, lawyer of Beijing King & Wood Mallesons. Agent ad litem: LIU Xiaowen, lawyer of Beijing King & Wood Mallesons (Qingdao). The Defendant: China Construction Bank Co. Ltd. Qingdao Zhongshan Road Sub-branch Domicile: No.93 Zhongshan Road, Shinei District, Qingdao, Shandong. Person in charge: WANG Li, bank president. Agent ad litem: YU Jie, International Business Department manager of the Bank. Agent ad litem: XIAO Tong, deputy manager. The Third Party: China National Electronic Imp. and Exp. Shandong Corporation Domicile: No.54 Maanshan Road, Ji’nan, Shandong. Legal representative: CONG Yadong, general manager. Agent ad litem: LI Lun, Lawyer of Deyi Junda Law Firm. This case involved a dispute between the Plaintiffs, Foreign Economic and Technical Cooperation Co., Ltd. of China Changjiang National Shipping Group (hereinafter referred to as “Foreign Economic and Technical Cooperation Co. of CCS”) and Changjiang Shipping Group Qingshan Shipyard (hereinafter referred to as “Qingshan Shipyard”), and the Defendant, China Construction Bank Co., Ltd. Qingdao Zhongshan Road Sub-branch (hereinafter referred to as “Zhongshan Bank”) over maritime security contract. The court approved Zhongshan Bank’s application to join China National Electronic Imp. & Exp. Shandong Corporation (hereinafter referred to as “CEIEC Shandong Company”) as the Third Party in the case. The court formed a collegiate panel and held a hearing in public, MA Yanhui and LIU Xiaowen as agents ad litem of the Plaintiffs; YU Jie and Xiao Tong as agents ad litem of Zhongshan Bank, and LI Lun as agent ad litem of CIEC Shandong Company, appeared in court to attend the hearing. Now the case has been concluded.

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The two Plaintiffs alleged that they entered into a contract titled Agreement II-1 with CIEC Shandong Company and Jiangsu Shenghua Shipbuilding Co., Ltd., which transferred the rights of co-building the two ships from Macs Maritime Carrier Shipping GMBH & Co. (hereinafter referred to as “Shipowner”) to the two Plaintiffs, for further building (contract No.qs-sh-zd-201002). According to the agreement, CIEC Shandong Company was to pay the two Plaintiffs 2,900,000 USD within three days from the signing of the delivery protocol of the new ship (contract No.ECTEC10315.) On October 12, 2010, Zhongshan Bank issued a Guarantee for Performance (2010 Bao Han No.10) as security for CIEC Shandong Company’s payment obligation at the request of CIEC Shandong Company, in order to provide an irrevocable and unconditional guarantee of payment at sight, with the Bank’s maximum payment limited to 2,000,000 USD to the two Plaintiffs. On September 3, 2013, the two Plaintiffs signed the delivery protocol of ship ECTEC10315 and sent Payment Notice to CIEC Shandong Company that same day. However, CIEC Shandong Company failed to pay. The two Plaintiffs then sent the original letter of guarantee and Reminder Notice of the Two 37000 DWT Multi-purpose Ships to Zhongshan Bank. However, Zhongshan Bank refused to pay because the name of the beneficiary was listed in Guarantee for Performance as “Changjiang Shipping Group Qingshan Shipyard,” which differed from the name of the claimant, “Qingshan Shipyard of China Changjiang Shipbuilding Industry Group.” As a result, the two Plaintiffs filed suit and requested the court that: (1) Zhongshan Bank should pay a total of 200,000,000 USD and interest at a rate of 5% for the ships; (2) Zhongshan Bank should pay the lawyer’s fees and other court costs to the Plaintiffs; (3) Zhongshan Bank should assume the litigation costs of this case. Zhongshan Bank argued that: 1. firstly, on October 26, 2010, upon CIEC Shandong Company’s request, the bank issued Guarantee for Performance, 2010 Bao Han No.10, that listed the beneficiaries as “Foreign Economic and Technical Cooperation Co. of China Changjiang National Shipping Group” and “Qingshan Shipyard pf China Changjiang Shipbuilding Industry Group.” Secondly, the bank received a Reminder Notice signed by Changjiang Shipping Group Qingshan Shipyard. It required it to verify and certify the identity, yet it only presented a certificate from their superior company. In such a situation, our actions to avoid the dishonor of our bank were reasonable and legal. 2. The interest claimed by the Plaintiffs was unreasonable because of the absence of documents meeting the requirements of Guarantee for Performance. As a consequence, our bank refused to remit payment to them. 3. The court should reject the Plaintiffs’ demand that the bank should be liable for the lawyer’s fees and court costs, due to the lack of any bilateral arrangement or supporting law. Zhongshan Bank made a motion to join CEIEC Shandong Company as the Third Party, and the reasons were as follows: 1. although this was a performance dispute upon Guarantee for Performance, the bank only performed the guarantee responsibility throughout the whole process of dealing. Rather, CEIEC Shandong Company had a direct interest with the case and should be liable for clearing the final payment. 2. The bank informed CEIEC Shandong Company after receiving

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the Reminder Notice sent by the Plaintiffs. Then, CEIEC Shandong Company required it to stop payment. 3. CEIEC Shandong Company provided the name of the beneficiary, and they could confirm in court that the Plaintiff was the appropriate beneficiary. CEIEC Shandong Company, as the Third Party, stated that: 1. Guarantee for Performance referred to was a demand letter of guarantee and was characterized by documentary payment terms. In this case, the Plaintiffs failed to provide documents to meet the requirements of Guarantee for Performance, and the listed names of the Plaintiffs were inconsistent with the named beneficiary in the guarantee. Therefore, Zhongshan Bank’s fear of dishonor was reasonable, and the court should reject the Plaintiffs’ claims. 2. No payment terms were mentioned in Guarantee for Performance. As a prerequisite to the payment, the Plaintiffs and the Shipowner must sign the delivery agreement for the new ship. However, the Plaintiffs did not notify the Shipowner to sign the agreement, nor had there been presented any efficacious certificates that could prove that the agreement was signed. 3. The liability to honor the presentation of the third party was related to the liability of the Defendant. Any liability of CIEC Shandong Company was related to the liability of Zhongshan Bank. Thus, this dispute should have been settled by arbitration between the Plaintiffs and Zhongshan Bank before this case was brought to court. The Plaintiffs submitted the following evidence to the court in order to prove the claims: 1. Agreement II-1 regarding the contractual transfer of the two 37000 DWT multi-purpose ships. To prove that: CIEC Shandong Company, as the Third Party, was required to pay 2,900,000 USD to the two Plaintiffs within three days from the day the Plaintiffs signed Delivery Protocol of the new ship, and upon CIEC Shandong Company’s failure, Zhongshan Bank would issue payment of 2,000,000 USD per vessel (or of RMB, in equal value) to two Plaintiffs as Zhongshan Bank’s Guarantee for Performance. 2. Guarantee for Performance, 2010 Bao Han No.10. Zhongshan Bank issued Guarantee for Performance to the Plaintiffs on October 26, 2010. To prove that: Zhongshan Bank demonstrably committed to provide an irrevocable and unconditional guarantee of payment, which was owed by CIEC Shandong Company. However, CIEC Shandong Company failed to carry out its obligation to pay, and as a result, the Plaintiffs were entitled to receive the original copy of Guarantee for Performance within the period of validity and then clear the payment within ten days after the demonstration of Notice of Claims. 3. Delivery protocol of the ship, payment notice, and fax receipt demonstration. To prove that: the Plaintiffs had fully performed their obligations under Agreement II-1 regarding the contractual transfer of the two 37000 DWT multi-purpose ships, signed the delivery protocol of the ship (contract No. ECTEC10315), and sent, on the same day, a notification regarding the terms of the payment, and had not received payment from CIEC Shandong Company.

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4. Reminder notice of the two 37000 DWT multi-purpose ships, receipt, and notice of dishonor. To prove that: the Plaintiffs had submitted the original copy of letter of guarantee and the debit note. However, Zhongshan Bank refused to pay due to the discrepancies in the listed name of the beneficiary. 5. Two guarantees for performance (No.2010 Bao Han No.7 and 2010 Bao Han No.8), the relevant reminder notice, receipt, and payment documents. To prove that: in accordance with the payment obligation in Article 2 of Contractual Transfer Agreement II-1 on the two 37000 DTW multi-purpose ships (No. qs-sh-zd-201002) Zhongshan Bank provided two original copies of letter of guarantee to the two Plaintiffs on October 26, 2010. After the two Plaintiffs made their claim for payments, Zhongshan Bank cleared all the payment in RMB under the letter of guarantee, in amount of 17,080,000 USD. Reminder notice displayed the stamps of the beneficiary Changjiang Shipping Group Qingshan Shipyard, and both Zhongshan Bank and CIEC Shandong Company accepted such evidence. 6. Documents from China Changjiang Shipbuilding Industry Group. To prove that: China Changjiang Shipbuilding Industry Group, as the competent authority of the Plaintiffs, issued documents to prove that the company’s name was Changjiang Shipping Group Qingshan Shipyard, thus confirming the identity of the Plaintiff. 7. Business license of Changjiang Shipping Group Qingshan Shipyard (backup copy). To prove that: Changjiang Shipping Group Qingshan Shipyard was the enterprise’s name and legal personality. 8. Notice for alteration of registration of enterprise legal person and its attached documents. To prove that: on January 16, 1996, Changjiang Shipping Group Qingshan Shipyard changed its name to the present one due to the change of its legal person, engraving the official seal of its full name after they passed the inspection and received approval from Wuhan Administrative Bureau For Industry and Commerce. This seal was still being used. 9. Documents from the head office of China Changjiang National Shipping Group Co. To prove that: it approved the establishment of China Changjiang Shipbuilding Industry Group, and thus, China Changjiang Shipbuilding Industry Group could take charge in the operation and management of the two Plaintiffs with the enterprise’s name unchanged. 10. Notice of enterprise change and attached documents (November 9, 2007). To prove that: the agency-in-charge of Changjiang Shipping Group Qingshan Shipyard was changed to “China Changjiang Shipbuilding Industry Group” after receiving approval from Wuhan Administrative Bureau For Industry and Commerce with the enterprise’s name and official seal remaining the same. 11. Brochures, audio-visual materials, and information on the official website of China Changjiang Shipbuilding Industry Group and Qingshan Shipyard of CCS. To prove that: Changjiang Shipping Group Qingshan Shipyard as the subordinate enterprise of China Changjiang Shipbuilding Industry Group expressed its subordinate relationship in varying degrees with China Changjiang Shipbuilding Industry Group during the propagating, producing,

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and operating process so as to be convenient in distinguishing and to achieve unified management. Clearing Agreement I regarding four 37,000 DTW multi-purpose ships and Clearing Agreement II regarding four 37,000 DTW multi-purpose ships. To prove that: the two clearing agreements were signed by two Plaintiffs and by CIEC Shandong Company on October 29, 2010, which showcased the stamped seal of Shipyard of China Changjiang National Shipping Group. Customs declaration for exportation of goods. To prove that: the delivery protocol of M.V. GREEN MOUNTAIN under the contract (No.ECTEC10315) was signed by the Plaintiffs and CIEC Shandong Company on September 3, 2013, and the two parties cleared the goods on September 5, 2013. The forwarding unit in the bill of entry was Changjiang Shipping Group Qingshan Shipyard. Interim certificate of class. To prove that: before ship delivery, Germanischer Lloyd issued an interim certificate of class, in which the name of the shipyard was listed as “Changjiang Shipping Group Qingshan Shipyard,” which was consistent with the name of the Plaintiff. Mail that informed the Plaintiffs that the sealed main contract was sent back to them. To prove that: in October 2010, CIEC Shandong Company signed the main contract and two related clearing agreements with the two Plaintiffs and Jiangsu Shenghua Company. However, CIEC Shandong Company left the official seal at its company, so they had to mail the contract and agreements signed and sealed by the other two parties back to the company, and then stamped and sent all the mailed papers to all the other parties. These acts could successfully prove that CIEC Shandong Company clearly knew that the signed name of the Plaintiffs on the paper was “Changjiang Shipping Group Qingshan Shipyard.” Appointed documents and labor contract of SHEN Jingmin, the authorized representative of Changjiang Shipping Group Qingshan Shipyard. To prove that: SHEN Jingmin, as the vice plant manager and the representative of Changjiang Shipping Group Qingshan Shipyard, signed the contract mentioned in this case. The Plaintiffs confirmed SHEN Jingmin’s action. YU Jie, as the person within Zhongshan Bank responsible for confirming the content of the letter of guarantee sent mail to the Plaintiffs. To prove that: on October 24, 2010, he asked the Plaintiffs to confirm the context of the contract. The mail including the related letter of guarantee, which sufficiently proved that Zhongshan Bank knew the identity of the Plaintiff and that the guarantee was presented by the Plaintiff. Chinese version of Delivery Protocol of Ship and Provisional Certificate of Vessel as well as the qualification certificate provided by Qingdao Business English Translation Office. To prove that: the two Plaintiffs completed the ship delivery on September 3, 2013, meeting the payment clause.

Neither party had any objection to the authenticity of Plaintiff’s evidences 1, 2, 3, 4, 5, 6, and 7, but they had objection to the contents to be proved. However, Zhongshan Bank refused to confirm the authenticity of the other evidence submitted

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by the Plaintiff. CIEC Shandong Company did not object to the authenticity of evidences 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 15, or 18, but objected to the contents to be proved. CIEC Shandong Company refused to confirm the authenticity of the other evidence submitted by the Plaintiff. In order to support its defense, Zhongshan Bank submitted the following evidence: 1. 2. 3. 4.

Copy of Guarantee for Performance; Application for letter of guarantee; Agreement on letter of guarantee; Notification from CEIEC;

The four pieces of evidence mentioned above could prove the identity of the beneficiary; 5. Copy of notarization, to prove that the letter of guarantee was issued in accordance with the contractual transfer Agreement II-1 on the two 37,000 DTW multi-purpose ships, no. qs-sh-zd-201002, annexed to the notarization. The Plaintiffs did not object to the authenticity of Zhongshan Bank’s evidences 1, 2, 3, or 5 but refused to confirm the authenticity of evidence 4 due to the absence of the original copy. CIEC Shandong Company did not object to the evidence offered by Zhongshan Bank. CIEC Shandong Company offered the following evidence to the court: 1. Agreement II on the two 37,000 DTW multi-purpose ships, to prove that Contractual Transfer Agreement was signed between CIEC Shandong Company and Changjiang Shipping Group Qingshan Shipyard. 2. Contractual Transfer Agreement II-1 on the two 37,000 DTW multi-purpose ships, to prove that: Contractual Transfer Agreement II-1 on the two 37,000 DTW multi-purpose ships as the supplementary to Agreement II was signed between CIEC Shandong Company and Changjiang Shipping Group Qingshan Shipyard. The Plaintiffs did not object to the authenticity of CIEC Shandong Company’s evidence 1, but did object to the authenticity of evidence 2. Neither the Plaintiffs nor Zhongshan Bank objected to CIEC Shandong Company’s evidence. The court reviews the Plaintiffs’ evidence and holds as follows: Evidences 2, 4, 5, 6, 7, 8 and 10 were verified and confirmed to be identical to the original manuscript, and neither Zhongshan Bank nor CIEC Shandong Company raised any objection to this evidence, so the court accepts this evidence. Evidences 3, 12, 13, 15 and 18 were verified and confirmed to be identical to the original manuscript, and all of the proofs that were accepted by CIEC Shandong Company are related to the contractual transfer and the ship delivery, and therefore, are accepted by the court. Evidences 9, 11, 16 and 17 were verified and confirmed to be identical to the original manuscript and thus is accepted by the court.

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The interim certificate of class provided by the Plaintiffs in evidence 14 was not the original copy, which led to objection from Zhongshan Bank and CIEC Shandong Company. Therefore, its effectiveness will be determined combined with other evidence. The Plaintiff’s evidence 1 and CIEC Shandong Company’s evidence 2 are parts of Contractual Transfer Agreement II-1, and were verified and confirmed to be identical to Contractual Transfer Agreement II-1. The content of these two evidence are consistent, except for the differences in sealing and signing. However, the court accepted these two evidence these because of the confirmation from the Plaintiffs and CIEC Shandong Company that the differences arose because the papers were signed at different times. Evidences 1, 2, 3 and 5 provided by Zhongshan Bank were verified and confirmed to be identical to the original manuscript, and neither the Plaintiff nor CIEC Shandong Company raised any objection; thus, the court accepts this evidence. Evidence 4 was verified and confirmed to be identical to the original manuscript by CIEC Shandong Company, who is the issuer; thus, the court accepts this evidence. Evidence 1 was verified and confirmed to be identical to the original manuscript, and neither the Plaintiffs nor Zhongshan Bank raised any objection to it; thus, the court accepts this evidence. On the basis of the evidence submitted by Zhongshan Bank, the Plaintiffs and CIEC Shandong Company, as well as the statements made in the hearing, the court finds the following facts: On August 29, 2010, CEIEC Shandong Company and Jiangsu Shenghua Company (A) concluded Agreement II with the two Plaintiffs (B), agreeing that B should continue the building of two 37,000 DTW multi-purpose ships (hull No. JSH405/406), which were originally supposed to be built by A. B signed a new contract with the Shipowner. The new contract was to come into effect depending on the progress of payments on the ship totaling 2,610 USD owed by the Shipowner to A. B agreed that A would pay B in cash at least 17,080,000 USD by October 15, 2010. A agreed to issue an irrevocable guarantee payable at sight in bank, covering the price gap between 43,000,000 USD and 40,100,000 USD. The base of the price difference was 2,900,000 USD per vessel, which decreases as the price of the imported equipment was reduced. The price reducing allocation plan was within 7,500 USD per vessel with all the reduced payments paid to A. If the reduced payments were higher than 7,500 USD per vessel, the extra money should be shared by A and B. This agreement was the primary framework agreed by all parts. On October 24, 2010, the two Plaintiffs signed Contractual Transfer Agreement II-1 on the two 37,000 DTW multi-purpose ships (no. qs-sh-zd-201002) (hereinafter referred to as “transfer contract”) with CEIEC Shandong Company and Jiangsu Shenghua Company. The parties agreed in the contract that CEIEC Shandong Company and Jiangsu Shenghua Company would transfer the shipbuilding contract of the two ships (contact No.SH-00405/406, hull No.JSH405/ 406), signed on November 29, 2007, to the two Plaintiffs for further building. Article 6 of the transfer contract stated the agreed price for shipbuilding. In

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accordance with the signed transfer contract, the construction price of the two ships was 40,100,000 USD per vessel. CEIEC Shandong Company and Jiangsu Shenghua Company agreed to pay the Plaintiffs the extra money totaling 2,900,000 USD per vessel within 3 days of signing the delivery protocol of ship. In order to make sure that CEIEC Shandong Company and Jiangsu Shenghua Company fulfilled their obligation, CEIEC Shandong Company issued Guarantee for Performance to the two Plaintiffs on October 25, 2010 and paid the guarantee amount of 2,000,000 USD per vessel (or, in RMB of equal value, the difference was 900 thousand Yuan per vessel which should be set in another discussion). The period of guarantee was set to end when the above-mentioned payments were received. Any dispute arising from the execution of the contract should be settled through the negotiation between both parties. If the parties failed to negotiate, the dispute should be submitted to the Shanghai International Shipping Arbitration Institute in accordance with the law of China and the arbitration rule of Shanghai International Shipping Arbitration Institute. The agreement was signed, but not officially stamped and sealed, by the respectively authorized person of each party. The Plaintiff printed its name as “Qingshan Shipyard of China Changjiang Shipbuilding Industry Group” on the agreement with SHEN Jingmin giving his signature on it. Then all parties sealed and signed the official agreement in which the Plaintiff sealed itself as “Changjiang Shipping Group Qingshan Shipyard.” On October 26, 2010, Zhongshan Bank issued the guarantee for performance (2010 Bao Han No.10) in accordance with applicant CEIEC Shandong Company and the contractual transfer of all other related parties, with the main content as follows: to Foreign Economic and Technical Cooperation Co. of China Changjiang National Shipping Group and Qingshan Shipyard of CCS, the beneficiary: your company signed the transfer contract (No.qs-sh-zd-201002) with Jiangsu Shenghua Company and the new shipbuilding contract (No.ECTEC10314/ECTEC10315) with the Shipowner. According to Article 6 of the agreement, CEIEC Shandong Company should pay you 2,900,000 USD as compensation for the price difference of the shipbuilding within 3 days after your company signs the delivery protocol of the new ship and the payment of 200 million USD was remitted. The application of CEIEC Shandong Company was accepted by our bank, meaning that we would provide you an irrevocable and unconditional guarantee of payment at sight in accordance with the contractual obligations of CEIEC Shandong Company. A. Except for the stipulation in Article 8, the maximum limit of suretyship liability afforded by our bank was 2,000,000 USD …… C. If the applicant breached the undertakings of paying within the period of validity of the Guarantee, the bank would pay you the claimed money with the suretyship mentioned above as the top ceiling, after your side offered all the written papers that were necessary. Any dispute arising from the execution of the contract should be settled through negotiation between the parties. For failure to negotiate, the parties could file a lawsuit with the people’s court in the bank’s location in accordance with laws. Once the lawsuit was filed, the guarantee should automatically prolong 180 days after the judgment came into effect. If the judgment required the bank to pay the amount

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under the guarantee, the bank would pay the amount within 10 banking days after receiving the judgment and associated interest, calculated by 5% since the day the money should be paid until the day actual payment was made. In this condition, the maximum amount of guarantee would increase to the total amount of the guarantee plus interest. On September 3, 2013, the two Plaintiffs signed the delivery protocol of ship under the contract of shipbuilding (No.ECTEC1031; hull No.JSH406, IMO No.9502312, ship name: GREEN MOUNTAIN) with the Shipowner. On September 5, the two Plaintiffs applied for the declaration for exportation of the above-mentioned completed ship. After signing the protocol, the two Plaintiffs issued payment notice to require Jiangsu Shenghua Company and CEIEC Shandong Company to transfer 2,900,000 USD to Foreign Economic and Technical Cooperation Co. of CCS’s account in accordance with the transfer agreement. However, both Jiangsu Shenghua Company and CEIEC Shandong Company failed to pay. On September 9, the two Plaintiffs presented the original copies of the reminder notice of the two 37,000 DWT multi-purpose ships and the guarantee for performance (2010 Bao Han No.10) to Zhongshan Bank, asking them to pay the Plaintiffs 2,000,000 USD, because CEIEC Shandong Company breached its payment obligation and failed to pay 2,900,000 to the Plaintiffs. On September 10, Zhongshan Bank submitted written materials to the Plaintiffs, claiming that that the claimant’s name in the reminder notice of the two 3700 DWT multi-purpose ships was different from the beneficiary listed in the guarantee for performance (2010 Bao Han No.10) and therefore, the bank refused to pay. The court finds out that Changjiang Shipping Group Qingshan Shipyard, as the Plaintiff, an entity owned by the whole people, was affiliated with China Changjiang Shipping Group. In 2006, China Changjiang Shipping Group issued a document (no. [2006] 438) to fund China Changjiang Shipbuilding Industry Group, which is a wholly-owned subsidiary possessing the qualification of an independent legal entity. In this document, the Plaintiff turned the wholly owned subsidiaries to China Changjiang Shipbuilding Industry Group. In 2007, Qingshan Shipyard of CCS altered the business registration of its relationship of administrative subordination without changing its whole name. China Changjiang Shipbuilding Industry Group said that after it funded the company, Qingshan Shipyard signed all kinds of business documents in the name of Qingshan Shipyard of CCS without altering the official seal and business license so as to unify the management and express its relationship of administrative subordination. Qingshan Shipyard of China Changjiang Shipbuilding Industry Group was Changjiang Shipping Group Qingshan Shipyard, in essence. In addition, the court finds that Zhongshan Bank issued two guarantees for performance (2010 Bao Han No.7 and 2010 Bao Han No.8) to the two Plaintiffs regarding the contractual transfer with the beneficiary of the two guarantees for performance as Foreign Economic and Technical Cooperation Co. of China Changjiang National Shipping Group and Qingshan Shipyard of CCS. Zhongshan Bank paid Foreign Economic and Technical Cooperation Co. of CCS the whole

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amount of money in RMB under the guarantees for performance, totaling 17,080,000 USD, after receiving the reminder notices for the two guarantees for performance from the two Plaintiffs. In two reminder notices, the Plaintiff, as the beneficiary, sealed itself as Changjiang Shipping Group Qingshan Shipyard. The dispute in this case arose from Zhongshan Bank’s failure to perform its payment obligation with CIEC Shandong Company informing Zhongshan Bank of its refusal to pay the Plaintiffs during the period of the Guarantee for Performance. The four main issues presented in this case for consideration are that: Firstly, as to the legal nature of the guarantee. The contractual transfer signed between the Plaintiffs, CEIEC Shandong Company, and Jiangsu Shenghua Company stipulated that CEIEC Shandong Company and Jiangsu Shenghua Company would pay the Plaintiffs the difference in the price of shipbuilding. Zhongshan Bank approved CEIEC Shandong Company’s application, and issued a letter of guarantee, promising to provide a guarantee to CEIEC Shandong Company for its payment obligation under the contractual transfer. The Plaintiffs accepted the guarantee, and therefore, the Plaintiff and Zhongshan Bank established a relationship of guaranty in terms of the sum that was owed by CIEC Shandong Company. Although the guarantee is the irrevocable and unconditional guarantee of payment at sight agreed upon in the letter of guarantee, the guarantee has been recognized as a dependent contract of guarantee, because, per Chinese Law of Guarantee and other related laws and rules, the applicant, issuer, and beneficiary of the Guarantee are all domestic enterprises, and are thus governed by the Uniform Rules for Demand Guarantees of the International Commercial Chamber. Therefore, the Guarantee is recognized as a dependent contract of guarantee. In this case, the documents provided by the Plaintiffs do not contain all the information necessary to judge whether Zhongshan Bank should undertake the liability on guarantee. It depends on the agreement appointed in the guarantee for performance whether Zhongshan Bank should undertake it or not. According to Article 19 of the Guaranty Law of the People’s Republic of China, the Guarantee issued by Zhongshan Bank is considered a Guaranty of Joint Liability, because there was no clear appointment of mode of guarantee in the Guarantee For Performance, while the Guarantee For Performance presented by Zhongshan Bank to the Plaintiffs undertaking the payment obligation CIEC Shandong Company failed to do so. In accordance with article 19 of the Guaranty Law of the People's Republic of China, where the debtor of a suretyship of joint and several liability defaults when the time limit for his performance of the obligation provided in the principal contract expires, the creditor may demand that the debtor perform his obligation, or demand that the surety undertake the suretyship liability within the scope of the suretyship agreement. The guarantor does not have the right of plea for preference claims. Although the main contract signed between the Plaintiffs and CIEC Shandong Company stipulated that arbitration was the method for solving disputes, no arbitration agreement was signed between the two parties; therefore, the Plaintiffs have the right to sue the guarantor directly with no need to settle the dispute of the main contract as a prerequisite.

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Secondly, as to whether or not Zhongshan Bank must pay 2,000,000 USD under the guarantee for performance, the Guarantee entered into by the parties is an effective and legal guaranty contract. According to the appointment in the guarantee for performance, the condition of paying the guaranteed money is as follows: CIEC Shandong Company (applicant of the guarantee for performance) breaches its duty by failing to pay the Plaintiffs, and the Plaintiffs must submit all the written documents produced during the period of validity. The condition of payment by CIEC Shandong Company to the Plaintiffs appointed in the contractual transfer is the signing of the delivery protocol between the two Plaintiffs and the Shipowner. Because the protocol was signed and the vessel was delivered, CIEC Shandong Company should transfer the difference of the price in the specified account to the two Plaintiffs. When the Plaintiffs’ payment request to CIEC Shandong Company went unanswered, the two Plaintiffs produced the eligible claiming documents in accordance with the Guarantee for Performance. Zhongshan Bank should carry out its payment obligation within 10 working days after receiving the documents mentioned above, transferring the appointed 2,000,000 USD to the Plaintiffs’specified account. As to the Plaintiff’s name “Qingshan Shipyard of CCS,” the shipyard uses the name “Qingshan Shipyard Of China Changjiang Shipbuilding Industry Group” in all contracts it signs, while it is listed as “Changjiang Shipping Group Qingshan Shipyard” in the industrial and commercial registration and in its seal. However, the evidence submitted by the two Plaintiffs and CIEC Shandong Company sufficiently prove that “Qingshan Shipyard of CCS” is the obligee of both the main contract and of the contractual transfer. The Plaintiffs and CIEC Shandong Company issued two guarantees for performance (2010 Bao Han No.7 and 2010 Bao Han No.8) separately under the same main contract and received payment from Zhongshan Bank, proving that Zhongshan Bank knew that the Plaintiff, Changjiang Shipping Group Qingshan Shipyard is indeed “Qingshan Shipyard of China Changjiang Shipbuilding Industry Group,” the beneficiary of the Guarantee For Performance. Moreover, Foreign Economic and Technical Cooperation Co. of CCS, as the beneficiary, has no flaws in its name. The Plaintiff transferred the required payment to the account of Foreign Economic and Technical Cooperation Co. of CCS. Thus, the court refuses to support Zhongshan Bank’s refusal to pay Qingshan Shipyard of CCS due to the listed names’ inconsistencies. CIEC Shandong Company claimed that it could not determine the authenticity of the delivery protocol because the Plaintiffs did not inform it to take part in the signing of the delivery protocol. The court ascertains that the condition of payment of the different price, in sum of 2,900,000 USD produced during the shipbuilding and agreed upon in the Contractual Transfer is the signing of the delivery protocol, not the participation of CIEC Shandong Company in the signing. Further, CIEC Shandong Company has provided the original copies of the delivery protocol and the export custom declaration, wherein the content of the information about the ship is consistent with the content in the contractual transfer and in the delivery protocol; therefore, the court rejects CIEC Shandong Company’s defense.

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Thirdly, as to whether Zhongshan Bank should pay the interest. On September 9, 2013, the two Plaintiffs filed the required written documents stipulated in the Guarantee for Performance. According to the guarantee for performance, Zhongshan Bank should pay the Plaintiffs within 10 days by September 23, 2013. If Zhongshan Bank fails to pay, it has to pay the Plaintiffs the associated interest. Further, the appointment in Article 8 stipulated that the annual interest rate is 5% per Chinese laws and thus should be supported. Zhongshan Bank insists that it should not be liable for the interest due to its failure to timely remit payment as stipulated in the Guarantee for Performance, as its failure was caused by the inconsistency between the offered documents and the required documents. The court rejects this defense, because Zhongshan Bank knew that Changjiang Shipping Group Qingshan Shipyard was the beneficiary “Qingshan Shipyard Of China Changjiang Shipbuilding Industry Group.” Moreover, the payee appointed by the two Plaintiffs is Foreign Economic and Technical Cooperation Co. of CCS, which was written consistently in the documents. Fourthly, as to whether CIEC Shandong Company is directly liable to the Plaintiffs. Article 18 of the Guaranty Law of the People’s Republic of China provides as follows: “as the creditor, the plaintiff has the right to choose only to lodge a lawsuit against the guarantor, requiring that he should bear the suretyship liability within the scope of suretyship liability.” After Zhongshan Bank’s assumption of the suretyship liability, it shall be entitled to recourse against the third party. Given that, Zhongshan Bank must pay the Plaintiffs 2,000,000 USD and interest at a rate of 5% calculated from September 24, 2013. The Plaintiffs’ claim for loss of lawyer’s fees and other litigation costs lacks support, and is therefore denied by the court. In conclusion, according to Article 18 and Article 121 of the Guaranty Law of the People’s Republic of China, the judgment is as follows: 1. The Defendant China Construction Bank Co., Ltd. Qingdao Zhongshan Road Sub-branch shall pay Foreign Economic and Technical Cooperation Co., Ltd. of China Changjiang National Shipping Group and Changjiang Shipping Group Qingshan Shipyard, within 10 days after the judgment comes into effect, 2,000,000 USD and interest at a rate of 5% calculated from September 24, 2013; 2. Reject other claims of Foreign Economic and Technical Cooperation Co., Ltd. of China Changjiang National Shipping Group and Changjiang Shipping Group Qingshan Shipyard; 3. The Third Party China National Electronic Imp. & Exp. Shandong Corporation shal not bear responsibility in this case. If the Defendant fails to fulfill its obligations to make the said payments within the time limit provided by this judgment, the interest paid shall be doubled for the period of deferment in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China.

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Court acceptance fee in amount of 95,000 yuan, shall be born by the Defendant. If not satisfy with this judgment, any party involved shall, within fifteen days as of the service of this judgment, submit a copy of an appeal to the court, with duplicates in the number of the opposing parties, so as to make an appeal to the Shandong High People’s Court. Presiding Judge: ZHANG Xianli Judge: LV Yanming Judge: LI Hua March 17, 2014 Clerk: XU Wenwen

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Shandong High People’s Court Civil Judgment Foreign Economic and Technical Cooperation Co., Ltd. of China Changjiang National Shipping Group et al. v. China Construction Bank Co., Ltd. Qingdao Zhongshan Road Sub-branch (2014) Lu Min Si Zhong Zi No.148 Related Case(s) This is the judgment of second instance and the judgment of first instance is on page 229. Cause(s) of Action 234. Dispute over maritime security Contract. Headnote Affirming lower court judgment holding the Plaintiff ship seller entitled to recover on bank guarantee given for purchase price of two ships, despite the fact that name of beneficiary in the guarantee contract was differently stated than in the sale documents, because bank knew that documents were intended to refer to same company, rejecting the Defendant bank’s argument that the Plaintiff’s first recourse should have been against defaulting purchasers. Summary The Defendant, Zhongshan Bank, guaranteed CIEC Shandong Company’s liability to pay for two vessels. CIEC Shandong breached its obligation to pay the Plaintiff for the two vessels. The Defendant refused to pay the Plaintiff, because the name of the beneficiary as stated in the guarantee contract differed from the Plaintiff’s name as stated in other documents relating to the sale. The Plaintiff sued the Defendant to enforce the guarantee. The court of first instance held that because the Defendant had actual knowledge that the Plaintiff’s name as stated in the guarantee contract was, despite the lack of conformity, referring to the same company as in the other documents, the Defendant was at fault in refusing to pay the Plaintiff and was liable for the amount claimed plus interest. The court of first instance rejected the Defendant’s argument that the Plaintiff should have begun by negotiating with or instituting an action against CIEC Shandong Company, as the applicant for the security contract, holding that under Chinese Guaranty Law, a plaintiff has the right to institute his action against the guarantor, and then the guarantor may recover from its debtor. The Defendant appealed and the appeal court affirmed the lower court’s judgment in all respects.

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Judgment The Appellant (the Defendant of first instance): China Construction Bank Co., Ltd. Qingdao Zhongshan Road Sub-branch Domicile: No.93 Zhongshan Road, Shinan District, Qingdao, Shandong. Person in charge: WANG Li, bank president. Agent ad litem: GENG Guoyu, lawyer of Shandong Zhongcheng Renhe Law Firm. The Respondent (the Plaintiff of first instance): Foreign Economic and Technical Cooperation Co., Ltd. of China Changjiang National Shipping Group Domicile: 22nd Floor, Zheng Xin Tower, No.26 Tianghan Road, Jiang’an District, Wuhan, Hubei. Legal representative: LI Wende, general manager. Agent ad litem: MA Yanhui, lawyer of Beijing King & Wood Mallesons. Agent ad litem: LIU Xiaowen, lawyer of Beijing King & Wood Mallesons (Qingdao). The Respondent (the Plaintiff of first instance): Changjiang Shipping Group Qingshan Shipyard Domicile: Shipyard Village, Industrial Port, Qingshan District, Wuhan, Hebei. Legal representative: XIE Qizhi, factory manager, Agent ad litem: MA Yanhui, lawyer of Beijing King & Wood Mallesons. Agent ad litem: LIU Xiaowen, lawyer of Beijing King & Wood Mallesons (Qingdao). The Third Party of first instance: China National Electronic Imp. & Exp. Shandong Corporation Domicile: No.54 Maanshan Road, Jinan, Shandong. Legal representative: PAN Xiangsheng, general manager. Agent ad litem: GUO Wennan, lawyer of Shandong Zhongcheng Renhe Law Firm. With respect to the case arising from dispute over contract of maritime security between the Appellant, China Construction Bank Co., Ltd. Qingdao Zhongshan Road Sub-branch (hereinafter referred to as “the Bank”), and the Respondents, Foreign Economic and Technical Cooperation Co., Ltd. of China Changjiang National Shipping Group (hereinafter referred to as “Changjiang Corporation”) and Changjiang Shipping Group Qingshan Shipyard (hereinafter referred to as “Qingshan Shipyard”), the Third Party of first instance, China National Electronic Imp. & Exp. Shandong Corporation (hereinafter referred to as “Shandong Corporation”), the Appellant disagreed with (2013) Qing Hai Fa Shang Chu Zi No.945 Civil Judgment of the Qingdao Maritime Court and appealed to the court. The court formed a collegiate panel and held a hearing in public after accepting this case. Agent ad litem of the Appellant GENG Guoyu, agent ad litem of the Respondents, MA Yanhui, LIU Xiaowen, and agent ad litem of the Third Party of first instance, GUO Wennan, attended the hearing. The case has been concluded. Changjiang Corporation and Qingshan Shipyard alleged that: in October 2010, with the Third Party Shandong Corporation and Jiangsu Shenghua Yachts

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Company Limited (hereinafter referred to as “Shenghua Company”), they signed 2X3700t. multi-purpose Ship Contract Transfer Agreement II-1 (contract No. qs-sh-zd-201002). On October 26, 2010, the Bank issued Guarantee for Performance 2010 Bao Han No.10 to Changjiang Corporation and Qingshan Shipyard at Shandong Corporation’s request. It guaranteed the payment obligation of Qingshan shipyard was irrevocable, unconditional, payable at sight. On July 18, 2013, Changjiang Corporation and Qingshan Shipyard signed the protocol of delivery and acceptance with shipowner. On July 25, 2013, Changjiang Corporation and Qingshan Shipyard performed the payment obligation according to the requirement of Guarantee for Performance, but the Bank cited ineligible name as the justification for dishonor by no-acceptance. For this reason, Changjiang Corporation and Qingshan Shipyard filed a lawsuit that: 1. the Bank should pay 2 million dollars together with interests at the rate of 5% per annum; 2. the Bank should pay lawyer’s fees and costs; 3. the Bank should bear the legal expenses. The Bank defended that: 1. on July 25, 2013, it received Reminder Notice signed by Qingshan shipyard. It requested a credible document having the public confidence but they provided a prove issued by parent company. Therefore, it was reasonable and legal for us to refuse the payment. 2. Payment of interests were unreasonable, because the reason of refusing was Changjiang Corporation and Qingshan Shipyard could not provide documents that met with requirements of L/ G. 3. The request of payment for lawyer’s fees and costs should not be sustained, because it did not be agreed in contract or regulated in law. Shandong Corporation stated that: 1. the Plaintiff in this case was not consistent with guarantee who could not provide documents that met with requirements of L/ G. Therefore, dishonour was right and the claim of Changjiang Corporation and Qingshan Shipyard should be rejected. 2. Guarantee for Performance was short of terms of payment. 3. The payment obligation of the Bank as a guarantor was tied to the payment obligation of the third party. Main contract regulated arbitration was the dispute resolution. Hence, the dispute had to be arbitrated and the Defendant was not to be charged for payment till it was resolved. The case should be suspended. It was found in the trial of the first instance that: On August 29, 2010, Shandong Corporation and Shenghua Company as Party A signed Agreement II with Changjiang Corporation and Qingshan Shipyard as Party B, which promised Party A to sign an agreement about two 37000t multi-purpose ships (No.JSH405/406) and Party B continued the construction of the project and signed a new shipbuilding contract on Party A’s behalf, but dependent on: 1. Party B had been paid 2,610 dollars for JSH405/406 ship and agreed Party A paid not less than 1,708 dollars in cash to his account before October 15, 2010. 2. Party A paid remnant money to Party B in the form which could be recognized before October 15, 2010 … 5. Party A agreed to offer an irrevocable, payable at sight guarantee from the Bank to Party B, which covered the difference between the 43 million dollars and contract price 40.1 million dollars. The cardinality of the price difference was 2.9 million dollars and decreased with the depreciation of imported equipment. If the reduced price of imported equipment for each ship was

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less than 750 thousand, the distribution of the price would be partly owned by Party A; if the reduced price more than 750 thousand, both of the parties shared the price of 50% … 10. This agreement as the primary framework was recognized by all parties. Changjiang Corporation and Qingshan Shipyard with Shandong Corporation and Shenghua Company signed 2X3700t multi-purpose Ship Contract Transfer Agreement II-1 No. qs-sh-zd-201002 (hereinafter referred to as “transfer agreement”): If the owner agreed, Shandong Corporation and Shenghua Company would transfer the contract of two multi-purpose ships (contract No.SH-00405/406; contract of two multi-purpose ships (contract No. SH-00405/406; hull No. JSH405/ 406) signed on September 29, 2007 to Changjiang Corporation and Qingshan Shipyard for continuing to build. Article 6 of agreement about amount of shipbuilding stipulated that: according to new signed contract, the two 37000t multi-purpose ships’ price was 40.1 million dollars per vessel. Shandong Corporation and Shenghua Company agreed that on basis of delivery protocol signed by Changjiang Corporation and Qingshan Shipyard with owner. Besides, they paid 2.9 million dollars per vessel to Changjiang Corporation and Qingshan Shipyard and to designated account within three days from the date of the protocol. To ensure Shandong Corporation and Shenghua Company would perform the obligation, Shandong Corporation should offer performance bond of bank to Changjiang Corporation and Qingshan Shipyard before 25 October 2010, which amount guaranteed was 2 million per vessel or equivalent RMB (difference was 90 thousand yuan per vessel signed additional.) The warranty period until Changjiang Corporation and Qingshan Shipyard received payments. In the performance period of the contract, disputes were resolved by negotiations. If there were no consensus upon the negotiations, it would be submitted to Shanghai international shipping arbitration court according to the Chinese law and arbitration rules. This agreement signed by the parties’ authorized persons initially, with only authorized persons’signature but no official seal. The printed name of Qingshan Shipyard was “China Changjiang River Shipping Group Shipyard Corporation Qingshan Shipyard” and the undersigned was Jingmin Shen. Then the parties signed and sealed on the formal agreement text, among which the official seal of Qingshan Shipyard was “China Changjiang River Shipping Group Qingshan Shipyard”. On October 26, 2010, the Bank offered Guarantee for Performance 2010 Bao Han No.9 to Changjiang Corporation and Qingshan Shipyard with Shandong Corporation’s application and the assignment agreement signed by the parties’ authorized persons. The main contents were that: “to the beneficiary: Foreign Economic and Technical Cooperation Co. of China Changjiang National Shipping Group and China Changjiang River Shipping Group Shipyard Corporation Qingshan Shipyard: because Shandong Corporation and Shenghua Company signed No.qs-sh-zd-201002 transfer agreement with you, and your company signed No.ECTEC10314/ECTEC10315 new shipbuilding contract with owner. In accordance with Article 6 of the assignment agreement, Shandong Corporation should pay 2.9 million dollars to Changjiang Corporation and Qingshan Shipyard’s

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designated account within three days from the date of signing delivery protocol of No.ECTEC10315 new shipbuilding contract, as the compensation for shipbuilding difference that Shandong Corporation should pay to you. We accepted the request of guarantee applicant, which guaranteed irrevocable, unconditional, payable at sight payment according to obligation of guarantee applicant under the agreement. 1. besides Article 8 of this guarantee provisions, our limitation of guarantee liability did not exceed two million dollars under this guarantee … 3. With the validity period of the guarantee, if guarantee applicant breached foregoing payment obligation that failed to pay, we would make payment for the amount of claim in the limit of foregoing amount within ten working days when you submitted written document to qualify … 8. If there were no consensus upon the negotiations, it should be submitted to the court where the bank located. When a suit was launched, the period of guarantee would be automatically extended to 180 days from the date of sentence taking effect. If the judgment or arbitration required our company to pay guarantee amount under the guarantee, within 10 bank working days from the date the judgment or arbitration began to be executed, we paid the amount and interests at 5% compounded annually from the date on which the same became due until the date of payment thereof. In that case, maximum guarantee amount would increase to the sum of payment balance and interests.” On September 3, 2013, Changjiang Corporation and Qingshan Shipyard signed the protocol of delivery and acceptance with shipowner for the vessel (hull No. JSH406, IMO No.9502312, named “GREENMOUNTAIN”) of No.ECTEC10315 shipbuilding contract. In September 5, Changjiang Corporation and Qingshan Shipyard applied for export declaration with completed ship. After signing the protocol of delivery and acceptance, Changjiang Corporation and Qingshan Shipyard sent the payment note to Shenghua Company and Shandong Corporation, and asked them to pay 2.9 million dollars to the account of Changjiang Corporation and Qingshan Shipyard according to assignment agreement. But the two companies failed to perform the payment obligations. On September 9, Changjiang Corporation and Qingshan Shipyard issued reminder notice of 2X3700t. multipurpose vessel and original Guarantee for Performance 2010 Bao Han No.10 to the Bank, asking the Bank to pay 2 million to Changjiang Corporation and Qingshan Shipyard with the performance band guarantee, in the case of guarantee applicant, Shandong Corporation breached payment obligations and failed to pay 2.9 million. On September 10, Changjiang Corporation and Qingshan Shipyard issued written material: after examination, the claimant in reminder notice of 2X3700t. multipurpose vessel disagreed with beneficiary in Guarantee for Performance 2010 Bao Han No.9, hence the Bank defaulted of payment. Moreover, Qingshang Shipyard was an enterprise owned by the whole people when shipyard first established and was affiliated with China Changjiang Shipping (Group) Corporation. In 2006, Changjiang Corporation with (2006) Changhang Zong Ren Fa No.438 set up wholly-owned subsidiary, China Changjiang River Shipping Group Shipyard Corporation, which had the qualifications of independent legal entity. In this document, Qingshan Shipyard changed to wholly-owned by

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China Changjiang River Shipping Group Shipyard Corporation. In 2007, Qingshan Shipyard changed relationship of administrative subordination in the industrial and commercial administrative departments but did not change its name. Since corporation funded, for convenient management and reflecting relationship of administrative subordination, Qingshan Shipyard signed various commercial papers under the name of China Changjiang River Shipping Group Shipyard Corporation Qingshan Shipyard but did not change official seal as well as business license, according to China Changjiang River Shipping Group Shipyard Corporation. China Changjiang River Shipping Group Shipyard Corporation Qingshan Shipyard was China Changjiang River Shipping Group Qingshan Shipyard actually. Furthermore, according to assignment agreement, two Guarantee for Performances the Bank offered were 2010 Bao Han No.7 and 2010 Bao Han No.8. The guarantee beneficiaries were Foreign Economic and Technical Cooperation Co. of China Changjiang National Shipping Group and China Changjiang River Shipping Group Shipbuilding Corporation Qingshan Shipyard. After Changjiang Corporation and Qingshan Shipyard offered reminder notice under the two guarantees, the Bank fully paid to Changjiang Corporation and Qingshan Shipyard of equivalent RMB to a sum of 17.08 million dollars. Beneficiary’s seal in reminder notice was Changjiang Shipping Group Qingshan Shipyard. The court of first instance held that: This case concerned the third party informed the Bank of dishonour led to Bank failed to perform the payment obligations to Changjiang Corporation and Qingshan Shipyard in honoring guarantee. The main disputes in the case were that: 1. Legal quality of involved guarantee. The assignment agreement signed by Changjiang Corporation and Qingshan Shipyard with Shandong Corporation and Shenghua Company promised that Shandong Corporation and Shenghua Company should pay Changjiang Corporation and Qingshan Shipyard for difference of shipbuilding price. Bank accepted Shandong Corporation’s application and issued a guarantee to Changjiang Corporation and Qingshan Shipyard which promised to undertake guarantee payment as the third party to Changjiang Corporation and Qingshan Shipyard’s payment obligations in the assignment agreement. If Changjiang Corporation and Qingshan Shipyard accepted guarantee and its contents should not infringe the provisions of the laws, Changjiang Corporation and Qingshan Shipyard with the Bank established contractual relationship on the thing of the third party should pay for Changjiang Corporation and Qingshan Shipyard. Although this guarantee was irrevocable, unconditional, payable at sight, in accordance with the Guaranty Law and relevant laws, the applicants, issuers, beneficiaries of guarantee all were domestic enterprises instead of foreign elements. All parties did not appoint the guarantee to apply to Uniform Rules for Demand Guarantees of ICC, so the guarantee was been identified as subordinate guaranty contract. It should be according to the guarantee to judge whether the Bank should take responsibilities, rather than the evidence provided by Changjiang Corporation and Qingshan Shipyard to regard as the all elements of assuming payment obligations.

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There was no express agreement about the mode of guarantee in the letter of guarantee, but the Bank guarantee, issued by the Bank to the Buyer and Qingshan Shipyard, providing that the Bank would undertake to make payment when the third party refused to perform the payment. According to Article 19 of the Guaranty Law of the People’s Republic of China, the guarantee issued by the Bank was the joint liability guarantee. According to Article 18 of the Guaranty Law of the People’s Republic of China, if the debtor of a joint liability guaranty could not perform the debt at the date of expiration of the debt performance time limitation prescribed in the master contract, the creditor could demand the debtor to perform the debt, and may also demand the guarantor to bear the guaranty liability within the extent of guaranty, namely, the guarantor did not have a right of plea for performance. Although in the master contract the dispute resolution agreed by Changjiang Corporation, Qingshan Shipyard and the third party was arbitration, Changjiang Corporation, Qingshan Shipyard and the Bank had not conclude an arbitration agreement for the disposal of disputes. So Changjiang Corporation and Qingshan Shipyard were entitled to choose to sue guarantor directly without the premise that the dispute of the master contract had already been resolved. 2. Whether the Bank should fulfill the obligation under Guarantee for Performance to make the payment of two million dollars. Involved guarantee was the guarantee contract which was established lawfully and legitimately. According to the agreements prescribed in the guarantee the Bank would meet the payment in the condition that the third party (applicants) had breached the obligation to pay to Changjiang Corporation and Qingshan Shipyard and Changjiang Corporation. Qingshan Shipyard and Changjiang Corporation had submitted all the qualified written documents within the validity of the guarantee. The third party prescribed in the transfer agreement should pay to Changjiang Corporation and Qingshan Shipyard in the condition that Changjiang Corporation and Qingshan Shipyard had signed the delivery protocol of the vessel with the shipowner. Now Changjiang Corporation and Qingshan Shipyard had already signed the delivery protocol of the vessel which was involved in the guarantee. So the third party should pay the difference of the ship building price to the Bank account appointed by Changjiang Corporation and Qingshan Shipyard. Changjiang Corporation and Qingshan Shipyard submitted the documents for claim which conformed with the requirement of the Guarantee for Performance to the Bank in the circumstance that they failed to claim payment from the third party. Thus, the Bank should pay agreed two million dollars to the account assigned by Changjiang Corporation and Qingshan Shipyard, within ten days after receiving above documents. In regard to the name of Qingshan Shipyard, it always used the name “China Changjiang River Shipping Group Shipbuilding Corporation Qingshan Shipyard” when signing contract with the other parties, but its name in official seal and business registration was “Changjiang Shipping Group Qingshan Shipyard”. There certainly existed the circumstance of the nonstandard usage of its name. But the evidence submitted by Changjiang Corporation, Qingshan Shipyard and the third

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party were enough to prove that Qingshan Shipyard was the creditor of the master contract, namely, the transfer agreement. Besides, the Bank had already undertaken the obligation of payment under Guarantee for Performance 2010 Bao Han No.7 and No.8 to Changjiang Corporation and Qingshan Shipyard. Thus, the Bank knew and accepted that “Changjiang Shipping Group Qingshan Shipyard” was “China Changjiang River Shipping Group Shipbuilding Corporation Qingshan Shipyard” which was the beneficiary of the guarantee. In addition, as beneficiary the name of Changjiang Corporation did not have defects. And for the Bank, it was not inappropriate that Changjiang Corporation and Qingshan Shipyard demanded the Bank to pay to the account of Changjiang Corporation. So the reason that the Bank refused to pay only due to the name of Qingshan Shipyard had discrepancy should be rejected. The defense of the Third Party was that the fact that Changjiang Corporation and Qingshan Shipyard did not inform him to participate the signing of the delivery protocol of the vessel made him could not make sure the truth of the delivery protocol of the vessel. The court of first instance held that although the transfer agreement prescribed that the third party should pay the 2.9 million dollars difference of the ship building price to Changjiang Corporation and Qingshan Shipyard in the condition that Qingshan Shipyard and Changjiang Corporation had signed the delivery protocol of the vessel with the shipowner, whether the third party had participated the signing of the delivery protocol of the vessel did not decide the payment of the above amount. Changjiang Corporation and Qingshan Shipyard had submitted the original of the delivery protocol of the vessel and the export declaration of the vessel to the court. The information of vessel recorded in the export declaration conformed with the information of vessel in the transfer agreement and the delivery protocol of the vessel. So for the above reasons, the above defenses of the Third Party should be rejected. 3. Whether the Bank should pay the interests. On September 9, 2013, Changjiang Corporation and Qingshan Shipyard submitted the written documents required by Guarantee for Performance to the Bank. So the Bank should make payment to Changjiang Corporation and Qingshan Shipyard within 10 working days subject to the guarantee, which means to pay before September 23, 2013. The Bank should pay the interests to Changjiang Corporation and Qingshan Shipyard because they did not pay the amount agreed in the guarantee. In regard to the calculating standard of the interests, the provision of the Article 8 of the involved guarantee ruled that the interests calculated at 5% annual rate complied with Chinese law and regulations so it should be supported. The Bank submitted that the fact that Changjiang Corporation and Qingshan Shipyard did not submit the documents which complied with the requirements of the guarantee leading them could not make payment during the time agreed in the guarantee, so they should not pay the interests. For this, the court of first instance held that the Bank knew that “Changjiang Shipping Group Qingshan Shipyard” was the guarantee beneficiary “China Changjiang River Shipping Group

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Shipbuilding Corporation Qingshan Shipyard”, and it was not inappropriate that Changjiang Corporation and Qingshan Shipyard appointed Changjiang Corporation as the payee. Thus, the above defenses of the Bank should be rejected. 4. The question about the Third Party. According to Article 18 of the Guaranty Law of the People’s Republic of China, Changjiang Corporation and Qingshan Shipyard were entitled to choose to bring a suit against the guarantor, and demand the guarantor to bear the guarantee liability within the extent of the guarantee. In this case, Changjiang Corporation and Qingshan Shipyard did not claim that the third party should bear the obligation of payment. The purpose that the Bank filed an application for adding third party to attend the court was to ascertain the facts. So in this case the third party should not be liable. But the Bank had the right to make a recovery on the third party after they had born the guarantee liability. Above all, the Bank should make payment to Changjiang Corporation and Qingshan Shipyard for 2 million dollars, plus the interests thereof calculating from September 24, 2013 at an annual rate of 5%. The claim made by Changjiang Corporation and Qingshan Shipyard in respect of the application for counsel fees and other legal fees should be dismissed, because there was no evidence. After the studying by the judge committee of the court of first instance and in accordance with Article 18 and Article 21 of the Guaranty Law of the People’s Republic of China, the court of first insurance judged as follows: 1. The Bank should make payment for 2 million dollars plus the interests thereof calculating from August 10, 2013 to the date when the Judgment became effective at an annual rate of 5% to Changjiang Corporation and Qingshan Shipyard within 10 days after the judgment came into effect. 2. Reject other claims of Changjiang Corporation and Qingshan Shipyard. 3. The Third Party Shandong Corporation should not bear the obligation. If the Bank failed to fulfill its obligation to make the above payments within the time limit provided by this judgment, the interests should be double paid for the period of deferred payment in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. As for the case acceptance fee in amount of RMB95,000, the Bank should bear all. The Bank appealed that: 1. It was reasonable that the court of first instance held that the involved guarantee was the subordinating guarantee, but in trial they emphasized the independence of the involved guarantee, granting the guarantee as the independent guarantee was erroneous in application of law. There was no such expressly agreement about the mode of guarantee in the guarantee, but the Bank undertook to make payment when the third party refused to perform the payment. In accordance with Article 19 of the Guaranty Law of the People’s Republic of China, the guarantee issued by the Bank was the joint liability guarantee. As for the subordinating guarantee, the obligation of the Bank was the secondary payer

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liability. The Bank would only undertake the obligation of payment when Shandong Corporation refused to perform the payment. 2. In the circumstance that the court of first instance had not confirmed the obligation of Shandong Corporation to pay to Changjiang Corporation and Qingshan Shipyard, it judged the Bank to undertake the obligation of payment. So the original judgment was erroneous in fact finding. The involved guarantee was the subordinating joint liability guarantee. The premise that the Bank undertook the obligation was that the condition about the performance of payment which provided in the master contract had fulfilled. Eventually the difference of price had not been settled in this case, so the condition of payment had not been fulfilled. Thus in this circumstance the trial of this case should be suspended. 3. It was erroneous that the court of first instance granted Qingshan Shipyard as the guarantee beneficiary due to the fact that the Bank had paid the amount of the other two guarantees. Even if the involved guarantee was the independent guarantee, the Bank was entitled to choose to refuse to pay based on the existed discrepancy. 4. The Bank did not make payment within the period agreed in the guarantee due to the fact that the name of the claimant in the guarantee had discrepancy. So the Bank should not pay the interests for the period of deferred. The Bank claimed to revoke the judgment made by the court of first instance and dismiss the claim of Changjiang Corporation and Qingshan Shipyard. The Bank also claimed that the case acceptance fee of the court of first and second instance should be paid by Changjiang Corporation and Qingshan Shipyard. The defenses of Changjiang Corporation and Qingshan Shipyard were that: 1. It was reasonable that the court of first instance held that the involved guarantee was the subordinating guarantee and the Bank should undertake the joint liability. Changjiang Corporation and Qingshan Shipyard were entitled to sue guarantor directly. The Bank undertook the obligation of payment was not in the condition that the other cases had been heard. So there was no need to suspend the proceeding of this case. 2. The Bank did not dispute the amounts of principal debts in the proceeding of the court of first instance, so there was no any basis to claim the uncertainty of principal debts now. 3. The Bank had fulfilled the obligation of guarantee under the two other guarantees of the same master contract, so they must know that Qingshan Shipyard was the guarantee beneficiary. Thus, it was reasonable that the court of first instance held that it should undertake the obligation of payment. The Bank did not dispute the position of Changjiang Corporation, so they should pay to Changjiang Corporation lawfully according to the debit note. 4. The Bank should pay the interests for the period of deferred. The involved guarantee issued by them had prescribed the interests for the period of deferred payment.

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After trial, the court finds the facts that: Shandong Corporation applied formally to the Shanghai Arbitration Commission for arbitration of this dispute during this trial. They claimed Changjiang Corporation and Qingshan Shipyard to pay the benefits which got from the price fluctuations of the imported equipment. Changjiang Corporation and Qingshan Shipyard claimed the Shandong Corporation and the Shenghua Company to pay the 5.8 million dollars plus the interests thereof. Shanghai Arbitration Commission rendered (2014) Hu Zhong An Zi No.1765 award on August 7, 2015, the result of the award including rejected the claims of Shandong Corporation, Shandong Corporation and Shenghua Company should pay the 5.8 million dollars and the interests thereof and etc. The other facts which the court found are consistent with the facts ascertained by the court of first instance. The major issue in this case is that whether the Bank should undertake the obligation of payment agreed in the guarantee. After the application of Shandong Corporation the Bank issued the Guarantee for Performance which prescribed Changjiang Corporation and Qingshan Shipyard as beneficiary on October 26, 2010. In accordance with the guarantee Shandong Corporation should pay 2.9 million dollars which as the compensation for the difference of the ship building price within 3 days after Changjiang Corporation and Qingshan Shipyard had signed the delivery protocol of the vessel with the shipowner. Therefore, the Bank guaranteed the obligation of irrevocable, unconditional and on demand payment. The amount of the guarantee limited to 2 million dollars. The Bank guaranteed to Changjiang Corporation and Qingshan Shipyard that Shandong Corporation would pay the difference of the shipbuilding price of 2.9 million dollars which generated from the assignment of the construction ship. Thus it can be seen that the guarantee made by the Bank subordinated to the agreement of transfer the construction ship between Shandong Corporation, Changjiang Corporation and Qingshan Shipyard. During this trial, after Shandong Corporation had applied the arbitration, the obligation relations among Shandong Corporation, Changjiang Corporation and Qingshan Shipyard became more clear. Thus Shandong Corporation and Shenghua Company should pay 5.8 million dollars and interests thereof to Changjiang Corporation and Qingshan Shipyard. In accordance with Guarantee for Performance, if Shandong Corporation breached the obligation of payment the Bank should pay the claim amount within 10 days after Changjiang Corporation and Qingshan Shipyard had submitted the qualified written documents. Shandong Corporation did not pay the compensation for the difference of the ship building price within the stipulated time, so the Bank should in accordance with the guarantee pay the agreed amount to Changjiang Corporation and Qingshan Shipyard. In regard to the interests, even though the name of Qingshan Shipyard on the time of demanding for payment did not conform with its name stated in the guarantee, in this case the guarantee guaranteed and subordinated the contract of transformation of shipbuilding. The contract seal on the master contract was Qingshan Shipyard, so it was not improper that Qingshan Shipyard exercised its

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rights to claim the Bank to make payment. The Bank alleged that the name of the beneficiary in the guarantee was different from the name of the claimant, so it refused to make payment. That reason was not established. The beneficiaries of the performance were not only Qingshan Shipyard, Changjiang Corporation was also the beneficiary. Even though Qingshan Shipyard could not be the qualified claimant, the Bank should pay to Changjiang Corporation to perform the obligation of guarantee which agreed in Guarantee for Performance. The Bank did not pay to any company, it broke the agreement of Guarantee for Performance. So Changjiang Corporation and Qingshan Shipyard brought a lawsuit against it. In accordance with Article 8 of Guarantee for Performance signed by the Bank, Changjiang Corporation and Qingshan Shipyard, “if any disputes about the payment arouse and after the amount under the guarantee which the court judging it should be paid by the Bank, the Bank should pay it.” The Bank should make payment, the amount which it should paid plus the interests thereof calculating from the date when it should pay to the date when it paid at an annual rate of 5% to Changjiang Corporation and/or Qingshan Shipyard. So it was proper that the court of first instance rendered the judgment that the Bank should begin to undertake the interest after it had received the documents for claim for 10 days. In conclusion, the judgment made by court of first instance is clear in finding the basic facts and correct in application of law. So the judgment of first instance shall be affirmed. On such basis, in accordance with Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of RMB95,000, shall be born by the Appellant China Construction Bank Co., Ltd. Qingdao Zhongshan Road Sub-branch. The judgment is final. Presiding Judge: ZHAO Tong Judge: DONG Bing Acting Judge: WANG Lei September 23, 2015 Clerk: ZHAO Fei

Shanghai Maritime Court Civil Judgment Hangzhou Hangsi Garment In & Export Co., Ltd. v. Meiji (China) Transportation and Logistics Co., Ltd. (2014) Hu Hai Fa Shang Chu Zi No.1534 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 267. Cause(s) of Action 223. Dispute over freight forwarding contract on the sea or sea-connected waters. Headnote The Plaintiff shipper held to be entitled to recover damages for total loss of a cargo of clothing, even though some appeared to be undamaged, because clothing was of a well-known brand and consignee was entitled to reject any clothes that did not meet its strict product requirements. Summary The Plaintiff was engaged by ESPRIT European Service Company to transport all of its cargoes of garments. On behalf of ESPRIT, the Plaintiff booked a shipment of clothing through the Defendant’s company website. The Plaintiff delivered the cargo to the Defendant’s warehouse, at the Defendant’s request, where it would be loaded for shipping. Before the cargo could be shipped, there was a fire at the warehouse that caused damage to some of the clothing. Upon inspection by ESPRIT at the place of destination, the clothes were all rejected. This included some clothing that was not noticeably damaged. The Plaintiff claimed damages from the Defendant for a total loss because the clothing was a proprietary brand, and so the Plaintiff was neither entitled to nor able to dispose of the unharmed cargo. The Defendant argued that a freight forwarding contract relationship did not exist between the Plaintiff and the Defendant, that the Plaintiff did not have the ownership of the cargo, and that the Defendant had properly performed its obligation under the contract, so it should not bear the loss. The court held that a freight forwarding contract did exist between the Plaintiff and the Defendant. ESPRIT was a well-known brand that needed to maintain its reputation and had strict product quality requirements. As such, ESPRIT’s refusal to accept any of the consignment of clothing was reasonable. Therefore, the court held that the Plaintiff could recover damages for a total loss. © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_11

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Judgment The Plaintiff: Hangzhou Hangsi Garment In & Export Co., Ltd. Legal representative: ZHU Wen. Agent ad litem: WANG Zhongqing, lawyer of Zhejiang Chuyang Law Firm. Agent ad litem: BAO Fang, lawyer of Zhejiang Chuyang Law Firm. The Defendant: Meiji (China) Transportation and Logistics Co., Ltd. Domicile: Room xxx, xxx Nansuzhou Road, Huangpu District, Shanghai. Legal representative: WEN Xianwei. Agent ad litem: ZHOU Zhiyong, lawyer of Shanghai Wintell & Co. (Tianjin). Agent ad litem: YANG Lei, lawyer of Shanghai Wintell & Co. (Tianjin). With respect to the case arising from dispute over maritime freight forwarding contract between the Plaintiff, Hangzhou Hangsi Garment In & Export Co., Ltd., and the Defendant, Meiji (China) Transportation and Logistics Co., Ltd., the Plaintiff filed an action before the Shanghai Huangpu People’s Court on August 5, 2014. After entertaining this case, the Defendant filed a jurisdiction challenge before the Shanghai Huangpu People’s Court within the period of plea filling. The Shanghai Huangpu People’s Court accepted the jurisdiction challenge and transferred this case to the court on October 8, 2014 according to (2014) Huang Pu Min Er (Shang) Chu Zi No.1075 Civil Ruling. After entertaining this case on December 2, 2014, the court organized the collegiate panel according to the law, and arranged evidence exchange on February 3, 2015, and held a hearing in public on April 8, 2015. WANG Zhongqing, agent ad litem of the Plaintiff, and YANG Lei, agent ad litem of the Defendant, participated in the trial. The case has been concluded. The Plaintiff alleged that there was long-term cooperation relationship between it and ESPRIT European Service Company (hereinafter referred to as “ESPRIT European”), and ESPRIT European appointed the Plaintiff to convey all their cargoes. The Plaintiff received the offer from ESPRIT Macao Offshore Commercial Service Company (hereinafter referred to as “ESPRIT Macao”) on May 11, 2012, in which ordered one consignment of female garment from the Plaintiff in FOB Shanghai. The Plaintiff booked the space for the shipment through the Defendant’s company website after stocking up, the Defendant sent the booking confirmation letter as well as the delivery notice via mail to the Plaintiff afterwards. The Plaintiff delivered the cargo to the appointed warehouse under the Defendant’s instruction and obtained the receipt from the warehouse. On July 24, 2014, the Plaintiff received the email from the Defendant about the fire occurred in the warehouse, which caused cargo damage, and the insurer of the Defendant issued the accident report against the aforementioned accident. ESPRIT European refused to pay the bill of the cargo due to the no shipment of the cargo in question. The Plaintiff issued the notice of claim against the accident to the Defendant and the warehouse respectively, but failed to receive certain reply. And no agreement had been reached after the negotiation between the related parties. The Plaintiff alleged that it, as the owner of the affected cargo, should recover the loss covering all the payment

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deserved to but failed to collect, due to the affect cargo, being a whole, was the proprietary brand and design ordered by ESPRIT European, and the Plaintiff was neither be entitled to nor be able to depose the cargo. The Defendant, as the freight forwarder of the Plaintiff, should bear the compensation responsibility against the loss. Thus, the Plaintiff requested that the Defendant should pay the compensation in amount of USD251,505, which was RMB1,595,774 according to the central parity rate 1:6.3449 of USD to RMB on August 31, 2012, and the interests thereon (the interest should be calculated at the one-year loan interest rate of the People’s Bank of China for the contemporary period of time from September 1, 2012 to the date of payment set by this Judgment). And court acceptance fee should be born by the Defendant. The Defendant contended that there was no freight forwarding contract relationship between the Plaintiff and the Defendant, which make the claim lodged by the Plaintiff lacking lawful basis; the Plaintiff did not have the ownership over the cargo in question, which make the Plaintiff was not suitable for the trial; the Defendant, as the agent of the buyer ESPRIT European, had properly perform the obligation under the contract, which make the Plaintiff’s claim was irrelevant to the Defendant and the Defendant should not bear the compensation responsibility; the loss amount alleged by the Plaintiff was not be supported by the evidence. Therefore, the Defendant requested the court to reject the claims of the Plaintiff. The Plaintiff submitted the following evidence to support its claims: 1. Order sent by ESPRIT Macao to the Plaintiff, to prove the sales contract relationship between ESPRIT Macao and the Plaintiff, the ownership of the Plaintiff over the cargo in question, and the value of the cargo in question. The Defendant did not confirm the authenticity, legality and relevancy of this evidence because the Plaintiff failed to conduct notarial certification procedure against this overseas order according to the law, the Defendant thought that this evidence could not prove that the Plaintiff owned the ownership over the cargo in question and the actual loss amount of the Plaintiff. The court holds that the details stated in the order, like the serial number, the cargo quantity, the loading port, the destination port, etc., coincide with the information in the booking and the booking confirmation letter emails the Defendant sent to the Plaintiff, and the court affirms the effect of evidence of this order, and it is able to prove that ESPRIT Macao ordered the cargo in question from the Plaintiff. 2. Commercial invoices, packing list, to prove that the Plaintiff actually deliver 6,075 pieces of the cargo. The Defendant had objection to the form of the evidence for these two sets of the evidence were issued overseas and the Plaintiff failed to conduct notarial certification procedure against them and provide the translated copies; and those evidence were provided unilateral by the Plaintiff and could not been used to determine the actual value of the cargo. The court holds that the information stated on the invoice and the packing list was basically accordance, and fit the statement of the order, thus affirms the effect of evidence of the commercial invoices and packing list, to prove that the Plaintiff actually shipped 6,075 packages of cargo, the unit price was USD41.40 per package.

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3. Booking and booking confirmation letter mail, the delivery notice the Defendant sent to the Plaintiff, to prove the freight forwarding contract relationship. The Defendant had no objection to the authenticity and legality, but had objection to the relevancy of this evidence, and thought that this Booking was only the information input system offered to the Plaintiff according to the authorization of ESPRIT European, and there was no freight forwarding contract relationship between the Plaintiff and the Defendant. Based on the fact that this evidence was sent by the Defendant and the Defendant had no objection to the authenticity of this evidence, the court affirms the authenticity of this evidence and holds that this evidence can prove the fact of the Plaintiff’s booking before the Defendant and the cargo delivery under the Defendant’s instruction. 4. Warehouse receipt, the inform email about the fire the Defendant sent to the Plaintiff, fire report, the certificate issued by the Defendant, to prove the fact that the cargo loss was occurred by the fire and was within the period of the storage in the Defendant’s appointed warehouse. The Defendant had no objection to the authenticity and legality of the warehouse receipt, but did not affirm the relevancy of the warehouse receipt, thought that the warehouse receipt could only prove the Plaintiff’s handing the cargo under the warehouse storage, and the Defendant only contacted the warehouse on behalf of ESPRIT European, and the storage fees was paid by the Plaintiff to the warehouse directly; the Defendant had no objection to the authenticity and legality of the inform email, but thought that this evidence only proved that the Defendant had fulfilled the notification obligation and had coordinated the accident handling; the Defendant had no objection to the authenticity, but had objection to the relevancy of the fire report, and thought that the warehouse should be blamed for the fire and the Defendant should not bear the compensation responsibility, the compensation should be calculated based on the actual amount after minus the salvage value; the Defendant had no objection to the authenticity of the certificate, but did not affirm the relevancy of it, and thought that this document was aiming at assisting the Plaintiff’s claim towards the warehouse. Considering the fact that the Defendant had no objection to the authenticity of this set of evidence, thus the court affirms the authenticity of this set of evidence and holds that this evidence can prove that the cargo was damaged in the warehouse fire after the Plaintiff delivered the cargo to the warehouse. 5. Emails between the Plaintiff, the Defendant and the warehouse, to prove that the Plaintiff asked for the compensation against the Defendant and the warehouse respectively, but failed to receive certain reply. The Defendant had no objection to the authenticity of this evidence but denied the content of it, for the emails showed the operation of the Defendant, as the agent of ESPRIT European, coordinating the accident handling between the Plaintiff and the warehouse. Considering the fact that the Defendant had no objection to the authenticity of this set of evidence, thus the court affirms the authenticity of this set of evidence and holds that this evidence can prove that the Plaintiff, the Defendant and the warehouse had conducted the negotiation against the accident handling after the occurrence of the fire.

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6. Receipt and supplementary terms, to prove that the Defendant should but not issue the receipt to the Plaintiff when the aforementioned accident had not happened. The Defendant had no objection to the authenticity of this evidence, but thought that it, as the agent of ESPRIT European, only issued the receipt under the requirement of the logistics management agreement with ESPRIT European. Considering the fact that this receipt was issued by the Defendant and the Defendant had no objection to the authenticity of this evidence, the court affirms the authenticity of this set of evidence but does not affirm the relevancy of the evidence for it is independent evidence not aiming at the cargo in question. The Defendant submitted the following evidence to rebut the claims of the Plaintiff: 1. Consignee information and letter accepting the terms, to prove that there was no freight forwarding contract relationship between the Plaintiff and the Defendant, the Defendant, as the agent of ESPRIT European, only handled the cargo transportation and the related documents affairs, and the receipt could not indicate the ownership. The Plaintiff had no objection to the authenticity and legality of this evidence, but thought that this evidence was unable to prove the facts the Defendant wanted to. Considering the fact that the Plaintiff had no objection to the authenticity of this evidence, the court affirms the authenticity of this set of evidence, holds that this evidence should prove the Plaintiff had confirmed the booking related terms but was insufficient to prove that there was no freight forwarding contract relationship between the Plaintiff and the Defendant. 2. Cargo receipt term, to prove that according to the terms stated on the back of the receipt, unless the fire was caused due to the negligence or reckless of the Defendant, the Defendant should not bear the compensation responsibility against the loss caused by this reason. The Plaintiff had no objection to the authenticity and legality of this evidence, but thought that this evidence was unable to prove the facts the Defendant wanted to. Considering the fact that the Plaintiff had no objection to the authenticity of this evidence, the court affirms the authenticity of this set of evidence, with regard to whether this term could support the Defendant enjoying the immunity, the court will explain in the reasoning part of this judgment. 3. Logistics management agreement signed between Meiji HK and ESPRIT European, to prove that the Defendant provided logistics service to ESPRIT European and was the agent of ESPRIT European, the local fees happened should be paid by the suppliers of ESPRIT European, the management fees happened should be paid by ESPRIT European, according to the content of the logistics management agreement, which indicated that there was freight forwarding contract relationship between the Plaintiff and ESPRIT European, instead of between the Plaintiff and the Defendant. The Plaintiff did not affirm the authenticity, legality and relevancy of the evidence, and thought that the relationship between the Defendant and ESPRIT European was irrelevant with

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this case, there was the freight forwarding contract relationship between the Plaintiff and the Defendant for the Plaintiff had paid the Defendant related fees. The court holds that this agreement indicated the relationship between Meiji HK and ESPRIT European, Meiji Logistics is a group company and provide relative services through subordinate companies all over the world according to the Defendant, but the relationship between Meiji HK and ESPRIT European will not affect the determination of the legal relationship between the Plaintiff and the Defendant in this case. 4. Business entrust agreement between the Defendant and the warehouse, supplemental agreement, supplemental agreement II, protocol, to prove that the warehouse storing the cargo in question was not under the operation or management of the Defendant, the manager and the operation should be blamed for the fire accident. The Plaintiff had no objection to the authenticity, the legality and relevancy of the evidence, but did not affirm the proof content, thought that the Defendant handed the cargo to the warehouse, and there was the contract relationship between the Plaintiff and the Defendant, instead of between the Plaintiff and the warehouse. Considering the fact that the Plaintiff had no objection to the authenticity of this evidence, the court affirms the authenticity of this set of evidence, holds that it can prove that the warehouse stored the cargo in question was appointed by the Defendant. It is found out that: On May 11, 2012, ESPRIT Macao sent No.XXXXXXX order to the Plaintiff for one consignment of female garment in FOB Shanghai, the consignment was shipped from China to Germany by sea, and the unit price of the cargo was USD41.40 each, with a total quantity of 6,043 pieces. The Plaintiff stated that the cargo in question was ordered by ESPRIT Macao, but the actual buyer of the cargo was ESPRIT European. According to the commercial invoice records, the actual shipment of cargo was 6,075 pieces in FOB Shanghai, the unit price of the cargo was USD41.40 each, making the total amount to USD251,505, after deducting the trade price related, the invoice issued by the Plaintiff to the buyer should show the actual payment of USD243,959.85. After stocking up, on July 6, 2012, the Plaintiff required the space booking via booking website provided by the Defendant, the Defendant sent email, said that the booking request had been received, and the approval of the reservation number will be sent to the Plaintiff afterwards. On July 16, 2012, the Defendant sent the email to the Plaintiff, in which confirmed that the booking request had been approved, the shipper booking information indicated that the shipper was the Plaintiff, the buyer was ESPRIT European, port of loading and the port of destination were from China Shanghai to Bremen Harbor, Germany, and the order was No.XXXXXXX. Previously, the Plaintiff signed a confirmation letter on April 15, 2009, confirming the terms of the agreement over the usage of open online booking function required by the Defendant. After the completion of booking, the Plaintiff printed delivery notice via the Defendant’s website under the Defendant’s notice, in which stated that the buyer

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was ESPRIT European, the buyer designated the Defendant handling and processing documents on its behalf, the Plaintiff was the shipper, the warehouse was under Shanghai Licai Logistics Co., Ltd. (hereinafter referred to as “Licai Company”). The Defendant stated that, Licai Company and Jincai Company were related companies, the Defendant signed a contract with Licai Company, the cargo was actually stored at Jincai Company. Jincai Company, issued a receipt voucher after receiving the cargo, the receipt indicated that the total cargo was 6,075 pieces, the actual delivery exceeding the number in the order. On July 24, 2012, the Defendant sent email to inform the Plaintiff the storage warehouse fire, the cause of fire was short circuit of fans, the cargo was totally 6,075 pieces, 734 of which were burned, 547 of which were affected by the fire, 984 pieces needed to change the plastic packaging, a total of 2265 pieces of damaged and cannot be shipped, 3,810 pieces of cargo were not affected. In August 2012, Jiannengda Insurance Notarization Company Shanghai Office conducted inspect against the cargo in question, 6,075 pieces of garment, 3,810 of which stayed in a normal state, 984 pieces were packaging burned or in different degrees of shrinkage, and the content were in normal condition, 1,281 pieces were burned in different degrees. After the Plaintiff knowing that the cargo had been damaged by the fire accident, he had communicated with the warehouse and the Defendant by email and claimed for compensation, but in the end, the opinions of the parties failed to reach an agreement. Among the emails, the Plaintiff’s email sent to the Defendant on August 21, 2012 said that client ultimately not accepted the cargo had not been damaged, and requested another 1,946 pieces transported by air for complement after his negotiations with client. On June 3, 2014, the Defendant issued a certificate describing the facts of the booking, delivery, accident, claim and other aspects of the case in question, and indicated that the existing documents could initially prove that the Plaintiff was the owner of the damaged cargo. The Defendant stated that he issued the certificate in order to cooperate with the Plaintiff’s claim against the insurance company of the warehouse, and the Plaintiff denied this statement, alleged that the certificate was prepared for the prosecution before the Shanghai Huangpu People’s Court. It is also found out that: 1. On March 14, 2010, the Defendant and Licai Company signed entrustment agreement, agreed that the Defendant designated Licai Company to provide services including customs clearance and inspection, container LCL operation, container truck transportation, warehousing and so on to the Defendant’s manufacturing producer in the Shanghai area, the agreement was valid from March 15, 2010 to March 14, 2013. Then, the two parties signed two supplemental agreement, agreed Licai Company to provide warehousing services in the Yangshan Bonded Port since September 1, 2011, with regard to customs service, the Defendant entrusted Jincai Company to provide the invoice and charge services and receive all services fees. On January 1, 2013, the Defendant, Licai Company, and Jincai Company signed the agreement, in which stated

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Licai Company will transfer all rights and obligations under the entrustment agreement to Jincai Company since the effective date of the agreement and the Defendant agreed. 2. The logistics management agreement was signed between Meiji Company and ESPRIT European, and the Defendant provided logistics service to ESPRIT European, Meiji Logistics was a group company and provided relative services through subordinate companies all over the world according to the Defendant. The Plaintiff and the Defendant confirmed that there was a long-term business relationship between the Plaintiff and ESPRIT European, according to the trading usage, if cargo normally shipped, the Defendant should issue a receipt for cargo to the Plaintiff one working day after the shipment, Article 5 at the back of the cargo receipt stated that: …… Meiji logistics should not bear the responsibilities due to the following reasons: (a) the fire damage liability, unless caused by the fault or neglect of Meiji Logistics; …… At the same time, after shipment, the Defendant would issue invoice to the Plaintiff, collected the bill of lading fees (preparing and issuing original bill of lading charges), service fee (fee paid to the customs broker), warehouse operation fees and fuel surcharges, port security charges, documentation fees, bulk and short split costs, seals fees and handling charges from the Plaintiff, the Plaintiff would pay to the Defendant. In this case the cargo had not been shipped due to the accident, the Defendant had not issued invoices, the Plaintiff had not paid the relevant fees. The court holds that: The first issue in this case lies in the legal relationship between the Plaintiff and the Defendant. The Plaintiff alleged the freight forwarding contract relationship existing with the Defendant. The Defendant contended that it was only the agent of the buyer, ESPRIT European, and did not have any contractual relationship with the Plaintiff. The court holds that, to arrange the shipment of cargo, the Plaintiff booked space on the published Defendant’s website, afterwards it delivered the cargo to the designated warehouse according to the Defendant’s delivery notice. Although the cargo did not conduct actual shipment due to accident, but according to the trading usage, after shipment, the Defendant would issue invoice to the Plaintiff, collected the bill of lading fees (preparing and issuing original bill of lading charges), service fee (fee paid to the customs broker), warehouse operation fees and fuel surcharges, port security charges, documentation fees, bulk and short split costs, seals fees and handling charges from the Plaintiff. The above series of facts indicated that the Defendant was the one arranging the shipment of the cargo in question for the Plaintiff, and its act conformed to the identity of freight forwarder. As to the legal relationship between the ESPRIT European and the Defendant, it was independent from the fact that Defendant accepted the booking request and conduct the actual shipment of cargo for the Plaintiff, charged costs according to the usage of trade, so freight forwarding Contract relationship between the Plaintiff and the Defendant is established. The second issue in this case lies in whether the Plaintiff was entitled to claim and whether the Defendant should pay compensation. The Defendant contended

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that the Plaintiff was not entitled to claim the cargo in question, and therefore had no right to claim compensation. The court holds that, firstly, in the freight forwarding contract relationship, the Defendant as the freight forwarder of the Plaintiff, after received the cargo, it was responsible for the safety of the cargo during the charge, till delivering the cargo to the consignee. According to the found facts, the Defendant had only storage agreement with Lichai Company, and Lichai Company provided the Defendant with Jincai Company’s warehouse, the Plaintiff delivered the cargo to the appointed warehouse under the Defendant’s instruction, so in the Plaintiff’s eyes, the Defendant should be liable for damages to the Plaintiff for the damage occurred during the period within the cargo storage. The Plaintiff claimed the rights on the basis of the contractual relationship of the freight forwarder, irrespective of whether the cargo was owned by the Plaintiff. Secondly, the trade term was FOB. Under this terms of the price, the Plaintiff, as the seller, must bear all risks of loss of or damage to the cargo until the cargo have passed the ship’s rail at the named port of shipment. The cargo in the warehouse was not sent to arrange transportation when the damage occurred, the risk of damaged cargo had been transferred to the buyer, thus the risk shall be bear by the Plaintiff. Therefore, the Plaintiff, as the risk bearing party, was entitled to claim compensation from the responsible person, which is not related to the ownership of the cargo. Thirdly, the Defendant argued that there was a cargo receipt within the Defendant’s business practices, the Defendant should be exempted from cargo loss caused by fire for exemption clauses stated in the back of cargo receipt. The court holds that although no actual cargo receipt issued due to the cargo damage occurred before the shipment in this case, but under the fact that the Plaintiff and the Defendant were confirmed, should issue a receipt for cargo without fire. However, the cargo receipt was provided by the Defendant, and the item on the back was printed as the standard terms in advance, and there was no evidence that the Plaintiff and the Defendant had reached this agreement. In accordance with the law, the provision of standard clauses is exempted from its liability and the term is invalid. Therefore, the Defendant’s grounds for exemption were untenable. To sum up, the Plaintiff has the right to claim compensation against the Defendant on the basis of the freight forwarding contract with the Defendant, and the Defendant shall be liable for compensation. The third issue in this case lies in the amount of cargo loss. The court holds that, firstly, the assessment report issued by the Notarization Company stated that expect 1,281 pieces were in different degree burned, the rest of the cargo were in normal condition, and it cannot be simply equated that the cargo looking in normal condition not existed damaged at all. Secondly, according to inform mail the Plaintiff sent to the Defendant on August 21, 2012, the buyer of the cargo, ESPRIT European refused to accept all orders of the cargo in question, including cargo that had not been affected. In view of the Defendant insisted he was agent of ESPRIT European, should know whether ESPRIT European accepted the cargo in question, the Defendant failed to submit related disproof, thus the court affirms the fact in Plaintiff’s mail. Due to the fact that “ESPRIT” was public well-known brand, ESPRIT European, to maintain a good reputation, has strict requirements on

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product quality, and the burned garment may be flaws, ESPRIT European’s refusing to accept was reasonable, there is nothing wrong with this. The Defendant thought that even if ESPRIT European rejected the cargo, the Plaintiff could also reduce or even avoid losses by resale. The court holds that “ESPRIT” has the exclusive store of this brand, and selling its brand clothing without authorization, or changing the brand logo and selling the same style clothes, may constitute infringement against “ESPRIT” brand. The Defendant requested the Plaintiff to achieve the purpose of derogation via infringement, which shall not be supported by the court. The Plaintiff has been unable to deliver the clothing successfully to ESPRIT European, or sell on the market, which can be regarded as the Plaintiff suffered a total loss. In addition, the Plaintiff stated in written that, if the Defendant to compensate the Plaintiff according to the total value, it agreed to transfer all of the remaining cargo rights to the Defendant during the trial. Therefore, if the Defendant insisted the cargo still remained residual or impairment treatment, the Defendant could dispose himself after the total compensation to the Plaintiff. Thirdly, the Plaintiff provided evidence, invoice and commercial orders, to prove the cargo value, the price of cargo were the same, but the commercial invoice indicated the cargo in question was delivered to giving the buyer with a discount, after deducting the discount, the actual amount of the cargo was USD 243,959.85, the loss of the cargo should be calculated after this amount. In respect to the Plaintiff’s claim for the claim amount shall be converted into RMB at the corresponding exchange rate, the court holds that the amount in the cargo orders and the commercial invoice were all in USD, the Plaintiff and the buyer of cargo agreed that trade was upon in dollars as the trade settlement currency, if the accident had not occurred, the Plaintiff will receive USD. At the same time, after the accident, the Plaintiff’s claim against the Defendant also required USD. Therefore, the court holds that the loss of cargo in question shall more reasonably in dollar terms. In respect to the interests, the Plaintiff alleged that the interest rate should be calculated after the one-year loan by the people's Bank of China from September 1, 2012 to the date when the judgment comes into effect. The court holds that loss of interests claimed by the Plaintiff was generated by the Defendant’s payment delay, shall be supported. The evidence provided by the Plaintiff indicated that he had claim for compensation in August 2012, but the Plaintiff failed to provide a reasonable loan basis, whereas the People’s Bank of China not stipulating the benchmark interest rate of US dollar deposits, as well as the fact that the Plaintiff’s USD Account belongs to China Merchants Bank, so the interest shall be calculated at the US Dollars current deposit interest rate of the China Merchants Bank for the period of time from September 1, 2012 to the date of payment set by this judgment. To sum up, according to Article 39, Article 40, Article 107, Article 396 and Article 406 Paragraph 1 of the Contract Law of the People’s Republic of China, Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, and Article 10 of the Provisions of the Supreme People’s Court on Several Issues concerning the Trial of Cases of Disputes over Marine Freight Forwarding, the judgment is as follows:

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1. The Defendant Meiji (China) Transportation and Logistics Co., Ltd. shall pay the Plaintiff Hangzhou Hangsi Garment In & Export Co., Ltd. indemnity USD243,959.85 and interest thereof within 10 days after this judgment comes into effect (the interest shall be calculated at the US dollars current deposit interest rate of the China Merchants Bank for the period of time from September 1, 2012 to the date of payment set by this judgment); 2. Reject Other Claims of the Plaintiff Hangzhou Hangsi Garment In & Export Co., Ltd. For failure to fulfill the obligation of payment within the period designated by this judgment, interest on the debt for the delayed period shall be doubled, according to Article 253 of Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB20,740, the Plaintiff Hangzhou Hangsi Garment In & Export Co., Ltd. shall bear RMB742.68, and the Defendant Meiji (China) Transportation and Logistics Co., Ltd. shall bear RMB19,997.32. In case of dissatisfaction with this judgment, the Plaintiff and the Defendant may within 15 days upon the service of this judgment, submit an appeal to the court, together with copies of the number of the opposing party, and appeal to the Shanghai High People’s Court. Presiding Judge: JIN Xiaofeng Judge: SUN Yingwei Acting Judge: WANG Lei May 25, 2015 Clerk: CHEN Ciyu

Appendix: Relevant Laws 1. Contract Law of the People’s Republic of China Article 39 If standard clauses are used in making a contract, the party that provides the standard clauses shall determine the rights and obligations between the parties in accordance with the principle of fairness, and shall call in a reasonable manner the other party’s attention to the exemptible and restrictive clauses regarding its liability, and give explanations of such clauses at the request of the other party. “Standard clauses” means the clauses that are formulated in anticipation by a party for the purpose of repeated usage and that are not a result of consultation with the other party in the making of the contract. Article 40 Standard clauses shall become invalid if they fall under any of the circumstances set forth in Articles 52 and 53 of this Law or if the party that provides the standard clauses exempts itself from the liability, imposes heavier liability on the other party, or precludes the other party from its main rights. Article 107 Either party that fails to perform its obligations under the contract or fails to perform them as contracted shall bear the liability for breach of contract by

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continuing to perform the obligations, taking remedial measures, or compensating for losses. Article 396 An entrustment contract is a contract whereby the principal and the agent agree that the agent shall handle the affairs of the principal. Article 406 Under a non-gratuitous entrustment contract where any loss is caused to the principal due to negligence of the agent, the principal may demand compensation therefor. Under a gratuitous entrustment contract where any loss is caused to the principal due to deliberate intention or gross fault of the agent, the principal may demand compensation therefor. …… 2. Civil Procedure Law of the People’s Republic of China Article 64 It is the duty of a party to an action to provide evidence in support of his allegations. Article 253 After the people’s court makes an order granting property preservation, if the party against whom the application is made provides a guaranty, the people’s court shall cancel the property preservation. 3. Provisions of the Supreme People’s Court on Several Issues Concerning the Trial of Cases of Disputes over Marine Freight Forwarding Article 10 If the principal claims the freight forwarding enterprise shall bear the relevant liability for indemnification on the grounds that such freight forwarding enterprise causes any loss to it due to handling marine freight forwarding matters, the people’s courts shall support the principal’s claim, except the freight forwarding enterprise may prove it has no fault.

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Shanghai High People’s Court Civil Judgment Hangzhou Hangsi Garment In & Export Co., Ltd. v. Meiji (China) Transportation and Logistics Co., Ltd. (2015) Hu Gao Min Si (Hai) Zhong Zi No.87 Related Case(s) This is the judgment of second instance and the judgment of first instance is on page 255. Cause(s) of Action 223. Dispute over freight forwarding contract on the sea or sea-connected waters. Headnote Affirming lower court judgment that the Plaintiff shipper was entitled to recover damages for total loss of a cargo of clothing, even though some appeared to be undamaged, because clothing was of a well-known brand and consignee was entitled to reject any clothes that did not meet its strict product requirements. Summary The Plaintiff was engaged by ESPRIT European Service Company to transport all of its cargoes of garments. On behalf of ESPRIT, the Plaintiff booked a shipment of clothing through the Defendant’s company website. The Plaintiff delivered the cargo to the Defendant’s warehouse, at the Defendant’s request, where it would be loaded for shipping. Before the cargo could be shipped, there was a fire at the warehouse that caused damage to some of the clothing. Upon inspection by ESPRIT at the place of destination, the clothes were all rejected. This included some clothing that was not noticeably damaged. The Plaintiff claimed damages from the Defendant for a total loss because the clothing was a proprietary brand, and so the Plaintiff was neither entitled to nor able to dispose of the unharmed cargo. The Defendant argued that a freight forwarding contract relationship did not exist between the Plaintiff and the Defendant, that the Plaintiff did not have the ownership of the cargo, and that the Defendant had properly performed its obligation under the contract, so it should not bear the loss. The court of first instance held that a freight forwarding contract did exist between the Plaintiff and the Defendant, and that ESPRIT’s refusal to accept any of the consignment of clothing was reasonable, so Plaintiff could recover damages for a total loss. The Defendant-Appellant appealed the ruling, arguing that the court of first instance was

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incorrect in ruling that a contract relationship existed and arguing that they should not bear liability. The appeal court held the Appellant did not provide enough evidence to prove its claim and affirmed the judgment of the lower court.

Judgment The Appellant (the Defendant of first instance): Meiji (China) Transportation and Logistics Co., Ltd. Domicile: Room xxx, xxx Nansuzhou Road, Huangpu District, Shanghai. Legal representative: WEN Xianwei. Agent ad litem: WU Jianhong, lawyer of Shanghai Wintell & Co. (Tianjin). The Defendant (the Plaintiff of first instance): Hangzhou Hangsi Garment In & Export Co., Ltd. Legal representative: ZHU Wen. Agent ad litem: WANG Zhongqing, lawyer of Zhejiang Chuyang Law Firm. Agent ad litem: BAO Fang, lawyer of Zhejiang Chuyang Law Firm. The Appellant, Meiji (China) Transportation and Logistics Co., Ltd. (hereinafter referred to as “Meiji Company”), dissatisfied with (2014) Hu Hai Fa Shang Chu Zi No.1534 Civil Judgment of the Shanghai Maritime Court in respect of the case of dispute over maritime freight forwarding contract, and appealed before the court. The court, after entertaining this case on July 3, 2015, organized the collegiate panel according to the law and tried this case on July 30, 2015. WU Jianhong, agent ad litem of Meiji Company, and WANG Zhongqing, agent ad litem of Hangzhou Hangsi Garment In & Export Co., Ltd. (hereinafter referred to as “Hangsi Company”), participated in the trial. The case has been concluded. Hangsi Company alleged that there was long-term cooperation relationship between it and ESPRIT European Service Company (hereinafter referred to as “ESPRIT European”), and ESPRIT European appointed the Plaintiff to convey all the cargoes. The Plaintiff received the offer from ESPRIT Macao Offshore Commercial Service Company (hereinafter referred to as “ESPRIT Macao”) on May 11, 2012, in which ordered one consignment of female garment from the Plaintiff in FOB Shanghai. The Plaintiff booked the space for the shipment through the Defendant’s company website after stocking up, the Defendant sent the booking confirmation letter as well as the delivery notice via mail to the Plaintiff afterwards. The Plaintiff delivered the cargo to the appointed warehouse under the Defendant’s instruction and obtained the receipt from the warehouse. On July 24, 2014, the Plaintiff received the email from the Defendant about the fire occurred in the warehouse, which caused cargo damage, and the Insurer of the Defendant issued the accident report against the aforementioned accident. ESPRIT European refused to pay the bill of the cargo due to the no shipment of the cargo in question. The Plaintiff issued the notice of claim against the accident to the Defendant and the Warehouse respectively, but failed to receive certain reply. And no agreement had

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been reached after the negotiation between the related parties. The Plaintiff alleged that he, as the owner of the affected cargo, should recover the loss covering all the payment deserved to but failed to collect, due to the affect cargo, being a whole, was the proprietary brand and design ordered by ESPRIT European, and the Plaintiff was neither be entitled to nor be able to depose the cargo. the Defendant, as the freight forwarder of the Plaintiff, should bear the compensation responsibility against the loss. Thus, the Plaintiff requested that the Defendant should pay the compensation in amount of USD251,505, which was RMB1,595,774 according to the central parity rate 1:6.3449 of USD to RMB on August 31, 2012, and the interests thereon (the interest shall be calculated at the one-year loan interest rate of the People’s Bank of China for the contemporary period of time from September 1, 2012 to the date of payment set by this judgment). And court acceptance fee should be born by the Defendant. Meiji Company contended that there was no freight forwarding contract relationship between the Plaintiff and the Defendant, which made the claim lodged by the Plaintiff lacking lawful basis; the Plaintiff did not have the ownership over the cargo in question, which make the Plaintiff was not suitable for the trial; the Defendant, as the agent of the buyer ESPRIT European, had properly perform their obligation under the contract, which make the Plaintiff’s claim was irrelevant to the Defendant and the Defendant should not bear the compensation responsibility; the loss amount alleged by the Plaintiff was not be supported by the evidence. Therefore, the Defendant requested the court of first instance to reject the claims of the Plaintiff. The court of first instance found out that: On May 11, 2012, ESPRIT Macao sent No.XXXXXXX order to the Plaintiff for one consignment of female garment in FOB Shanghai, the consignment was shipped from China to Germany by sea, and the unit price of the cargo was USD41.40 each, with a total quantity of 6,043pieces. The Plaintiff stated that the cargo in question was ordered by ESPRIT Macao, but the actual buyer of the cargo was ESPRIT European. According to the commercial invoice records, the actual shipment of cargo was 6,075 pieces in FOB Shanghai, the unit price of the cargo was USD41.40 each, making the total amount to USD251,505, after deducting the trade price related, the invoice issued by the plaintiff to the buyer should show the actual payment of USD 243,959.85. After stocking up, on July 6, 2012, the Plaintiff required the space booking via booking website provided by the Defendant, the Defendant sent email, said that the booking request had been received, and the approval of the reservation number would be sent to the Plaintiff afterwards. On July 16, 2012, the Defendant sent the email to the Plaintiff, in which confirmed that the booking request had been approved, the shipper booking information indicated that the shipper was the Plaintiff, the buyer was ESPRIT European, port of loading and the port of destination were from China Shanghai to Bremen Harbor, Germany, and the order was No.XXXXXXX. Previously, the Plaintiff signed a confirmation letter on April 15, 2009, confirming the terms of the agreement over the usage of open online booking function required by the Defendant.

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After the completion of booking, the Plaintiff printed delivery notice via the Defendant’s website under the Defendant’s notice, in which stated that the buyer was ESPRIT European, the buyer designated the Defendant handling and processing documents on his behalf, the Plaintiff was the shipper, the warehouse was under Shanghai Licai Logistics Co., Ltd. (hereinafter referred to as “Licai Company”). the Defendant stated that, Licai Company and Jincai Company were related companies, the Defendant signed a contract with Licai Company, the cargo was actually stored at Jincai Company. Jincai Company, issued a receipt voucher after receiving the cargo, the receipt indicated that the total cargo was 6,075 pieces, the actual delivery exceeding the number in the order. On July 24, 2012, the Defendant sent email to inform the Plaintiff the storage warehouse fire, the cause of fire was short circuit of fans, the cargo was totally 6,075 pieces, 734 of which were burned, 547 of which were affected by the fire, 984 pieces needed to change the plastic packaging, a total of 2,265 pieces of damaged and could not be shipped, 3,810 pieces of cargo were not affected. In August 2012, Jiannengda Insurance Notarization Company Shanghai Office conducted inspect against the cargo in question, 6,075 pieces of garment, 3,810 of which stayed in a normal state, 984 pieces were packaging burned or in different degrees of shrinkage, and the content were in normal condition, 1,281 pieces were burned in different degrees. After the Plaintiff knowing that the cargo had been damaged by the fire accident, he had communicated with the warehouse and the Defendant by email and claimed for compensation, but in the end, the opinions of the parties failed to reach an agreement. Among the emails, the Plaintiff’s email sent to the Defendant on August 21, 2012 said that client ultimately not accepted the cargo had not been damaged, and requested another 1,946 pieces transported by air for complement after the negotiations with client. On June 3, 2014, the Defendant issued a certificate describing the facts of the booking, delivery, accident, claim and other aspects of the case in question, and indicated that the existing documents could initially prove that the Plaintiff was the owner of the damaged cargo. The Defendant stated that it issued the certificate in order to cooperate with the Plaintiff’s claim against the insurance company of the warehouse, and the Plaintiff denied this statement, alleged that the certificate was prepared for the prosecution before the Shanghai Huangpu People’s Court. It was also found that: 1. On March 14, 2010, the Defendant and Licai Company signed entrustment agreement, agreed that the Defendant designated Licai Company to provide services including customs clearance and inspection, container LCL operation, container truck transportation, warehousing and so on to the Defendant’s manufacturing producer in the Shanghai area, the agreement was valid from March 15, 2010 to March 14, 2013. Then, the two parties signed two supplemental agreement, agreed Licai Company to provide warehousing services in the Yangshan Bonded Port since September 1, 2011, with regard to customs service, the Defendant entrusted Jincai Company to provide the invoice and

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charge services and receive all services fees. On January 1, 2013, the Defendant, Licai Company, and Jincai Company signed the agreement, in which stated Licai Company would transfer all rights and obligations under the entrustment agreement to Jincai Company since the effective date of the agreement and the Defendant agreed. 2. The logistics management agreement was signed between Meiji Company and ESPRIT European, and the Defendant provided logistics service to ESPRIT European, Meiji Logistics was a group company and provided relative services through subordinate companies all over the world according to the Defendant. The Plaintiff and the Defendant confirmed that there was a long-term business relationship between the Plaintiff and ESPRIT European, according to the trading usage, if cargo normally shipped, the Defendant should issue a receipt for cargo to the Plaintiff one working day after the shipment, Article 5 at the back of the cargo receipt stated that: …… Meiji logistics should not bear the responsibilities due to the following reasons: (a) the fire damage liability, unless caused by the fault or neglect of Meiji Logistics; …… At the same time, after shipment, the Defendant will issue invoice to the Plaintiff, collect the bill of lading fees (preparing and issuing original bill of lading charges), service fee (fee paid to the customs broker), warehouse operation fees and fuel surcharges, port security charges, documentation fees, bulk and short split costs, seals fees and handling charges from the Plaintiff, the Plaintiff would pay to the Defendant. In this case the cargo had not been shipped due to the accident, the Defendant had not issued invoices, the Plaintiff had not paid the relevant fees. The court of first instance held that: to arrange the shipment of cargo, the Plaintiff booked space on the published the Defendant’s website, afterwards he delivered the cargo to the designated warehouse according to the Defendant’s delivery notice. Although the cargo did not conduct actual shipment due to accident, but according to the trading usage, after shipment, the Defendant would issue invoice to the Plaintiff, collect the bill of lading fees (preparing and issuing original bill of lading charges), service fee (fee paid to the customs broker), warehouse operation fees and fuel surcharges, port security charges, documentation fees, bulk and short split costs, seals fees and handling charges from the Plaintiff. The above series of facts indicated that the Defendant was the one arranging the shipment of the cargo in question for the Plaintiff, and his act conformed to the identity of freight forwarder. As to the legal relationship between ESPRIT European and the Defendant, it was independent from the fact that the Defendant accepted the booking request and conduct the actual shipment of cargo for the Plaintiff, charged costs according to the usage of trade, so freight forwarding contract relationship between the Plaintiff and the Defendant was established. The court of first instance held that: in the freight forwarding contract relationship, the Defendant as the freight forwarder of the Plaintiff, after received the cargo, it was responsible for the safety of the cargo during the charge, until the cargo delivery to the consignee. According to the found facts, the Defendant had only storage agreement with Licai Company, and Licai Company provided the

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Defendant with Jincai Company’s warehouse, the Plaintiff delivered the cargo to the appointed warehouse under the Defendant’s instruction, so in the Plaintiff’s view, the Defendant should be liable for damages for the damage occurred during the period within the cargo storage. The Plaintiff claimed the rights based on the contractual relationship of the freight forwarder, irrespective of whether the cargo was owned by the Plaintiff. The trade term was FOB. Under this trade terms, the Plaintiff, as the shipper, must bear all risks of loss or damage against the cargo until the cargo have passed the ship's rail at the named port of shipment. The cargo in the warehouse had not arranged the transportation when the damage occurred, the risk had been transferred to the buyer, thus the risk should be bored by the Plaintiff. Therefore, the Plaintiff, as the risk bearing party, was entitled to claim compensation from the responsible parties, which was not related to the ownership of the cargo. The Defendant argued that there was a cargo receipt within the Defendant’s business practices, the Defendant should be exempted from cargo loss caused by fire according to exemption clauses stated in the back of cargo receipt. The court of first instance held that although no actual cargo receipt was issued due to the cargo damage occurred before the shipment in this case, but under the fact confirmed by the Plaintiff and the Defendant, receipt should be issued for cargo without fire. However, the cargo receipt was provided by the Defendant, and the terms on the back was printed as the standard clauses in advance, and there was no evidence that the Plaintiff and the Defendant had reached this agreement. In accordance with the law, the provision of standard clauses which exempted the liability is invalid. Therefore, the Defendant’s grounds for exemption were untenable. To sum up, the Plaintiff had the right to claim compensation against the Defendant on the basis of the freight forwarding contract with the Defendant, and the Defendant should be liable for compensation. The court of first instance held that the assessment report issued by the Notarization Company stated that expect 1,281 pieces were in different degree burned, the rest of the cargo were in normal condition, and it could not be simply equated that the cargo looking in normal condition not existed damaged at all. According to inform mail the Plaintiff sent to the Defendant on August 21, 2012, the buyer of the cargo, ESPRIT European refused to accept all orders of the cargo in question, including cargo that had not been affected. Whereas the Defendant insisted that it was agent of ESPRIT European, should know whether ESPRIT European accepted the cargo in question, the Defendant failed to submit related disproof, thus the court affirmed the fact in Plaintiff’s mail. Due to the fact that “ESPRIT” was public well-known brand, ESPRIT European, to maintain a good reputation, had strict requirements on product quality, and the burned garment may be flaws, ESPRIT European’s refusing to accept was reasonable, there was nothing wrong with this. The Defendant thought that even if ESPRIT European rejected the cargo, the Plaintiff could also reduce or even avoid losses by resale. The court held that “ESPRIT” had the exclusive store of this brand, and selling its brand clothing without authorization, or changing the brand logo and selling the same style clothes, may constitute infringement against “ESPRIT” brand. The Defendant requested the Plaintiff to achieve the purpose of derogation via infringement, which

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should not be supported by the court. The Plaintiff had been unable to deliver the clothing successfully to ESPRIT European, or sell on the market, which could be regarded as the Plaintiff suffered a total loss. In addition, the Plaintiff stated in written that, if the Defendant compensated the Plaintiff according to the total value, it agreed to transfer all of the remaining cargo rights to the Defendant during the trial. Therefore, if the Defendant insisted that the cargo still remained residual or impairment treatment, the Defendant could dispose himself after the total compensation to the Plaintiff. The Plaintiff provided evidence, invoice and commercial orders, to prove the cargo value, the price of cargo were the same, but the commercial invoice indicated the cargo in question was delivered to giving the buyer with a discount, after deducting the discount, the actual amount of the cargo was USD243,959.85, the loss of the cargo should be calculated after this amount. The court of first instance held that: the amount in the cargo orders and the commercial invoice were all in USD, the Plaintiff and the buyer of cargo agreed that trade was upon in dollars as the trade settlement currency, if the accident had not occurred, the Plaintiff would receive USD. At the same time, after the accident, the Plaintiff’s claim against the Defendant also required USD. Therefore, the court held that the loss of cargo in question should more reasonably in dollar terms. loss of interests claimed by the Plaintiff was generated by the Defendant’s payment delay, should be supported. The evidence provided by the Plaintiff indicated that it had claim for compensation in August 2012, but the Plaintiff failed to provide a reasonable loan basis, whereas the People’s Bank of China not stipulating the benchmark interest rate of US dollar deposits, as well as the fact that the Plaintiff’s USD Account belonged to China Merchants Bank, so the interest should be calculated at the US dollars current deposit interest rate of the China Merchants Bank for the period of time from September 1, 2012 to the date of payment set by this judgment. Therefore, the judgment of first instance was as follows: 1. The Defendant Meiji (China) Transportation and Logistics Co., Ltd. should pay the Plaintiff Hangzhou Hangsi Garment In & Export Co., Ltd. indemnity USD243,959.85 and interest thereof within 10 days after this judgment came into effect (the interest should be calculated at the US dollars current deposit interest rate of the China Merchants Bank for the period of time from September 1, 2012 to the date of payment set by this judgment); 2. Reject Other Claims of the Plaintiff Hangzhou Hangsi Garment In & Export Co., Ltd. Court acceptance fee of first instance in amount of RMB20,740. Hangsi Company should bear RMB742.68, and Meiji Logistics should bear RMB19,997.32. In second instance, Meiji Company appealed as follows: 1. It never charge any fees against Hangsi Company, the trade term was FOB, the booking was entrusted by the buyer, Hangsi Company delivered the cargo was under the buyer delivery instructions, Hangsi Company could only provide the

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cargo receipt after delivery, there was no freight forwarding contract relationship between them. The first instance wrongly affirmed that Meiji Company issued invoice to Hangsi Company to charge the freight charges after shipment. 2. Even if the contract relationship was established, the cargo was entering Jincai Company warehouse, Hangsi Company should claim its rights against Jincai Company, the first instance wrongly affirmed that Meiji Company was liable. 3. The receipt of the cargo specified the exemption of fire, and the ownership of the cargo had been transferred at the time of delivery, Hangsi Company had no the right of claim and the right to win against the loss. 4. Assessment report indicated that there were more than 3,800 pieces in the normal state within the cargo in question, the first instance wrongly affirmed statement of Hangsi Company. The laws were incorrectly applied in the judgment of first instance, the facts were incorrectly ascertained in the judgment of first instance. Thus, Meiji Company appealed that the judgment of first instance should be revoked and retried. In second instance, Hangsi Company contended as follows: 1. Hangsi Company book space from Meiji Company, Meiji Company confirmed booking, and notified the delivery, which could prove there was a freight forwarding relationship between that Meiji Company and Hangsi Company. 2. From submitted evidence of Meiji Company, Meiji Company set entrust relationship between the company and the warehouse, the company entrusted the freight forwarding operation to Jincai Company and Licai Company, any occurred storage accident responsibility should be born by Meiji Company. 3. From the point of view of the ownership of the cargo, or from the cargo delivery to Meiji Company, the company had the ownership of the cargo in question. 4. The cargo in question was well-known global brands, Meiji Company, alleged to be the agent of ESPRIT, should be very clear to brand protection of the cargo, so whether the cargo can be sold in the market after rejected by the buyer, Meiji Company should known well. The affirmed facts of first instance were clear and the law application was correct, Hangsi Company request the court of second instance to reject the appeal of the Meiji Company. Neither party provided new evidence in the second instance. It is found out that: Although Meiji Company had objection to the facts ascertained by the first instance, such as freight forwarding contracts between the two parties and other facts, but they failed to provide sufficient evidence to prove it, therefore the objection cannot be supported. The facts ascertained by the first instance are confirmed by the court. The court holds that: This case is dispute over freight forwarding contract by sea, the main issue are that whether the contract relationship was established, the loss amount and the bear of the damage liability.

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According to the provisions of the Civil Procedure Law of the People’s Republic of China, it is the duty of the party of an action to provide evidence in support of his allegations. If there is no or insufficient evidence to prove the facts of the claim, the party shall bear the negative consequences. In this case, Hangsi Company provided the evidence materials such as orders, invoices and packing list, booking and confirmation of booking mails, warehouse receipt vouchers, the certificate issued by Meiji Company, mails between two parties about cargo storage, warehouse incoming, fire, and claim, etc., which had formed a complete chain of evidence to prove the fact that Hangsi Company, as the principal of the freight forwarding contract in question, booked the shipment of cargo from Meiji Company, Meiji Company, as trustee of the freight forwarding contract in question, accepted the entrustment and sent the cargo to the designated warehouse for storage under Hangsi Company’s instructions. And the contract relationship established effectively between the two parties, the parties shall perform their respective obligations under the contract in question. Meiji Company denied the contractual relationship between the two parties, but failed to prove that the freight forwarding contract in question was between Hangsi Company and outsiders, should bear the legal responsibilities. It must be pointed that the trade terms was FOB, Hangsi Company was the shipper, the cargo in question was affected by fire before the shipment just after being delivered to the designated warehouse. According to the provisions of FOB term, the shipper shall bear all the risks before cargo had passed the vessel's rail, thus Hangsi Company, as the owner of the cargo, was entitled to lodge an action and claim the rights towards Meiji Company, the entrustee of the freight forwarding contract in question. The related parties confirmed Meiji Company should issue the cargo receipt, but fire exemption provisions stated at the back of cargo receipt was standard terms unilaterally printed by Meiji Company, without the agreement of the related parties, which could not bind Hangsi Company. In addition, according to the current evidence, after the fire accident, the buyer refused to accept the cargo under pre-shipment of Hangsi Company according to the freight forwarding contract, and pay the purchase price of the cargo, Hangsi Company also was not entitled to resell the cargo, thus the determination of court of first instance, which Hangsi Company can be regarded as suffering total loss, was not improper. The allegation of Meiji Company such as there was no contract relationship between the parties, Hangsi Company shall claim towards Jincai Company, the fire exemption, Hangsi Company has no right of claim and the right to win and wrongly affirmed cargo loss, etc. should not be as proper grounds of appeal, the court shall not support. To sum up, the facts affirmed by the original judgment are clear and the application of the law is correct and shall be affirmed. The appeal of Meiji Company lacks the factual and legal basis, and the court will not support it. Therefore, according to Article 170 Paragraph 1 Sub-paragraph 1, Article 175 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows:

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Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of RMB19,997.32, shall be born by the Appellant, Meiji (China) Transportation and Logistics Co., Ltd. The judgment is final. Presiding Judge: SHUN Chenmin Acting Judge: FEN Guanghe Acting Judge: ZHOU Yi October 8, 2015 Clerk: LUO Gang

Appendix: Relevant Laws 1. Civil Procedure Law of the People’s Republic of China Article 170 After trying a case on appeal, the people’s court of second instance shall, in the light of the following situations, dispose of it accordingly: (1) If the facts were clearly ascertained and the law was correctly applied in the original judgment, the appeal shall be rejected in the form of a judgment and the original judgment shall be affirmed; (2) If the application of the law was incorrect in the original judgment, the said judgment shall be amended according to the law; (3) If in the original judgment the facts were incorrectly or not clearly ascertained and the evidence was insufficient, the people's court of second instance shall make a written order to revoke the judgment and remand to case to the original people's court for retrial, or the people’s court of second instance may amend the judgment after investigating and clarifying the facts; (4) If there was violation of legal procedure in making the original judgment, which may have affected correct adjudication, the judgment shall be revoke by a written order and the case remanded to the original people's court for retrial. Article 175 The judgment and the written order of a people’s court of second instance shall be final.

Shanghai Maritime Court Civil Judgment Hehai Technology Engineering Group Co., Ltd. v. Xianghai Heavy Industry Group Co., Ltd. (2015) Hu Hai Fa Shang Chu Zi No.3274 Related Case(s) This is the judgment of first instance, and the judgment of second instance and the ruling of retrial are on page 289 and page 303 respectively. Cause(s) of Action 236. Dispute over contract for construction of dock or harbor. Headnote The Plaintiff’s claim for outstanding payments for construction of a dock basin held to successful because the court rejected the Defendant’s claim that construction was deficient. Summary The Defendant contracted with the Plaintiff to construct a dock basin after the Plaintiff won the tender offer. Under the general contract the Plaintiff was obligated to construct the dock basin within a four month time period and it was required to pass qualifications with an excellent standard. The Defendant agreed in the original contract to pay the Plaintiff following completion. However, after the Defendant failed to pay, the two parties negotiated the payment timeline and fee structure, along with penalties for failure to perform. After the Defendant again failed to pay the Plaintiff brought suit to recover the outstanding balance due under the contract. The Defendant argued that the dock basin failed to fulfill the quality stipulated in the contract. It was held by the Shanghai Maritime Court that the Defendant’s claim that the dock basin failed to fulfill the quality stipulated had no legal basis, and there was no misunderstanding between the parties. Furthermore, the Plaintiff was entitled to seek interest on the debt for the Defendant’s failure to pay the outstanding balance of the debt. Therefore, the court found that the Defendant must pay the Plaintiff the outstanding balance of RMB859,400 plus interest, along with the court fees for the original claim (RMB17,394) and the acceptance fees of the counterclaim (RMB29,416.50).

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_12

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Judgment The Plaintiff (the counterclaim Defendant): Hehai Technology Engineering Group Co., Ltd. Domicile: No.10, Guoqing Middle Road, Taixing City, Taizhou, Jiangsu. Legal representative: YU Jianguo, chairman. Agent ad litem: ZHANG Xiucheng, lawyer of Jiangsu Bocheng Law Firm. Agent ad litem: WENG Gang, lawyer of Jiangsu Bocheng Law Firm. The Defendant (the counterclaim Plaintiff): Xianghai Heavy Industry Group Co., Ltd. Domicile: Changxing Village, Huiping Town, Qidong City, Nantong City, Jiangsu. Legal representative: LU Jun, chairman. Agent ad litem: DAI Yong, lawyer of Jiangsu Jianghai Law Firm. Agent ad litem: CHU Jiangxin, lawyer of Jiangsu Jianghai Law Firm. With respect to the case of dispute over contract for construction of dock or harbor, the Plaintiff (the counterclaim Defendant) Hehai Technology Engineering Group Co., Ltd. (hereinafter referred to as Hehai Group) filed an action against the Defendant (the counterclaim Plaintiff) Xianghai Heavy Industry Group Co., Ltd. (hereinafter referred to as Xianghai Heavy Industry) before the court on December 8, 2015. After accepting the case on the same day, the court constituted a collegiate panel and held a hearing. Xianghai Heavy Industry filed an application for challenge of jurisdiction on December 25, 2015, and the court rendered a ruling to reject it on January 4, 2016. Later, Xianghai Heavy Industry filed an appeal against adjudication of jurisdiction objection. On February 29, 2016, the second instance rendered a ruling that the appeal should be dismissed. During the course, Hehai Group filed an application for property preservation, and the court rendered a ruling to approve the application according to law. On April 26, 2016, Xianghai Heavy Industry filed a counterclaim, and the court placed the counterclaim on file and accepted it. On May 24, 2016, the court combined the action and the counterclaim and held a hearing in public. ZHANG Xiucheng, agent ad litem of Hehai Group, and DAI Yong, agent ad litem of Xianghai Heavy Industry, appeared and participated in the action. This case has been concluded. Hehai Group alleged that it had signed a general contract for the construction of dock basin of Jiangsu Xianghai Shipbuilding Industry Co., Ltd. with Xianghai Heavy Industry through tender. After the execution of the contract, Hehai Group performed contractual obligations under the agreement, but Xianghai Heavy Industry had defaulted part of the project fund. On June 24, 2013, the two parts reached an agreement on the payment issue to set a payment deadline, but Xianghai Heavy Industry still defaulted in the payment. In August 2015, the two parties came to an agreement on payment deadline, payment methods and other issues. However, Xianghai Heavy Industry only paid part of the fund and still faulted spare money. Consequently, Hehai Group filed an action to the court to request to order that Xianghai Heavy Industry to pay debt RMB859,400 (hereinafter currency referred to

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RMB) and pay the interest from January 1, 2009 to the day when they actually pay the debt four times of loan interest according to the penalty interest standard in the light of loan interest rate of Bank of China in the corresponding period. Xianghai Heavy Industry defended that the action and the request to pay RMB859,400 could not be founded: (1) the total price included in the two parts’ overall contract was RMB11,260,000, which was the closed contractual total price and do not adjust regardless the change of expenses of labor, price of commodities, exchange rate, tax rate and so on. In the case that the alteration of design results in the change of contractual total price, the two parties should make a negotiation on the altered content and sign an addendum, thus the contract coming into force. Presently, Hehai Group failed to provide the addendum, therefore they could not charge project fund except for the total contract price. It was also stipulated in the general contract that the project quality must reach the excellent level. If it failed, Hehai Group must rework until it reaches the excellent level. In the case that the project quality fails to reach excellent but qualified level and Xianghai Heavy Industry approves to use, the building cost of projects should be settled in accordance with eighty percent of the total contractual price. Hehai Group had obtained project fund RMB13,727,000, and Xianghai Heavy Industry had overpaid RMB4,719,000. (2) On June 24, 2013, Hehai Group, in the name of “Nantong Xianghai shipyard project’s construction project management team of Jiangsu Hehai Technology Engineering Group Co., Ltd.” had signed the addendum with Xianghai Heavy Industry. But the construction project management team did not register in the industry and commerce department and it could not enjoy principal qualification to sign the agreement, therefore the addendum could not be founded in the light law. Even though the addendum could be founded, the project involved could finish completion and acceptance in July 2015 and the project spare money could be paid after the project has finished completion and acceptance as well as received acceptance certificate. Therefore, the agreement on payment for the spare money before the end of 2013 in the addendum could not be performed due to the lack of payment condition, and the project involved had never been settled. (3) Hehai Group’s request to calculate the overdue interest four times in accordance with loan interest rate of Bank of China in corresponding time had no contractual and legal basis. Xianghai Heavy Industry requested the court to reject the action according to law. Xianghai Heavy Industry counterclaimed that in April 2008 Xianghai Heavy Industry signed the general contract for the construction of dock basin with Hehai Group and the total price of the contract was RMB11,260,000, which was closed price. Starting date agreed in the contract was April 20, 2008, and the completion date was August 20, 2008. The project should be subject to the agreed quality standard after it was through completion and acceptance. It was also included in the contract that quality of the project must reach the excellent level. If it failed to reach the excellent level, Hehai Group should rework until it reaches the excellent level. In the case that the project quality fails to reach excellent but qualified level and Xianghai Heavy Industry approves to use it, the building cost of projects should be settled in accordance with eighty percent of contractual total price. And presently

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quality of the project failed to reach the excellent level and Xianghai Heavy Industry should pay the project fund RMB9,008,000. But now Xianghai Heavy Industry had paid RMB13,727,000, therefore Hehai Group should return RMB4,719,000. It was agreed in the contract that Hehai Group should pay the penal sum RMB4,000 if it was overdue for one day. The completion date agreed in the contract was August 20, 2008 and the date receiving the acceptance certificate of the project was July 3, 2008, therefore Hehai Group was overdue for 2,591 days and should pay penal sum RMB10,364,000. Presently Xianghai Heavy Industry requested Hehai Group to pay the penal sum RMB2,000,000 and preserve the right of recourse for spare money. In addition, there was vast misunderstanding in the agreement signed by the two parties on August 20, 2015 and therefore Xianghai Heavy Industry requested the court to order to revoke the agreement and Hehai Group to pay the counterclaim expense. Hehai Group defended against the counterclaim that it did not break contract. Although the starting date agreed in the contract was April 20, 2008, the real starting date was May 28, 2008. And the quality assessment provided by Xianghai Heavy Industry demonstrated the completion date was October 2, 2008. By rule, completion test was finished by Xianghai Heavy Industry and the quality assessment provided by Xianghai Group also demonstrated Hehai Group had submitted relevant completion technology filed material early, therefore failing of receiving completion and acceptance certificate in time could not be blamed for Hehai Group. After completion of the project, Xianghai Heavy Industry had paid part of the project fund and as for the spare money, the two parties had negotiated many times, coming to an agreement, and Xianghai Heavy Industry had performed their obligation in accordance with the agreement. But presently Xianghai Heavy Industry denied the agreement they had performed for the reason that the engineering department did not have enough communication with financial department, which lacked legal basis and should not be approved by the court. In addition, the project quality assessment not only referred to the dock basin construction provided by Hehai Group but also referred to pipeline, firefighting and some other aspects. Therefore, the evidence provided by Xianghai Heavy Industry could not demonstrate the reason why the quality of project did not reach the excellent level lied in the construction quality of Hehai Group and their counterclaim request lacked factual and legal basis. Hehai Group requested the court to dismiss the counterclaim request of Xianghai Heavy Industry. The evidence submitted by Hehai Group with the view of demonstrating the fact of the action, the cross-examination opinions of Xianghai Heavy Industry and the attestation opinions of the court are as follows: 1. Two addendums signed by two parties on June 24, 2013, to prove that the two parties settled the project and made new agreement on payment amount and time by Xianghai Heavy Industry. Xianghai Heavy Industry raised no objection about the authenticity of this evidence but denied the content of it. They thought that there was conflict in the content of the agreement. The project did not receive completion and acceptance at that time but it was agreed in the

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agreement that Xianghai Heavy Industry should pay at the end of this year, in addition, one of the agreements lacked inscribe time. But Xianghai Heavy Industry agreed sand leakage of dock basin specified in the agreement. The court attests that Xianghai Heavy Industry raised no objection about the authenticity of this evidence and the facts could be judged by the content specified in the evidence. The court has no objection about probative force of the evidence. 2. Agreement signed by the two parties on August 20, 2015, to prove that due to the failing of performing the former addendum of Xianghai Heavy Industry, the two parties reached a new payment agreement through negotiation and the formation of the plaintiff’s appeal subject. Xianghai Heavy Industry raised no objection about the authenticity of this evidence, but thought that the relevant project did not be settled when signing the agreement and there was huge misunderstanding when Xianghai Heavy Industry signed the agreement, therefore requested the court to terminate the agreement. The court attests that Xianghai Heavy Industry raised no objection about the authenticity of this evidence and the facts could be judged by the content specified in the evidence. The court has no objection about probative force of the evidence. 3. General contract for the construction of dock basin signed by the two parties in April 2008, to prove that fundamental legal relation between the two parties. Xianghai Heavy Industry raised no objection about the authenticity of this evidence but thought there was specific prescription on the completion date, building cost of project, quality of project in the evidence, therefore it could demonstrate the appeal of the plaintiff lacked contractual basis. The court attests that Xianghai Heavy Industry raised no objection about the authenticity of this evidence and the facts could be judged by the content specified in the evidence. The court has no objection about probative force of the evidence. Xianghai Heavy Industry submitted no evidence of the action. The evidence submitted by Xianghai Heavy Industry with the view of demonstrating the fact of the counterclaim, the cross-examination opinions of Hehai Group and the attestation opinions of the court are as follows: 1. General contract for the construction of dock basin signed by the two parties in April 2008, to prove that it was agreed on the starting date, the completion date, quality standard, building cost of contract, settlement ways, payment deadline and so on in the construction contract of the two parties and the contractual total price was closed price. In the case that Hehai Group completes beyond the limited time, they should pay the penal sum. Hehai Group raised no objection about the authenticity of this evidence, but thought after construction the two parties signed two agreements in June 2013 and in August 2015, making new stipulation on unfinished issues. Therefore, the two parties should perform in accordance with the new agreements. The court attests that both partied raised no objection about the authenticity of this contract and submitted it as both parties’ evidence material. The court approves probative force of the contract.

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2. Quality assessment, to prove that the quality of the project was assessed as qualified not the excellent level. Hehai Group raised no objection about the authenticity of this evidence, but thought in accordance with the quality assessment, the construction was not beyond the limited time and there were only two types of assessment results–qualification and disqualification without the excellent standard in the water transport completion project. The court attests that Hehai Group raised no objection about the authenticity of this evidence and the facts could be judged by the content specified in the evidence. The court approves probative force of the evidence. 3. Completion and acceptance certificate of the port project, to prove that the relevant project was completed and accepted as qualified on July 3, 2015, and the quality of it was qualified not excellent standard stipulated in the contract, in addition, Hehai Group was overdue for too much time. Hehai Group raised no objection about the authenticity of this evidence, but did not accept the purpose of demonstration. They thought the total project, except for the dock basin constructed by Hehai Group, included pipeline, firefighting, environment protection and other items that did not belong to Hehai group’s construction. And the completion and acceptance was finished by Xianghai Heavy Industry. Hehai Group had early submitted the related material to Xianghai Heavy Industry, but Xianghai Heavy Industry did not go through the completion and acceptance formalities, therefore failing of receiving the completion and acceptance certificate could not be blamed for Hehai Group. The court attests that Hehai Group raised no objection about the authenticity of this evidence and the facts could be judged by the content specified in the evidence. The court approves probative force of the evidence. 4. Two payment system special credentials of Jiangsu Rural Credit Cooperatives, to prove that Xianghai Heavy Industry had paid RMB150,000 twice (in all RMB300,000) to Hehai group on September 6, 2015 and on September 30, 2015. Hehai Group raised no objection about the authenticity of this evidence and accepted the fact of Xianghai Heavy Industry’s payment. The court approves probative force of the evidence. Against the counterclaim of Xianghai Heavy Industry, Hehai Group submitted Quality Assessment Procedure and Standard of Jiangsu Water Transport Project (Su Jiao Gui [2012] No.8), which could demonstrate the completion quality assessment standard and manifested that the reason that the project quality of Xianghai Group was not up to standard was unreasonable. Xianghai Heavy Industry raised no objection about the authenticity of this evidence, but denied Hehai Group’s opinion about the project’s quality standard and thought the sand leakage of dock basin referred in the agreement provided by Hehai Group illustrated there was serious problem in the project quality. The court holds that this evidence was the assessment procedure and standard provided by local competent department. Xianghai Heavy Industry raised no objection about the authenticity of this evidence and the facts could be judged by the content specified in the evidence. The court approves probative force of the evidence.

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The court ascertains the facts of the subject case as follows: In April 2008, Hehai Group signed the general contract for the construction of dock basin with Xianghai Heavy Industry, which stipulated that the dock basin engineering project was confirmed by tender in April 2008 and Hehai Group won the tender to construct. The starting date was April 20, 2008. The completion date was August 20, 2008, which was the day when the contractual project finished the completion and acceptance and the project’s quality reached the standard agreed in the contract. The project site was Changxing Village, Huiping Town, Qidong City. Construction range was only the dock basin. In any case, the time limit of the project could not be delayed except for force majeure and reason from Xianghai Heavy Industry. If it was not the above reasons for not completing according to the agreed date, Hehai Group was blamed for the violation of the agreement and should pay the penalty RMB4,000 per day. The project quality must reach excellent standard and the expense was included in the total contractual price. If it failed to reach the excellent level, Hehai Group should rework until it reached the excellent level. In the case that the project quality failed to reach excellent but qualified level and Xianghai Heavy Industry approved to use, the building cost of projects should be settled in accordance with eighty percent of contractual total price. The total contractual price was RMB11,260,000, including the monitoring expense of material and pile foundation. The contract was the closed total price contract and did not adjust with the change of expenses of labor, price of commodities, exchange rate, tax rate, interest rate and so on. In the case that the alteration of design results in the change of total price, the two parties should made a negotiation on the altered content and sign an addendum, thus the contract coming into force. After signing the contract, Hehai Group started working on May 28, 2008 and the dock basin project was completed on October 2, 2008. On October 14, 2010, Quality Supervision Office for Dock Basin Project of Nantong City organized relevant departments to assess the completion quality of dock basin engineering and examined the spot after hearing reports of building, design, supervision and management, construction organization. And the Office examined technology filed material of project’s handing over of construction, supervision and management organization and the project quality, combining with the entity special project inspection and evaluation before completion and acceptance, was assessed as qualification. On June 24, 2013, Xianghai Heavy Industry and Hehai Group came to an addendum, which stipulated that Xianghai Heavy Industry should pay Hehai Group the project fund RMB300,000 before completion and acceptance of the dock basin project and paid Hehai Group RMB1,000,000 within three months after it was qualified in completion and acceptance and received acceptance certificate. And other spare money should be paid to Hehai Group before the end of 2013. Hehai Group should issue an invoice in full to Xianghai Heavy Industry after they had received Xianghai Heavy Industry’s second project fund RMB1,000,000, otherwise Xianghai Heavy Industry had the right to postpone paying the third project fund. For the reason that there was sand leakage in dock basin, Xianghai Heavy Industry had the right to detain project fund RMB700,000 as cash deposit of later disposal. In the case that Xianghai Heavy Industry did not pay the project fund on time under

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the former agreement, Hehai Group would not undertake the disposal expense for sand leakage. And meanwhile if Xianghai Heavy Industry could not pay the entire project fund before the end of 2014, they must pay the bank loan interest in the corresponding period from October 2009 to the day they pay the entire fund to Hehai Group. On the same day, the two parties signed another agreement on sand leakage of dock basin, which stipulated that the project fund RMB700,000 was agreed by Hehai Group to be deducted from the settlement fund as maintaining fund and Xianghai Heavy Industry need not to pay it again if Xianghai Heavy Industry paid the project fund to Hehai Group in accordance with the former agreement. On August 20, 2015, the two parties signed an agreement again to stipulate the issue on the general contract for the construction of dock basin project signed by the two parties and performing of the addendum signed on June 24, 2013, and they came to the following agreement: The two parties confirmed that the project fund had been settled, and Xianghai Heavy Industry had paid the project fund RMB13,427,000 and still default in RMB459,400. Xianghai Heavy Industry agreed to pay the project fund RMB150,000 before August 31, 2015, to pay RMB150,000 before September 27, 2015, and to pay the entire project fund before October 31, 2015. In the case that Xianghai Heavy Industry paid the entire project fund within the agreed time limit, Hehai Group would not claim the maintaining expense RMB700,000 included in the addendum of June 24, 2013. In the case that Xianghai Heavy Industry did not pay the fund within the above time limit, Hehai Group had the right to claim the above RMB459,400 and the maintaining expense RMB700,000. After signing the agreement, Xianghai Heavy Industry had paid RMB150,000 twice (RMB300,000 in total) on September 6, 2015 and on September 30, 2015. It is otherwise found out that: On July 3, 2015, Nantong Port Management Department issued the completion and acceptance certificate of port project (Tong Gang Yan Zheng Zi [2015] No.01) to demonstrate the completion and acceptance of dock basin engineering of Xianghai Heavy Industry Group Co., Ltd. in Qihai Harbor District, Nantong Port was qualified and it was accepted to put into use. It included dock berth with 3,000 tons (5,000 tons if taking account of water conservancy project) and related supporting facility. The court holds that: The case is the dispute over contract of dock construction, and two parties raises no objection about the fact that the two parties signed the general contract of dock basin, Hehai Group completing the engineering construction project and Xianghai Heavy Industry paying the project fund RMB13,727, 000 to Hehai Group, therefore the two parties should perform their own rights and obligations in accordance with the contract. According to the claims and defenses of the two parties and the fact ascertained in the court trial, the court holds that the outstanding issues in this case lie in the following: (1) whether there is vast misunderstanding in the agreement signed by two parties on August 20, 2015 and whether the reason that Xianhai Heavy Industry revokes the agreement could be accepted. (2) Whether Hehai Group completed the construction in accordance with the time limit and quality agreed in

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the general contract, whether there are quantities adding in the engineering and whether their appeal sum is reasonable. The first outstanding issue in this case: whether there is important misunderstanding. In accordance with Article 54 of the Contract Law, one party has the right to request the People’s Court or Arbitral Institution to alter or revoke the contract that is concluded due to huge misunderstanding. According to Article 71 of the Opinions of the Supreme People’s Court on Several Issues concerning the Implementation of the General Principles of the Civil Law of the People’s Republic of China (for Trial Implementation), important misunderstanding refers to the behavior that an actor, due to his false conception for the nature of behavior, opposite party, variety, quality, specification and quantity of the subject matter, makes the result contrary to his original meaning and causes huge losses. After the relevant dock basin engineering completed and received the acceptance certificate in October 2010, Xianghai Heavy Industry signed the addendums on June 24, 2013 and on August 20, 2015 with Hehai Group, making a stipulation on default sum, payment time and responsibility for breach of contract of Xianghai Heavy Industry. As for the addendum signed in 2013, Xianghai Heavy Industry held that the opposite party signing the contract was “Nantong Xianghai shipyard project’s construction project management team of Hehai Group”, which did not register in the industry and commerce department and could not enjoy principal qualification to sign the agreement. But in fact, the two parties’ general contract for construction of dock basin has clearly prescribed that Hehai Group should appoint and accredit personnel to project department of construction site in accordance with bidding document, and the project department was founded in accordance with the agreement of contract. Xianghai Heavy Industry’s denying of the validity of the project department lacks the factual and legal basis, and Hehai Group subsequently confirmed the project department’s behavior. Meanwhile Xianghai Heavy Industry performed their payment obligation under the agreement. Therefore, Xianghai Heavy Industry has no evidence to demonstrate the agreement is invalid. As for the agreement signed on August 20, 2015, it was signed due to failing of implementation of the addendum signed on June 24, 2013, and the agreement stated that the two parties had settled the engineering, and Xianghai Heavy Industry had paid the project fund RMB13,427,000 and still defaulted for RMB459,400. The sum Xianghai Heavy Industry paid was consistent with the fact examined by court trial. After signing the agreement, Xianghai Heavy Industry paid the project fund RMB150,000 twice (RMB300,000 in total) on September 6, 2015 and on September 30, 2015 to Hehai Group in accordance with the agreement. Xianghai Heavy Industry partly performed the obligation to pay the fund, and only left the last project fund unpaid. From the completion of the project, the execution of the two agreements to the appeal from Hehai Group, there is no evidence to demonstrate that Xianghai Heavy Industry raises objection to the engineering time limit, quality and standard of engineering, default sum, regrets for the payment and requests to return the fund that they have paid. That is to say Xianghai Heavy Industry does not demonstrate they have false conception for the nature of behavior, opposite party, variety, quality, specification and quantity of the subject matter.

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Presently they hold that there is significant misunderstanding in the execution of the agreement and requests the court to revoke it only for the reason that financial personnel don’t make enough communication with the engineering project personnel and therefore they think the settlement sum is advance payment. The request lacks factual and legal basis, therefore the court give no support. The second outstanding issue in this case: as for the construction deadline, it is agreed as 4 months in the general contract from April 20, 2008 to August 20, 2008. Quality assessment issued by Quality Supervision Office for Dock Basin Project of Nantong City manifested that the starting date is May 28, 2008, the completion date is October 2, 2008 and the time limit is 4 months and 2 days, which could not demonstrate Hehai Group delays significantly. Although it is agreed in the contract that the completion date is according to the date when the project is completed and accepted, and the quality of it reached the standard stipulated, the completion and acceptance started in October 2010. But Quality Assessment Committee was entrusted by Xianghai Heavy Industry, and they had no evidence to demonstrate that Hehai Group’s delay in submitting relevant engineering material resulted in their delay in applying for assessment. And the day when receiving the completion and acceptance certificate is July 3, 2015 and Xianghai Heavy Industry offers no explanation to the court and Hehai Group, therefore delay in assessing the quality of project could not be blamed for Hehai Group and the agreement signed by the two parties on August 20, 2015 after completing the project and receiving the completion and acceptance certificate involves nothing about that. Therefore, Hehai Group’s delay in the deadline lacks substantial evidence, the fact that Xianghai Heavy Industry requests Hehai Group to pay penal sum RMB2,000,000 for beyond the deadline of completion lacks substantial evidence, and therefore the court gives no support. As for the construction quality, the quality of completion of the project affirmed in the quality assessment is qualified and the completion and acceptance certificate of port engineering manifested that the project was completed and accepted as qualified, therefore it was permitted to put into use. According to the stipulation of Quality Assessment Procedure and Standard of Jiangsu Water Transport Project, quality assessment of water transport project is divided into two phases–quality assessments of handing over the engineering and quality evaluation of completion of engineering. The former one could be divided into qualification and disqualification, the latter one could be divided into excellence, qualification and disqualification. Xianghai Heavy Industry only submits quality assessment of handing over the engineering, but did not submit quality evaluation of completion of water transport engineering. However, the data in the rating scale of entity assessment of dock basin engineering, examination rating scale of quality assessment material and rating scale of appearance quality affixed in the quality assessment of handing over the engineering conformed to the condition of excellence standard on construction project in Quality Assessment Procedure and Standard of Jiangsu Water Transport Project. Therefore, the facts that Xianghai Heavy Industry demonstrates that the project’s quality of Hehai Group does not reach the standard only due to the recordation content in the completion and acceptance certificate and should settle

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the project fund eighty percent of it according to the agreement lack substantial evidence, and the court gives no recognition. For the same reason, Xianghai Heavy Industry’s reason for that Hehai Group did not complete the project in accordance with the contract’s requirements and they did not complete the construction engineering in accordance with the general contract is invalid, and the court will not adopt the relevant defense justification. In view of above, the fact that Xianghai Heavy Industry holds that there is significant misunderstanding in the agreement signed by the two parties on August 24, 2015 lacks substantial grounds and the agreement is legitimate and valid. The two parties should perform their own rights and obligations in accordance with the agreement and Hehai Group has the right to request Xianghai Heavy Industry to pay the default and relevant interest loss in accordance with the agreement. However, Hehai Group’s request to count the overdue payment interest according to the penalty interest standard in the light of loan interest rate of Bank of China lacks contractual and legal basis. The court holds that it is reasonable to count from the date when Xianghai Heavy Industry broke the contract in the light of loan interest rate of Bank of China according to the agreement. Xianghai Heavy Industry has no evidence to demonstrate that Hehai Group delays in project’s time limit and their request for Hehai Group to pay the overdue penalty sum lacks substantial evidence. According to Article 60 Paragraph 1, Article 113 Paragraph 1 of the Contract Law of the People’s Republic of China, Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, Article 90 of the Interpretation of the Supreme People’s Court concerning the Application of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: 1. The Defendant (Plaintiff of counterclaim) Xianghai Heavy Industry Group Co., Ltd. shall pay the Plaintiff (Defendant of counterclaim) Hehai Technology Engineering Group Co., Ltd. RMB859,400 and pay its interest loss counting from November 1, 2015 to the day when the judgment comes into effect in accordance with the loan interest of Bank of China in the corresponding period within 10 days after the judgment comes into force. 2. Not support other claims of the Plaintiff (Defendant of counterclaim) Hehai Technology Engineering Group Co., Ltd. 3. Not support other counterclaims of the Defendant (Plaintiff of counterclaim) Xianghai Heavy Industry Group Co., Ltd. In the case that the Defendant (Plaintiff of counterclaim) Xianghai Heavy Industry Group Co., Ltd fails to perform the payment obligation within the period stipulated in the judgment, they should pay double the debt interest in the delayed period according to Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB12,394 and the application fee for property preservation in amount of RMB5,000, totaling RMB17,394, shall be born by the Defendant (Plaintiff of counterclaim) Xianghai Heavy Industry Group Co., Ltd. Court acceptance fee of counterclaim in amount of RMB58,833, half of which,

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RMB29,416.50, shall be born by the counterclaim Plaintiff Xianghai Heavy Industry Group Co., Ltd. If dissatisfied with this judgment, the Plaintiff (Defendant of counterclaim) Hehai Technology Engineering Group Co., Ltd. and the Defendant (Plaintiff of counterclaim) Xianghai Heavy Industry Group Co., Ltd. shall within fifteen days as of the service of this judgment, submit an appeal to the court, with duplicates in the number of the opposing parties, so as to appeal to the Shanghai High People’s Court. Presenting Judge: LIU Qiong Judge: CHEN Lei People’s Juror: WANG Meiyan June 30, 2016 Clerk: XIE Yizhou

Appendix: Relevant Laws 1. Contract Law of the People’s Republic of China. Article 60 The parties shall fully perform their respective obligations in accordance with the contract. Article 113 Damages to consumer where a party failed to perform or rendered non-conforming performance, thereby causing loss to the other party, the amount of damages payable shall be equivalent to the other party's loss resulting from the breach, including any benefit that may be accrued from performance of the contract, provided that the amount shall not exceed the likely loss resulting from the breach which was foreseen or should have been foreseen by the breaching party at the time of conclusion of the contract. 2. Civil Procedure Law of the People’s Republic of China Article 64 It is the duty of a party to an action to provide evidence in support of his allegation. 3. Interpretation of the Supreme People’s Court on the Application of the Civil Procedure Law of the People’s Republic of China Article 90 A party shall provide evidence to prove the facts on which his claims are based or to repudiate the facts on which the claims of the opposing party are based, unless it is otherwise prescribed by any law. Where a party fails to provide evidence or the evidence provided is insufficient to support his claims before a judgment is entered, the party bearing the burden of proof shall take the adverse consequences.

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Shanghai High People’s Court Civil Judgment Hehai Technology Engineering Group Co., Ltd. v. Xianghai Heavy Industry Group Co., Ltd. (2016) Hu Min Zhong No.351 Related Case(s) This is the judgment of second instance, and the judgment of first instance and the ruling of retrial are on page 277 and page 303 respectively. Cause(s) of Action 236. Dispute over contract for construction of dock or harbor. Headnote Affirming lower court decision giving judgment on the Plaintiff’s claim for outstanding payments for construction of a dock basin because court rejected the Defendant’s claim that construction was deficient. Summary The Defendant contracted with the Plaintiff to construct a dock basin after the Plaintiff won the tender offer. Under the general contract the Plaintiff was obligated to construct the dock basin within a four month time period and it was required to pass qualifications with an excellent standard. The Defendant agreed in the original contract to pay the Plaintiff following completion. However, after the Defendant failed to pay, the two parties negotiated the payment timeline and fee structure, along with the penalties for failure to perform. After the Defendant again failed to pay the Plaintiff brought suit to recover the outstanding balance due under the contract. The Defendant argued that the dock basin failed to fulfill the quality stipulated in the contract. The first Shanghai Maritime Court held that the Defendant’s claim that the dock basin failed to fulfill the quality stipulated had no legal basis, and there was no misunderstanding between the parties. Furthermore, the Plaintiff was entitled to seek interest on the debt for the Defendants failure to pay the outstanding balance of the debt. Therefore, the Defendant must pay the outstanding balance of RMB859,400 and interest to the Plaintiff, along with the court acceptance fees of the first action and counterclaim. It was held by the Shanghai High People’s Court that the original judgment shall be affirmed, and that the Defendant will continue to be liable to the Plaintiff for the amount stipulated in the first instance, and the Defendant shall pay the court acceptance fee of the second instance case which is RMB64,848.80.

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Judgment The Appellant (the Defendant of first instance, the counterclaim Plaintiff): Xianghai Heavy Industry Group Co., Ltd. Domicile: Changxing Village, Huipu Town, Qidong City, Nantong City, Jiangsu. Legal representative: LU Jun, chairman. Agent ad litem: DAI Yong, lawyer of Jiangsu Jianghai Law Firm. The Respondent (the Plaintiff of first instance, the counterclaim Defendant): Hehai Technology Engineering Group Co., Ltd. Domicile: No.10, Guoqing Middle Road, Taixing City, Taizhou, Jiangsu. Legal representative: YU Jianguo, chairman. Agent ad litem: ZHANG Xiucheng, lawyer of Jiangsu Bocheng Law Firm. Dissatisfied with the Civil Judgment (2015) Hu Hai Fa Shang Chu Zi No.3274 of the Shanghai Maritime Court with respect to the case of the dispute over contract of dock construction, the Appellant Xianghai Heavy Industry Group Co., Ltd. (hereinafter referred to as Xianghai Heavy Industry) filed an appeal against the Respondent Hehai Technology Engineering Group Co., Ltd. (hereinafter referred to as Hehai Group) before the court. After accepting the appeal on August 23, 2016, the court constituted a collegiate panel and held a hearing in public on September 28, 2016. DAI Yong, agent ad litem of Xianghai Heavy Industry, and ZHANG Xiucheng, agent ad litem of Hehai Group, appeared and participated in the action. This case has been concluded. Hehai Group alleged in first instance that it had signed General Contract for the Construction of Dock Basin of Jiangsu Xianghai Shipbuilding Industry Co., Ltd. (hereinafter referred to as General Contract) with Xianghai Heavy Industry through bid invitation. After signing of the contract, Hehai Group performed contractual obligations, but Xianghai Heavy Industry had defaulted part of the project fund. On June 24, 2013, the two parts reached an agreement on the payment issue to set a payment deadline, but Xianghai Heavy Industry still defaulted in the payment. In August 2015, the two parties came to an agreement on payment deadline, payment ways and other issues. However, Xianghai Heavy Industry only paid part of fund and still faulted the spare money. Consequently, Hehai Group filed an action to the court requesting that Xianghai Heavy Industry to pay debt RMB859,400 (hereinafter currency referred to RMB) and pay the interest loss from January 1, 2009 to the day when they actually pay the debt four times of loan interest according to the penalty interest standard in the light of loan interest rate of Bank of China in the corresponding period. Xianghai Heavy Industry defended in the first trial that the action and the request to pay RMB859,400 could not be founded: 1. the total price included in the two parts’ general contract was RMB11,260,000, which was the closed total contractual price and did not adjust with the change of expenses of labor, price of commodities, exchange rate, tax rate and so on. In the case that the alteration of design results in the change of total contractual price, the two parties should make a negotiation on the

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altered content and sign an addendum, thus the contract coming into force. Presently, Hehai Group failed to provide the addendum, therefore they could not charge project fund except for the total contract price. It was also stipulated in the general contract that the project quality must reach excellent level. If it failed, Hehai Group must rework until it reaches excellent level. In the case that the project quality fails to reach excellent but qualified and Xianghai Heavy Industry approves to use, the building cost of projects should be settled in accordance with eighty percent of total contractual price. Hehai Group had obtained project fund RMB13,727,000, and Xianghai Heavy Industry had overpaid RMB4,719,000. 2. On June 24, 2013, Hehai Group, in the name of “Nantong Xianghai shipyard project’s construction project management team of Jiangsu Hehai Technology Engineering Group Co., Ltd.” had signed the addendum with Xianghai Heavy Industry. But the construction project management team did not register in the Industry and Commerce Department and it could not enjoy principal qualification to sign the agreement, therefore the addendum could not be founded in light of law. Even though the addendum could be founded, the project involved could finish completion and acceptance in July 2015 and the project spare money should be paid after the project has finished completion and acceptance as well as received acceptance certificate. Therefore, the agreement on payment for the spare money before the end of 2013 in the addendum could not be performed due to lack of the payment condition, and the project involved had never been settled. 3. Hehai Group’s request to calculate the overdue interest four times in accordance with loan interest rate of Bank of China in corresponding time had no contractual and legal basis. Xianghai Heavy Industry requested the court to reject the action in light of law. Xianghai Heavy Industry counterclaimed that in April 2008, Xianghai Heavy Industry signed the general contract for the construction of dock basin with Hehai Group and the total price of the contract was RMB11,260,000, which was the closed price. Starting date agreed in the contract was April 20, 2008, and the completion date was August 20, 2008 The project should be subject to the agreed quality standard after it was through completion and acceptance. It was also included in the contract that quality of the project must reach excellent level. If it failed to reach excellent, Hehai Group should rework until it reaches excellent level. In the case that the project quality fails to reach excellent but qualified level and Xianghai Heavy Industry approves to use, the building cost of projects should be settled in accordance with eighty percent of total contractual price. And presently quality of the project failed to reach excellent level and Xianghai Heavy Industry should pay the project fund RMB9,008,000. But now Xianghai Heavy Industry had paid RMB13,727,000, therefore Hehai Group should return RMB4,719,000. It was agreed in the contract that Hehai Group should pay the penal sum RMB4,000 if it was overdue for one day. The completion date agreed in the contract was August 20, 2008 and the date receiving the acceptance certificate of the project was July 3, 2008, therefore Hehai Group was overdue for 2,591 days and should pay penal sum RMB10,364,000. Presently Xianghai Heavy Industry requested Hehai Group to pay penal sum RMB2,000,000 and preserve the right of recourse for the spare money. In addition, there was huge misunderstanding in the agreement signed by the two

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parties on August 20, 2015 and therefore Xianghai Heavy Industry requested the court of first instance to revoke the agreement and Hehai Group to pay the counterclaim expense. Hehai Group defended against the counterclaim that it did not break the contract. Although the starting date agreed in the contract was April 20, 2008, the real starting date was May 28, 2008. And the quality assessment provided by Xianghai Heavy Industry demonstrated the completion date was October 2, 2008. In practice, the completion test was to be finished by Xianghai Heavy Industry and the quality assessment provided by Xianghai Group also demonstrated Hehai Group had submitted relevant completion technology material early, therefore failing to receive completion and acceptance certificate in time could not be blamed for Hehai Group. After completion of the project, Xianghai Heavy Industry had paid part of the project fund and as for the spare money, the two parties had negotiated many times and then coming to an agreement, and Xianghai Heavy Industry had performed their obligation in accordance with the agreement. But presently Xianghai Heavy Industry denied the agreement they had performed for the reason that the engineering department did not have enough communication with financial department, which lacked legal basis and should not be approved by the court. In addition, the project quality assessment not only referred to the dock basin construction provided by Hehai Group but also referred to pipeline, firefighting and some other aspects. Therefore, the evidence provided by Xianghai Heavy Industry could not demonstrate the reason why the quality of project did not reach excellent level lied in the construction quality of Hehai Group and their counterclaim request lacked factual and legal basis. Hehai Group requested the court to reject the counterclaims of Xianghai Heavy Industry. The court of first instance ascertained the facts of the subject case as follows: In April 2008, Hehai Group signed the general contract for the construction of dock basin with Xianghai Heavy Industry, which stipulated that the dock basin engineering project was confirmed by a tender in April 2008 and Hehai Group won the bid to construct. The starting date was April 20, 2008. The completion date was August 20, 2008, which was the day when the project finished the completion and acceptance and the project’s quality reached the standard agreed in the contract. The project site was Changxing Village, Huiping Town, Qidong. Construction range was only the dock basin. In any case, the time limit of the project could not be delayed except for force majeure and reason of Xianghai Heavy Industry. If it was not the above reasons for not completing according to the agreed date, Hehai Group was blamed for the violation of the agreement and should pay the penalty RMB4,000 per day. The project quality must reach excellent standard and the expense was included in the contractual total price. If it failed to reach excellent level, Hehai Group should rework until it reaches excellent level. In the case that the project quality failed to reach excellent but qualified level and Xianghai Heavy Industry approved to use, the building cost of projects should be settled in accordance with eighty percent of contractual total price. The contractual total price was RMB11,260, 000, including the monitoring expense of material and pile foundation. The contract was the closed total price contract and did not adjust with the

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change of expenses of labor, price of commodities, exchange rate, tax rate, interest rate and so on. In the case that the alteration of design results in the change of total price, the two parts should make a negotiation on the altered content and sign an addendum, thus the contract coming into force. After signing the contract, Hehai Group started working on May 28, 2008 and the dock basin project was completed on October 2, 2008. On October 14, 2010, Quality Supervision Office for Dock Basin Project of Nantong City organized relevant departments to assess the completion quality of dock basin engineering and examined the spot after hearing reports of building, design, supervision and management, construction organization. And the Office examined technology filed material of project’s handing over of construction, supervision and management organization and the project quality, combining with the entity special project inspection and evaluation before completion and acceptance, was assessed as qualification. On June 24, 2013, Xianghai Heavy Industry and Hehai Group came to an addendum, which stipulated that Xianghai Heavy Industry should pay Hehai Group the project fund RMB300,000 before completion and acceptance of the dock basin project and paid Hehai Group RMB1,000,000 within three months after it was qualified in completion and acceptance and received acceptance certificate. And other spare money should be paid to Hehai Group before the end of 2013. Hehai Group should issue an invoice in full to Xianghai Heavy Industry after they had received Xianghai Heavy Industry’s second project fund RMB1,000,000, otherwise Xianghai Heavy Industry had the right to postpone paying the third project fund. For the reason that there was sand leakage in dock basin, Xianghai Heavy Industry had the right to detain project fund RMB700,000 as cash deposit of later disposal. In the case that Xianghai Heavy Industry did not pay the project fund on time according to the former agreement, Hehai Group would not undertake the disposal expense for sand leakage. Meanwhile, if Xianghai Heavy Industry could not pay the entire project fund before the end of 2014, they must pay the bank loan interest in the corresponding period from October 2009 to the day they pay the entire fund to Hehai Group. On the same day, the two parties signed another agreement on sand leakage of dock basin, which stipulated that the project fund RMB700,000 was agreed by Hehai Group to be deducted from the settlement fund as maintaining fund and Xianghai Heavy Industry need not to pay it again if Xianghai Heavy Industry pays the project fund to Hehai Group in accordance with the former agreements. On August 20, 2015, the two parties signed an agreement again stipulating the issue on the general contract for the construction of dock basin project signed by the two parties and performing of the addendum signed on June 24, 2013, and they came to the following agreement: The two parties confirmed that the project fund had been settled, and Xianghai Heavy Industry had paid the project fund RMB13,427,000 and still defaulted in RMB459,400. Xianghai Heavy Industry agreed to pay the project fund RMB150,000 before August 31, 2015, to pay RMB150,000 before September 27, 2015, and to pay the entire project fund before October 31, 2015. In the case that Xianghai Heavy Industry paid the entire project fund within the agreed time limit, Hehai Group would not claim the maintaining expense RMB700,000 included in the addendum of June 24, 2013. In the case that Xianghai Heavy

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Industry did not pay the fund within the above time limit, Hehai Group had the right to claim the above RMB459,400 and the maintaining expense RMB700,000. After signing the agreement, Xianghai Heavy Industry had paid RMB150,000 twice (RMB300,000 in total) on September 6, 2015 and September 30, 2015. It was otherwise found out that: On July 3, 2015, Nantong Port Management Department issued the completion and acceptance certificate of port project (Tong Gang Yan Zheng Zi [2015] No.01) to demonstrate the completion and acceptance of dock basin engineering of Xianghai Heavy Industry Group Co., Ltd. in Qihai Harbor District, Nantong Port was qualified and it was accepted to put into use. It included dock berth with 3,000 tons (5,000 tons if taking account of water conservancy project) and related supporting facility. The court of first instance held that: The case was the dispute over contract of dock construction, and two parties raised no objection about the fact that the two parties signed the general contract of dock basin, Hehai Group completing the engineering construction project and Xianghai Heavy Industry paying the project fund RMB13,727,000 to Hehai Group, therefore the two parties should perform their own rights and obligation in accordance with the contract. According to the claims and defenses of the two parties and the fact ascertained in the court trial, the court of first instance held that the outstanding issues in this case lie in the following: (1) whether there was vast misunderstanding in the agreement signed by two parties on August 20, 2015 and whether the reason that Xianhai Heavy Industry revoked the agreement could be accepted; (2) whether Hehai Group completed the construction in accordance with the work time limit and quality agreed in the general contract, whether there were quantities adding in the engineering and whether the sum claimed was reasonable. The first outstanding issue in this case: whether there was important misunderstanding. In accordance with Article 54 of the Contract Law, one party had the right to request the People’s Court or Arbitral Institution to alter or revoke the contract that was concluded due to huge misunderstanding. According to Article 71 of the Opinions of the Supreme People’s Court on Several Issues concerning Implementation of the General Principles of Civil Law of the People’s Republic of China (for Trial Implementation), important misunderstanding referred to the behavior that an actor, due to his false conception for the nature of behavior, opposite party, variety, quality, specification and quantity of the subject matter, made the result contrary to his original meaning and causes huge losses. After the relevant dock basin engineering completed and received the acceptance certificate in October 2010, Xianghai Heavy Industry signed addendums on June 24, 2013 and on August 20, 2015 with Hehai Group, making stipulation on default sum, payment time and responsibility for breach of contract of Xianghai Heavy Industry. As for the addendum signed in 2013, Xianghai Heavy Industry held that the opposite party signing the contract was “Nantong Xianghai shipyard project’s construction project management team of Hehai Group”, which did not register in the Industry and Commerce Department and could not enjoy principal qualification to sign the agreement. But in fact, the two parties’ general contract for construction of dock

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basin has clearly prescribed that Hehai Group should appoint and accredit personnel to project department of construction site in accordance with bidding document, and the project department was founded in accordance with the agreement of contract. Xianghai Heavy Industry’s denying of the validity of the project department lacks the factual and legal basis, and Hehai Group subsequently confirmed the project department’s behavior. Meanwhile Xianghai Heavy Industry performs their payment obligation according to the agreement. Therefore, Xianghai Heavy Industry has no evidence to demonstrate the agreement was invalid. As for the agreement signed on August 20, 2015, it was signed due to failing of implementation of the addendum signed on June 24, 2013, and the agreement stated that the two parties had settled the engineering, and Xianghai Heavy Industry had paid project fund RMB13,427,000 and still defaulted in RMB459,400. The sum Xianghai Heavy Industry paid was consistent with the fact examined by the court trial. After signing the agreement, Xianghai Heavy Industry paid the project fund RMB150,000 twice (RMB300,000 in total) on September 6, 2015 and September 30, 2015 to Hehai Group in accordance with the agreement. Xianghai Heavy Industry partly performed the obligation to pay the fund, and only left the last project fund unpaid. From the completion of the project, to signing of the two agreements, until the appeal from Hehai Group, there was no evidence to demonstrate that Xianghai Heavy Industry raised objection to the engineering time limit, quality and standard of engineering, default sum and so on, except for the payment and requested to return the fund that they have paid. That was to say Xianghai Heavy Industry did not demonstrate they has false conception for the nature of behavior, opposite party, variety, quality, specification and quantity of the subject matter. Presently it hold that there was important misunderstanding in the signing of the agreement and requested the court to revoke it only for the reason that financial personnel did not make enough communication with the engineering project personnel and therefore it thought the settlement sum was advance payment. The request lacked factual and legal basis, therefore the court of first instance gave no support. The second outstanding issue in this case: as for the construction deadline, it was agreed as 4 months in General Contract from April 20, 2008 to August 20, 2008. Quality assessment issued by Quality Supervision Office for Dock Basin Project of Nantong City manifested that the starting date was May 28, 2008, the completion date was October 2, 2008 and the time limit was 4 months and 2 days, which could not demonstrate Hehai Group delays significantly. Although it was agreed in the contract that the completion date was according to the date when the project was completed and accepted, and the quality of it reached the standard stipulated, the completion and acceptance was started in October 2010. But Quality Assessment Committee was entrusted by Xianghai Heavy Industry, and it had no evidence to demonstrate that Hehai Group’s delay in submitting relevant engineering material resulted in their delay in applying for assessment. And the day when receiving the completion and acceptance certificate was July 3, 2015 and Xianghai Heavy Industry made no interpretation to the court and Hehai Group, therefore delay in assessing the quality of project could not be blamed for Hehai Group and the agreement signed by the two parties on August 20, 2015 after completing the

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project and receiving the completion and acceptance certificate involves nothing about that. Therefore, Hehai Group’s delay in the deadline lacked substantial evidence, the fact that Xianghai Heavy Industry requested Hehai Group to pay penal sum RMB2,000,000 for beyond the deadline of completion lacked substantial evidence, and therefore the court gave no support. As for the construction quality, the quality of completion of the project affirmed in the quality assessment was qualified and the completion and acceptance certificate of port engineering manifested that the project was completed and accepted as qualified therefore it was permitted to put into use. According to the stipulation of Quality Assessment Procedure and Standard of Jiangsu Water Transport Project, quality assessment of water transport project was divided into two phases– quality assessments of handing over the engineering and quality evaluation of completion of engineering. The former one could be divided into qualification and disqualification, the later one could be divided into excellence, qualification and disqualification. Xianghai Heavy Industry only submited quality assessment of handing over the engineering, but did not submit quality evaluation of completion of water transport engineering. However the data in the rating scale of entity assessment of dock basin engineering, examination rating scale of quality assessment material and rating scale of appearance quality affixed in the quality assessment of handing over the engineering conformed to the condition of excellence standard on construction project in Quality Assessment Procedure and Standard of Jiangsu Water Transport Project. Therefore, the facts that Xianghai Heavy Industry demonstrated that the project’s quality of Hehai Group did not reach the standard only due to the recordation content in the completion and acceptance certificate and should settle the project fund eighty percent of it according to the agreement lack substantial evidence, and the court gave no recognition. For the same reason, Xianghai Heavy Industry’s reason for that Hehai Group did not complete the project in accordance with the contract’s requirements and they did not complete the construction engineering in accordance with the general contract was invalid, and the court of first instance would not adopt the relevant defense justification. Thus, the fact that Xianghai Heavy Industry held that there was important misunderstanding in the agreement signed by the two parties on August 24, 2015 lacked substantial grounds and the agreement was legitimate and valid. The two parties should perform their own rights and obligation in accordance with the agreement and Hehai Group had the right to request Xianghai Heavy Industry to pay the default and relevant interest loss in accordance with the agreement. However, Hehai Group’s request to count the overdue payment interest according to the penalty interest standard in the light of loan interest rate of Bank of China lacked contractual and legal basis. The court of first instance held that it was reasonable to count from the date when Xianghai Heavy Industry broke the contract in the light of loan interest rate of Bank of China according to the agreement. Xianghai Heavy Industry had no evidence to demonstrate that Hehai Group delays in project’s time limit and the request for Hehai Group to pay the overdue penalty sum lacks substantial evidence. According to Article 60 Paragraph 1, Article 113 Paragraph 1 of the Contract Law of the People’s Republic of China, Article 64 Paragraph1 of the

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Civil Procedure Law of the People’s Republic of China, Article 90 of the Interpretation of the Supreme People’s Court concerning the Application of the Civil Procedure Law of the People’s Republic of China, the judgment was as follows: 1. The Defendant (the counterclaim Plaintiff) Xianghai Heavy Industry Group Co., Ltd. should pay the Plaintiff (the counterclaim Defendant) Hehai Group RMB859,400 and pay its interest loss counting from November 1, 2015 to the day when the judgment came into effect in accordance with the loan interest of Bank of China in the corresponding period within 10 days after the judgment came into effect. 2. Not support other claims of the Plaintiff (the counterclaim Defendant) Hehai Technology Engineering Group Co., Ltd. 3. Not support other counterclaims of the Defendant (the counterclaim Plaintiff) Xianghai Heavy Industry Group Co., Ltd. Court acceptance fee of first instance in amount of RMB12,394 and the application fee for property preservation in amount of RMB5,000, totaling RMB17,394, should be born by Xianghai Heavy Industry. Court acceptance fee of the counterclaim in amount of RMB58,833, and after halving the fee, it was RMB29,416.50, should be born by Xianghai Heavy Industry. Dissatisfied with the judgment of first instance, Xianghai Heavy Industry filed an appeal and held that: 1. Court of first instance violated the procedure. 1) Hehai Group, in the name of “Jiangsu Hehai Technology Engineering Group Co., Ltd.” filed an action of this case, but the court of first instance did not notify Xianghai Heavy Industry of alteration of name and did not affirm the relevant facts in judgment of first instance but altered directly Hehai Group’s name. It was the procedural impropriety. 2) Hehai Group filed the action and requested Xianghai Heavy Industry to pay the fund RMB850,000 in the pleadings, but the court of first instance judged that Xianghai Heavy Industry should pay RMB859,400 to Hehai Group in the condition that Hehai Group did not add claims. It was judged not according to claim. 2. The judgment of first instance made false facts affirmation. 1) The foundational fact of the agreement signed by the two parties on August 20, 2015 was that the relevant project had been settled. But Hehai Group did not submit completion settlement report after the project was completed and accepted, and it resulted in failing of transaction of completion settlement. Therefore, this agreement was signed on the condition that there was important misunderstanding of Xianghai Heavy Industry’s responsible personnel and should be revoked according to law. If the agreement was legal, Xianghai Heavy Industry still defaulted in Hehai Group’s project fund RMB459,400 when signing the agreement, and now Xianghai Heavy Industry paid RMB300,000 to

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Hehai Group on September 6, 2015 and September 30, 2015. Therefore, presently Xianghai Heavy Industry defaulted in RMB159,400 but not RMB859,400 affirmed by the judgment of first instance. 2) The judgment of first instance made false affirmation on the relevant project’s quality level. After the relevant project was affirmed as qualified through quality assessment of project completion, there was serious quality question of sand leakage of dock basin in pilot running period. The completion and acceptance certificate of dock basin engineering on July 3, 2015 affirmed that the relevant project was qualified in completion and acceptance, therefore the construction quality of Hehai engineering did not reach the agreed quality level in the contract. 3) The first instance made false affirmation on whether the engineering completion delayed. The completion date of the relevant project was July 3, 2015. It was false to regard October 2, 2008 as the completion date in the judgment of first instance. Hehai Group delayed in completion of the engineering and should perform the obligation of breaking the agreement for Xianghai Heavy Industry in accordance with the contract. Above all, Xianghai Heavy Industry requested the court of second instance to revoke the judgment of first instance and remand for retrial or reject Hehai Group’s claims of first trial and support Xianghai Heavy Industry’s counterclaims. Against Xianghai Heavy Industry’s appeal, Hehai Group defended that the judgment of first instance affirmed the fact clearly, applied to law appropriately and the procedure was proper: 1. Procedure. 1) Hehai Group altered their name after the court of first instance was finished and submitted relevant industrial and commercial registration before the judgment of the first trial, and therefore it was not an improper affirmation by the court of first instance. 2) As for the issues on claims, Hehai Group altered the claims RMB850,000 to RMB859,400 and made a supplementary legal fare in court of first instance, and therefore the tribunal did not exceed its authority in issuing the arbitral award in judgment of first instance. 2. The addendum signed on August 20, 2015 was concluded by Xianghai Heavy Industry’s operator Mr. Ji and agent through many negotiations, and was real intention of the two parties. In addition, Xianghai Heavy Industry paid the first two stage’s fund RMB300,000 under the agreement, and therefore there was no important misunderstanding. 3. Quality grade of engineering and the completion time were affirmed properly by the court of first instance in accordance with corresponding norm in the light of relevant material and evidence submitted by Xianghai Heavy Industry in the first trial. Above all, Hehai Group requested the court of second instance to dismiss the appeal and affirm the original judgment.

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In second instance, Xianghai Heavy Industry submitted the following materials and evidence: 1. Application Report of Handing Over the Engineering and eleven Inspection Sheets of Subdivisional Work, which were made by Hehai Group from December 21, 2008 to March 19, 2009, to prove that the relevant engineering was completed beyond the time limit. 2. Memorandum signed by Xianghai Heavy Industry and Hehai Group on December 27, 2011, to prove that Hehai group affirmed there was quality problem of the relevant engineering and it needed to be maintained. 3. Handing over Procedure of Material of Completion of Dock Basin on October 29, 2011, to prove that at that time the two parties affirmed Hehai Group did not hand over all completion materials to Xianghai Heavy Industry. In terms of the above evidence and material, Hehai Group made cross-examination and held that: 1. Hehai Group made no affirmation about the authenticity of Application Report of Handing Over the Engineering and Inspection Sheets of Subdivisional Work, and there was conflict between these evidence and material’s content and Quality Assessment submitted by Xianghai Heavy Industry in first instance. The two parties both accepted the probative force of Quality Assessment, and therefore the completion date should be subject to the date demonstrated in Quality Assessment. 2. Hehai Group could not affirm whether party B’s signature of Memorandum was by Hehai Group’s staff, and therefore did not affirm its authenticity. Meanwhile, Hehai Group proposed the court to notice that party A’s signature was Mr. Ji, which was consistent with Xianghai Heavy Industry’s signature in the agreement on August 20, 2015. 3. Hehai Group could not affirm the Handing over Procedure of Material of Completion of Dock Basin’s authenticity. In the case it was authentic, the completion date of the engineering could not be affirmed for the reason that organizing completion and acceptance was Xianghai Heavy Industry’s obligation and Hehai Group only cooperated with them. In terms of the above evidence and material, the court’s attestation opinions are as follows: 1. There is significant conflict between the recordation of Application Report of Handing Over the Engineering and Inspection Sheets of Subdivisional Work and Quality Assessment and other evidence submitted by Xianghai Heavy Industry in first instance. Quality Assessment was affirmed by both parties and was issued by the third party, Nantong Quality Supervisory Station of Dock Basin Engineering, and therefore the date should be subject to the completion date recorded in Quality Assessment. The court does not affirm the effect of evidence. 2. Memorandum and Handing over Procedure of Material of Completion of Dock Basin are not be affixed Xianghai Heavy Industry and Hehai Group’s seal, and

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Hehai Group did not affirm its authenticity, therefore the court does not affirm the evidence. Hehai Group submitted a call record between their agent ZHANG Xiucheng and Xianghai Heavy Industry’s staff Mr. Ji, which were used to demonstrate the agreement on August 20, 2015 was the result of many communications of the two parties and was the real intention of the two parties, therefore there was no important misunderstanding. Xianghai Heavy Industry did not affirm the authenticity of the call record. The court holds that this evidence is audio-visual material in form, but Hehai Group only submits written material rather than the original carrier and does not submit evidence to demonstrate the relevant personnel’s real identity. Therefore, the court does not affirm its effect of evidence. The court ascertains the facts of the subject case as follows: Jiangsu Hehai Technology Engineering Group Co., Ltd. altered its name to Hehai Technology Engineering Group Co., Ltd on May 5, 2016 by approval of Industry and Commerce Department. It is otherwise found out that: Xianghai Heavy Industry affirmed the effect of the addendum they signed with Hehai Group on June 24, 2013. Other facts ascertained by the court of first instance are evidenced by relevant evidence, and the court affirms the facts ascertained by court of first instance. The court holds the following opinions: The case is the dispute over contract of dock construction. To construct the relevant dock basin, the two parties signs the general contract in April 2008 to make agreement on engineering quality, construction time limit, payment of engineering fund and other issues. After that, the two parties signed three agreements on June 24, 2013 and on August 20, 2015 to make an alteration or addendum on sum and payment of engineering fund, cash deposit of engineering fund and other issues. Hehai Group claims right to Xianghai Heavy Industry according to above contract or agreements. Xianghai Heavy Industry affirms effect of the general contract and the agreement on June 24, 2013, but claims that the agreement on August 20, 2015 was signed by the staff on the basis of important misunderstanding that the relevant engineering has been settled according to the general agreement, therefore it could be revoked. And according to agreement on construction quality and time limit in the general contract, Xianghai Heavy Industry requests Hehai Group to return the overcharged engineering fund and perform the obligation of violation of the agreement. Therefore, the major outstanding issue in this case is whether there is important misunderstanding during Xianghai Heavy Industry was signing the agreement on August 20, 2015 and therefore it could claim to revoke it. The court holds the opinion that it was agreed the construction time limit, construction quality, completion of the engineering, settlement and other issues in the general contract, but the general contract is not invariable from the facts affirmed by the two parties. For example, Xianghai Heavy Industry claims that it is agreed that quality of engineering must reach excellent standard in the general contract, and requests to discount the engineering fund in accordance with eighty

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percent of the total price. But it is agreed in Paragraph 1 of the two parties’ addendum on June 24, 2013 to regard “the project was completed and accepted qualification and received completion and acceptance certificate” as the precondition of payment of engineering fund. Therefore, Xianghai Heavy Industry regarded the fact that Hehai Group did not submit settlement report of completion after the relevant engineering was completed and accepted as the reason of failing of settlement the two parties. It lacks substantial basis. Otherwise, seeing from some expressions in the addendum signed by the two parties on June 24, 2013—“Other spare money should be paid to party B before the end of 2013” “The Party B should issue an invoice full mount after they receive the second engineering fund RMB 1,000,000” “The party A detains Party B engineering fund RMB 700,000 as cash deposit of disposal in later time”, the two parties made agreement on the total engineering fund, the final payment time and probable maintaining expense when they were signing the agreement on June 24, 2013. To say the least, the agreement of 2015 was signed after the engineering was completed and accepted. Although the two parties does not make affirmation about relevant issues of settlement of engineering fund before signing the agreement, the agreement of paid engineering fund, unpaid engineering fund, payment management and the disposal of detaining maintaining expense in the agreement could be the manifest of settlement of engineering. Therefore, Xianghai Heavy Industry’s appeal reason of revoking the agreement on August 20, 2015 lacked factual and legal basis, and the court does not accept it. Xianghai Heavy Industry should perform the obligation of payment to Hehai Group according to the agreement. Xianghai Heavy Industry also claimed that although the agreement on August 20, 2015 was valid, Xianghai Heavy Industry did not detain the maintaining expense RMB700,000 referred in Paragraph 3 in the agreement, and therefore what they should pay was the unpaid fund RMB159,400 after it paid RMB300,000 to Hehai Group twice according to the agreement. As for it, because it was recorded in Paragraph 3 of agreement on August 20, 2015 that “in the case that the party A fails to pay according to the above time limit, the party B has the right to claim party A to pay the above RMB45,940,000 and the maintaining expense RMB70,000,000 in the addendum on June 24, 2013”, it is not inappropriate for Hehai Group to claim for the sum according to the agreement. And seeing from the addendum on June 24, 2013, the maintaining expense RMB700,000 is not included in the engineering fund that Hehai Group requested Xianghai Heavy Industry to pay in Paragraph 1 of the addendum. As for the issues such as quality of relevant engineering and time limit of construction, because the agreement on August 20, 2015 was signed on the foundation of the general contract for the construction of dock basin of Jiangsu Xianghai Shipbuilding Industry Co., Ltd. signed by the two parties and the performance issues of addendum signed on June 24, 2013 by the two parties, forming the final agreement on the relevant issues of engineering of the two parties, there is no need to examine the former issues. In fact, the relevant engineering is completed and accepted as qualified, which is consistent with the addendum on June 24, 2013 and it is not inappropriate of the affirmation on construction time limit of relevant engineering by the court of first instance according to the evidence affirmed by the

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two parties. Therefore, Xianghai Heavy Industry’s defense and claim on construction quality and date of relevant engineering lacks both factual and legal basis, and the court does not support it. As for the procedural issue of first instance that Xianghai Heavy Industry claims, Hehai Group alters the appeal capital of Sub-paragraph 1 to RMB859,400 and makes a supplementary payment of legal fare in court in the first instance, and therefore Xianghai Heavy Industry’s appealing reason of it lacks factual basis and the court does not support it. The issue on name alteration of Hehai Group is examined by the court of first instance, but was not stated in the judgment document. It is indeed improper and should be corrected. In view of above, the affirmed facts are clear and the judgment result is appropriate in the judgment of first instance and should maintain it. Xianghai Heavy Industry’s appeal reason lacks factual and legal basis, and the court does not support its appeal. According to Article 170 Paragraph 1 Sub-paragraph 1, Article 175 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of first instance, the application fee for property preservation and court acceptance fee of counterclaim shall be born according to the judgment of first instance. Court acceptance fee of second instance in amount of RMB64,848.80, shall be born by Xianghai Heavy Industry Group Co., Ltd. The judgment is final Presenting Judge: DONG Min Judge: LIN Lan Acting Judge: HU Hailong December 21, 2016 Clerk: LUO Gang

Appendix: Relevant Laws Civil Procedure Law of the People’s Republic of China Article 170 After trying a case on appeal, the people’s court of second instance shall, in the light of the following situations, dispose of it accordingly: (1) if the facts were clearly ascertained and the law was correctly applied in the original judgment, the appeal shall be rejected in the form of a judgment and the original judgment shall be affirmed. Article 175 The judgment and the written order of a people’s court of second instance shall be final.

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The Supreme People’s Court of the People’s Republic of China Civil Ruling Hehai Technology Engineering Group Co., Ltd. v. Xianghai Heavy Industry Group Co., Ltd. (2017) Zui Gao Fa Min Shen No.2231 Related Case(s) This is the ruling of retrial, and the judgment of first instance and the judgment of second instance are on page 277 and page 289 respectively. Cause(s) of Action 236. Dispute over contract for construction of dock or harbor. Headnote The Supreme People’s Court dismissed the Defendant’s application for retrial and affirmed lower courts’ judgments and made judgment on the Plaintiff’s claim for outstanding payments for construction of a dock basin because court rejected Defendant’s claim that construction was deficient. Summary The Defendant contracted with the Plaintiff to construct a dock basin. The Plaintiff was obligated to construct the dock basin within a four month time period and it was required to pass qualifications with an excellent standard, with payment to be made upon completion. After the Defendant failed to pay, the two parties negotiated a payment timeline and fee structure, along with penalties for failure to perform. After the Defendant again failed to pay the Plaintiff brought suit to recover the outstanding balance due under the contract. The Defendant argued that the dock basin failed to fulfill the quality stipulated in the contract. The court of first instance held that the Defendant’s claim of poor quality performance had no basis, and so the Plaintiff was entitled to recover the outstanding balance of payment due, plus interest. On appeal, the appeal court affirmed the judgment of the court of first instance. The Defendant filed an application for retrial with the Supreme People’s Court, asserting three grounds for retrial: (1) the Plaintiff was in breach of contract for failing to complete the project on time, (2) the agreement signed by the parties should be revoked because it was premised upon a major misunderstanding, (3) even if the agreement was not revoked, the Defendant should not be required to make a maintenance payment to the Plaintiff. The Supreme People’s Court dismissed the Defendant’s application for a retrial. Firstly, the court concluded that

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there was no breach of contract for a delay in the project’s completion. Moreover, there was an acceptance of the completion of the dock after its inspection. Secondly, the court held that there was no major misunderstanding as to the nature of the contract. Thirdly, the court found that the Defendant was responsible for making a maintenance payment to the Plaintiff after failing to pay for the project within the specified timeframe, because this was directly stipulated in the contract. Therefore, the court dismissed the Defendant’s application for retrial.

Ruling The Claimant of Retrial (the Defendant of first instance, the counterclaim Plaintiff, the Appellant of second instance): Xianghai Heavy Industry Group Co., Ltd. Domicile: Changxing Village, Huiping Town, Qidong City, Nantong City, Jiangsu. Legal representative: LU Jun, chairman. Agent ad litem: DAI Yong, lawyer of Jiangsu Jianghai Law Firm. The Respondent (the Plaintiff of first instance, the counterclaim Defendant, the Respondent of second instance): Hehai Technology Engineering Group Co., Ltd. Domicile: No.10, Guoqing Middle Road, Taixing City, Taizhou, Jiangsu. Legal representative: YU Jianguo, chairman. Agent ad litem: ZHANG Xiucheng, lawyer of Jiangsu Bocheng Law Firm. With respect to the case arising from dispute over dispute over dock construction project contract between the Claimant of Retrial, Xianghai Heavy Industry Group Co., Ltd. (hereinafter referred to as Xianghai), and the Respondent of Retrial, Hehai Technology Engineering Group Co., Ltd. (hereinafter referred to as Hehai), the Claimant of Retrial disagreed with the Shanghai High People’s Court (2016) Hu Min Zhong No.351 Civil Judgment, and applied for retrial to the court. The court formed a collegiate panel to investigate the case, now the case has been concluded. Xianghai claimed that: firstly, the confirmation of the judgments of first and second instances about Whether the project involved was delayed was wrong. (1) The General Contract Clause 1 stipulated that, the completion date was the date when this contract project passed the completion acceptance and the project quality reached the level standard agreed in the contract. Clause 16 stipulated that, the quality of this project must reach good standards. (2) according to the identification of completion date in the General Contract Clause 1, the project involved had not been completed so far, and Hehai breached the contract by delay in completion. According to the General Contract Clause 13, Hehai should pay a total penalty of RMB10,364,000 for the delay in completion penalty (the following currencies were all RMB). (3) The courts of first and second instances held that the completion date of Hehai was October 2, 2008, which was obviously wrong. The Quality Appraisal only appraised the delivery quality of the project involved, not the identification of

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the completion time of the project. (4) The judgments of first and second instances equated the completion time with the completion time of the project involved, which was obviously wrong. (5) The project involved only passed the acceptance check on July 3, 2015 because of serious problems with the construction quality of Hehai. (6) Even if the completion date determined by the first and second instances or the delivery date claimed by Hehai, which exceeded the four-month period agreed in the contract, Hehai should also be liable for breach of contract. Secondly, the Agreement concluded by the two parties on August 20, 2015 should be revoked due to a major misunderstanding by Xianghai. The settlement of the port and pool project undertaken by Hehai was the prerequisite for the conclusion of the Agreement between Xianghai and Hehai, but the project involved had not been settled so far. When Xianghai and Hehai concluded an agreement, there was a misunderstanding about whether the project had been settled. Thirdly, if the Agreement should not be revoked, according to the agreement, Xianghai should only pay Hehai 159,400 yuan, but the courts of first and second instances confirmed that Xianghai should pay Hehai 859,400 yuan, which was wrong. In conclusion, according to the Civil Procedure Law of the People’s Republic of China Article 200 Sub-Paragraph 2, it applied for retrial. Hehai argued that: firstly, the supplementary agreement concluded between the two parties on June 24, 2013 reached a new agreement on the performance of the contract, and a new agreement on the rights and obligations of the parties. Secondly, the agreement concluded by the two parties on August 20, 2015 made it clear that if Xianghai failed to pay 459,400 yuan in accordance with the agreement, it should pay the entire construction cost of 1,159,400 yuan. The agreement was signed and sealed by both parties, and Xianghai fulfilled the payment obligation of 300,000 yuan. Thirdly, it could be seen from the evidence provided to Xianghai that the Hehai did not have the problem of delay in completion. Even if there was delay in completion, the two parties reached two supplementary agreements on the relevant clauses. This was a new expression of the two parties’ agreement on the main terms of the original contract through consensus. Both supplementary agreements were partially fulfilled by Xianghai, which proved that there were no major misunderstandings. The recording of the call between the person in charge of Hehai and Xianghai could prove that Xianghai admitted the fact that it owed money and that there was no breach of contract. In conclusion, it required the court to dismiss the application for retrial of Xianghai. After investigation, the court holds that, the case is the application for retrial, which should be investigated in accordance with the Civil Procedure Law of the People’s Republic of China. Regarding issue that whether Hehai had delay in completion. Although the General Contract stipulated the completion date, the Agreement concluded by the two parties on August 20, 2015 recognized that the project was settled, and also agreed on the payment of the project payment to Xianghai. The agreement in the Agreement constituted a change to the content of the General Contract, and it does not reflect the content of Hehai’s responsibility for breach of contract for delay in completion, plus the conclusion of the project involved in the acceptance of the

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completion was also qualified, so it is not inappropriate that the judgment of second instance confirmed that there was no need to try the issue of breach of contract caused by delay in completion. The retrial reason of Xianghai cannot be established. Regarding issue whether Xianghai misunderstood the Agreement concluded on August 20, 2015 and whether the Agreement should be revoked. The Agreement was an agreement between the parties on the implementation of the Supplementary Agreement concluded in June 2013. In addition to clarifying that the project involved was settled, the Agreement also confirmed the amount of the project payment paid to Xianghai, the amount owed to the project, the repayment period, the specific payment arrangement and the liability for breach of contract. Xianghai’s work as a market operating entity with sufficient cognitive ability should clearly recognize the legal consequences of conclusion the Agreement, but he failed to provide sufficient evidence to prove that it had a major misunderstanding of the nature of the contract conclusion and the fact of project settlement. Moreover, Xianghai also paid a total of 300,000 yuan to Hehai on September 6, 2015, and September 30, 2015, and partially fulfilled the repayment obligations agreed in the agreement. Xianghai does not have a wrong understanding of the fact that the project was settled and its rights and obligations under the Agreement. Therefore, the court of second instance did not support the reason about misunderstandings conclusion of the Agreement, and the Agreement should be revoked, which is not inappropriate. The retrial reason of Xianghai cannot be established. Regarding issue that whether Xianghai should pay 700,000 yuan warranty payment of Hehai. According to the Agreement Clause 3, if Xianghai was paid within the agreed time limit, Hehai no longer claimed 700,000 yuan for the maintenance payment in the supplementary agreement on June 24, 2013; if Xianghai failed to pay on time, Hehai had the right to claim 700,000 yuan for maintenance. In this case, Xianghai did not pay the payment as agreed, and the original judgment judged that Xianghai should pay 700,000 yuan for maintenance to Hehai, which is in accordance with the contract, and is not inappropriate. The retrial reason of Xianghai cannot be established. Pulling the threads together, the application for retrial of Xianghai is not consistent with the Civil Procedure Law of the People’s Republic of China Article 200. According to the Civil Procedure Law of the People’s Republic of China Article 204 Paragraph 1, the Interpretation of the Supreme People’s Court concerning the Application of the Civil Procedure Law of the People’s Republic of China Article 395 Paragraph 2, the ruling is as follows: Dismiss the application for retrial of Xianghai Heavy Industry Group Co., Ltd. Presiding Judge: SHEN Hongyu Acting Judge: WANG Shuo Acting Judge: ZHU Ke June 30, 2017 Clerk: LV Mengtao

Dalian Maritime Court Civil Judgment Heilongjiang Sanjiang Foreign Shipping Agency Co., Ltd. v. Fuyuan Port Authority (2015) Da Hai Fa Shang Chu Zi No.367 Related Case(s) None. Cause(s) of Action 213. Dispute over charter party. Headnote The Plaintiff shipowner held not entitled to terminate charter party for the Defendant’s late payment of hire, which was held not to constitute a fundamental breach of contract entitling the Plaintiff to terminate. Summary The Plaintiff claimed that it was entitled to terminate the charter party contract it had with the Defendant because of the Defendant’s failure to pay hire. The Defendant asked the court to reject the Plaintiff’s claims, arguing that it had paid hire in full in accordance with the contract, before receiving the Plaintiff’s complaint. The court held that the Defendant’s delay in paying hire did not create a fundamental breach of contract and the Plaintiff’s general purpose of receiving hire for use of its ship had been fulfilled. Furthermore, the court held that ruling for the Plaintiff went against the principle of good faith. Therefore, the court rejected the claims of the Plaintiff and required the Plaintiff to bear the court acceptance fee of 100 RMB.

Judgment The Plaintiff: Heilongjiang Sanjiang Foreign Shipping Agency Co., Ltd. Domicile: Shidaowai District, Harbin City, Heilongjiang. Legal representative: ZANG Guoxing, general manager. Agent ad litem: JIN Futang, legal consultant of the company. The Defendant: Fuyuan Port Authority. Domicile: Fuyuan District, Fuyuan City, Heilongjiang. Legal representative: FENG Wenzi, director of the company. Agent ad litem: WANG Yucheng, deputy director of Legal Affairs of the company. © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_13

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With respect to the dispute over charter party, the Plaintiff Heilongjiang Sanjiang Foreign Shipping Agency Co., Ltd. (hereinafter referred to as Sanjiang Company) against the Defendant Fuyuan Port Authority (hereinafter referred to as Fuyuan Port). After accepting the action, the court constituted a collegiate panel according to the law and held hearings in public on June 16, 2015, July 6, 2015 and November 5, 2015. The court heard the case together with another case (2015) Da Hai Fa Shang Chu Zi No.369. Legal representative of the Plaintiff, ZANG Guoxing, agent ad litem of the Plaintiff, JIN Futang, and agent ad litem of the Defendant, WANG Yucheng, attended the hearings. Now the case has been concluded. The Plaintiff alleged that the Plaintiff and the Defendant signed two charter parties on August 30, 2014. In the process of performance, the Defendant delayed to pay the rent RMB50,000 of the two C/Ps agreed in 2014. Ten days from May 1, 2015 after the hearing, the Defendant did not pay half of the rent of 2015 according to the time stipulated in the contract. The Defendant paid the rent by two separate times on May 13 and 22, 2015, of which the 200 thousand was other charges advanced by the Defendant instead of the rent. The Defendant's default on the rent had broken the contract. Article 5 in the two contracts agreed “if the lessee fails to pay the rent in accordance with the contract, the lessor shall have the right to cancel the contract.” The Defendant paying the corresponding payment in litigation did not affect the Plaintiff to exercise its right to cancel the contract. Therefore, in accordance with Article 93 of the Contract Law of the People’s Republic of China, the Plaintiff requested the court to terminate Charter Partys signed by the Plaintiff and the Defendant of renting the M. V. “Long Teng 05” and other four ships. The Plaintiff submitted the following evidence to support its claims: (1) Charter Party signed by the Plaintiff and the Defendant to rent M.V. “Long Teng 05” and other four ships; (2) Charter Party signed by the Plaintiff and the Defendant to rent M.V. “Long Teng 07”. Above two evidence provided by the Plaintiff was to prove that there was a charter party relationship between the Plaintiff and the Defendant; (3) the Plaintiff made a statement that the Defendant was still in debt, to prove the fact that Defendant did not pay the rent. The Defendant defended that: Before receiving legal complaint, the Defendant had paid the full rent of 2014 and the payable rent in the first half of 2015 in accordance with the contract and it did not owe the Plaintiff rent. The Plaintiff claimed that RMB200 thousand of the rent it received was the other fee owed by the Defendant, but the Defendant in the remittance had clearly stated that the use of the remittances for “charter”. After reconciliation in litigation to confirm the Defendant owed other costs to the Plaintiff, the Defendant paid the next rent of RMB550 thousand in accordance with the agreed time, and at the same time paid other costs disputed before the reconciliation. The agreement between the Plaintiff and the Defendant on the rescission of the contract was very unclear. There was no agreement on the grace period and the notice period of rent payment. Therefore, whether the Plaintiff’s right of rescission was established shall be determined by following the legal condition for dissolution of the contract. Now the Plaintiff had received the full rent, as well as other disputed money between the two sides and

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the purpose of the contract signed by the Plaintiff and the Defendant had been achieved. At this point, the Plaintiff dissolving the contract would cause the Defendant an immeasurable loss. So the Defendant requested the court to reject Plaintiff’s claims. The Defendant submitted the following evidence to the court to support the pleas: 1. The Defendant paid the deposit and rent schedule before May 22, 2015, payment electronic return receipt and part of the VAT invoice issued by the Plaintiff, to prove that the Defendant had paid the full rent before May 22, and it did not owe the Plaintiff rent. 2. Three copies of payment documents on September 9, 2015, to prove that after the reconciliation in the proceedings, the Defendant paid the next rent of RMB550 thousand in accordance with the agreed time and at the same time it paid the disputed ship accessories section RMB133,850, agency fees RMB200,362.07 before the reconciliation. 3. Six copies of certificate of Shipping Permits for International Routes, to prove that the Defendant chartered the Plaintiff’s ship to engage the international passenger transport business. With respect to the two charter parties provided by the Plaintiff (the Plaintiff’s evidence 1, 2), the Defendant confirmed the authenticity, legality, and validity. The Defendant in the litigation also provided evidence of the agreement signed between the Defendant and shipowner of M.V. “Long Teng 17” Heilongjiang Waterway Bureau and other evidence, to prove that the Plaintiff and the Defendant signed the charter party of M.V. “Long Teng 17”. The Plaintiff also provided a certificate issued by Heilongjiang Waterway Bureau and the statement issued by the Plaintiff, to prove that the shipowner of M.V. “Long Teng 17” recognized the validity of the contract signed by the Plaintiff and the Defendant as well as other relevant facts. Evidence 1 and evidence 2 provided by the Plaintiff and the relevant evidence was true and lawful, confirming the contractual relationship of the two sides was legal and effective, which shall be adopted by the court. Evidence 1 and evidence 2 provided by the Defendant could prove the fact that the Defendant paid relevant money to the Plaintiff. The Plaintiff had objection to the purpose of the Defendant’s payment, but there was no objection to the fact that the Defendant had paid. The above evidence could prove the fact that the Defendant had paid the relevant money, which the court shall adopt. Evidence 3 provided by the Defendant proved that the usage of the ship, chartered by the Defendant, had certain relevancy with the relevant facts of the case. The court shall adopt it. Evidence 3 provided by the Plaintiff was a statement of the Defendant’s, which was different from results of the reconciliation by both two parties, so the court does not adopt it. In the course of the hearing of the case, the two parties made a reconciliation on September 1, 2015. The two sides confirmed by reconciliation that the Plaintiff received RMB200 thousand of deposit, RMB950 thousand paid by Defendant Fuyuan Port. The issue of the dispute: the Defendant Fuyuan Port believed that the

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payment of RMB950 thousand was the full rent of the whole year of 2014 and the first half of 2015 and the Defendant did not owe the ship’s rent. After reconciliation, the Defendant admitted that in other business dealings between the two sides, it still owed the port charges of Russian port RMB200,362.07 and RMB133,850 for the ship accessories advanced by the Plaintiff. (Disputes over the ship accessories money had been sued in another court). The Plaintiff Sanjiang Company thought that: RMB950 thousand paid by the Defendant included ship rent RMB750 thousand and port charges RMB200 thousand advanced by the Plaintiff. The Defendant still owed the Plaintiff RMB200 thousand for the ship rent, and besides the cost of the port charges RMB362.07 and the ship accessories RMB133,850. The two sides had no objection to the amount owed before May 22, 2015, but had objection to the reasons of the arrears. The court finds out the facts as follows: The Plaintiff Sanjiang Company and the Defendant Fuyuan Port signed Charter Party and agreed to rent M.V. “Long Teng 05”, M.V. “Long Teng 15”, M.V. “Long Teng 19”, M.V. “Long Teng 20”, M.V. “Long Teng 21” to the Defendant Fuyuan Port. The charter term was from August 30, 2014 to November 10, 2019. On the same day, the two sides signed another Charter Party, which agreed to charter M.V. “Long Teng 17”of Sanjiang Company to Fuyuan Port. The charter term was from August 30, 2014 to November 10, 2015. The Defendant chartered the above six ships to engage international passenger transport service with Russia on the border between China and Russia. The above two ship rental contracts agreed: the lessee paid RMB200 thousand of ship security deposit to the shipowner within 5 days after signing contract. Less than a sailing period in 2014, the rent of six ships involved in the two contracts was determined RMB400 thousand of the rent in 2014. In 2014, the rent was paid 50%—RMB200 thousand after the contract was signed and before the ship was delivered. The remaining 50% rent–another RMB200 thousand should be paid within 10 days of the using ship suspended. In 2015, the annual rent of 6 ships was determined RMB1.1 billion. The 50% annual rent–RMB550 thousand should be paid within 10 days of unused ship put into operation and remaining 50% rent RMB550 thousand should be paid before September 10. Article 5 of the two C/Ps agreed that “if the charterer failed to pay the rent in accordance with the contract, the shipowner had the right to dissolve the contract”. After signing the C/Ps, the Defendant Fuyuan Port agreed to pay ship security deposit RMB200 thousand on September 1, 2014 and paid 50% rent–RMB200 thousand in 2014. On November 21, 2014 and January 20, 2015 the Defendant respectively paid RMB150 thousand for the rent of 2014. After receiving the above RMB350 thousand rent, the Plaintiff issued a special VAT invoice for ship rent. On May 1, 2015, Fuyuan Port started the business, and the ship put into operation. On May 13, 2015, the Defendant Fuyuan Port paid RMB200 thousand to the Plaintiff Sanjiang Company and the purpose of payment receipt was stated “charter fee”. On May 22, 2015, the Defendant Fuyuan Port paid RMB400 thousand to the Plaintiff Sanjiang Company and the purpose of payment receipt was stated “charter fee”. On September 1 2015 after reconciliation by the two sides confirmed that: before May

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22, 2015, the Plaintiff received another RMB950 thousand from the Defendant Fuyuan Port except RMB200 thousand security deposit. On September 9 2015, the Defendant Fuyuan Port remitted three separate payments to the Plaintiff Sanjiang Company and the statement of the payment receipt were that: agency fee was RMB200,362.07, accessories money was RMB133,850 and the ship rent was RMB550 thousand. The Plaintiff acknowledged the receipt of the money mentioned above in the suit. However, RMB550 thousand mentioned in the above was of the Defendant’s own accord to compensate for the loss of the Plaintiff due to his breach of contract. The Plaintiff still insisted on the claim of dissolving the contract. The issue in this case: whether the Plaintiff’s claim of dissolving the contract shall be supported. The court holds that: Charter Parties signed by the Plaintiff and the Defendant agreed to charter M.V. “Long Teng 05” and the other four ships were legal and effective and shall be protected by law. The fact that the Defendant delayed the payment of rent is clear, which constituted a breach of contract because delaying in performing contractual obligations. However, the court does not support the Plaintiff’s claim of dissolving the contract for concerning the following factors: The Defendant delaying in payment of rent did not fundamentally cause the failure of achieving the Plaintiff’s objective of the contract, which does not belong to a fundamental breach of contract. In accordance with the agreement of the two contracts, the Defendant Fuyuan Port paid 50% rent in 2014–RMB200 thousand. The other 50% rent–RMB200 thousand shall be paid within 10 days of the using ship suspended in the 2014 winter. The Defendant Fuyuan Port paid only RMB150 thousand of this part in 2014 and the last RMB50 thousand was paid on May 13, 2015. (Before the Defendant received the Lawsuit). From the amount of delaying in the performance, time and the continued performance of the contract and other facts, the default did not fundamentally cause the failure of the Plaintiff achieving objective of the contract, which shall not be considered as a major fundamental breach of contract. In accordance with the contract, Defendant Fuyuan Port shall pay 50% of the annual rent–RMB550 thousand within 10 days of unused ship put into operation in 2015. On May 1, 2015, Fuyuan Port opened and the ships were put into operation. On May 13, 2015, the Defendant Fuyuan Port paid RMB200 thousand to the Plaintiff Sanjiang company. (including RMB50 thousand owed in 2014). On May 22, 2015, the Defendant Fuyuan Port paid RMB400 thousand to the Plaintiff Sanjiang Company. Although the Plaintiff believed that RMB200 thousand of the above payment was to pay other funds, the payment receipt had stated clearly that the payment was for “rent ship” and “charter fee”. And before the lawsuit, there was still a dispute between the two parties over the specific amount of the other expenses owed to the Plaintiff. So it could be concluded that the payment behavior of the Defendant on May 13 and 22, 2015 was paying the ship charter. The Defendant did not pay the ship rent within 10 days after opening on May 1, 2015 in accordance with the contract, which constituted delay in performance. But with respect to the time of delay in performance and its influence on the realization of the

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contract purpose, it shall not be considered as a fundamental breach of contract. The plaintiff's agent proposed at the third session: according to Article 152 of the Maritime Code of the People’s Republic of China: if the charterer failed to pay the rent for more than seven days in accordance with the time stipulated in the contact, the shipowner had the right to terminate the contract, it could be confirmed that the Defendant’s breach of contract was a fundamental breach and the Plaintiff had the right to terminate the contract. The court holds that: according to Article 3 of the Maritime Code of the People’s Republic of China, “Ship” in this code meant sea-going ships and other mobile units, the inland waterway ship rent contract in this case did not apply to the Maritime Code of the People’s Republic of China. Referring to Article 152 of the Maritime Code of the People’s Republic of China was not appropriate to determine whether the charterer's delay in payment of rent belonged to a fundamental breach of contract. This case should be combined with inland river shipping practice to determine whether the Defendant’s delay in payment of rent caused a fundamental obstacle to the Plaintiff's realization of the purpose of the contract, which was to judge whether the Defendant’s breach of contract constituted a fundamental breach. The Defendant Fuyuan Port had paid the RMB50 thousand rent of 2014 to the Plaintiff before the receiving the Lawsuit. The delay payment of the 50% rent of 2015 was paid more than 10 days. The above rents had been already received by the Plaintiff. Although the Plaintiff insisted to terminate the contract, the Defendant’s default on the contract did not lead to the contract unable to perform. During the lawsuit, the Defendant paid the other 50% of the rent of 2015 and all the debts involving other legal relationship before the lawsuit at the same time. So far, the Plaintiff’s purpose of collecting rents by signing a ship rental contract had been fulfilled. Therefore, although the Defendant Fuyuan Port delayed in performance in two times that belonged to a breach of contract, and the court noticed that the payment of rent was the main contractual obligation of the Defendant. But the Defendant delay in payment of rent did not fundamentally cause the failure of achieving the Plaintiff’s objective of the contract, which should not be regarded as fundamental breach of contract. The requirements to terminate the contract agreed by the Plaintiff and the Defendant were not concrete and complete. It is unfair to support the Plaintiff and ordered the contract to be terminated according to the terms of this contract, and did not meet the usual circumstances about the purpose of signing a contract between the two parties, and made it difficult to maintain the security and stability of transactions. Article 5 of the contract agreed that: the charterer shall pay the rent in accordance with the contract. If the charterer failed to pay the rent in accordance with the contract, the charter had the right to cancel the contract and asked for compensation for the loss. If only interpreting the clause in literal, it could be thought that no matter what the specific amount of the rent that the Plaintiff defaulted, and the length of time defaulted in paying, as long as the charterer failed to pay the rent in accordance with the agreement, the Plaintiff could terminate the contract in accordance with this clause. However, it was not fair and reasonable to make such an interpretation of the clause and implement it accordingly. The general

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breach of contract of a Party could lead to the legal consequence of terminating a contract, which did not meet real purpose of signing a contract between the two parties in the usual circumstances. The conditions of terminating the contract were too arbitrary and did not meet the need of maintaining the security and stability of transactions. In the usual sense, the purpose of the clause of terminating the contract agreed by the parties was to ensure the realization of the Plaintiff’s right to collect the rent according to the contract and granted the Plaintiff the right to terminate the contract when the Plaintiff was unable to realize this right. Although the Plaintiff delayed in receiving the payment of the rent in this case, the Defendant had paid the rent in full after default within a certain period of time. The purpose of Plaintiff to collect the rent according to the contract did not be fundamentally affected. At this time, the Plaintiff could not only terminate the contract in accordance with the above clause of the contract to achieve the purpose of the contract. The continued performance of the contract did not prevent the Plaintiff from achieving contractual purpose of collecting the rent. At this time, the termination of the contract could increase the transaction costs of the parties further, which caused a waste of social resources and did not meet the need of maintaining the security and stability of transactions. Therefore, from the purpose of making the terms of terminating the contract, the influence degree of default party breaking the contract to the realization of the contract, and the maintenance of fair and stable transaction security and other aspects of fair, it should not only be based on the clause of terminating the contract signed by the Plaintiff and the Defendant to support the claim of the Plaintiff to terminate the contract. According to the principle of good faith, the parties shall exercise their rights in good faith and shall not abuse their rights. The Defendant’s default in payment of the rent constituted a breach of contract, but the Plaintiff could maintain its legitimate rights and interests not only by terminating the contract in accordance with the above clause of the contract. The continued performance of the contract neither damaged the interests of the contract that the Plaintiff expected nor caused further losses to the Plaintiff. If the two parties terminated the contract, the Defendant would lose the facilities to engage equivalent international passenger transport with Russia, which could cause great losses to the Defendant. Although the Plaintiff believed that the ship can be directly operated by itself after the termination of the contract, which was harmless to the Plaintiff. But this did not meet the need of protecting the interests of the both parties in balance and maintaining the safety and stability of transaction, and did not conform to the internal requirement of exercising right in good faith in the principle of good faith. The non-default party shall not abuse their rights when default party breaking the contract did not fundamentally block the realization of the purpose of the contract and the contract could continue to be fulfilled. According to Article 94 Sub-paragraph 3 of the Contract Law of the People’s Republic of China: the party delayed performance of its main obligations, and failed to perform within a reasonable time after receiving demand for performance, the other party could terminate the contract. Although the Plaintiff and the Defendant in this case did not agree to make the advance exhortation and give a reasonable period for the conditions of terminating the contract, according to

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the principle of good faith, it was inappropriate for non default party to exercise the right of terminating the contract directly without a notice and a certain grace period in the condition that the default party breaking the contact was not enough to block the realization of the purpose of the contract. The non–defaulting party exercising the right to terminate the contract at this time did not conform to the requirements of the principle of good faith, which the court does not support. In conclusion, concerning comprehensively the extent of the Defendant’s default and the clause of terminating the contract agreed by the Plaintiff and the Defendant, and the principle of good faith to judge the legality and rationality of Plaintiff’s right to exercise the right to cancel the contract, the court holds that it is not appropriate for Plaintiff to exercise the right to terminate the contract. The claim of Plaintiff of terminating Charter Party M.V. “LongTeng 05” and the other four ships signed by the Plaintiff and the Defendant should not be supported. So according to Article 6 of the Contract Law of the People’s Republic of China, the judgment is as follows: Reject the claims of the Plaintiff. Court acceptance fee in amount of RMB100, shall be born by the Plaintiff. If dissatisfied with this judgment, any parties shall within fifteen days as of the service of this judgment, submit an appeal and the copy to the Liaoning High People’s Court. Presiding Judge: WANG Xiansong Judge: LANG Yongbo People’s Juror: LIU Jiefeng January 27, 2016 Clerk: LI Jia’ning

Ningbo Maritime Court Civil Judgment Hin-pro International Logistics Limited v. Chile South American Steamship Co., Ltd. (2013) Yong Hai Fa Shang Chu Zi No.513 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 333. Cause(s) of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote Claim arising from delivery of goods without presentation of original bill of lading held not to be time-barred by one-year statute of limitations. Summary The Plaintiff contracted for the Defendant to carry goods (washing machines) to be shipped from Ningbo, China to Cabello, Venezuela. The goods were delivered without presentation of the original bills of lading and the Plaintiff requested monetary compensation for the amount of goods from the Defendant. The Defendant claimed that the Plaintiff was a freight forwarder and not a shipper and thus should have known the Venezuelan laws regarding the bill of lading. The Defendant provided the court with expert Venezuelan witnesses testifying to Venezuelan law but failed to translate the testimony into either English or Chinese thus prohibiting the testimony from evidence. The Defendant also claimed that the Plaintiff filed their claim past the statute of limitations and therefore could not bring suit. According to the law, in case the holder of an original bill of lading files an action on the ground that the carrier delivers goods without the original bill of lading, the provisions of Article 257 of the Maritime Code shall apply, and the time limit for statute of limitations shall be one year commencing from the date of delivery of goods by the carrier. The court found for the Plaintiff as it was within the one year date from the delivery of goods by carrier.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_14

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Judgment The Plaintiff: Hin-pro International Logistics Limited. Domicile: 801, Sterling Centre 11 Cheungyue Street, Laichikok, Kowloon Hong Kong, the People`s Republic of China. Legal representative: SU Wei, chairman. Agent ad litem: GU Liaohai, lawyer of Beijing Liaohai Law Firm. Agent ad litem: ZHAO li, lawyer of Beijing Liaohai Law Firm. The Defendant: Chile South American Steamship Co., Ltd. Domicile: Plaza Sotomayor 50, Valparaiso, Republic of Chile. Legal representative: Hector Arancibia Sanchez, executive director. Agent ad litem: WANG Jun, lawyer of Guangdong WANG JING & Co. Agent ad litem: WANG Weisheng, lawyer of Guangdong WANG JING & Co. With respect to the dispute over contract of carriage of goods by sea, the Plaintiff, Hin-pro International Logistics Limited, filed litigation against the Defendant, Chile South American Steamship Co., Ltd. before Ningbo Maritime Court and the case was accepted on July 23, 2012. After accepting the case on July 23, 2013, the court formed a collegiate panel in accordance with the law. The Defendant in September 24, 2013 put forward challenge of jurisdiction to the court and on October 16, 2013, the court rejected the Defendant’s challenge. Zhejiang High People’s Court on December 20, 2013 dismissed the appeal and affirmed the original ruling. Two hearings in public were heared on January 24 and April 16, 2014. GU Liaohai and ZHAO Li, as agents ad item of the Plaintiff, WANG Jun and WANG Weisheng, as agents ad item of the Defendant, took part in the proceedings; the Defendant’s witness Venezuelan citizen Sabatino (josealfredosabatinopizzolante) testified in the court. Now the case has been concluded. The Plaintiff alleged that: at the beginning of March 2012, due to the need to purchase a batch of washing machine from Ningbo (China) to La Puerto Cabello (Puertocabello, Venezuela), the Plaintiff booked the cargo space with the Defendant though its agency, Zhejiang Xuanhui International Freight Forwarding Limited (hereinafter referred to as “Zhejiang Xuanhui”) and discussed specific matters of transportation. The Defendant issued the original bill of lading (No.pbqlmdw00) on April 9, 2012 and goods would be shipped from China to Venezuela, involving a total of 15 containers of goods, valued USD381,600. The Defendant charged 63,750 dollars for marine transport and 23,480 yuan for incidental expenses. On June 10, 2012, the Plaintiff found the goods under the bill of lading had been unloaded on May 18 at the destination port, Cabello, and in May 31 had been delivered without the original bill of lading. The Plaintiff held that the Plaintiff was the shipper of the goods recorded in the bill of lading and therefore enjoy rights for the goods under the bill of lading. The Defendant had the obligation based on the bill of lading to deliver the goods at the port of destination. However, the Defendant let the goods delivered without the bill of lading, which cause the Plaintiff suffered huge losses. The Plaintiff requested that the Defendant should compensate its losses USD381,600 for the

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delivery of goods without the bill of lading, USD67,500 for the loss of freight, 25,710 yuan for transport fees, lawyer fee of RMB120 thousand yuan, and loss of exchange rate arising from the capital amount of USD449,100 since June 1, 2012 to the date of lawsuit calculated pursuant to the People’s Bank of China foreign exchange deposit rate over the same period (a loss of 100,015 yuan). The Defendant defended that: 1. Although the format of the bill of lading was the Defendant’s bill of lading, there was no evidence for the Plaintiff to prove that the Defendant was authorized to issue. The ship carrying the goods was not the Defendant or the bareboat charter carrier. The Defendant was nether involved in the bill of lading nor the actual carrier. 2. The Plaintiff alleged in the complaint that the booking was based on the commission of foreign clients, so the Plaintiff was the agent of the so-called foreign client, rather than as the shipper and the carrier signed a contract of carriage of goods by sea. The Plaintiff needd to provide the contract for the international sale of goods, export declaration which could prove its rights relating to the goods if the Plaintiff claimed as the shipper. But the Plaintiff did not provide evidence, so the Plaintiff was just the freight forwarder rather than the seller of the contract. 3. As for the statute of limitations, the statute of limitations for claiming the rights of the carrier was one year, and when the goods were paid or delivered by the Plaintiff, the Plaintiff had already exceeded the statute of limitations and should not be supported by the court. 4. The transfer records of the containers that the Plaintiff provide could only show the fact that containers circulate in the port, but could not explain the existence of delivery of goods without bill of lading. In the case that the Plaintiff could not prove the fact of delivery of goods without bill of lading, at most could only claim for loss of goods, and the carrier could enjoy the limitation of liability for maritime claims. 5. According to the legal requirements of the local discharge port, the goods must be submitted to the port authority after its arrival at the discharging port, then the carrier would lose control of the goods. During the booking process with the Defendant, the Plaintiff specially issued the letter of guarantee and committed that the carrier would be exempted from delivery of goods without bill of lading when the cargo was delivered to the port authorities according to the local law and compensated the losses that the carrier suffered. The fact that the Plaintiff issued the letter of guarantee indicated that it was clear that the carrier could not control the goods and could not deliver the goods at the destination port. 6. Even if compensation was needed, according to the law, the losses and damages of goods were limited in the CIF value of the goods itself, excluding other freight, lawyer fees and other items. In conclusion, the Plaintiff’s claim should be rejected.

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In order to prove its claims, the Plaintiff Hin-pro International Logistics Limited provided the following evidence to the court within the period of proof: 1. Company’s business license of both the Plaintiff and Defendant, to prove their litigation qualification. 2. No.pbqlmdw00 original B/L showed the fact that the contract of carriage of goods by sea between the Plaintiff and the Defendant and the Defendant’s delivery of goods without bill of lading after receiving the goods. As the shipper and holder of the original bill of lading, the Plaintiff had the right to claim the delivery of goods without civil liability. 3. The Plaintiff and the buyer, raselcaconsolidadores C.A, from Venezuela (hereinafter referred to as Ruixika Company) signed a supply agreement and No. ve10279-c sales contract, the packing list and the commercial invoice, to prove that the contracts for the international sale of goods between the Plaintiff and Ruixika Company was established. There were 15 containers’ goods under the bill of lading No.pbqlmdw00 that the Plaintiff held, valued USD381,600, which suffered economic losses for the Defendant’s delivery of goods without bill of lading. 4. Payment transactions that the Defendant charged freight, incidental charges, expense confirmation sheet, the Plaintiff’s payment of USD64,050 to the Defendant from HSBC on May 14, 2012, CMSB’s electronic receipt on May 25, 2012, BOC settlement business application on May 24 and Ping An Bank online transactions list on May 31, to prove that freight valued USD64,050 under the bill of lading the Plaintiff held by No.pbqlmdw00 under the bill of lading the goods involved a total of 15 container shipping fee of USD64,050, terminal fees and charges 25,260 yuan, both the Plaintiff’s Zhejiang office/agent paid in advance to the Defendant, the Defendant to the Plaintiff from delivery of goods without the loss of freight. 5. Container transport tracking information by the notarized Defendant company website, to prove that the Defendant delivered the goods without bill of lading on May 31, 2012. 6. Contract and travel notes that, because the Defendant forced the Plaintiff for the delivery of goods without the rights and legal fees of RMB100 thousand yuan, 20 thousand yuan travel lawyer. 7. Two e-mails that Defendant sent to the Plaintiff on March 31, 2012 and April 11th caused the Plaintiff that the Defendant, although in March 31, 2012 issued a notice requiring all the goods to Venezuela to sign the delivery of goods without guarantee, but in April 11, 2012 the Plaintiff provided clear notice to cancel the delivery of goods without guarantee requirements, therefore, guarantee the delivery of goods without even there has failure in April 11, 2012. 8. The Plaintiff after the court of Hefei Hualing Co., Ltd. (hereinafter referred to as Hualing Company) issued instructions, and Ruixika Company, to prove that they had not signed a contract for the sale of goods, was only due to its name to the booking could be obtained at a lower price for the freight, so as to the bearer

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of the bill of lading the shipper, the division did not export to foreign buyers of goods, no delivery to the shipping carrier of goods. The Defendant cross-examined that: 1. Two business license, no objection to the former, but the latter was South American Ship (China) Shipping Co., Ltd. rather than the Defendant’s business license. 2. The bill of lading bill of lading, but the Defendant could not see the format of the bill of lading, the carrier was the Defendant, was likely to be another independent legal person established in Chinese namely CSAV (China) Shipping Co., Ltd. as the carrier. Bill of lading was Chinese Ningbo Ocean Shipping Agency Ltd., such as the right to sign the bill of lading issued by its own, would also be identified as the carrier; if the Plaintiff that China Ningbo Ocean Shipping Agency Co., Ltd. was the Defendant, the Plaintiff needed to burden of proof. As regards the shipper, from the Plaintiff’s complaint, the Plaintiff was booking a foreign client’s consignment, which was the identity of the foreign customer’s agent, rather than the actual shipper. 3. Sales contract, packing list, commercial invoice, no objection to the authenticity of the commercial invoice and packing list; had objection to the authenticity of the letter of intent or delivery of the sales contract, because the baggage so far had nearly two years, the Plaintiff never mentioned letter of intent to supply and sales contract, who was the sales contract signed by both parties who signed on, when there was no evidence to prove, should not be recognized. 4. The Defendant charges sea freight and miscellaneous expenses list, etc., the occurrence of the above-mentioned funds had nothing to do with the Defendant, the cost was not paid to the Defendant, the Defendant had not received. 5. Container tracking information, no objection. 6. Lawyers commissioned by the contract and evidence of travel notes, this part of the case evidence and no relevancy, whether it was in accordance with China’s maritime code or delivery of goods without the judicial interpretation, the scope of compensation of the goods were limited to goods CIF price, the so-called legal fees, travel expenses were beyond the scope of compensation. 7. Two e-mail from the Defendant to confirm the authenticity of the two e-mails. The e-mail in March 31 was not the earliest time the Defendant notified the Plaintiff, which was first notified in March 26, and the Plaintiff issued a letter of guarantee in March 27. The e-mail in March 31 was only a supplementary note. The authenticity of the April 11 email confirmation, the correct translation was just suspend the guarantee, which not to say the guarantees after April 11 and before that was not set up, but only after April 11 did not need to issue new guarantees, the one before was still valid. 8. Situation of Hualing Company. The Defendant provided a written cross-examination opinion: (1) the evidence was beyond the period of proof provided, should not organize cross examination; (2) the note from the form, proof issued by the Department of materials after the unit rather than the nature

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of documentary evidence, testimony of witnesses, such as the witness not to testify its validity should not be adopted; (3) the situation that the seal was elongated, the law did not belong to the round red seal, could not explain the Department of Hualing Company issued by, its authenticity was of great doubt; (4) witness statements were only its own perception of the fact that the company was not involved in Hualing since claiming contracts for the international sale of goods and the contract of carriage of one of the parties, it was impossible to prove that the Plaintiff for the contract of carriage of the shipper or the actual shipper; (5) the situation showed that due to the name of the company could get the shipping Hualing booking fee discount, so the Plaintiff as a shipper, in fact, the Defendant business institutions to verify, the Defendant never gave any preferential freight Hualing Company. In order to prove its defenses, the Defendant provided the following evidence to the court within the period of proof: 1. Shanghai Hin-pro International Logistics Limited’s (hereinafter referred to as “Shanghai Hin-pro”) business license, to prove that Shanghai Hin-pro’s legal representative was YANG Jian. 2. The business registration information, the registration certificate for the nature of business logistics, so in this case the identity for freight forwarders, rather than the manufacturer or trader of the goods; delivery of goods without the signature of English signature guarantee consistent and provided by the Plaintiff, the Plaintiff could be identified by the letter of guarantee issue. 3. The qualification and record of NVOCC of Shanghai Hin-pro, to prove that its English name registered in the transportation ministry identified with the Plaintiff name. Therefore YANG Jian in the office English signature guarantee Plaintiff had the right to sign the letter of guarantee had the legal effect. 4. Hongtai (Hong Kong) International Logistics Co., Ltd. (hereinafter referred to as Hong Kong Hongtai) registration data, to prove that Hong Kong Hongtai with the Plaintiff registered in the same place, used the same office, telephone, fax, business involved in Hong Kong Hongtai bill of lading issued payment documents involved in the bill of lading was the Plaintiff authorized Hong Kong Hongtai issued bills of lading, so the Plaintiff was the identity of the freight forwarder. 5. Logisticamaritimalogimarc.a. (hereinafter referred to as Rocky Ma Company) agent contract with the Defendant, to prove that Rocky Ma Company was the Defendant in Venezuela’s agent, responsible for representing the Defendant and the Venezuelan Port authorities and customs units of communication. 6. Letter of guarantee, to prove that the Plaintiff issued a letter of guarantee, said the provisions of Venezuela know and accept the law allows delivery without original bill of lading, after the arrival of the goods must be handed over to the port management, to ensure their own risk, not to pursue any responsibility of the Defendant. The letter of guarantee was signed by YANG Jian, the legal representative of Shanghai Hin-pro. According to evidence 1–3, the letter of

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guarantee was issued by the Plaintiff’s English signature, and YANG Jian had the right to sign the letter of guarantee, which had legal effect. Notice, to prove that the Plaintiff must prove that the Defendant was sent to Venezuela’s goods provides a guarantee, accordingly, the Plaintiff provided the evidence of 6 guarantees, that the Plaintiff knew the delivery of goods without the risk at the port of destination, to ensure the delivery of goods without liability for the Defendant. Payment certificate of freight and agency fees, to prove that the goods involved in Venezuela buying Swiss Sika Corporation passed Caribbean shipping company (hereinafter referred to as the Caribbean) to pay the sea freight and port fees to the Plaintiff, the Plaintiff provided the claim should not be supported. Domestic exporters Zhejiang Ande Electric Co., Arda (Zhejiang) Electric Co., Ltd., Ningbo Lamo Electric Appliance Co., Ltd. received payment certificate, issued by the relevant bill of lading, packing list, commercial invoice, the bill of lading the shipper and the consignee was real goods business relationship. That real trade contract existed between domestic exporters and importers in Venezuela, Venezuela’s domestic exporters received the payment from the importer payment, the Plaintiff did not trade goods. Transfer order of the equipment, to prove that the carrier delivered the goods to the port authorities according to the law of the port of destination, and the port authorities were responsible for delivering the goods to the consignee. Letter from the port authority of the Republic of Georgia, to prove that the Defendant requested the Venezuelan authorities not to release the goods without providing the original bill of lading, in order to reduce the loss. Port authorities reply Rocky Ma Company letter, to prove that the port authority replied interpretation according to Venezuelan law and the port authority did not need to deliver the goods with the original bill of lading, which meant that the authority had the right to deliver the goods without the bill of lading. Notice which Rocky Ma Company sent to the customs authority, supporting to prove that the Defendant asked Venezuela did not delivery of goods without customs. E-mail about the cost of the midway port, to prove that the Defendant claimed that the Plaintiff should bear some fees for the midway port, and the relevant amount was unknown at present, and the settlement was not completed now. Legal opinion and its annex issued by the Venezuelan lawyer Sabatino (josealfredosabatinopizzolante), to prove that in accordance with the provisions of the law of Venezuela, the carrier must deliver the goods to the port to the port authorities, port authorities and customs were not required by the original bill of lading for the goods, the carrier of the goods had lost control. Witness Sabatino stated in the court: the Venezuelan lawyer; according to the provisions of Venezuela Maritime Law, Customs Organization Law, general law of the port, after the arrival of the goods at the port of Venezuela the carrier must deliver the goods to the port authorities or customs, in particular Article 203.2 of Maritime Law, Customs Organization Law Article twenty-second, article twenty-third,

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Customs Organization Law Article ninety-seventh and General Port Law article eighty-third and eighty-fifth. According to the twenty-second article of the Customs Organization Law, the carrier could only deliver or unload the goods to the designated warehouses such as the customs or the port. In this case the warehouse of the port customs supervision and control was the only Port Authority warehouse that was bolivarianadepuertos S.A. (hereinafter referred to as Bolivar Company) warehouse, according to the provisions of general law of sixty-second port and ninety-first, Polly Wahl Company responsible for the goods delivery and bear the responsibility for delivery of goods. 16. E-mail, to prove that before the prosecution the claim that the Plaintiff filed to the Defendant were only the loss of freight which does not exceed USD1,752,880 (including other filed in court), involved in the Ningbo Maritime Court proceedings of the case, the loss of freight up to more than USD947,125. At the time that the Plaintiff did not think of trade in goods, but only freight forwarders, to bring the lawsuit claims the delivery of goods without loss. The Plaintiff Hin-pro International Logistics Limited made the cross-examination: Evidence 1–4, 6 Shanghai Hin-pro business license and NVOCC qualification information and on-board bill of lading, the business registration information, Hong Kong Hongtai registration information, the Plaintiff’s guarantee, could not achieve the purposes of proof. It clearly showed that Shanghai Hin-pro and the Plaintiff were two different legal person according to their registration and there was no control relationship between them either not exist the so-called legal interests of the association. They were completely independent. The Defendant tried to prove that the guarantee that YANG Jian issued was equal to the one that Plaintiff issued, but YANG Jian was just the legal representative of Shanghai Hin-pro, and the Plaintiff knew nothing about the guarantee and did not recognize the authenticity, relevancy and effectiveness of the guarantee. It was YANG Jian who signed this guarantee, and YANG Jian was the legal representative of Shanghai Hin-pro. Besides the guarantee itself clearly stated that authorization was one of the necessary conditions to come into effect. Without the authorization, the guarantee had no legal effect. Evidence 5, 7. There was no objection to the agency contract between the company and the Defendant and the Defendant’s request for the letter of indemnity. Evidence 8. Freight and agency fees. There was business between Caribbean Company and the Plaintiff. The payment had no relevancy to this case, which could not neither prove that the payment was made on behalf of Ruixika Company nor prove that there was only freight forwarders between the Plaintiff and Ruixika Company. Moreover, it did not mean that there was no delinquency loan even a portion of the costs had been paid. Evidence 9. Certificate which the exporter issued that the goods had been received. Hong Kong Hongtai and the Plaintiff were different legal persons. The freight forwarder bill of lading that Hong Kong Hongtai issued had no necessary relation to the Plaintiff and the opposite party of the packing list was not Ruixika

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Company. Even if Hong Kong Hongtai on behalf of the Plaintiff sighed the bill of lading, it was only the agent of the Plaintiff and the ultimate consequences should be born by the Plaintiff. It was also normal for domestic manufacturers to receive payment for that the Plaintiff was in the organization of good and this part of the evidence had nothing to do with the case. Evidence 10. Equipment transfer sheet. The Plaintiff recognized the fact of delivery without the original bill of lading but was not clear about the process of delivery, because the equipment handover sheet was all Spanish, with no Chinese or English translation, so the cross-examination could not be made for it. Evidence 11–13. Rocky Ma Company’s correspondences with the destination port authorities and the customs. It could be seen that the Defendant knew that the Plaintiff went against for the delivery of goods without bill of lading and that the goods should be delivered under the original bill of lading. In order to avoid the loss, the Defendant through proxy Rocky Ma Company negotiated with the port authority. The reply that the port authorities sent just was to prove that the original bill of lading must be provided for the related import procedures at the Customs, but did not prove that the Defendant’s goods must be handed over to the port authorities. Evidence 13. There was no Chinese translation in the letter to the Customs issued by Rocky Ma Company and was not approved. Evidence 14. Emails about the intermediate port costs. The authenticity of emails had been approved. The related halfway expenses had been paid by Ruixika Company to the Defendant. Evidence 15. Venezuela lawyer’s legal opinion evidence and its annex. First of all, Sabatino, as the witness, his identity certification was not notarized, only with the Spanish translation but no Chinese nor English translation, so the content was not clear. On the case that Sabatino’s lawyer identity was not confirmed, the legal opinions and the statements in the trial issued by the witness could not be used as the evidence. Secondly, from the point of view of the content, it was impossible to find out which law or the provisions states that goods arrived at the port of Venezuela must be delivered to the customs or port authorities Venezuelan law stated that of delivery of goods should be according to the contract, or in accordance with the law, or according to the custom of the port. It was legal to deliver the goods to consignees under those three conditions and there was no mandatory provisions that goods must be delivered to the customs or ports. Thirdly, from the provisions cited from the legal opinion, it could be seen that the original bill of lading must be provided when the goods were sent to the customs for clearance procedures rather than delivery of goods without bill of lading after its arrival at the designated port of Venezuela. Evidence 16. Emails that the Plaintiff claimed compensation against the Defendant before the prosecution and the authenticity of the messages was to be confirmed. Before that the Plaintiff indeed believed that it could request to the Defendant for refund of freight and the value loss could be claimed against the buyers. However, as time goes by, it required the Defendant to bear the loss of the goods and the loss of freight, which was allowed by law.

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After the court, the Defendant added the following evidence to the court: 17. On June 3, 2014, the Defendant submitted to the court the Venezuelan law experts’ testimony and its annex (evidence 15), with complete and original Spanish version, English translation and Chinese translation, to prove the same evidence 15. The Defendant also submitted the application for requisition of the evidence which it apply to the court for investigating the manufacture’s signing and performing of the contract of international sale of goods. The Defendant also submitted the application for judicial identification, which intend to identify the authenticity of goods sales contract signed by the application and provide evidence of the Plaintiff in evidence 4, to prove that Ruixika Company did not sign a sales contract with the Plaintiff and the contract that the Plaintiff provided was forged. 18. On June 9, 2014, the Defendant provided a complete set of equipment transfer notes (namely evidence 10) with Chinese translation, to prove that the purpose was the same as evidence 10. 19. On July 4, 2014, the Defendant submitted to the court (1) Jason Salazar’s signature document with its Chinese translation, (2) the materials that the Defendant according to the survey issued by the Shanghai Maritime Court order transferred from Shanghai Kangdelai enterprise development group Limited by Share Ltd (hereinafter referred to as Kant Levin). The former was used to prove that Jason Salazar the Plaintiff referred in the contract for the international sale of goods on behalf of the company Ruixika Company signed the contract which was not Ruixika employees. He had never on behalf of Ruixika Company signed any sales contracts with the relevant goods. The signature on the sales contract and the letter of intent procurement submitted by the Plaintiff was not his signature. Therefore, the Plaintiff was not the shipper of the goods involved. The latter was used to prove that the goods involved were sold directly to the Venezuelan buyers by the mainland manufacturer, Candele Company, and the payment was also paid by the buyers to the mainland manufacturers, which had nothing to do with the Plaintiff. 20. On August 7, 2014, the Defendant submitted to the court the notarized certification of the equipment handover sheet (evidence 10, 18) and its Chinese translation, to prove the same purpose as the evidence of 10 and 18; and the notice to directly discharge which the customs officers issued, to prove that the customs required the Defendant to deliver the goods to the port. 21. On August 15, 2014, the Defendant submitted four pieces of evidence to the court: (1) the notarized certification of Jason Salazar’s statement (evidence 19) and its Chinese translation. (2) The evidence and materials that the Plaintiff submitted to the Tianjin maritime court evidence. (3) The materials that the Tianjin Maritime Court transferred from Tianjin Customs. (4) The statement that Ernesto Lopez Hostos issued, in which the purpose of proof of evidence 1 and 4 was the same as the evidence of 19 Evidence (1), (2), (3) could prove that in the Tianjin Maritime Court proceedings, the goods shipped from Tianjin port were directly sold by Beijing Hergom International Trade Co., Ltd. (hereinafter

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referred to as Hergom Company) to foreign veiwline corp cirdadde panama, company. The business body on the export goods declaration was not the Plaintiff Hin-pro International Logistics Limited and the domestic manufacturers did not sell the goods to the Plaintiff, or resale to Ruixika Company. 22. On August 29, 2014, the Defendant submitted the statement of Ruixika Company, namely evidence 21 (4), the notarized certificate of Ostoss’s statement, supporting to prove that Ruixika Company had never signed the contract for the international sale of goods with the Plaintiff. As for the supplementary evidence of 17–22 that the Defendant submitted, the Plaintiff held that the proofs had exceeded the time period and they were all invalid evidence Therefore it was no longer necessary to retrial and make the cross examination. while retaining the objection on the supplementary evidence, the Plaintiff submitted supplementary cross-examination: Evidence 17, not original, and only a supplement to evidence 15. The opinion of the evidence was the same as evidence 15 and the legal opinion could not prove that the Venezuelan law stipulated that the goods must be delivered to the port authorities. As for the application for investigation, the manufacturer which the Defendant applied for the investigation has nothing to do with this case. There were many bodies during the process of commerce and manufacturer’s receipt of payments could not prove that other merchants all received the payments, so the survey application was not related with the case. As for the application of judicial appraisal, the Defendant tried to identify the authenticity of the contract, but now there was no reference, so it could not be used for judicial expertise. Evidence 18 and 20 evidence of equipment transfer sheet, the cross -examination opinion was the same as evidence 10. The Defendant tried to prove that it delivered the goods to the port authorities, but could neither prove that this was the mandatory provisions of Venezuela law nor could prove that the Defendant could be exempted from liability of delivery without bill of lading according to the law. Evidence 19-(1) and 21-(1) Jason Salazar’s statement. The Plaintiff held that the Plaintiff was the shipper ordered on the 10 sets of bill of lading in which there were 19 sets of a bill of lading shipper. Undoubtedly, the Plaintiff was the shipper in these 10 cases. In the remaining 9 set of bills of lading the Plaintiff was not a shipper, but the Plaintiff still held the original bill of lading, which showed that the Plaintiff was entitled for the ownership of the goods and was the actual shipper involved in the shipment. For the Defendant delivered the goods without bill of lading, there was still the debt relationship between the Plaintiff and Ruixika Company. No matter Ruixika Company or Jason Salazar, the contract agents were all the interested parties of the Defendant, the effectiveness of the statement they made was far lower than that of the original bill of lading. Besides Ruixika Company and Caribbean Company to a large extent was affiliated company. Jason Salazar also participated in the trade between the Plaintiff and Ruixika Company or the Caribbean shipping, but the relationship is deliberately concealed in the statement. Therefore, the evidence is likely not made by the trade agent Jason Salazar. Perhaps it changed its signature to conceal the truth. After the case happened, Jason

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Salazar and chairman Ostoss disappeared. Now they suddenly came to testify and its authenticity was questionable. As for evidence 19-(2) the Kangdely company’s customers, from the form, the declaration that payment had been received, receipt voucher, freight forwarder bill of lading, commercial invoice, packing list and so on were not original, which was unable to confirm their authenticity and legality. Among them, the payer payment vouchers, commercial invoice, packing list that had nothing to do with the case, not the goods the consignee could not prove kindly exported the goods were goods involved, could effectively explain the goods payment paid, so there was no association with the case. Step back and say, even if the company was kindly of the goods in the domestic manufacturers, but the trade link of modern international trade involved many, the Plaintiff was intermediate supplier of the goods, domestic manufacturers received the payment was normal, the payment did not mean that the Plaintiff had received payment. Moreover, if the company received the goods payment kindly, combined with the Plaintiff’s sales contract showed that the Plaintiff was involved the sale of the goods and the shipper. Evidence 20-(2). The customs notice addressed the issue of direct unloading rather than how to deliver the goods. The Defendant was confused with the concept of whom the goods must be delivered to and how to unload them, which were actually two different issues. Evidence 21-(2) (3): the Defendant wanted to prove that the export company which declared the customs in Tianjin was the company of Aihekang Company rather than the Plaintiff. However, the business unit and delivery unit of the customs declaration was not the Plaintiff, which could not prove that the Plaintiff was not the trader. Evidence of 21-(4) and 22: Ernesto Lopez Ostoss’s statement. First of all, from the formal point of view, the statement had no original version and the identity certificate of legal representative annexed was not original. So its authenticity could not be recognized and whether Ostoss was the legal representative of Ruixika Company could not be identified. Ruixika Company was a Venezuelan company, and the statement that Ostoss issued should be notarized in Venezuela rather than in Florida in the United States, which the evidence notarization procedure was illegal. According to the received emails, Ostoss was not only the legal representative and the board of Caribbean Company, but also the executives of Ruixika Company, which had direct interests with this case. The two companies were to a great extent associated companies. The statement deliberately concealed Ostoss’s identify as the general manager of Caribbean Company and the collaboration relationship between the two companies, making false proof that there’s no business with the Plaintiff. Therefore, the probative force was very weak or even illegal and invalid, which could not against the notarized evidence of the original sales contract which the Plaintiff. On the contrary, in the emails which Ostoss sent to the Plaintiff, it admitted that it had purchased the white household electrical appliances, which was to prove that there was trade between the Plaintiff and Ruixika Company and the Plaintiff was the shipper of the goods.

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After the trial, the court holds that: evidence 1—the Plaintiff’s registration information. The Defendant had no objection and identified it. Another evidence is not the Defendant’s registration information, which has nothing to do with the case and is not recognized. Evidence 2—bill of lading and evidence 3—the packing list, commercial invoice, evidence 5, 7—the container transport tracking information and the two emails that the Defendant sent to the Plaintiff about the two letters of guarantee. The Defendant had no objection and identified it. Evidence 3—The supply letter of intent and sales contract are notarized and authenticated. Although the Defendant did not approve it, it did not submit the corresponding rebuttal, which is also confirmed by the court. Evidence 4 is the freight and charges of the goods involved, and the certificate of payment is original and should be ascertained. Evidence 6—the attorney agent contract is original, which is confirmed by the court. Although evidence 8 was submitted after the period of proof pf burden, just as evidence of 17–22 that the Defendant submitted, its content can collaborate with the fact of the Plaintiff’s evidence of 2, 3 that the goods have been delivered to the carrier and hold the original bill of lading and the court also affirmed. In the evidence submitted by the Defendant, there was evidence 1-4-6— Shanghai Hin-pro business license and non-vessel carrier qualification information and record bill of lading, the Plaintiff’s industrial and commercial registration information, Hong Kong Hongtai registration information, the letter of guarantee. Because the signatory on the letter of guarantee is YANG Jian rather than the legal representative of Shanghai Hin-pro, so the Defendant is unable to provide a valid Plaintiff’s letter of authorization and the letter of guarantee lacks authenticity and legality, which cannot be identified. The Defendant recognized the evidence of 5, 7, 11, 12, 14, 16 that the agency contract between Rocky Ma Company and the Defendant, the notice that the Defendant asked the Plaintiff to provide, correspondences between Rocky Ma Company and the port of destination port authorities, the emails about the cost of the halfway ports, and the emails which before the lawsuit the Plaintiff claimed against the Defendant and the Court also identified it. Evidence 8—freight, agency fees, which cannot prove that the relevancy with the case, and cannot be identified. Evidence 9—the proof issued by domestic exporters that the payment has been received, etc., no original, the Plaintiff to be denied, and the case is not associated with the Court not to be identified. Evidence 10— container equipment transfer orders became legal after the Defendant submitting the notarized certification, English and Chinese translation that evidence 18, 20-(1). The court identified its authenticity, but the evidence cannot prove that the Defendant has delivered the goods according to the mandatory provisions of the Venezuelan law. Evidence 13—the letter from Rocky Ma Company to the port of destination without a translation and cannot be identified. Evidence 15—the lawyer of Venezuela legal advice and its annex, because there is no valid evidence to prove that the legal advice of the identity of the lawyer Sabatino identity, so the court does not identify the legal opinion and court testimony. The supplementary evidence of 17–22 that the Defendant after the trial provided just as the Plaintiff’s evidence of 8 were submitted after the period of proof of burden. The evidence 17—law opinions is a supplement to the evidence 15. The

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certificate issued by the legal opinion of the identity of the evidence is still insufficient and the court will not identify it. Investigation and identification of the application in the evidence of 17, because the evidence applied to investigate and collect does not belong to the relevant departments of the state and the people's court in accordance with the transfer of powers to the archives identification of international trade contract and identification of authenticity of the lack of samples, so the two applications are not allowed in our court. The evidence 18 and 20 (1) are complementary to the form of the equipment transfer form of evidence 10. The evidence 19 (1), 21 (1), 21 (4) and 22—two statements of Jason Salazar and Ernesto Lopez Ostoss, which is the testimony of a witness who did not appear in court to answer questions, so the court cannot identify the authenticity. For the evidence 21 (2) (3), 19 (2)—the relevant archival materials of Shanghai maritime court and Tianjin maritime court of evidence of other court cases, it is unknown that whether the court will adopt, which also not necessarily associated with the case and the court shall not identify it. Evidence 20 (2)—the customs notice is about the problem of direct delivery, which is not necessarily connected with the dispute on delivery in this case and the court cannot recognize it. In accordance with the above evidence and trial statement, the court confirms the following facts: On January 3, 2012, the Plaintiff as a seller of goods, signed the sale contract of built-in hob with Ruixika Company, which contract number was ve10279-c, the number of 3,600, the price of USD106, a total of USD381,600, the price terms for the CIF of Venezuela, at the loading port of Chinese Ningbo, to the destination port of Venezuela Cabello. The way of payment was cash on delivery, which meant that the buyer paid all the goods to the seller within 10 days after the goods arrived at the destination, and the seller sent the original bill of lading and the attached documents to the buyer by express mail after receiving the payment. In order to transport the aforesaid goods, the Plaintiff made a booking to the Defendant, and through its Zhejiang office/agent, negotiated with the Defendant about the specific transportation items. The Defendant was commissioned to issue a full set of original bills of lading (pbqlmdw00) to the Plaintiff on April 9, 2012. Bill of lading stated that Hualing Company was the shipper, Ruixika Company was consignee, Caribbean Company was notify party, from the loading port Ningbo to the destination port Venezuela La Bello, vessel name was cmacgmorca/00843/E, the name of goods for washing machine, the number of 3,600 cases, a total of 15 containers, container inku6321988, gldu7168110, caxu9069589, inku6225840 bsiu9142467, inku6301641, tghu8284560, gvcu5249040, caiu8442607, inku6228432, gesu6162744, fciu9103680, caxu8143207, gldu7134975, amfu8788715, and the bills of lading were issued by Ningbo Ocean Shipping Agency Company Limited on behalf of the accused. The goods were shipped from the Port of Ningbo on April 9, 2012 and arrived at the port of destination cabelloin on May 18, 2012. On May 31, 2012, the goods involved were released without original bill of lading. The Plaintiff failed to claim against the Defendant and made a plea to the court at the cost of legal fees of RMB100 thousand yuan.

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The court holds that the bill of lading is stated “the dispute shall be submitted to the London high court jurisdiction”, but the Defendant’s domicile, the place of the contract performance, the place which the contract is signed, the Plaintiff’s domicile, the location of the subject matter is not agreed in the UK and the place of jurisdiction court under the jurisdiction clause of the agreement where has no actual connection with the case disputes shall be confirmed invalid. The loading port of the goods is Ningbo of China, so Ningbo is departure place of transport and the court has jurisdiction in this district. Although it is stipulated in this bill of lading that the any related claims or disputes should apply to British law, both parties did not provide the British law. Meanwhile, both the Plaintiff and the Defendant were quoted the People’s Republic of China legal prosecution and defense, so the case should apply to Chinese law. The bill of lading is the proof of the contract of carriage of goods by sea, the receipt of the goods by the carrier and the certificate of the carrier’s delivery of the goods. The Plaintiff as the seller of the contract for the international sale of goods submit the consignment to the goods, holding the original bill of lading, shall be deemed as the actual shipper of the maritime transport of goods. The Defendant as the carrier stated in the bill of lading, so the relationship of the contract of carriage of goods by sea between the Plaintiff and Defendant has established and has legal effect. The Defendant in this case provides the letter of guarantee issued by the Plaintiff about the delivery of goods without bill of lading, hoping to identify that before signing a contract of carriage of goods by sea the Defendant as the shipper had known Venezuela provisions on the delivery of goods without an original B/L. Therefore, the Defendant’s defense that the Plaintiff is a freight forwarder rather than the shipper lack evidence and reason, which cannot be supported by the court. According to the law, In case the holder of an original B/L files an action on the ground that the carrier delivers goods without the original B/L, Article 257 of the Maritime Code shall apply, and statute of limitations shall be one year commencing from the date of delivery of goods by the carrier. The goods arrived at the port of destination on May 30, 2012 and the carrier shall deliver the goods on May 30, 2012, the day after that date. The Hin-pro International Logistics Co., Ltd. on May 16, 2013 sued the court, which did not exceed one year during the litigation. The accused’s defense against the Plaintiff’s litigation beyond the litigation period of proof and the court shall not support it. The bill of lading is the certificate of delivery of the goods, even if the bill of lading is a straight bill of lading, the carrier still has the obligation to deliver documents. The container tracking information showed that the containers on May 31, 2012 have been delivered to the consignee by port (port to consignee) and on June 1 (consignee to port) have been returned to the port, which can preliminarily prove that the goods have been delivered to the consigner. The Defendant argued that in the case which the Plaintiff could not prove the delivery of goods without original B/L, it could most only claim for loss of goods, but did not provide the evidence of the loss of the goods, so the judge shall not support the defense. Because the original B/L is still hold by the Plaintiff, so the fact that the Defendant delivered the goods without an original B/L is established. As the shipper, the

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Plaintiff held the original bill of lading and had the right to require the carrier to bear the civil liability for delivery of the goods without the original bill of lading according to the contract of carriage of goods by sea, and the carrier did not enjoy the limitation of liability. The Defendant should compensate for the loss of goods due to delivery of goods without an original B/L which amount calculated by goods amounting to USD381,600. According to the Plaintiff with foreign buyers Ruixika Company contracts for the international sale of goods, the goods price for CIF price, have been included in the freight, the Plaintiff claimed the Defendant’s compensation payment of USD381,600 outside the shipping cost and freight, the person does not support. The Plaintiff’s lawyer fee of RMB100 thousand yuan, is the Plaintiff for their own rights and interests and the expenses, the amount is reasonable, the person shall be protected; but its lawyers travel expenses 20 thousand yuan and foreign currency deposit exchange rate losses 100,015 yuan, did not provide the corresponding evidence, no legal basis for the trial. The court does not support. Although according to the law, the law stated in the bill of lading carrier in accordance with the unloading port where the provisions must be delivered to the carrier to Hong Kong goods to the local customs or port authorities, shall not bear civil liability of delivery of goods without original bill of lading, but the carrier should bear that unloading port local legal obligations. In this case, although the Defendant only submitted a foreign testimony of Sabatino and written legal opinions, but firstly, the witness material not notarized, when the court issued proof of identity no translation, no academic works and related law firm recommended materials, not prove the identity of the witness and professional degree. Secondly, even if the legal identity of the expert witness can confirm from its offer of the Venezuela Customs Organization Law Article 22 stipulates that: “the carrier shall deliver the goods to the person responsible for the approval of the public or private customs warehouse and the warehouse in a working day after unloading, or that the consignee or the consignee is the authorized agent of the people”, so the delivery object has public warehouse, private warehouse or the consignee three, do not see “must be delivered to the local customs or port authorities”. Finally, the legal opinion cited Venezuela Maritime Law Article 203, “since the carrier from the shipper or its agent or other competent departments have the right to receive the cargo, the goods shall be deemed supervision right has oversight of the carrier, the carrier of the goods in the delivery of the goods when the termination, delivered to: 1) when the consignee, the consignee did not directly receive the goods from the carrier, the carrier shall be in accordance with the contract law, the port of discharge or general trade practices to the consignee, or 2), according to the contract law, the port of discharge or as trade practice, the goods must be delivered to the relevant authorities or third parties.” However, the annex to the legal advice does not contain the Maritime Law of Venezuela, nor does it see the provisions of the act concerning the obligations of the carrier terminating the delivery to the port authorities or customs authorities. Therefore, the Defendant in accordance with the provisions of the law on the port of discharge, the carrier must deliver the goods to the customs or

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port authorities, do not assume the responsibility to defend the delivery of goods without evidence, and lack of reason, the court shall not support. Pulling the threads together, as for the reasonable parts of the plea of the Plaintiff, the court supported it. According to Article 71 of the Maritime Code of the People’s Republic of China, Article 2, Article 4, Article 6 and Article 14 Paragraph 1 of the Provisions of the Supreme People’s Court on Certain Issues concerning the Application of Law to the Trial of Cases Involving Delivery of Goods without Original Bills of Lading, Article 10 of the Law of the Application of Law for Foreign-related Civil Relations, the judgment is as follows: 1. The Defendant, Chile South American Steamship Co., Ltd., within ten days after the effective date of this judgment, shall compensate the Plaintiff Hin-pro International Logistics Limited for USD381,600, the loss of the goods lawyer fee of RMB100 thousand yuan; 2. Reject other claims of the Plaintiff Hin-pro International Logistics Limited. If the monetary obligation is not fulfilled in accordance with Article 25 specified in the Civil Procedure Law of the People’s Republic of China, the debt interest during the delay of performance shall be doubled. Court acceptance fee in amount of RMB30,830 yuan, the Plaintiff Hin-pro International Logistics Limited shall bear 5,910 yuan, and the Defendant Chile South American Steamship Co., Ltd. shall bear 24,920 yuan. In case of dissatisfaction with this judgment, both parties may within 30 days upon the service of this judgment, submit a statement of appeal to the court, together with copies in accordance with the number of the opposite parties. The appellate shall be Zhejiang High People’s Court. (The appeal fee shall be RMB10,310 (the exact amount is determined by the Zhejiang High People’s Court, the excess part will be refunded in the future) and shall be paid before the submission of the statement of appeal. otherwise, the appeal will be deemed to be withdrawn automatically. Remittance: Non-tax Revenue Settlement Account of Zhejiang Province Finance Department. Number of accounts: 19000101040006575401001. Bank of accounts: Agricultural Bank of China West Lake branch of Hangzhou city. If no payment has been made within seven days after the expiration of the appeal period, the appeal shall be withdrawn automatically. Presiding Judge: CHEN Xiaoming Judge: XIAO Zibei Acting Judge: SHAN Yajuan November 19, 2014 Clerk: XU Meina

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Appendix: Relevant Laws 1. Maritime Code of the People’s Republic of China Article 71 A bill of lading is a document which serves as an evidence of the contract of carriage of goods by sea and the taking over or loading of the goods by the carrier, and based on which the carrier undertakes to deliver the goods against surrendering the same. 2. Provisions of the Supreme People’s Court on Certain Issues concerning the Application of Law to the Trial of Cases Involving Delivery of Goods without Original Bills of Lading Article 2 Where a carrier, in violation of laws, delivers goods without the original bill of lading (B/L), thus injuring the original B/L holder’s rights under the B/L, the original B/L holder may request the carrier to bear the civil liability for the resultant loss. Article 4 Where a carrier bears any civil liability for delivery of goods without the original B/L, the provisions of Article 56 of the Maritime Code relevant to limited compensation liability shall not apply. Article 6 The amount of compensation for the loss caused by a carrier to the holder of an original B/L due to delivery of goods without the original B/L shall be calculated based on the value of goods plus freight and insurance expenses when the goods are shipped. Article 14 In case the holder of an original B/L files an action on the ground that the carrier delivers goods without the original B/L, the provisions of Article 257 of the Maritime Code shall apply, and the time limit for statute of limitations shall be one year commencing from the date of delivery of goods by the carrier. If the holder of an original B/L, files an action involving tort on the ground that the carrier and a person who collects the goods without the original B/L jointly commit the act of delivery of goods without the original B/L, with regard to statute of limitations, the provisions specified in the preceding paragraph shall apply. 3. Law of the Application of Law for Foreign-related Civil Relations Article 10 Foreign laws applicable to foreign-related civil relations shall be ascertained by the people’s court, arbitral authority or administrative organ. If any party chooses the applicable foreign laws, he shall provide the laws of this country. If foreign laws cannot be ascertained or there are no provisions in the laws of this country, the laws of the People’s Republic of China shall apply.

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Zhejiang High People’s Court Civil Judgment Hin-pro International Logistics Limited v. Chile South American Steamship Co., Ltd. (2015) Zhe Hai Zhong Zi No.13 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 315. Cause(s) of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote Revoke lower court judgment allowing the Plaintiff freight forwarder to sue for delivery of goods without presentation of original bill of lading, as the Plaintiff failed to establish that it had actually suffered loss. Summary On appeal from the 2013 decision, South American Steamship Company appealed the judgment granting Hin-pro Company legal fees and loss of goods. After an analysis of the previous court’s rationale and decision, the Zhejiang High People’s Court reversed the lower court’s ruling and held that Hin-pro Company, as the holder of the original bill of lading, has the right to be the Plaintiff, the signature on the letter of guarantee did not belong to any subsidiary or person capable of signing the letter of guarantee, South American Company cannot be exempted from its delivery of goods without responsibility under the Provisions of the Supreme People’s Court on Certain Issues concerning the Application of Law to the Trial of Cases Involving Delivery of Goods without Original Bills of Lading, and that Hin-pro Company failed to establish that they actually suffered losses when the goods were delivered without the original bill of lading. The appeal was upheld and repealed the 2013 civil judgment and lowered required legal fees to be paid.

Judgment The Appellant (the Defendant of first instance): Chile South American Steamship Co., Ltd. Domicile: Plaza Sotomayor 50, Valparaiso, Republic of Chile. Legal representative: Hector Arancibia Sanchez, executive director. Agent ad litem: WANG Jun, lawyer of Guangdong WANG JING & Co. Agent ad litem: CHEN Xiangyong, lawyer of Guangdong WANG JING & Co.

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The Respondent (the Plaintiff of first instance): Hin-pro International Logistics Limited. Domicile: 801, sterling centre 11 Cheungyue Street, Laichikok, Kowloon, Hong Kong, the People’s Republic of China. Legal representative: SU Wei, chairman. Agent ad litem: GU Liaohai, lawyer of Beijing Liaohai Law Firm. Agent ad litem: ZHAO li, lawyer of Beijing Liaohai Law Firm. Dissatisfied with the Civil Judgment (2013) Yong Hai Fa Shang Chu Zi No.513 of Ningbo Maritime Court in respect of the case of dispute over contract of carriage of goods by sea in which the Appellant Chile South American Steamship Co., Ltd. (hereinafter referred to as “South American Company”) and the Respondent Hin-pro International Logistics Limited (hereinafter referred to as “Hin-pro Company”) were involved, the Appellant South American Company filed an appeal before the court. After accepting the appeal on January 8, 2015, the court formed a collegiate panel and held a hearing in public on February 5, 2015. WANG Jun, as agent ad litem of the Appellant South American Company, GU Liaohai and ZHAO Li, as agents ad litem of the Respondent Hin-pro Company, participated in the hearing. This case has been concluded now. On May 16, 2013, Hin-pro Company sued to the court of first instance that: at the beginning of March 2012, due to the need to purchase a batch of washing machine from Ningbo (China) to La Puerto Cabello (Puertocabello, Venezuela), the Plaintiff booked the cargo space with the defendant though its agency, Zhejiang Xuanhui International Freight Forwarding Limited (hereinafter referred to as “Zhejiang Xuanhui”) and discussed specific matters of transportation. The Defendant issued the original bill of lading (No. pbqlmdw00) on 9 April 2012 and goods would be shipped from China to Venezuela, involving a total of 5 containers of goods, valued USD381,600. The Defendant charged USD63,750 for marine transport and 23,480 yuan for incidental expenses. On June 10, 2012, the Plaintiff found the goods under the bill of lading had been unloaded on May 18 at the destination port, Cabello, and on May 31 had been delivered without the original bill of lading. The Plaintiff held that the Plaintiff was the shipper of the goods recorded in the bill of lading and therefore enjoyed rights for the goods under the bill of lading. The Defendant had the obligation based on the bill of lading to deliver the goods at the port of destination. However, the Defendant let the goods delivered without the bill of lading, which caused Plaintiff to suffer huge losses. The Plaintiff requested the court of first instance to order the Defendant to compensate its losses USD381,600 for the delivery of goods without the bill of lading, USD67,500 for the loss of freight, 25,710 yuan for transport fees, lawyer fee of RMB120 thousand yuan, and loss of exchange rate arising from the capital amount of USD449,100 since June 1, 2012 to the date of lawsuit calculated pursuant to the People’s Bank of China foreign exchange deposit rate over the same period (a loss of 100,015 yuan).

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South American Company defended in the first instance that: 1. Although the format of the bill of lading was the Defendant’s bill of lading, there was no evidence for the Plaintiff to prove that the Defendant was authorized to issue. The ship carrying the goods was not the Defendant or the bareboat charter carrier. The Defendant was nether involved in the bill of lading nor the actual carrier. 2. The Plaintiff alleged in the pleading that the booking was based on the commission of foreign clients, so the Plaintiff was the agent of the so-called foreign client, rather than as the shipper and the carrier signed a contract of carriage by sea. The Plaintiff need to provide the contract for the international sale of goods, export declaration which could prove its rights relating to the goods if the Plaintiff claimed as the shipper. But the Plaintiff did not provide evidence, so the Plaintiff was just the freight forwarder rather than the seller of the contract. 3. As for the statute of limitations, the statute of limitations for claiming the rights of the carrier was one year, and when the goods were paid or delivered by the Plaintiff, the Plaintiff had already exceeded the statute of limitations and should not be supported by the court. 4. The transfer records of the containers that the Plaintiff provide could only show the fact that containers circulate in the port, but could not explain the existence of delivery of goods without bill of lading. In the case that the Plaintiff could not prove the fact of delivery of goods without bill of lading, at most could only claim for loss of goods, and the carrier could enjoy the limitation of liability for maritime claims. 5. According to the legal requirements of the local discharge port, the goods must be submitted to the port authority after its arrival at the discharging port, then the carrier will lose control of the goods. During the booking process with the Defendant, the Plaintiff specially issued the letter of guarantee and committed that the carrier would be exempted from delivery of goods without bill of lading when the cargoes were delivered to the port authorities according to the local law and compensated the losses that the carrier suffered. The fact that the Plaintiff issued the letter of guarantee indicated that it was clear that the carrier could not control the goods and could not deliver the goods at the destination port.6. Even if compensation was needed, according to the law, the losses and damages of goods were limited in the CIF value of the goods itself, excluding other freight, lawyer fees and other items. In conclusion, the Plaintiff’s claim should be rejected. The court of first instance confirmed the following facts: On January 3, 2012, the Plaintiff as a seller of goods, signed the sale contract of built-in hob with Ruixika Company, which contract number was ve10279-c, the number of 3600, the price of USD106, a total of USD381,600, the price terms for the CIF of Venezuela, at the loading port of Chinese Ningbo, to the destination port of Venezuela Cabello. The way of payment was cash on delivery, which meant that the buyer paid all the goods to the seller within 10 days after the goods arrived at

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the destination, and the seller sent the original bill of lading and the attached documents to the buyer by express mail after receiving the payment. To transport the aforesaid goods, the Plaintiff made a booking to the Defendant, and through its Zhejiang office/agent, negotiated with the Defendant about the specific transportation items. The Defendant was commissioned to issue a full set of original bills of lading (pbqlmdw00) to the Plaintiff on April 9, 2012. Bill of lading stated that Hualing Company was shipper, Ruixika Company was consignee, Caribbean Company was notify party, from the loading port Ningbo to the destination port Venezuela La Bello, vessel name was cmacgmorca/00843/E, the name of goods for washing machine, the number of 3,600 cases, a total of 15 containers, container inku6321988, gldu7168110, caxu9069589, inku6225840 bsiu9142467, inku6301641, tghu8284560, gvcu5249040, caiu8442607, inku6228432, gesu6162744, fciu9103680, caxu8143207, gldu7134975, amfu8788715, and the bills of lading were issued by Ningbo Ocean Shipping Agency Company Limited on behalf of the accused. The goods were shipped from the port of Ningbo on April 9, 2012 and arrived at the port of destination cabelloin on May 18, 2012. On May 31, 2012, the goods involved were released without original bill of lading. The Plaintiff failed to claim against the Defendant and made a plea to the court at the cost of legal fees of RMB100 thousand yuan. The court of first instance held that the bill of lading was stated the dispute should be submitted to the London high court jurisdiction, but the Defendant’s domicile, the place of the contract performance, the place which the contract was signed, the Plaintiff’s domicile, the location of the subject matter was not agreed in the UK and the place of jurisdiction court under the jurisdiction clause of the agreement where had no actual connection with the case disputes should be confirmed invalid. The loading port of the goods was Ningbo of China, so Ningbo was departure place of transport and the court had jurisdiction in this district. Although it was stipulated in this bill of lading that the any related claims or disputes should apply to British law, both parties did not provide the British law. Meanwhile, both the Plaintiff and the Defendant were quoted the People’s Republic of China legal prosecution and defense, so the case should apply to Chinese law. The bill of lading was the proof of the contract of carriage of goods by sea, the receipt of the goods by the carrier and the certificate of the carrier’s delivery of the goods. The Plaintiff as the seller of the contract for the international sale of goods submit the consignment to the goods, holding the original bill of lading, should be deemed as the actual shipper of the maritime transport of goods. The Defendant as the carrier stated in the bill of lading, so the relationship of the contract of carriage of goods by sea between the Plaintiff and Defendant had established and had legal effect. The Defendant in this case provided the letter of guarantee issued by the Plaintiff about the delivery of goods without bill of lading, hoping to identify that before signing a contract of carriage of goods by sea the Defendant as the shipper had known Venezuela provisions on the delivery of goods without an original B/L. Therefore, the Defendant’s defense that the Plaintiff was a freight forwarder rather than the shipper lacked evidence and reason, which could not be supported by the court.

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According to the law, in case the holder of an original B/L files an action on the ground that the carrier delivers goods without the original B/L, Article 257 of the Maritime Code should apply, and statute of limitations should be one year commencing from the date of delivery of goods by the carrier. The goods arrived at the port of destination on May 30, 2012 and the carrier should deliver the goods on the day after that date. Hin-pro International Logistics Co., Ltd. on May 16, 2013 sued to the court, which did not exceed one year during the litigation. The accused’s defense against the Plaintiff’s litigation beyond the litigation period of proof and the court should not support it. The bill of lading was the certificate of delivery of the goods, even if the bill of lading was a straight bill of lading, the carrier still had the obligation to deliver documents. The container tracking information showed that the containers on May 31, 2012 have been delivered to the consignee by port (port to consignee) and on June 8 (consignee to port) had been returned to the port, which could preliminarily prove that the goods had been delivered to the consigner. The Defendant argued that in the case which the Plaintiff could not prove the delivery of goods without original B/L, it could most only claim for loss of goods, but did not provide the evidence of the loss of the goods, so the court should not support the defense. Because the original B/L was still hold by the Plaintiff, so the fact that the Defendant delivered the goods without an original B/L was established. As the shipper, the Plaintiff held the original bill of lading and had the right to require the carrier to bear the civil liability for delivery of the goods without the original bill of lading according to the contract of carriage of goods by sea, and the carrier did not enjoy the limitation of liability. The Defendant shall compensate for the loss of goods due to delivery of goods without an original B/L which amount calculated by goods amounting to USD381,600. According to the Plaintiff with foreign buyers Ruixika Company contracts for the international sale of goods, the goods price for CIF price, had been included in the freight, the Plaintiff claims the Defendant’s compensation payment of USD381,600 outside the shipping cost and freight, the person did not support. The Plaintiff’s lawyer fee of RMB100 thousand yuan, was the Plaintiff for their own rights and interests and the expenses, the amount was reasonable, the person should be protected; but its lawyers travel expenses 20 thousand yuan and foreign currency deposit exchange rate losses 100,015 yuan, did not provide the corresponding evidence, no legal basis for the trial. The court should not support. Although according to the law, the law stated in the bill of lading carrier in accordance with the unloading port where the provisions must be delivered to the carrier to Hong Kong goods to the local customs or port authorities, should not bear civil liability of delivery of goods without original bill of lading, but the carrier should bear that unloading port local legal obligations. In this case, although the Defendant only submitted a foreign testimony of Sabatino and written legal opinions, but firstly, the witness material not notarized, when the court issued proof of identity no translation, no academic works and related law firm recommended materials, not prove the identity of the witness and professional degree. Secondly, even if the legal identity of the expert witness could confirm from its offer of

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“Venezuela Customs Organization Law” Article 22 stipulated that: “the carrier shall deliver the goods to the person responsible for the approval of the public or private customs warehouse and the warehouse in a working day after unloading, or that the consignee or the consignee is the authorized agent of the people”, so the delivery object had public warehouse, private warehouse or the consignee three, did not see “must be delivered to the local customs or port authorities”. Finally, the legal opinion cited Venezuela Maritime Law Article 203, “since the carrier from the shipper or its agent or other competent departments have the right to receive the cargo, the goods shall be deemed supervision right has oversight of the carrier, the carrier of the goods in the delivery of the goods when the termination, delivered to: (1) when the consignee, the consignee did not directly receive the goods from the carrier, the carrier shall be in accordance with the contract law, the port of discharge or general trade practices to the consignee, or (2) according to the contract law, the port of discharge or as trade practice, the goods must be delivered to the relevant authorities or third parties.” However, the annex to the legal advice does not contain the Maritime Law of Venezuela, nor did it see the provisions of the act concerning the obligations of the carrier terminating the delivery to the port authorities or customs authorities. Therefore, the Defendant in accordance with the provisions of the law on the port of discharge, the carrier must deliver the goods to the customs or port authorities, did not assume the responsibility to defend the delivery of goods without evidence, and lack of reason, the court should not support. Pulling the threads together, as for the reasonable parts of the claims of the Plaintiff, the court supported it. According to Article 71 of the Maritime Code of the People’s Republic of China, Article 2, Article 4, Article 6 and Article 14 Paragraph 1 of the Provisions of the Supreme People’s Court on Certain Issues concerning the Application of Law to the Trial of Cases Involving Delivery of Goods without Original Bills of Lading, Article 10 of the Law of the Application of Law for Foreign-related Civil Relations, the judgment made on November 19, 2014 was as follows: 1. The Defendant, within ten days after the effective date of this judgment, should compensate the Plaintiff USD381,600, and the loss of the goods lawyer fee of RMB100 thousand yuan; 2. Reject other claims of the Plaintiff. If the monetary obligation is not fulfilled in accordance with Article 253 specified in the Civil Procedure Law of the People’s Republic of China, the debt interest during the delay of performance should be doubled. Court acceptance fee in amount of RMB30,830 yuan, the Plaintiff should bear 5,910 yuan, and the Defendant should bear 24,920 yuan. After the judgment, South American Company was dissatisfied with the judgment and appealed to the court that: 1. Letter of Sale and Supply Contract provided by Hin-pro Company was forged. Hin-pro Company was not the seller of involved goods and Ruixika Company was not the buyer of involved goods.

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2. Hin-pro Company was neither a contract shipper nor a actual shipper. It was only an affiliated company of Soar International Logistics Limited [Hongtai (Hong Kong) International Logistics Co., Ltd., hereinafter referred to as Hongtai Company]. 3. According to the provisions of the Venezuelan law, the goods involved must be handed over to the port authorities and South American Company did not have to bear the legal liability of delivery of goods without an original bill of lading. 4. On September 27, 2012, Hin-pro Company issued a letter of guarantee to South American Company to ensure that all the goods sent to Venezuela did not pursue the liability of South American Company for the delivery of goods without an original B/L. The validity of the letter of guarantee should not be denied. 5. Hin-pro Company lawyers claimed that there was no legal basis and should not be supported. In conclusion, South American Company requested to revoke the original judgment and reject Hin-pro Company’s first instance litigation claims. Hin-pro Company defended that: (1) Letter of Sale and Supply Contract were notarized and were confirmed by the effective judgment, which the effectiveness should be recognized. (2) Hin-pro Company commissioned the goods South American Company for shipment and paid the corresponding freight, so Hin-pro Company was the actual shipper. After the dispute occurred, in the correspondences with the Venezuelan local port company and the customs, South American Company clearly put forward that Hin-pro Company was the shipper of the goods involved, which also confirmed Hin-pro Company’s foresaid claims. (3) The letter of guarantee was issued by Shanghai Hin-pro International Logistics Co., Ltd, but without authorization. Meanwhile, the name of “YANG Jian” signed on the letter was not the same person as that of legal representative of Shanghai Hin-pro International Logistics Co., Ltd. The relevancy and legality of the letter of guarantee were not recognized. (4) Venezuelan law stipulated that there were three ways of delivery of goods to Hong Kong and it was not the only mandatory requirements to deliver the goods to the port authorities. South American Company could not be exempted from the liability of delivery of goods without an original B/L. (5) There were both grounds and judicial practice for the claims of lawyer fee. In conclusion, Hin-pro Company requested to dismiss the appeal and affirm the original judgment. During the second trial, South American Company provided three pieces of evidence to the court: (1) Statement issued by Ciberlux, to prove that Ciberlux was the buyer of the goods involved who directly signed the sales contract with the domestic seller and paid all the money. (2) Legal translation, the resume of Venezuela legal expert, to reinforce the first instance evidence 15-legal opinion and its annex and to prove the identity of foreign lawyers and the legal effect of their views. (3) Statement of the legal representative and the chairman of board of Ruixika Company, to prove that Ruixika Company never signed any sales contract with Hin-pro Company and never received any relevant packing lists or the commercial invoice issued by Hin-pro Company. Hin-pro Company cross-examined that evidence 1 did not

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belong to the new evidence, and even if there was business relationship between Ciberlux Company and domestic sellers, it could not deny the fact that the company as a trade intermediary obtain the ownership of goods involved. Evidence 2, 3 was corroborative evidence which could not prove its purpose of proof and its authenticity, legality and relevancy could not be recognized. Hin-pro Company submitted the following evidence: 1. Commission Agreement, Agreement on behalf of the retention and payment of commission and Statistics Report on coal industry commission, to prove that the company was Indonesia’s New Pacific Investment LTD. (hereinafter referred to as New Pacific Investment Company), providing information on the introduction of coal transactions, communication, intermediary services and New Pacific Investment Company paid Hin-pro Company commission. 2. Sales contract, commission deduction instructions, the notice on commission deductions, the form of invoice and the packing list issued by New Pacific Investment Company, to prove the fact that Hin-pro Company and New Pacific Investment Company reached the sales contracts on relevant home appliances, medical equipment, footwear and other goods involved and New Pacific Investment Company deducted the loan with retained coal commission 3. Three emails sent by South American Company to Hin-pro Company about booking, to prove that South American Company agreed Hin-pro Company to book in their own names or that of Hualing Company, Moonlight Company. 4. Moonlight Company’s case description, to prove that moonlight is the shipper of cargoes involved and it only agreed Hin-pro Company in its name to book from South American Company and obtain the relevant benefits. 5. Emails sent by South American Company to Hin-pro for claims, the civil petition field by South American Company to Wuhan Maritime Court, to prove that the claims of Hin-pro Company from the beginning to the end always include the loss of goods. 6. Emails sent by South American Company to Hin-pro Company on the freight fluctuations, to prove that South American Company in 2012 substantially increased the freight and it was the actual carrier of the goods. 7. Witness testimony made by ZHANG Bo, the deputy general manager of Hin-pro Company, to prove that Hin-pro Company signed a trade contract with New Pacific Investment Company and purchased goods from New Pacific Investment Company and resold to Ruixika Company. As for the evidence provided by Hin-pro Company, South American Company cross-examined that: (1) Registered name and place of New Pacific Investment Company registered name and registration were all false. New Pacific Investment Company did not exist, so the authenticity and legality of the evidence could not be recognized. (2) Firstly, New Pacific Investment Company did not exist. Secondly, the domestic exporter of Ningbo Lamo Electric Appliance Co, Ltd. (hereinafter referred to Lamo Electric Appliance) sold the goods for each 50 US dollars FOB to Ciberlux. New

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Pacific Investment Company sold the goods to Hin-pro Company as the price of 61.75 US dollars after buying from Ciberlux’s home. Ruixika company did not purchase from the local enterprise Ciberlux Company but from Hin-pro in Hong Kong, which did not meet the trade habit. Then, in the commission deduction instructions issued on January 5, 2012, the deposit included the form of invoice of xxx, but the invoice was issued on December 28, 2012 and the invoice did not exist at the time of the debit, which was inconsistent with the common sense. Finally, New Pacific Investment Company issued multiple copies of the packing list before the actual day, which violated the operation process of container transportation. There were many doubts in this group of evidence and did not have the authenticity. 3. The authenticity was recognized, but there was no association with the case. 4. Moonlight did not exist and there was no proof that Moonlight could enjoy the discount on the booking, so the authenticity and legality of the evidence were not recognized. The authenticity of evidence 5 and evidence 6 was approved, but did not have the relevancy. 7. The testimony of ZHANG Bo was inconsistent with the facts and did not have the authenticity. According to the application of South American Company, the court transferred the situation description from Lamo Electric Appliance which showed that Lamo Electric Appliance directly signed a trade contract with Ciberlux Company and the payment had been received. South American Company had no objection to the evidence, but Hin-pro Company defended that the fact of whether Lamo Electric Appliance received the payment was not relevant to the case. Even if Lamo Electric Appliance received the payment, it could not deny the fact that Hin-pro Company as a trade broker did not receive payment. After the examination of the evidence submitted by the two parties, the court holds that evidence 1—the statement of Ciberlux Company provided by South American Company was in accordence with the situation briefing transferred by the court from Lamo Electric Appliance. Lamo Electric Appliance would sell the goods to Ciberlux Company and the goods would be delivered by its freight forwarding company, Hongtai Ccompany, which the fact collaborates with the freight forwarding B/L issued by Hongtai Company, commercial invoices and customs declarations provided by Lamo Electric Appliance. Also, Hin-pro Company admitted in the second trial that there was a trade contract between Lamo Electric Appliance and Ciberlux Company, so the statement of Ciberlux Company and the situation briefing of Lamo Electric Appliance can be accepted. Evidence 2, during the second trial period, although South American Company provided the identification of the Venezuelan lawyer and related writings, in view of his lawyer’s professional identity and in the absence of authority or recommendation, his identity of legal expert cannot be recognized and the evidence cannot be admitted. Evidence 3—the description of the legal representative and director of Ruixika Company has been notarized. Since the sales contract between Hin-pro Company and Ruixika Company is not established (the specific reason will be elaborated in the judgment section), it is impossible for Ruixika Company to receive the relevant packing list and commercial invoice issued by Hin-pro Company and the evidence should be admitted.

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Evidence 1—Commission Agreement, Agreement on behalf of the retention and payment of commission and Statistics Report on coal industry commission provided by Hin-pro Company are all the agreements about other affairs between Hin-pro Company and New Pacific Investment Company, which is not relevant with the case and cannot to be accepted. Evidence 2—sales contract, commission deduction instructions and commission deductions received notice, a form of invoices and packing lists issued by New Pacific Investment Company, which has so many contradictions in them. The cross-examination of South American Company is reasonable and the evidence cannot be admitted. Evidence 3, 4, 6, South American Company has no objection to its authenticity and legality. The fact that Hin-pro Company used its own company name or borrowed the name of Hualing Company and Moonlight Company for booking exists and should be admitted. Evidence 5—the related legal documents, which the authenticity is recognized. Evidence 7—witness testimony of ZHANG Bo. Because he is the deputy general manager of Hin-pro Company and is also the legal representative of Shenzhen Hin-pro Logistics Limited who has interests with the case. His testimony is not objective, and the contents of his statement contradict with other evidence, which cannot be accepted. Although evidence 3—Sales Letter of Intent and supply contract provided by Hin-pro Company in the first trial are original, Jerson Salazar on behalf of Ruixika Company to sign contracts is not the legal representative and Hin-pro Company cannot prove that Jerson Salazar is legally authorized. Meanwhile, there is no record of any consultation about the signing of Sales Letter of Intent and supply contract, which is not consistent with common sense, so the evidence cannot be admitted. Evidence 9 provided by South American Company in the first instance— the proof of payment, related freight forwarding B/L, packing lists and commercial invoices issued by Lamo Electric Appliance are in accordence with the evidence transferred by the court, which should be recognized. The court of first instance made a mistake in the confirmation of the above two evidence and the court should correct it. The court of first instance found out the fact that Hin-pro Company booked from South American Company for the shipment of goods and South American Company negotiated with the local port warehouse after goods arriving at the port of destination, and finally the goods were delivered without an original B/L, which that both parties have no objection and confirm them. The court also finds out that: the goods under the bill of lading are that of the sales contract between domestic seller and Ciberlux Company in Venezuela and the domestic seller received the full payment paid by the Venezuelan buyer. Venezuelan buyers designated Hongtai Company to be responsible for the shipment of goods in the country. Hin-pro Company and Hongtai Company which belongs to the same controller are associated companies. The identify made by the court of first instance about the fact that Hin-pro Company as the buyer signed the sales contract with Ruixika Company is not proper and should be corrected. The court holds that South American Company is a company of Republic of Chile, so the case is a dispute concerning foreign affairs over the contract of

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carriage of foreign goods by sea. The B/L is stipulated in this bill of lading and the related any claim or dispute should apply British law, but the parties have not provided the British law, and both parties cited the People’s Republic of China law for the prosecution and defense, so it is proper that the court of first instance decided to apply the law of the People’s Republic for the trial and the court confirms it. According to the appeals and reasons of South American Company and the attorneys of opinions of Hin-pro Company, the issues of second instance of this case are as follows: 1. Whether the subject qualification of Hin-pro Company is eligible. 2. Whether Hin-pro Company issued the letter of guarantee which can exempt South American Company from legal liability of delivery without an original B/ L and whether the guarantee is effective. 3. Whether South American Company can be exempted liability of delivery without an original B/L by citing Article 7 of Provisions of the Supreme People’s Court on Certain Issues concerning the Application of Law to the Trial of Cases Involving Delivery of Goods without Original Bills of Lading. 4. Whether Hin-pro Company suffered losses. Both parties have no objection to the issues of the court. The analysis of issues of this case are as follows: 1. Whether the subject qualification of Hin-pro Company is eligible. Hin-pro Company alleged that it was the owner of the goods and the shipper of original B/L who had the right to request South American Company to bear the liability of delivery of goods without original B/L. South American Company argued that Hin-pro Company was neither the owner of the goods, nor the parties to the contract, who only was the associated company of the freight forwarding company, Hongtai Company and did not have the qualification of the Plaintiff. The court holds that B/L is the evidence of the contract of carriage of goods by sea. Hin-pro Company booked with South American Company through emails and paid freight and charges. South American Company issued B/L to Hin-pro Company stating Hin-pro Company as the shipper and the contract of carriage of goods by sea has been established between the two parties. Although South American Company denied the existence of the contract of carriage of goods by sea between the two parties, it did not provide the evidence to prove it, and the court does not support it. The goods were delivered at the port of destination and South American Company has no objection to its delivery of goods without an original B/ L. According to Article 2 of the Provisions of the Supreme People’s Court on Certain Issues concerning the Application of Law to the Trial of Cases Involving Delivery of Goods without Original Bills of Lading, Hin-pro Company as the holder of an original B/L enjoys the right to appeal to the carrier, South American Company, so Hin-pro Company as the subject of the case is eligible.

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2. Whether Hin-pro Company issued the letter of guarantee which can exempt South American Company from legal liability of delivery without an original B/ L and whether the guarantee is effective. South American Company contended that Hin-pro Company issued the letter of guarantee which was valid and South American Company could be exempted from liability of delivery of goods without an original B/L. Hin-pro Company alleged that the letter of guarantee was issued by Shanghai Hin-pro International Logistics Co., Ltd. and it did not have legal effect without its authorization. The court holds that South American Company in the first instance submitted the letter of guarantee inscribed in time on March 27, 2012. It stated that after knowing the fact that the goods sent to Venezuela would be allowed by local authorities and entities to be delivered by the consignee (or other third party) without the original bill of lading, which meant that the original B/L would not guarantee the control of goods under the contract of carriage of goods it proved, the guarantee confirmed that it was still willing to carry the goods to Venezuela and assume their own risk of delivery of goods without B/L at the destination port. The inscription of the letter of guarantee is signed the name of “YANG Jian” and is stamped with the English seal of Hin-pro Company. Although Hin-pro Company denied the fact that the letter of guarantee was issued by it or by Shanghai Hin-pro International Logistics Co., Ltd. with its authorization, there is no objection to the authenticity of the seal of Hin-pro stamped on the letter of guarantee. Therefore, the court holds that South American Company has reason to believe that the letter of guarantee is the presentation of true meaning of Hin-pro. On April 11, 2012, South American Company informed Hin-pro Company of requirements of the letter of guarantee that those customers who are not listed in the blacklist will be suspended shipment (goods shipped to Venezuela), which means that South American Company expressly stated that the goods shipped to Venezuela are not required to provide the letter of guarantee for delivery of goods without an original B/L. And the goods arrived at the port after the foresaid notices are sent. Therefore, South American Company contested in the lawsuit for exemption through the letter of guarantee and the court shall not support it. 3. Whether South American Company can be exempted liability of delivery without an original B/L by citing Article 7 of the Provisions of the Supreme People’s Court on Certain Issues concerning the Application of Law to the Trial of Cases Involving Delivery of Goods without Original Bills of Lading. South American Company contended that according to the Venezuelan law, the goods must be handed over to the port authorities after arriving at the port. According to the Provisions of the Supreme People’s Court on Certain Issues concerning the Application of Law to the Trial of Cases Involving Delivery of Goods without Original Bills of Lading, it did not need to bear civil liability for delivery without an original B/L. Hin-pro Company defended that the Venezuelan law did not stipulate that the goods must be handed over by the port authority and South American Company could not be exempted from the delivery of goods without an original B/L.

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The court holds that in accordance Article 7 of the Provisions of the Supreme People’s Court on Certain Issues concerning the Application of Law to the Trial of Cases Involving Delivery of Goods without Original Bills of Lading, if the carrier is obliged, according to the provisions of the laws of the place where the port of discharge is located stated in the B/L, to deliver the goods arrived at the port of discharge to the local authority in charge of customs or port, the carrier shall not bear the civil liability for delivery of goods without any original B/L. In this case, although South American Company provided the witness testimony of the Venezuelan lawyer, the identity of the witness legal expert could not be confirmed. Step back, even if the identity of the witness legal experts has been identified, according to the available “legal opinion” involved the Customs Organization Law of Venezuela Article 22, Venezuela Maritime Law Article 203, the delivery of goods, private object has public warehouse or consignee three, could not the goods must be delivered to the local customs of the port authority or conclusion. The company of America provisions according to local law must deliver the goods to the port authorities that did not provide sufficient evidence to prove effective, the court cannot be exempted from its delivery of goods without responsibility. 4. Whether Hin-pro Company suffered losses. Hin-pro Company claimed that it was the owner of the goods, which purchased the goods from New Pacific Investment Company and after that resold the goods to Ruixika Company, but suffered losses caused by South American Company due to the delivery of goods without an original B/L, so it required South American Company to bear the liability for compensation. South American Company argued that Hin-pro Company was not the owner of the goods which were exported to Ciberlux Company in Venezuela by the domestic seller and the seller had received all the payments, so Hin-pro Company had not suffered and it did not need to bear any liabilities. The court holds that in accordance with Article 3 of the Provisions of the Supreme People’s Court on Certain Issues concerning the Application of Law to the Trial of Cases Involving Delivery of Goods without Original Bills of Lading, where any loss is caused to the holder of an original B/L due to delivery of goods by a carrier without the original B/L, the holder may request the carrier to bear the liability for breach of contract or tort. In this case, Hin-pro Company claimed the loss of payments as the owner of the goods, but it confirmed that the goods were the goods which had been exported to Ciberlux Company in Venezuela by the domestic seller. At the same time, Hin-pro Company also contended that it purchased the goods from New Pacific Investment company. For this purpose, Hin-pro Company submitted the sales contract, commission agreement, commission deduction instructions and other evidence to prove its owner status. However, firstly, there are no specific agreements in the sales contract on the goods name, quantity, price, delivery time and other major terms of the contract and it is only stated that goods–home appliances and accessories, medical equipment, industrial parts, decoration materials,, shoes, furniture, kitchenware, clothing which detailed names and standards are subject to PROFORMAINVOICE, quantity—

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subject to PROFORMAINVOICE, unit price–subject to PROFORMAINVOICE, shipment period–2012 to 2013, specific time subject to PROFORMAINVOICE and so on. The contents of the sales contract are too simple to perform. Although the contract referred to Subject to PROFORMAINVOICE, it is also clear agreed that “PROFORMAINVOICE signed by the two parties signed consists of the part of this contract which has the same effect with the contract”. However, Hin-pro Company has so far failed to submit the so-called PROFORMAINVOICE. Also, there is a variety of goods agreed in Sales Contract, but there are not any consultation or order records of the two parties but the principle of the agreement, which the content cannot form the corresponding relationship with goods involved in the B/L. Secondly, Hin-pro Company contended that it had not paid New Pacific Investment Company, only paying the corresponding consideration as the way of commission discount. The coal business commission report submitted by Hin-pro Company was the materials made for the unilateral party and the authenticity of amount of the commission was difficult to confirm in the absence of real transaction contract. Therefore, the evidence supporting to prove the ownership of Hin-pro Company was insufficient. In addition, Hin-pro Company contended that the goods had been sold to another Venezuelan buyer Ruixika Company after purchased from Ciberlux Company in Venezuela. Hin-pro Company provided Letter of Sale and Supply Contract to prove its business relationship with Ruixika Company, but Letter of Sale and Supply Contract as the buyer’s signature only Jerson Salazar, and Jerson Salazar is a general employee of Ruixika Company, and Hin-pro Company has not proved that the employee has been authorized by Ruixika Company. Therefore, the authenticity and legality of Letter of Sale and Supply Contract are not yet available identified. Moreover, South American Company in the second instance provided the description of legal representative the directors of Ruixika Company, to prove that Hin-pro never signed any sales contract. Therefore, Hin-pro Company wanted to prove that there was a trade contract between Ruixika Company and it, which did not have enough evidence. Based on the above analysis, the court ascertains that the evidence submitted by Hin-pro Company is not sufficient to prove that it is the owner of the goods or it suffered losses. Therefore, there is no sufficient evidence for the claim which South American Company delivered the goods without an original B/L. In summary, Hin-pro Company failed to prove that it had suffered losses caused by South American Company due to the delivery of goods without an original B/L and its claims for compensation is without solid legal grounds. The appeal of grounds of South American Company are established and should be supported. The judgment of first instance is improperly determined and should be corrected. In accordance with Article 70 Paragraph 1 Sub-paragraph 2 of the Civil Procedure Law of the People’s Republic of China, and Article 2, Article 3, Article 6 of the Provisions of the Supreme People’s Court on Certain Issues concerning the Application of Law to the Trial of Cases Involving Delivery of Goods without Original Bills of Lading, the judgment is as follows:

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1. Revoke (2013) Yong Hai Fa Shang Chu Zi No.513 Civil Judgment of the Ningbo Maritime Court of the People’s Republic of China. 2. Reject the claims of Hin-pro International Logistics Limited. Court acceptance fees of first and second instances in amount of RMB30,830, shall be born by Hin-pro International Logistics Limited. The judgment is final. Presiding Judge: KONG Fanhong Acting Judge: HUO Tong Acting Judge: ZHENG Enliang October 22, 2015 Clerk: DING Lin (Editor’s Note: After this judgment of second instance, Hin-pro Internation Logistics Limited applied to the Supreme People’s Court for retrial of this case. The application was rejected in May 2016, which affirmed this judgment of second instance.)

Ningbo Maritime Court Civil Judgment Huarong Financial Leasing Company Limited v. China Construction Bank Zhoushan Dinghai Sub-branch (2015) Yong Hai Fa Shang Chu Zi No.996 Related Case(s) This is the judgment of first instance and the judgment of second instance and the ruling of retrial are on page 375 and page 393 respectively. Cause(s) of Action 238. Dispute over maritime security. Headnote The Plaintiff ship purchaser held entitled to recover under refund guarantee provided by the Defendant bank for advance installments paid to shipbuilder under construction contract that was not completed because of shipbuilder’s bankruptcy, rejecting bank’s argument that the Plaintiff and shipbuilder had fraudulently colluded to raise the ship’s price artificially. Summary The Plaintiff entered into a contract with a shipbuilder to build a new ship. The Defendant bank guaranteed to refund sums paid by the Plaintiff to shipbuilder if the shipbuilder did not complete the construction of the ship in accordance with the timetable set in the contract. After the Plaintiff had paid four of five installments to the shipbuilder, the shipbuilder was declared bankrupt. The shipbuilder’s administrator in bankruptcy did not declare that the contract should be completed, so it was rescinded by operation of law. The Plaintiff demanded payment from the Defendant bank under the refund guarantee. The Defendant bank refused to pay, alleging that the Plaintiff and the shipbuilder had fraudulently colluded to raise the price of the ship under construction. The court held that the price set in the construction contract was genuine, and that the Defendant was obliged to honor the refund guarantee.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_15

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Judgment The Plaintiff: Huarong Financial Leasing Company Limited Domicile: 6th and 7th floor of the World Trade Building, No.122 Shuguang Road, Hangzhou, Zhejiang. Code of organization: 73452166-5. Legal representative: Li Ping, chairman. Agent ad litem: XU Jianmin, lawyer of Zhejiang Hightac Law Firm. Agent ad litem: YANG Liping, lawyer of Zhejiang Hightac Law Firm. The Defendant: China Construction Bank Zhoushan Dinghai Sub-branch Domicile: No.38 West Jiefang Road, Dinghai District, Zhoushan, Ƶhejiang. Code of organization: 84873801-0. Legal representative: ZHOU Xiaochi, president of the Sub-branch. Agent ad litem: ZHOU Jianxin, vice president of the legal affairs department of China Construction Bank Zhejiang Branch. Agent ad litem: LI Wei, lawyer of Zhejiang Liuhe (Zhoushan) Law Firm. With respect to the dispute over maritime security filed by Huarong Financial Leasing Company Limited (hereinafter referred to as “Huarong Company”) against the Defendant, China Construction Bank Zhoushan Dinghai Sub-branch (hereinafter referred to as “Dinghai Construction Bank”) on September 28, 2015. The court, after accepting the case on the same day, formed a collegiate panel according to law. During the pleading period, the Defendant Dinghai Construction Bank made challenge of jurisdiction to the court and the court ruled rejection against the Defendant on November 4, 2015. The Defendant refused to accept the ruling and lodged an appeal. On January 6, 2016, the Zhejiang High People’s Court ruled to reject the Defendant’s appeal and affirmed the original ruling. The court heard the case in public on February 23, 2016, March 11, 2016 and April 15, 2016. The Plaintiff Huarong Company’s agents ad litem XU Jianmin and YANG Liping, the Defendant Dinghai Construction Bank’s agents ad litem ZHOU Jianxin and LI Wei appeared in court and participated in the lawsuit. Now the case has been concluded. The Plaintiff Huarong Company alleged that: on December 10, 2012, the Plaintiff as the lessor and the lessee Qingdao Xinwei Shipping Co., Ltd. (hereinafter referred to as “Xinwei Company”) concluded and signed a contract for financial lease. The subject matter of lease was a CCS Class 67000 DWT bulk cargo ship. On the same day, in order to fulfill the above-mentioned financial leasing contract, the Plaintiff concluded and signed a ship-building contract numbered Huarong lease (12) Zhi Jian Zi No.1200603104 with Zhejiang Zhenghe Shipbuilding Co., Ltd. (hereinafter referred to as “Zhenghe Company”) and Xinwei Company. The contract stipulated that the number of the ship under construction was ZH670069 and the total construction price was RMB224,000,000, payment by five instalment and per instalment was 44,800,000, the first four payments were advance payment of shipbuilding. Before the Plaintiff paid for the first instalment for advance payment of shipbuilding, Zhenghe Company should provide advance payment guarantee of

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ship issued by bank of Zhenghe Company in order to ensure that while the Plaintiff terminated the contract in accordance with the contract, Zhenghe Company could perform the obligation to refund the Plaintiff. On February 14, 2012, Dinghai Construction Bank issued advance payment guarantee of the ship numbered 2012-028 and promise bearing the joint liability guarantee for Zhenghe Company. The term of validity of the advance payment guarantee of the ship was until the date of deliver the vessel and not exceeding October 31, 2014. After signing the contract, the Plaintiff fully paid the first four advance payments of shipbuilding in total RMB179,200,000 in time in accordance with the contract for the construction of the ship. Due to the failure of Zhenghe Company to deliver the vessel on schedule by February 28, 2014 as agreed upon in the contract, the Plaintiff and the Defendant signed two supplemental agreement with Zhenghe Company on October 23, 2014 and April 20, 2015 to extent the time limit of delivery of the vessel till August 31, 2015. The Defendant’s guarantee period was extended to September 30, 2015, and the Defendant promised that if Zhenghe Company was unable to deliver the vessel, the Defendant should pay RMB 179,200,000 without preconditions for the Plaintiff’s claims within 10 working days. On June 30, 2015, the Zhoushan Dinghai People’s Court (hereinafter referred to as the Dinghai Court) ruled to accept the application of bankruptcy and reforming of Zhenghe Company. Zhenghe Company’s bankruptcy administrator did not notify the Plaintiff to continue performing the construction contract within two months from the date of acceptance of the bankruptcy petition, according to the Enterprise Bankruptcy Law of the People’s Republic of China, the contract for the construction of the vessel was deemed to be dissolved already. Zhenghe Company was not able to deliver the ship at the scheduled time and did not return the vessel’s advance payment to the Plaintiff, so as the joint and several liability guarantor of Zhenghe Company, the Defendant should assume the guarantee liability unconditionally in accordance with the law. It was hereby requested to order the Defendant to indemnify the Plaintiff: the Defendant Dinghai Construction Bank should immediately pay the Plaintiff shipbuilding advance payment RMB179,200,000 and pay the corresponding interest (in accordance with the benchmark lending rate of the People’s Bank of China over the same period, the date of the prosecution should be counted until the date of the performance of the judgment) and compensate the lawyer fee for the Plaintiff to realize the creditor right RMB100,000. Before the trial, the Plaintiff added claims to request to confirm the advance payment guarantee of ship of the vessel numbered No.2012-028 to be valid in accordance with the law. The Defendant Dinghai Construction Bank defended that: 1. The Plaintiff alleged that the Plaintiff fully paid the first four advance payments of shipbuilding in total RMB179,200,000 in time was inconformity with the facts. In fact, the aforesaid 85 million of advance payments of shipbuilding had been taken back by the Plaintiff. After Zhenghe Company received the advance payments of shipbuilding under the shipbuilding contract RMB44.8 million and advance payments of shipbuilding under ZH670070 RMB44.8 million (in total RMB89.6 million), and transferred to the related enterprises Qingdao Hongji

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Material Co., Ltd. (hereinafter referred to as Hongji Company) at 7 times in total RMB85 million from December 21, 2012 to December 28, 2012. After Hongji Company received the payment, Hongji Company immediately transferred the RMB85 million at 6 times to the Plaintiff Huarong Company in the name of repaying assignment of debt bore by the Plaintiff to Zhejiang Haijiang Engineering Company Limited (hereinafter referred to as Haijiang Company). When the creditor’s rights were transferred, Haijiang Company was insolvent, the above creditor rights accepted by Hongji Company could not be repaid at all. So the fact was that Hongji Company was cooperate with the Plaintiff to withdraw the vessel’s advance payment, this act was malicious collusion to acquiring Huarong Company’s non-performing assets. The refund guarantee and the supplementary agreement involved should be invalid. In fact, the actual cost of the ZH670069 vessel was significantly lower than the cost agreed upon in the shipbuilding contract. The Plaintiff and Zhenghe Company malicious collusion with each other. They artificially raise the cost of building the vessel in advance and withdrew the vessel’s advance payment afterwards to defraud the Defendant to issue the vessel payment refund guarantee. The refund guarantee and the supplementary agreement formed between the Plaintiff and the Defendant should be void. The fault of causing the contract null and void lied in the Plaintiff and Zhenghe Company, the Defendant should not be guilty of any fault and shall not bear liability for guarantee or other civil liability in this case. In addition, the letter of guarantee involved had been filed for confirmation of invalidation in the Dinghai Court. According to the shipbuilding contract, the Plaintiff was responsible for supervising construction of the vessel involved. The Plaintiff should be sufficient knowledge of the situation when Zhenghe Company was misappropriated and the shipbuilding contract was not effectively fulfilled. But the Plaintiff was indolent in exercising the contractual rights and ignore the inappropriate execution of Zhenghe Company and Zhenghe Company’s improper performance and put the cart before the horse and hope Zhenghe Company break the contract and through the Defendant’s guarantee to get compensation, thus to pass the market transaction risk. The Plaintiff was responsible for the failure to complete construction and advance payment for shipbuilding of the vessel, the Plaintiff failed to stop loss duty and there was no right to obtain payment through the guarantee. The Plaintiff declared the full amount of the claim to Zhenghe Company’s bankruptcy administrator in relation to the advance payment of RMB179,200,000 in shipbuilding. The bankruptcy proceedings of Zhenghe Company was not concluded yet, thus the case should be suspended. Even if the Defendant needed to be responsible for the case, the Defendant should bear the suretyship liability on the part of the Plaintiff which had not paid off at the end of the bankruptcy proceedings. The Plaintiff had no right to ask Dinghai Construction Bank to bear the liability for the full advance payment of the vessel. In accordance with the provisions of the Enterprise Bankruptcy Law of the People’s Republic of China, interest bearing ceased to bear interest since the application for bankruptcy. Therefore, even if the Plaintiff’s claim was

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established, the interest should be ceased since the application for bankruptcy day of Zhenghe Company. The effectiveness of the cease should remain in force of the contract of guarantee. Therefore, the Plaintiff claimed that interest was obviously lack of legal basis. In addition, the lawyers’ fee involved in the shipbuilding contract had not been agreed upon, and the lawyers’ fee was not covered by the guarantee, therefore, the Plaintiff’s claim for lawyers’ fee was also unfounded according to law. In conclusion, the Defendant requested the court to reject the claims of the Plaintiff Huarong Company. To support the claims, the Plaintiff Huarong Company presented the following evidential materials within the time limit for adducing evidence: First group of evidence: 1. Contract of vessel construction and contract of financial lease, to prove that on December 10, 2012, the Plaintiff as the lessor and Xinwei Company concluded and signed a contract for financial lease. The subject matter of lease was a CCS Class 67000 DWT bulk carrier. The total construction price was RMB224 million, the rent was paid in 120 installments. Zhenghe Company provided joint and several liability guarantees to the Plaintiff for Xinwei Company. In order to to fulfill the above-mentioned financial leasing contract, the Plaintiff concluded and signed a contract of ship construction Zhenghe Company and Xinwei Company. The contract stipulated that the delivery date of the vessel should be before or on May 31, 2017. And the total construction price was RMB224 million, with an average payment of RMB 44,800,000 in five installments, the first four payments quality were advance payment of shipbuilding, before the Plaintiff pay for the first installment for advance payment of shipbuilding, Zhenghe Company should provide the letter of indemnity on refunds of the advance payment of shipbuilding drawn upon by the bank in order to ensure that while the Plaintiff terminated the contract in accordance with the contract, Zhenghe Company could perform the obligation to refund the Plaintiff. 2. Vessel advance payment refund guarantee, to prove that the Defendant accepted the request of Zhenghe Company and agreed to provide joint and several liability guarantees to Zhenghe Company for the refund to the Plaintiff. The amount of the shipbuilding advance payment was RMB 179,200,000. 3. Four copies of payment documents for shipbuilding, to prove the Plaintiff fully paid the first four advance payments of shipbuilding in total RMB179,200,000 and in average 44,800,000 each time in time in accordance with the contract for the construction of the ship. 4. Zhoushan Dinghai Court of the People’s Republic of China Civil Ruling (2015) Zhou Ding Shang Po (Yu) Zi No.4-1, to prove that on June 30, 2015, the application for reorganization of Zhenghe Company was accepted by the Dinghai Court.

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5. Contracts for the construction of ships and supplementary letters of indemnity, to prove that Zhenghe Company was unable to deliver the vessel, the Plaintiff and the Defendant Zhenghe Company and Xinwei Company jointly signed the supplemental agreement to confirm the Plaintiff had already paid the first four advance payments of shipbuilding in total RMB179,200,000 and to extend the delivery of the vessel to July 31, 2015. Dinghai Construction Bank agreed to continue providing joint and several liability guarantees and the guarantee period was extended to August 31, 2015. The Defendant promised that if Zhenghe Company was unable to deliver the vessel, the Defendant should pay RMB 179,200,000 without preconditions for the Plaintiff’s claims within 10 working days. 6. Contracts for the construction of ships and supplementary letters of indemnity II, to prove that on April 20, 2015, Zhenghe Company was unable to deliver the vessel again, the Plaintiff and the Defendant Zhenghe Company and Xinwei Company jointly signed the supplemental agreement again to extend the delivery of the vessel to November 30, 2015 and the guarantee period was extended to December 31, 2015. 7. Refund letter of advance payment of the vessel construction contract, to prove that the bankruptcy administrator of Zhenghe Company did not notify the Plaintiff to continue to perform the construction contract within two months from the date of acceptance of the bankruptcy petition, the contract of construction was deemed to be relieved. On September 22, 2015, the Plaintiff sent letter to the bankruptcy administrator of Zhenghe Company to refund the money of building vessel and to pay the corresponding interest. 8. Notice of claim and attachment, to prove that Zhenghe Company did not return the money of building the vessel, on September 24, 2015, the Plaintiff claimed to the Defendant to refund RMB179,200,000 of advance payment of shipbuilding. 9. Vouchers and invoices of lawyer’s fees, to prove that in order to realize the creditor’s rights of the case, the Plaintiff paid RMB100 thousand to Zhejiang Hightac Law Firm. Second group of evidence: Shipbuilding contracts, the refund letters of advance payment of the vessel construction contract, certificates of ownership of Huarong 1, Huarong 2 and Huarong 3; to prove that during March 2011, Huarong Company entrusted Zhenghe Company to build 3 bulk cargo ship of 57,000 tons and the price of the vessel was RMB210 million. As the newly build new type vessel, the related 67,000 tons bulk carrier costs RMB224 million for building was the result was agreed upon after repeated haggling by the parties, so the price was real and reasonable and there was no problem of colluding with each other to raise the price of the ship. The three vessels were also provided with the advance refund guarantee by the Defendant, the three vessels had been completed and delivered without any dispute, which showed that the procedures of signing, performing and ensuring the vessel in this case were in line with the usual practice of the parties, and there was no intention or fact of collusion with each other.

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Third group of evidence: Letter of guarantee was entered into between Zhenghe Company and the Defendant; the first creditors’ meeting information issued by Zhenghe Company’s bankruptcy administrator; statement of claims filed by the Defendant to the bankruptcy administrator, to prove that according to the provisions of the Construction Bank internal rule of the relevant provisions of the letter of guarantee business and the letter of guarantee agreement, in order to get the payment of prepaid money involved in the letter of guarantee, Zhenghe Company had already provided the full amount counter guarantee to the Defendant, including real estate, the main sea right of assets, wharf, berth etc. all mortgaged to the Defendant. The total amount of the guarantee of this case and three guarantees of the other case was RMB501,700,000, and the amount of mortgaged property secured by was RMB509,930,000, the rights of the Defendant were adequately guaranteed and the risk of the guarantee had been fully and effectively controlled. The letter of guarantee was also stipulated that the guarantee was independent guarantee, the circumstances of the contract under the basic transaction should not affect the Defendant’s compensation. The Defendant had the right and duty to supervise the advance payment of the ship under the guarantee. After the Defendant provided the letter of guarantee, for Zhenghe Company, it received a high commission from Zhenghe Company and taking a huge profit, and the money was drawn from the vessel’s advance payment. The main reason why Zhenghe Company was in debt crisis was that in recent years, the domestic shipbuilding industry, especially dry bulk cargo ships, built capacity surplus and industry continued to slump, the main business profit was difficult to support the financial cost and eventually led to funding strand breaks. Fourth group of evidence: In July 28, 2013, to solve the financial difficulties of shipbuilding, Huarong Company, Zhenghe Company and Xinwei Company, signed an agreement for advance payment of the third phase of shipbuilding, to prove that the Defendant knew the fact that the third phase of shipbuilding was paid in advance. This showed that Dinghai Construction Bank had already known that the funds had been diverted and the funding gap had been exposed, but they had not strengthened their regulatory obligation to make it earmarked, Instead, the money continued to be diverted, and there was marked fault of Dinghai Construction Bank. Fifth group of evidence: Basic information of Hongji Company, the agreement on transfer of creditor’s rights signed by the Plaintiff and Hongji Company, (2012)Yong Hai Fa Shang Chu Zi No.93 Civil Mediation of the court, (2012)Yong Hai Fa Zhi Min Zi No.69 Notice of Acceptance of Application for Enforcement, (2013)Yong Hai Fa Shang Chu Zi No.380 Civil Mediation and pleading of the case, Application for amendment of the claim, consents, The People’s Government of Dinghai District of Zhoushan asked for further support for the bankruptcy reorganization of Zhenghe Company, agreement, Hongji Company undertaking and RMB6 million payment voucher, on

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December 22, 2015, Zhenghe Company applied the Dinghai Court before the preservation of the application, etc. The group of the evidence proved that: the original debtor of Huarong Company, Haijiang Company and ZHUANG Lihong, LI Guoliang, GU Yadi, Sanmen Jiantiaogang Ship Repair Co., Ltd. (hereinafter referred to as “Jiantiaogang Company”) and the guarantors enjoyed RMB89,639,425.18 of creditor’s rights, which was true, lawful and effective. On December 12, 2012, Huarong Company transferred the creditor’s rights of Haijiang Company at the price of RMB85 million to Hongji Company. The intention of both parties was true, lawful and effective, and had nothing to do with the letter of guarantee involved. After the transfer of the above claims, the parties agreed not to notify the debtor orally, and Huarong Company would continually collect the debt with the debtors. Huarong Company sued at the court (2013) Yong Hai Fa Shang Chu Zi No.380 to continually claim debts. With the consent of Hongji Company, the case of mediation for the amount was RMB14 million. While transfer the creditor’s rights, Haijiang Company and the guarantor were not bankrupted, it was still possible and conditional to obtain payment of the transferred creditor’s rights. Besides, on December 23, 2015, requested by the People’s Government of Dinghai District, Huarong Company paid RMB6 million to pay the social security costs of the staffs of Zhenghe Company during the bankruptcy reorganization period to Dinghai District Cengang Street Collective Assets Management Co., Ltd. (hereinafter referred to as “Cengang Company”). Hongji Company issued the commitment letter that Hongji Company recognized the approval of the facts of the transfer of the creditor’s rights of the claim fact from first to last assignment. And Dinghai District government, Dinghai Construction Bank were also knowing and recognized, there was non-existent that the Plaintiff colluded with Zhenghe Company and Hongji Company. Sixth group of evidence: Debt transfer agreement issued by Huarong Company and Zhoushan Baijie Trading Co., Ltd. (hereinafter referred to as “Baijie Company”); the indictment of Huarong Company claiming the debtor, Zhejiang Haiyu Shipping Trading Co., Ltd. (hereinafter referred to as “Haiyu Company”) and the security WANG Jiacheng, WU Haina, Civil Ruling (2012) Yong Hai Fa Zhou Shang Chu Zi No.27 of the court, Application of withdraw, the indictment of lawsuit of Huarong Company on September 28, 2015, notification of acceptance of the case, summons, two copies of joint and several guarantee letter issued by Baijie Company, to prove that: on December 17, 2013, Huarong Company transferred the creditor’s rights it owned to Haiyu Company at the price of RMB79,990,000 to Baijie Company at the price of RMB63,600,000. The meaning of both parties was true, lawful and valid. After the transfer of the above claims, the parties agreed not to notify the debtor orally, and Huarong Company would continually collect the debt with the debtors. So Huarong Company sued at the court about the dispute over financial leasing contract numbered (2012) Yong Hai Fa Zhou Shang Chu Zi No.27 and (2015) Yong Hai Fa Shang Chu Zi No.1027, to prove the authenticity of the transferred creditor. And when the creditor’s rights were transferred, Haiyu Company and its surety Zhejiang Hengyu Shipbuilding Co., Ltd. (hereinafter referred to as “Hengyu Company”).

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There was no bankruptcy at all and there were still assets available for enforcement. On January 25, 2015, Baijie Company voluntary commited to bear joint and several guarantee on refund of ship advance payment and corresponding interest for Zhenghe Company. Seventh group of evidence: Civil Ruling of (2015) Yong Hai Fa Shang Chu Zi No.996 of the court, petition submitted by Dinghai Construction Bank for jurisdiction, Civil Ruling of Zhejiang High People’s Court (2015) Zhe Xia Zhong Zi No.230, to prove that Dinghai Construction Bank put forward the application for challenge of jurisdiction, objection and appeal to the court, the two related advance payment refund guarantee of the vessel were independent guarantees, unaffected by basic legal relations. Eighth group of evidence: Bank journal of Zhenghe Company, statement of commencement and commencement of use of the four vessels numbered ZH670069/70, ZH670076/77, the partial exchange memo which Zhenghe Company used the payment of the vessel to pay the interests of loan to Dinghai Construction Bank. The above evidence showed that: the special shipbuilding payment paid by Huarong Company was embezzled RMB900 thousand to repay interest on the Defendant’s loan and embezzled to returned the sub loan of Dinghai Financial Security Company RMB30 million. The money was also used to engage in large transactions with third parties, individuals or companies (such as Haitong Company of Zhoushan Port RMB40 million, LIU Yukun RMB15 million). After that, the money for the two vessels started into force and went into operation RMB more than 180 million was total and large transferred to the associated company such as Baijie Company in 7 days by Zhenghe Company. The Defendant should be informed of this. There were serious faults of the Defendant in the regulation of the money of building vessel, or even deliberate collusion. It was because the special money of building vessels was heavily diverted and that led to four vessels construction funding gap amounted to about RMB300 million. Ninth group of evidence: Two notice of declare of creditor’s rights, to prove that on November 7, 2015, the Plaintiff notified the Defendant to declare the creditor’s rights to the administrator of Zhenghe Company on two vessels numbered ZH670069/70, and agreed that if the Plaintiff was discharged by the Defendant in this case, the right of compensation of the corresponding bankruptcy claim which was limited to the scope of the Plaintiff’s payment should be transferred to the Defendant. Tenth group of evidence: According to the Plaintiff’s application, the court retrieved the credit of bankrupt declaration form of the above mentioned third group of evidence from Zhenghe Company and bankruptcy administrator of Zhenghe Company. Besides, the court retrieved the original copy of the condition form of the money for the four vessels start into force and go into operation numbered ZH670069/70, ZH670076/77 and

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made an investigation record of the corporate finance chief inspector of Zhenghe Company LU Fang. The Plaintiff had no objection to the evidence of this group and reckons that these evidence could prove that the Defendant signed a capital supervision agreement with Zhenghe Company on the advance payment of shipbuilding under the letter of related guarantee, the use of advance payments for vessels with Zhenghe Company must be agreed by the Defendant, Zhenghe Company mortgaged all the assets to the Defendant and signed more than one copy of the total amount of the mortgage contracts including the amount of credit included in the advance payment of the covering letter of guarantee. The Defendant’s right of recourse under the letter of guarantee of this case would be fully guaranteed. Zhenghe Company had informed the Defendant’s governor and business manager of the transfer of creditor’s rights to Baijie Company of RMB63,600,000, the Defendant was informed without demur. Eleventh group of evidence: 1. Bill of complaint and list of evidence in subrogation litigation of Zhenghe Company claimed at the Dinghai Court, 7 vouchers of bank that Zhenghe Company paid RMB85 million to Hongji Company, to prove the assignment of claims of RMB85 million that Zhenghe Company paid to Hongji Company was paid from Zhenghe Company’s basic account of the Construction Bank, Ningbo Merchants Bank and Zhoushan ICBC and other bank accounts of their own sufficient funds, not from the shipbuilding specific regulatory account tail numbered 3101. So the money was not the source of payment from Huarong Company ZH670069/70 vessels shipbuilding section. Huarong Company did not make it clear whether the money was from Zhenghe Company or any other company related after received the money of assignment of creditor’s rights paid by Hongji Company. Hongji Company based on the transfer of creditor’s rights had been sued in Dinghai Court for right of subrogation, it proved that Hongji Company, Huarong Company and the bankrupt administrator of Zhenghe Company recognized the validity and validity of the transfer of the creditor’s rights. 2. Ensure business practices and ensure internal management procedures of the Construction Bank, to prove that Construction Bank provided strict form examination and substantive examination for issuing bank guarantee. 3. Two judgments of the other courts, to prove that according to the previous trial practice, if the transfer of the creditor’s rights did not notify the debtor, the transfer effect between the assignor and the assignee should not be affected. After the court cross-examination, the Defendant Dinghai Construction Bank considered the evidence provided by the Plaintiff that: About the first group of evidence, there was no objection for the Defendant to the evidence 1 to 8. There was no objection to the authenticity and legality of evidence 9, but it was not as the basis for supporting the Plaintiff’ lawyer’s fee. About the second group of evidence, there was no objection to the authenticity and legality of the evidence, but there was no relevancy to this case. In March 2011, the Baltic Index (BDI) at the time of the signing of the three vessel construction

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contracts was around 1530 points, the index continued to decline during the following year. The construction price of the vessels should fall by December 2012, but the cost of the four involved vessels did not decline but to raise up, it showed that Huarong Company and Zhenghe Company raised the vessel price artificially and then withdrew the shipbuilding funds, this was an objective situation reflected by the verification opinions of Zhenghe Company’s bankruptcy administrator. About the third group of evidence, there was no objection to the authenticity and legality of the evidence, but there was objection to the relevancy, it was impossible to prove the facts of the Plaintiff’s proof. The adequacy of the counter guarantee provided by Zhenghe Company and the rate of repayment of the bankrupt creditor’s rights, there was no relation between the validity of the letter of guarantee agreement and the advance payment letter involved. The letter of guarantee agreement did not stipulate that the letter of guarantee involved was an independent guarantee, only agreed when the claim occurred, the Defendant could make an independent judgment on whether the payment was made or not. Supervision of special funds for shipbuilding stipulated in the agreement, it was rights, not obligations, and the Defendant could only achieved formal supervision. The method of malicious collusion between the Plaintiff and Zhenghe Company to withdraw the advance payment of shipbuilding had gone beyond the scope of formal supervision. The Defendant’s fee for the letter of guarantee involved was only 4‰ per year, charged on a monthly basis. Up to now the Defendant only received RMB761,600, from the ZH670069 vessel. It was far from what the Plaintiff’s called “big profits”. About the fourth group of evidence, there was no objection to the authenticity and legality of the evidence, but there was objection to the relevancy, The agreement could not prove that Dinghai Construction Bank knew and agreed that the vessel was misappropriated at that time. Money was tight with Zhenghe Company at the time. Huarong Company agreed to advance payment of the third phase of shipbuilding, which would help Zhenghe Company to promote vessel construction smoothly. The agreement was signed before the Dinghai Construction Bank seal, Dinghai Construction Bank seal only showed that the money had been received, there was no existence that the Defendant was informed and agreed to the appropriation of the vessel by Zhenghe Company. About the fifth group of evidence, there was objection to the authenticity and legality and the relevancy of the debt transfer agreement of Hongji Company. There was no objection to the authenticity and legality of the rest of evidence, and there was disagreement about the relevancy. It was particularly important to note that Haijiang Company and Hongji Company’s business licenses were revoked as early as December 10, 2012. The creditor’s rights transfer agreement was invalid because of the violation of the mandatory provisions of the laws and regulations. The transfer of claims was the means of the Plaintiff to withdraw the advance payment of the vessel, it was the transfer of false claims, it did not notify the debtors, and the price was virtual high. After the transfer of the creditor’s rights, Huarong Company was still collect, claim and apply for enforcement in its own name, the letter of acceptance was entirely for the action of this case, and then it was not entrusted with the fact that the Defendant would not approve it. The debtor Haijiang

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Company and the guarantor Jiantiaogang Company were unable to pay hundreds of billions of debt and were exploded by the court, the creditor’s right belonged to the inferior creditor’s rights and had no transfer value, and there was no possibility of continued repayment. RMB6 million which Huarong Company paid to Cengang Company was the local government borrowed from Huarong Company for the sake of difficulties, there was no relationship with Hongji Company, the commitment letter issued by Hongji Company was the false evidence issued by Hongji Company in conjunction with Huarong Company. About the sixth group of evidence, there was objection to the authenticity and legality and the relevancy of the debt transfer agreement of Hongji Company and Baijie Company. There was no objection to the authenticity and legality of the rest evidence, and there was disagreement about the relevancy. Although Huarong Company claimed RMB79,990,000, but the actual debt confirmed by the bankruptcy administrator of Hengyu Company was RMB 63,540,000, which was basically the same to the transfer price of Baijie Company. In order to reduce the bad assets at the end of the year, Huarong Company transferred at almost the same price RMB63,600,000 to Baijie Company. Baijie Company was also inconsistent with the full transferee of the bad debt. In the end, RMB8,130,000 of the debt repaid was still collected by Huarong Company. The debt transfer agreement was a means of withdrawing the ship’s advance payment by Huarong Subsidiary Company through Huarong Company. The transfer price of the debt was a virtual high enough to be repaid. Without informing the debtor, it belonged to the assignment of false creditor’s rights. There was no evidence to prove that Baijie Company entrusted Huarong Company to collect the money, although Haiyu Company and the other guarantee was not bankrupted, but according the proof of the evidence by the Defendant, several tens of millions of debt failed to carry out and was court exposed. The existence of the so-called transfer of creditor’s rights could not be objective. About the seventh group of evidence, there was no objection to the authenticity and legality of the evidence, but there was objection to the relevancy, the letter of guarantee could not be proved to be an independent guarantee. The second instance ruling had clearly not support the statement of independent guarantee, instead, the letter of guarantee should be the guarantee contract of the contract for the construction of the vessel, and the guarantee should be the priority of the vessel under the contract. About the eighth group of evidence, there was no objection to the authenticity of the bank journal of Zhenghe Company, statement of commencement and commencement of use of the four vessels numbered ZH670069/70, ZH670076/77, but there was objection to the relevancy and legality of the evidence. There was objection to the authenticity and legality and the relevancy of the partial exchange memo which Zhenghe Company used the payment of the vessel to pay the interests of loan to Dinghai Construction Bank, but there was disagreement about the relevancy. This part of evidence did not prove that shipbuilding advances were used to repay the loans of Dinghai Construction Bank. For loans to Zhenghe Company, the Defendant did not draw the loan lending after withdraw the loan. Interest on loans

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was the normal financial cost and capital cost of an enterprise in a company’s operations, expenses were normal in shipping payment. There was no such thing as the Plaintiff claimed the Defendant’s supervision of funds, faults or laissez faire. About the ninth group of evidence, the Defendant could not confirm the authenticity of the evidence, and there was objection to the facts of the case. In the case of insolvency of Zhenghe Company, the discharge rate was very low. The Plaintiff had declared the claim, even if the Defendant was liable for the warranty, the Defendant should only assume the insufficient liquidation part of the main debtor. About the tenth group of evidence, there was no objection to the authenticity and legality of the evidence, however, there was objection to the content of the transcripts and the facts to be proved. The respondent alleged that all the assets of Zhenghe Company were mortgaged to the Defendant, which was not in accordance with the facts. It was most, rather than all, did Zhenghe Company mortgaged to the Defendant, there were still some equipment such as two gantry crane did not mortgaged. It was not the fact that the respondent said RMB63,600,000 debt transfer agreement was signed while given to the Defendant, in fact, it was after the verification report was issued by the administrator, did the Defendant asked for exactly what it wanted from Zhenghe Company. About the eleventh group evidence, evidence 1 was the copy and it could not confirm the authenticity. RMB85 million was not paid in the shipbuilding account, but from the time of the payment, it was after Zhenghe Company received the money from Huarong Company, they transferred the money to Hongji Company. So the Defendant held that there was an association with the shipbuilding money. Evidence 2–3 was not the evidence of facts, it should be considered according to the specific case. To support the defenses, the Defendant presented the following evidential materials within the time limit for adducing evidence: 1. Agreement of issuing the letter of guarantee, to prove that in December 14, 2012, the Defendant signed a letter of guarantee with Zhenghe Company, to issue a vessel advance payment refund guarantee to the Plaintiff for the vessel numbered ZH670069 constructed by Zhenghe Company; 2. Ship advance payment refund guarantee, to prove that the amount of the guarantee was RMB179,200,000, the guarantee method was joint and several liability guarantee, the scope of the guarantee was only for refund of shipbuilding advances, excluding interest and lawyer’s fee; 3. Construction contracts of the vessel and two copies of supplemental agreement of guarantee, to prove that on October 23, 2014 and April 20, 2015, Dinghai Construction Bank issued two copies of supplemental agreement of guarantee of the above said money with the Plaintiff. The extension of the time of delivery of the vessel and the corresponding guarantee period were agreed; 4. Civil Ruling of the Dinghai Court on (2015) Zhou Ding Shang Po (Yu) Zi No.4-1, to prove that on June 30, 2015, the Dinghai Court had ruled and accepted the reforming and bankrupting of Zhenghe Company;

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5. Two copies of the verification opinions on shipowners’ related matters under the guarantee of Dinghai Construction Bank; 6. Contract of the construction of the vessel. The above two evidence proved that the bankruptcy administrator of Zhenghe Company issued two copies of verification opinions, affirmed that the Plaintiff withdrew their claim in the form of debt transfer, under which ZH670069/70 of RMB85 million and under ZH670076/77 of RMB63,600,000. According to the stipulation of the fifth clause of the shipbuilding contract, the Plaintiff had the duty to supervise the vessel, however, the cost of the vessel contracted by Huarong Company and Zhenghe Company was virtual high. The cost of virtual high limit under the ZH670069/70 was RMB85 million, under ZH670076/77 was RMB63,600,000 which was withdrew by the Plaintiff. 7. Civil Judgment of the court (2012) Yong Hai Fa Quan Zi No.31, to prove that the Plaintiff possessed the rent and other debt claim of Haijiang Company RMB89,639,425.18. 8. Business information of Haijiang Company, court person subject to enforcment information, to prove that when the agreement concerning the transfer of the creditor’s rights was signed (December 12, 2012), Haijiang Company had a business license revoked by the administration industry and commerce (December 10, 2012). Besides, in July 2012, Haijiang Company was unable to pay RMB250 million of debt and had been exposed online by the Executive Board of the Court. The implementation of the amount of exposure of Haijiang Company at sea reached RMB2.8 million, which had been badly insolvent. It was impossible for Huarong Company to get paid to farm-in the creditor’s debt. 9. Notice of claim, to prove that on September 24, 2015, the Plaintiff issued a claim to Dinghai Construction Bank, formally for RMB179,200,000 advance payment of shipbuilding under the covering letter of indemnity. 10. Zhenghe Company’s first creditors’ meeting information, to prove that the Plaintiff declared the claim to the trustee of Zhenghe Company, Zhenghe Company’s bankruptcy process was not over yet, the amount of the Plaintiff’s allocation had not been determined, the Defendant should not be claimed in this case. 11. Notification of acceptance of case of Dinghai Court, notice of payment, civil pleadings, to prove that Dinghai Construction Bank filed a lawsuit to Dinghai Court in January 2016 confirming the invalidity of the letter of guarantee involved. The Defendants were Huarong Company and Zhenghe Company, Dinghai Court accepted the case numbered (2016) Zhe 0902 Min Chu No.00173. 12. Two copies of civil rulings, to prove that the objection of the jurisdiction of Huarong Company to the Dinghai Court was rejected. 13. Details of the collection and loan of Zhenghe Company of the Defendant, to prove that the Defendant did not have a loan for granting the loan to Zhenghe Company.

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14. Business information of Jiantiaogang Company, the performance exposure information of the court, to prove the related guarantor of Haijiang Company and Haiyu Company both had huge debts. The guarantors of Haijiang Company ZHUANG Lihong, LI Guoliang, and Jiantiaogang Company had a debt of RMB2.5 million. The guarantors of Haiyu Company WANG Jiacheng, WU Haina, the debt was more than 27 million, and the corresponding claims could not be repaid continually. 15. Seven copies of the bank receipt, to prove that Zhenghe Company paid the Dinghai District Economic Guarantee Corporation RMB15 million, and Dinghai Construction Bank 900,000 interest was paid from the account No.1800 of the account of the Construction Bank, rather than the shipbuilding account. 16-17. Four copies of the cooperation agreement on closed management of funds for export ship construction projects (hereinafter referred to as the “capital supervision agreement”), 4 copies of the mortgage collateral contract, the two evidence was based on the Plaintiff's application and the court ordered the Defendant to provide it. 18. Two copies of civil rulings of Zhoushan Intermediate People’s Court (2016) Zhe 09 Min Xia Zhong No.10, No.11, to prove the jurisdiction of the three cases of the Dinghai Court, which was related to the four cases of the court, had been affirmed by the court of second instance. For the evidence provided by the Defendant Dinghai Construction Bank, the Plaintiff Huarong Company held the opinions of cross-examination as follows: There was no objection to the evidence 1–4, 6, 7, 9. Regarding evidence 5, the Plaintiff only acknowledged the authenticity of No.8 verification opinion. There was objection to the authenticity, legality and relevancy of No.9 verification opinion. It was without a seal, and was issued by the Defendant’s unilateral request, the words were incorrect, and the conclusion was arbitrary. No.8 verification opinion did not mention any unusual phenomena of capital exchanges. The two verification opinions on Zhenghe Company and Hongji Company of the RMB85 million of financial transactions, the amount of time inconsistent with the description was paradoxical. The assignment of debt had no relationship with the ZH670069/70 vessel paid for by the Plaintiff. The Defendant’s claim that the Plaintiff could withdraw the vessel’s money in the form of the transfer of the claim could not be established. The contract of vessel construction was reasonable in cost, when the Defendant issued the letter of guarantee, it was in accordance with its strict regulations and internal review procedures, the matter, including the cost, was carefully analyzed before deciding. Although the contract agrees that the Plaintiff had the right to supervise, the limit of supervision of the Plaintiff was only about shipbuilding progress and quality supervision, it was not the Plaintiff’s responsibility to regulate the shipbuilding money and the Defendant could not shirk the direct supervision responsibility for shipbuilding funds. Regarding evidence 8 and 14, there was objection to the authenticity, legality and relevancy. The Defendant downloaded and printed it online by themselves and did

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not notarize it. While signing the transfer of creditor’s rights agreement, the Plaintiff did not know Haijiang Company had been revoked and the business entity still existed. The largest claim for financial lease was the finance lease vessel, the creditor could claim title to the leased property and could also be held accountable for the shareholders of the company as well as the guarantor’s security responsibility. It was impossible to prove that the transfer of the creditor’s rights could not be repaid. Huarong Company commissioned by Hongji Company sued Haijiang Company and the case number was (2013) Yong Hai Fa Shang Chu Zi No.380, confirming that the Plaintiff could receive RMB14 million in compensation according to law. It was proof that the transferred creditor’s rights had the property to be repaid. Regarding evidence 13, there was objection to the authenticity, legality and relevancy, it was a statement made by the Defendant unilaterally, and it was not in conformity with the formal requirement of the evidence. There was no corresponding evidence to support it. Regarding evidence 15, Zhenghe Company paid Dinghai Economic Security Company RMB15 million, it was obvious that Dinghai Economic Security Company repaid the loan of Zhenghe Company which fully explained that the shipbuilding money was misappropriated. Evidence 16–17 was that the Plaintiff applied for the court to order the Defendant to provide, the Plaintiff held that from evidence 16, the fund supervision agreement could be seen that the shipbuilding funds of the involving four vessels had the nature of earmarking, the Defendant should fulfill strict supervision obligations of closed funds to ensure all the funds are used for shipbuilding projects in accordance with the main contract. As stipulated in the seventh clause of the agreement, the use of each closed fund should be submitted by Zhenghe Company, indicating the real purpose, should attach the copies of the purchase contract and the list of relevant agreements, and could be paid after approval by Dinghai Construction Bank. The eighth rule stipulated that Zhenghe Company was obliged to provide timely payment of the information or information required by Dinghai Construction Bank for the purpose of determining whether the payment was earmarked for the purpose of the payment of the application, Dinghai Construction Bank had the right to approve or disapprove of a certain payment application, had the right to audit and check every payment already paid, and challenge the relevant personnel, the original materials for each money paid by the treasury to verify, had the right to use the situation to determine whether the funds in the special account and ship construction plan to further support from too many, had the right to stop the use of project funds, some measures should be taken to stop payment or re plan cash flow. The eleventh rule stipulated that when the following circumstances occurred, Dinghai Construction Bank had the right to stop Zhenghe Company and the supervision of the funds: 1. A significant deviation from the use of funds or a serious departure from the capital usage plan; 2. It was considered that shipbuilding progress report showed significant problems in shipbuilding quality or failed to perform according to shipbuilding contract standard;

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3. Credit was declining with Zhenghe Company’s breach of other banks or breaches; 4. Financial deterioration; 5. Zhenghe Company provided false information, data, or information. Obviously, Dinghai Construction Bank had not reached the responsibility of fund supervision, and it should be undertaken by its own responsibility when it was diverted. Evidence 17 anti-guarantee mortgage contract, the Plaintiff held that Zhenghe Company could have pledged most of its assets to Dinghai Construction Bank, in issuing the guarantee, Dinghai bank had sufficient protection, however, the risk of the guarantee was in a laissez faire state. As for the above evidence provided by the Plaintiff and the Defendant, the court holds that, the evidence which the Plaintiff Huarong Company provided, in addition to the two copies which in the fourth and fifth group of the evidence of the creditor’s rights transfer agreement and the authenticity of the ninth group of evidence, the Defendant, Dinghai Construction Bank had no objection to the authenticity of the remaining evidence, and the court will identify them. The two creditor’s rights transfer agreements and other documents that can prove the existence of the debt, the court documents, the payment of the creditor’s rights, the transfer of documents and so on, can be mutually verified, therefore the court will identify them. The ninth group of evidence was two originals of the claims declaration, which were also given identification by the court; the eleventh group of evidence confirmed that the Defendant was not responsible for the fact that RMB85 million was not paid in the special account for the construction of the vessel, so evidence 1 is affirmed; evidence 2 and 3 was not evidence of the facts of the case, so the court will not affirm it. Evidence provided by the Defendant Dinghai Construction Bank, the Plaintiff Huarong Company confirmed evidence 1–4, 6–7, 9–12, and 15–18 of the authenticity of all objection, therefore the court will identify them. The two copies of the bankruptcy administrator in evidence 5, although the Plaintiff had objection to its authenticity, it had also provided as evidence and then withdrawn, therefore the court affirms its authenticity. Evidence of 8, 13 and 14 is the Defendant printing on its own, the Plaintiff had objection to its authenticity, and the evidence had no connection with the case, the court will not identify it. According to the three pieces of evidence for the transfer of the Plaintiff, the Plaintiff and the Defendant had no objection to the authenticity of the record of investigation, though the Defendant investigation states of objection, it did not provide evidence to the contrary, so the court identifies it. In accordance with the above evidence and the court investigation, the court finds the following facts: In 2011, Huarong Company began to cooperate with Zhenghe Company in shipbuilding. The two sides signed three contracts for the construction of 57000 tons bulk carriers, each costing RMB210 million and was all issued a cash advance refund guarantee by the Defendant Dinghai Construction Bank. The three vessels had completed construction and the actual delivery date was July 2012, February 2013 and May 2013, respectively. The name of the ship was “Huarong 1”, “Huarong 2” and “Huarong 3”.

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On December 10, 2012, the Plaintiff as the lessor and Xinwei Company concluded and signed a contract for financial lease. The subject matter of the lease was a CCS Class with Unlimited Navigation Areas 67000 DWT bulk carrier guarantee speed 14 Knots. On the same day, in order to fulfill the above-mentioned financial leasing contract, the Plaintiff concluded and signed a contract of ship construction numbered Huarong lease (12) direct construction No.1200603104 with Zhenghe Company and Xinwei Company. The contract stipulated that the number of the ship under construction was ZH670069 and the total construction price was RMB224 million, with an average payment of RMB44,800,000 in five installments, the first four payments quality were advance payment of shipbuilding. Before the Plaintiff paid for the first installment for advance payment of shipbuilding, Zhenghe Company should provide the letter of indemnity on refunds of the advance payment of shipbuilding drawn upon by the bank in order to ensure that while the Plaintiff terminated the contract in accordance with the contract, Zhenghe Company could perform the obligation to refund the Plaintiff. If the contract was discharged in accordance with the provisions of this contract before delivery of the contract, Zhenghe Company should, within 10 working days after receipt of the contract, refund notice issued by the Plaintiff and refund of all vessel advances paid by the Plaintiff, including interest received from Zhenghe Company until the date of the refund. It was agreed that the date of the delivery of the vessel should be before January 31, 2015. If all permits in total of delivery were delayed was more than 150 days, or more than 180 days allowed for delayed and non-permissible delays, the Plaintiff had the right to terminate the contract. On February 14, 2012, Dinghai Construction Bank issued the letter of indemnity on refunds of the advance payment of shipbuilding under the application of Zhenghe Company and agreements were made with Zhenghe Company for the construction of the above ZH670069 bulk cargo carrier, application for Dinghai Construction Bank issued by the Plaintiff as beneficiary. The payment of the guarantee for ship with a guarantee amount of RMB179,200,000, the rate was 4% and collected monthly. If the beneficiary claimed against the Defendant, the Defendant had the right to independently judge the claim and whether the amount of the claim was in conformity with the agreement of the guarantee; the external payment paid by the Defendant, without the prior consent of Zhenghe Company, which promised not to raise any objection as long as the Defendant paid under the letter of guarantee. Even if the existence of the beneficiary showed fraud, if the contract under the basic contract was not established, not effective, invalid, partially invalid or revoked, was canceled, or any other circumstances, Zhenghe Company was obliged to pay full compensation to Dinghai Construction Bank. Zhenghe Company should, as required, provide truthful, lawful, and effective financial statements and related information, as well as all bank name, account number, balance of deposits and other information, accept the supervision of Dinghai Construction Bank on production, operation and financial activities, and should not withdraw funds, transfer funds, or resort to any other means to evade debts, etc.

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On the same day, Zhenghe Company and the Defendant Dinghai Construction Bank signed another copy of the fund’s supervision agreement, the contract agreed that the shipbuilding payment which Zhenghe Company received was obligated to be earmarked for the fixed purpose. To ensure that all shipbuilding projects were carried out in accordance with the main contract, Zhenghe Company should submit the overall plan for the shipbuilding plan and fund support to Dinghai Construction Bank on time, at the end of the month Zhenghe Company should submit monthly progress reports and the premise of shipbuilding funds plan for next month. The use of each closing fund was required by Zhenghe Company, and each payment was indicated for real use, attach copies of purchase contract, relevant list of agreements and other documents, and could be paid by the Bank of China until approval by Dinghai Construction Bank. It was the duty of Zhenghe Company to submit the payment application in time to provide the information required by Dinghai Construction Bank, so that Dinghai Construction Bank would determine whether the payment was earmarked, Dinghai Construction Bank had the right to approve or disapprove a payment application, had the right to audit and check every sum of money paid, and challenge the personnel concerned, verify the original materials that had been paid for storage, and had the right to determine whether the use of the funds of the special account was compatible with the plan for the construction of the vessel. If there was too much deviation from the project, it could have the right to suspend further funds for the project, stop certain payments, or propose measures to reschedule the cash flow. If Dinghai Construction Bank considered any significant deviation from the use of funds or seriously deviates from the funds usage plan, the quality of shipbuilding was a serious problem or failed to comply with the standards of shipbuilding contract, or if Zhenghe Company broke the contract with the other bank, financial deterioration or the provision of false information, data or information, Dinghai Construction Bank had the right to stop Zhenghe Company and the regulatory funds. On the same day, the Defendant Dinghai Construction Bank issued a letter of guarantee of the advance payment of the vessel numbered 2012-028. The beneficiary was Huarong Company, and the Defendant voluntarily offered the joint and several liability guarantees for the refund of the vessel’s advance payment under the construction contract numbered Huarong lease (12) direct construction No.1200603104. The maximum amount was RMB179,200,000 and not exceeding the sum paid by the Plaintiff actually received by Zhenghe Company, the validity period of the guarantee was until the delivery of the vessel, and invalid no later than January 31, 2015. In the period of validity of this guarantee, if Zhenghe Company was in violation of the shipbuilding contract agreed, and did not return the ship’s advance payments to the Plaintiff, the Defendant promised to pay within 30 working days after receipt of the original and qualified claim of the original letter of guarantee. The amount of the guarantee should be limited to the amount paid by the Plaintiff in connection with the actual contract of the vessel under the contract of shipbuilding involved, and the maximum amount should not exceed RMB179,200,000. After the guarantee was received, on December 17, 2012, December 27, 2012, July 31, 2013, and January 15, 2014, Huarong Company paid the first RMB179,200,000 advance payments to Zhenghe Company in average RMB44,800,000 each. The

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Plaintiff made representations repeatedly due to the failure of Zhenghe Company to deliver the vessel on schedule. On October 23, 2014, Huarong Company with Zhenghe Company and Xinwei Company signed with Dinghai Construction Bank on the guarantee agreement of the shipbuilding contract. Confirm that the Plaintiff paid RMB179,200,000 for the first four portions of advance payment of the vessel to Zhenghe Company, the date of delivery of Zhenghe Company was until April 30, 2015. Dinghai Construction Bank agreed to continue to provide joint and several liability guarantees for Zhenghe Company to refund the advance payment of shipbuilding, the guarantee period was extended to May 31, 2015, and the Defendant promised to pay RMB179,200,000 unconditionally to the Plaintiff Huarong Company for compensation within 10 working days. On April 20, 2015, a supplementary agreement was signed by the above parties because of the failure of Zhenghe Company to deliver the vessel in time to extend the delivery time of the vessel of Zhenghe Company until August 31, 2015, if Zhenghe Company failed to deliver the vessel at maturity, Huarong Company could unilaterally terminate the contract for the construction of the vessel. The extension of the guarantee period for Dinghai Construction Bank of the vessel was extended to September 30, 2015, and the claim against Huarong Company was unconditionally paid within 10 working days. In March 2015, Zhenghe Company was in bankruptcy liquidation with the court for lack of liquidity in the event that the assets were insufficient to pay off all the debts. On June 30, 2015, the Dinghai Court ruled to accept it. During the time Zhenghe Company organized bankruptcy reorganization, the Defendant Dinghai Construction Bank declared the creditor’s right to the bankruptcy administrator of Zhenghe Company including the guarantee claims totaling RMB1,154,515,279.51, that the vessel failed to be completed and stopped construction, and it lacked a term of delivery. On September 22, 2015, the Plaintiff Huarong Company wrote to Zhenghe Company and its bankruptcy administrator, who did not notify the Plaintiff to continue performing the construction contract within two months from the date of acceptance of the bankruptcy petition. According to the Enterprise Bankruptcy Law of the People’s Republic of China, the contract for the construction of the vessel was deemed to already be dissolved. It was requested that in order to indemnify the Plaintiff, Zhenghe Company should immediately pay the Plaintiff the shipbuilding advance payment of RMB179,200,000 and pay the corresponding interest. On September 24, 2015, the Plaintiff issued a notice of claim to Dinghai Construction Bank, noticed that the contract for the construction of the vessel involved was canceled, and neither Zhenghe Company pressed about the delivery of the vessel nor refunded the advance payment of the vessel. Therefore, the Defendant was required to pay the Plaintiff RMB179,200,000 within 10 working days. Otherwise, Huarong Company would take legal measures to require the Defendant to bear the liability for breach of contract and bear the expenses incurred by the Plaintiff for the realization of the claim. Another investigation, on December 12, 2012, Huarong Company enjoyed the creditor’s debt in total of RMB89,639,425.18 because of the shipping finance lease contract to the debtor Haijiang Company and the underwriters ZHUANG Lihong,

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LI Guoliang, GU Yadi, and Jiantiaogang Company. In the process of applying to the court for enforcement, Huarong Company signed the agreement on transfer of creditor’s rights to Hongji Company, with the transfer price of RMB85 million to Hongji Company. At the end of 2012, Hongji Company transferred RMB85 million to Huarong Company. In addition, on December 17, 2013, Huarong Company also signed a debt transfer agreement with Baijie Company. Huarong Company transferred the creditor’s rights because of the shipping finance lease contract on the relationship between debtor Haiyu Company and the guarantor WANG Jiacheng, WU Haina that they owned of Haiyu Company at the price of RMB79,990,000 to Baijie Company at the price of RMB63,600,000. At the end of 2013, Baijie Company paid the transfer of RMB63,600,000 of creditor’s rights to Huarong Company. However, the above two cases of the transfer of creditor’s rights had not been notified to the debtor. In the following years, Huarong Company continued to recover from the debtor and the case was still under trial and implementation. The court holds that this case is a dispute of maritime claims arising from the advance payment of the vessel and the money refund guarantee issued by the contract for the construction of the vessel. There is no objection that the Plaintiff signed the ship construction contract with Zhenghe Company and vessel leasing contract with Xinwei Company or that the Defendant issued the letter of guarantee, fund supervision agreement, shipbuilding advance payment, refund guarantee. Huarong Company requires Dinghai Construction Bank to undertake the refund obligations stipulated in the guarantee. Dinghai Construction Bank argued that Huarong Company and Zhenghe Company engaged in malicious collusion to raise the price of the vessel, with false claims transfer agreement to withdraw the vessel’s money, to defraud Dinghai Construction Bank guarantee, so the letter of guarantee is invalid. For the issues, the court analyzes and identifies as follows: 1. Whether there is malicious behavior to raise the vessel price of Huarong Company and Zhenghe Company? Huarong Company has a long-term and multi-business cooperation relationship with Zhenghe Company. At the time of negotiations on the related vessel construction, there were “Huarong 1”, “Huarong 2” and “Huarong 3”, three vessels under construction. The related vessel numbered ZH670069 was ten thousand tons bigger than the three other vessels, and the construction costs was increased by RMB14 million, therefore, that was not unreasonable. Moreover, the decision of the cost of ships involved was not only the Plaintiff and Zhenghe Company but also the lessee of financing lease company Xinwei Company. If they raised the vessel price it would directly lead to damage to the interests of Xinwei Company. The Defendant Dinghai Construction Bank was a financial institution involved in the mortgage business of the vessel, and Dinghai Construction Bank should have a clear understanding of the market and value of the vessel, at the time the Plaintiff entered into a contract for the construction of the vessel with Zhenghe Company, it was agreed that the price of the vessel was open and transparent. Dinghai Construction Bank can independently determine whether the contract vessel price is virtually high at that time and accordingly to decide whether to participate in the

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provision of vessel advance payment and refund guarantee. However, it was obvious that Dinghai Construction Bank was aware of accepting the vessel price at that time, but now they believe the cost of the vessel was maliciously raised and there is no evidence to support it. The decline of BDI will inevitably lead to the decline in the cost of vessels during the same period, and there is no corresponding theoretical and practical basis. The court will not accept it. 2. Whether the transfer of the two claims is true and relevant to the case? The Defendant Dinghai Construction Bank said that Huarong Company engaged in malicious collusion with Zhenghe Company, in the name of the transfer of the creditor's right, acted in the malicious acquisition of non-performing assets and withdrew RMB63,600,000 back of the advance payment of the vessel numbered ZH670076/77 and RMB85 million payment of the two vessels numbered ZH670069/70. The court holds that: firstly, the Plaintiff Huarong Company and Haijiang Company and the Haiyu Company’s transfer of the original creditor is real, not imaginary, and all cases in our court are on the basis. Secondly, the Plaintiff and Zhenghe Company and the associated companies have seven large financial leasing and bare boat charter construction business cooperation. Based on mutually beneficial cooperation and continuity business with a long-term nature, the Plaintiff and the positive association between Zhenghe Company and Hongji Company, Baijie Company decided on two independent consultation agreements on the transfer of creditor’s rights related matters, when the parties sign a debt transfer agreement, the meaning is clear and true, and so far the parties of the contract have no objection to the validity of the transfer agreement. There is no evidence that, in the circumstances, the parties of the transfer of the creditor’s rights have been expressly aware that the transferee of the transfer of the creditor's rights will certainly not be repaid from the debtor. Thirdly, the transfer of claims paid RMB85 million is not paid in Zhenghe Company’s special accounts of the shipbuilding, and it is paid by Hongji Company to Huarong Company. There is no evidence that the payment is directly related to the ship's payment to Zhenghe Company. In the opinion of Zhenghe Company’s bankruptcy administrator, only the description of the authenticity of the aforesaid transfer agreement shall be further checked, and not deemed false. Fourth, the defendant has the right and duty to supervise the advance payment of the ship under the guarantee, Dinghai Construction Bank has the right to control the use and flow of funds, if the Defendant put the supervision into place, the vessel’s specific section shall be used either for shipbuilding or for the completion of the construction of the vessel to Huarong Company, or if it is still under supervision of special accounts unused, if the funds for the construction of the vessel are safe, it is not necessary for the Defendant to bear any guarantee responsibility. To sum up, the transfer of the creditor's rights is the true meaning of the transferor, and does not violate the relevant provisions of the laws and regulations of our country, occurs between Huarong Company, Hongji Company, and Huarong Company and belongs to two different relationships between Huarong Company and Hongji Company, which has no relationship to the case.

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3. Whether the case exists to defraud the letter of guarantee? The Defendant argued that the Plaintiff Huarong Company and Zhenghe Company as the main parties of the contract defrauded the Defendant Dinghai Construction Bank to offer guarantee, violated the mandatory provisions of laws and administrative regulations, therefore the guarantee should be invalid. The court holds that the real purpose of the contract signed by the Plaintiff Huarong Company and Zhenghe Company is shipbuilding, the shipbuilding contract is authentic and effective and has been actually fulfilled, as the completed three vessels “Huarong 1”, “Huarong 2”, and “Huarong 3”, are all issued the advance payment guarantees by the Defendant Dinghai Construction Bank. The business process and trading habits are formed by the long-term cooperation between the parties. In addition, the letter of guarantee agreement is signed by Zhenghe Company and Dinghai Construction Bank independent of each other. Huarong Company has not participated in the contract. The contract for the construction of the vessel has not been stipulated the letter of guarantee shall be issued by Dinghai Construction Bank. Dinghai Construction Bank is only one of the lines of opening guarantee between Zhenghe Company. Therefore, there is no evidence that Huarong Company and Zhenghe Company have the existence of fraud, Dinghai Construction Bank of guarantees common intent, or behavior. In summary, there is no evidence that Huarong Company and Zhenghe Company have the behavior to raise the price of the vessel, with false transfer of claims to withdraw the ship's money, to defraud the letter of subjective, intentional, or objective behavior. The letter of guarantee involved in the case represents the true intention of the Plaintiff and the Defendant, and is legally valid and legally binding. According to the Enterprise Bankruptcy Law of the People’s Republic of China Article 18: after the people’s court accepts an application for bankruptcy, the administrator shall have the right to decide to rescind or continue to perform a contract that is concluded before the acceptance yet remains to be fulfilled by both the debtor and other party and shall notify the other party of his decision. Where the administrator fails to notify the other party within two months from the date when the bankruptcy application is accepted or fails to give any reply to the exhortation made by the other party within 30 days from the date the exhortation is made, the contract shall be deemed to be rescinded. Where the administrator decides that performance of the contract shall be continued, the other party shall comply. However, the other party shall have the right to request the administrator to provide guaranty. Where the administrator refuses to do so, the contract shall be deemed to be rescinded. In this case, Zhenghe Company’s bankruptcy administrator has not informed Huarong Company within two months from the date of acceptance of the bankruptcy petition. Therefore, the contract between Zhenghe Company and Huarong Company involved in the shipbuilding contract has been relieved. According to the law, when the contract has been completed, the parties concerned may request restitution or other remedial measures according to the performance and the nature of the contract, and have the right to claim compensation for the loss. Therefore, Huarong Company has the right to require

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Zhenghe Company to refund all the shipbuilding proceeds. The advance payment of the shipbuilding payment issued by Dinghai Construction Bank, which the guarantee method stipulated in the letter of guarantee, shall be joint and several liability. According to the law, the creditor may ask the debtor to fulfill his obligation, or he may require the guarantor to undertake the suretyship liability within his scope of suretyship, therefore, the Plaintiff has the right to directly claim the right of Zhenghe Company and the guarantor of Zhenghe Company, which is Dinghai Construction Bank. The Plaintiff’s claim has already been provided, and the Defendant’s plea for the invalidity of the letter of guarantee shall not be accepted by the court. Moreover, while signing the two vessel construction and guarantee agreements with Huarong Company and Zhenghe Company, Dinghai Construction Bank confirmed the amount of advance payments made by the vessel has been clearly, and it is promised that the Plaintiff's claim shall be liable for unconditional payment within 10 working days. The Defendant refused to pay in this case, and should bear the corresponding legal responsibility. Since the Plaintiff sued the Defendant in accordance with the calculation of the People’s Bank of China benchmark interest rate loans paid for rational from the date the Plaintiff raised the sue, the court will admit the claim. But for the realization of creditor’s rights, the Plaintiff paid the lawyer’s fee, it is not included in the letter of guarantee which Dinghai Construction Bank have issued, so the court will not support the claim. Because Zhenghe Company is in bankruptcy reorganization process, although the Plaintiff and the Defendant have declared the case to the bankruptcy administrator in full, the Plaintiff made it clear that if the case had been paid by the Defendant, they agreed to transfer the creditor’s rights limited to the scope of payment to the Defendant. It is impossible for the Plaintiff to get double compensated, Huarong Company directly requests the Defendant to undertake the suretyship responsibility conforms to the regulations of the Article 44 of the Interpretation of the Supreme People’s Court on Several Issues concerning the Application of the Guaranty Law of the People’s Republic of China. To sum up, the portion of the claims raised by the Plaintiff which are reasonable will be supported by the court. According to Article 18 Paragraph 1 of the Enterprise Bankruptcy Law of the People’s Republic of China, Article 94 Paragraph 5 and Article 97 of the Contract Law of the People’s Republic of China, Article 18 of the Guaranty Law of the People’s Republic of China, Article 44 of the Interpretation of the Supreme People’s Court on Several Issues concerning the Application of the Guaranty Law of the People’s Republic of China, and after the discussion by the judicial committee of the court, the judgment is as follows: 1. Confirm the vessel’s advance payment refund guarantee issued by Dinghai Construction Bank numbered 2012-028 as valid; 2. Dinghai Construction Bank shall immediately pay the Plaintiff shipbuilding advance payment RMB179,200,000 and the corresponding interest (in accordance with the benchmark lending rate of the People’s Bank of China over the same period, the date of the prosecution shall be counted until the date of the performance of the judgment) from September 28, 2015 until the date of the performance of this judgment within 10 days after the judgment comes into effect;

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3. Reject Other Claims of the Plaintiff Huarong Company. If the performance is not fulfilled within the time limit specified in this judgment, the monetary obligation shall be paid under the stipulates of the Civil Procedure Law of People’s Republic of China Article 253, shall pay double the interest on a debt during the delay. Court acceptance fee in amount of RMB938,300, shall be born by the Defendant Dinghai Construction Bank. In event of dissatisfaction with this judgment, the Plaintiff and the Defendant may, within 15 days upon service of this judgment, file an application with the court for appeal, with duplicates being submitted in terms of the number of the other parties, to lodge an appeal to the Zhejiang High People’s Court. [The acceptance fee for the appeal case shall be RMB938,300 (the exact amount shall be determined by Zhejiang High People’s Court, and the excess portion shall be refunded later) and the acceptance fee shall be paid to the finance department of Zhejiang Province non tax income balance account while submitting the appeal. The bank of deposit is China Agricultural Bank, Hangzhou Xihu Branch, bank account number is 19000101040006575401001. If the payment has not been made within seven days after the expiration of the appeal period, it shall be subject to the voluntarily withdrawal of appeal]. Presiding Judge: CHEN Xiaoming Judge: LI Xianda Acting Judge: QIAN Bingbing April 29, 2016 Clerk: XU Meina

Appendix Relevant Laws 1. Enterprise Bankruptcy Law of the People’s Republic of China Article 18 After the people’s court accepts an application for bankruptcy, the administrator shall have the right to decide to rescind or continue to perform a contract that is concluded before the acceptance yet remains to be fulfilled by both the debtor and other party and shall notify the other party of his decision. Where the administrator fails to notify the other party within two months from the date when the bankruptcy application is accepted or fails to give any reply to the exhortation made by the other party within 30 days from the date the exhortation is made, the contract shall be deemed to be rescinded. Where the administrator decides that performance of the contract be continued, the other party shall comply. However, the other party shall have the right to request the administrator to provide guaranty. Where the administrator refuse to do so, the contract shall be deemed to be rescinded.

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2. Contract Law of the People’s Republic of China Article 94 Legally prescribed conditions giving rise to termination right the parties may terminate a contract if: i. Force majeure frustrated the purpose of the contract; ii. Before the time of performance, the other party expressly stated or indicated by its conduct that it will not perform its main obligations; iii. The other party delayed performance of its main obligations, and failed to perform within a reasonable time after receiving demand for performance; iv. The other party delayed performance or otherwise breached the contract, thereby frustrating the purpose of the contract; v. Any other circumstance provided by law occurred. Article 97 Remedies in case of termination upon termination of a contract, a performance which has not been rendered is discharged; if a performance has been rendered, a party may, in light of the degree of performance and the nature of the contract, require the other party to restore the subject matter to its original condition or otherwise remedy the situation, and is entitled to claim damages. 3. Guaranty Law of the People’s Republic of China Article 18 A suretyship of joint and several liability refers to a suretyship contract wherein the parties agree that the surety and the debtor shall be jointly and severally liable. Where the debtor of a suretyship of joint and several liability defaults when the time limit for his performance of the obligation provided in the principal contract expires, the creditor may demand that the debtor perform his obligation, or demand that the surety undertake the suretyship liability within the scope of the suretyship agreement. 4. Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of the Guaranty Law of the People’s Republic of China Article 44 During the term of guarantee, the creditor may either declare her or his claim to the people’s court or make a claim to the guarantor once the court accepts the bankruptcy application of the debtor. The guarantor shall continue to assume obligation on the portion unpaid in bankruptcy procedure after submission of claim declaration by the creditor. The creditor shall require the guarantor to assume security liability within six months as of the termination of the bankruptcy procedure.

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Zhejiang High People’s Court Civil Judgment Huarong Financial Leasing Company Limited v. China Construction Bank Zhoushan Dinghai Sub-branch (2016) Zhe Min Zhong No.357 Related Case(s) This is the judgment of second instance, and the judgment of first instance and the ruling of retrial are on page 349 and page 393 respectively. Cause(s) of Action 238. Dispute over maritime security. Headnote Affirming lower court decision holding the Plaintiff ship purchaser entitled to recover under refund guarantee provided by the Defendant bank for advance installments paid to shipbuilder under construction contract that was not completed because of shipbuilder’s bankruptcy, rejecting bank’s argument that the Plaintiff and shipbuilder had fraudulently colluded to raise the ship’s price artificially. Summary The Plaintiff entered into a contract with a shipbuilder to build a new ship. The Defendant bank guaranteed to refund sums paid by the Plaintiff to shipbuilder if the shipbuilder did not complete the construction of the ship in accordance with the timetable set in the contract. After the Plaintiff had paid four of five installments to the shipbuilder, the shipbuilder was declared bankrupt. The shipbuilder’s administrator in bankruptcy did not declare that the contract should be completed, so it was rescinded by operation of law. The Plaintiff demanded payment from the Defendant bank under the refund guarantee. The Defendant bank refused to pay, alleging that the Plaintiff and the shipbuilder had fraudulently colluded to raise the price of the ship under construction. The court of first instance held that the price set in the construction contract was genuine, and that the Defendant was obliged to honor the refund guarantee. The Defendant appealed. The appeal court affirmed the judgment of the court of first instance and held that bank guarantee was legally valid and that the Plaintiff was entitled to the direct payment from the Defendant bank as guarantor.

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Judgment The Appellant (the Defendant of first instance): China Construction Bank Zhoushan Dinghai Sub-branch Domicile: No.38 West Jiefan Road, Dinghai District, Zhoushan, Zhejiang. Code of Organiƶation: 84873801-0. Legal representative: ZHOU Xiaochi, president of the Sub-branch. Agent ad litem: LI Wei, lawyer of Zhejiang Liuhe (Zhoushan) Law Firm. Agent ad litem: WEI Feizhou, lawyer of Zhejiang Liuhe (Zhoushan) Law Firm. The Respondent (the Plaintiff of first instance): Huarong Financial Leasing Company Limited Domicile: 6th and 7th floor of the World Trade Building, No.122 Shuguang Road, Hangzhou, Zhejiang. Code of OrganiƵation: 73452166-5. Legal representative: Li Peng, chairman. Agent ad litem: SHAN Man, lawyer of Zhejiang Heyiguanda Law Firm. The Appellant, China Construction Bank Zhoushan Dinghai Sub-branch (hereinafter referred to as “Dinghai Branch”), dissatisfied with (2015) Yong Hai Fa Shang Chu Zi No.996 Civil Judgment of the Ningbo Maritime Court in respect of the case of dispute over maritime security filed by the Respondent, Huarong Financial Leasing Company Limited (hereinafter referred to as “Huarong Company”) against it, lodged an appeal before the court. The court, after entertaining this case on June 2, 2016, organized a collegiate panel according to the law and held a hearing in pubic on July 20, 2016. LI Wei and WEI Feizhou, agents ad litem of Dinghai Branch, and SHAN Man, agent ad litem of Huarong Company, participated in the hearing organized by the court. Because of the complexity of the case, the trial period has been extended for three months according to the law. This case has been concluded. On September 28, 2015, Huarong Company claimed to the court of first instance that: On December 10, 2012, the Plaintiff as the lessor and the Qingdao Xinwei Shipping Co., Ltd. (hereinafter referred to as “Xinwei Company”) concluded and signed a contract for financial lease. The subject matter of the lease was a CCS Class 67000 DWT bulk carrier. On the same day, in order to fulfill the above-mentioned financial leasing contract, the Plaintiff concluded and signed a contract of ship construction numbered 1200603104, Huarong Lease (12) Zhijian with Zhejiang Zhenghe Shipbuilding Co., Ltd. (hereinafter referred to as “Zhenghe Company”) and Xinwei Company. The contract stipulated that the number of the ship under construction was ZH670069 and the total construction price was RMB224 million, with an average payment of RM 44,800,000 in five installments, the first four payments were advance payment of the shipbuilding, before the Plaintiff could pay for the first installment for advance payment, Zhenghe Company should provide the refund guarantee drawn by the bank for advance payment of the shipbuilding. In order to ensure that should the Plaintiff terminated the contract in accordance with the contract, Zhenghe Company could perform the obligation to refund the Plaintiff. On February 14, 2012, Dinghai

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Branch issued the refund guarantee numbered 2012-028 under the application of Zhenghe Company to provide joint and several liabilities guarantee to Zhenghe Company for the refund to the Plaintiff. The validity of the refund guarantee was until the delivery date of the vessel and not exceeding October 31, 2014. After signing the contract, the Plaintiff fully paid the first four advance payments of the shipbuilding in total of RMB179,200,000 in time in accordance with the contract for the construction of the ship. Due to the failure of Zhenghe Company to deliver the vessel as scheduled by February 28, 2014 in the contract, the Plaintiff and the Defendant signed two addendums with Zhenghe Company on October 23, 2014 and April 20, 2015 to extent the time limit of delivery of the vessel till August 31, 2015. The Defendant’s guarantee period was extended to September 30, 2015, and the Defendant promised that if Zhenghe Company was unable to deliver the vessel, the Defendant should pay RMB 179,200,000 unconditionally for the Plaintiff’s claims within 10 working days. On June 30, 2015, Zhoushan Dinghai People’s Court (hereinafter referred to as Dinghai Court) ruled to accept the application of bankruptcy and reforming of Zhenghe Company. Zhenghe Company’s bankruptcy administrator had not notified the Plaintiff to continue performing the construction contract within two months from the date of acceptance of the bankruptcy petition, according to the rules of the Enterprise Bankruptcy Law of the People’s Republic of China, the contract for the construction of the vessel was deemed to be dissolved already. Zhenghe Company had not been able to deliver the ship at the scheduled time and had not returned the vessel’s advance payment to the Plaintiff, so as the joint and several liabilities guarantors of Zhenghe Company, the Defendant should assume the guarantee liability unconditionally in accordance with the law. It was hereby requested to order the Defendant to indemnify the Plaintiff: the Defendant, Dinghai Branch should immediately pay the Plaintiff shipbuilding advance payment RMB179,200,000 and pay the corresponding interest (in accordance with the benchmark lending rate of the People’s Bank of China over the same period, the date of the prosecution should be counted until the date of the performance of the judgment) and compensate the lawyer’s fee for the Plaintiff to realize the creditor right RMB100 thousand. Before the trial, the Plaintiff increased the claim to request to confirm for the advance payment refund guarantee of the vessel numbered No.2012-028 valid in accordance with the law. Dinghai Branch defended at the court of first instance that: 1. The Plaintiff alleged that the Plaintiff fully paid the first four advance payments of shipbuilding in total RMB179,200,000 in time was opposed to the facts. In fact, the aforesaid advance payments of shipbuilding have been taken back for 85 million by the Plaintiff. After Zhenghe Company received the advance payments of shipbuilding under the shipbuilding contract RMB44,800,000 and advance payments of shipbuilding under ZH670070 RMB44,800,000 (in total RMB89,600,000), and transferred to the related enterprises Qingdao Hongji Material Co., Ltd. (hereinafter referred to as Hongji Company) 7 expenses in total RMB85 million from December 21, 2012 to December 28, 2012. After Hongji Company received the payment, it immediately transferred RMB85 million divided into 6 expenses to the Plaintiff Huarong Company in the name

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of repay Zhejiang Haijiang Engineering Company Limited (hereinafter referred to as the name of Haijiang Company) creditor’s rights transfer section of the Plaintiff. When the creditor’s rights were transferred, Haijiang Company was insolvent, Hongji Company’s transfer of the creditor’s claim could not be repaid at all, it was actually a collusion with the Plaintiff withdrawing the vessel’s advance payment, this act belonged to malicious collusion, acquiring Huarong Company’s non-performing assets. The refund guarantee and the supplementary agreement involved should be invalid. In fact, the actual cost of the ZH670069 vessel was significantly lower than the cost agreed upon in the shipbuilding contract. The Plaintiff and Zhenghe Company malicious colluded with each other artificially raised the cost of building the vessel in advance and withdrawing the vessel’s advance payment afterwards to defraud the Defendant to issue the vessel payment refund guarantee. The refund guarantee and the supplementary agreement between the Plaintiff and the Defendant should be void. The fault of causing the contract null and void lied in the Plaintiff and Zhenghe Company, the Defendant should not be guilty of any fault and should not be liable for suretyship or other civil liability in this case, In addition, the refund guarantee involved had been filed under the Dinghai Court for declaratory judgment. According to the shipbuilding contract, the Plaintiff was responsible for the construction of the vessel involved. The Plaintiff should be sufficiently knowing the facts of the situation when Zhenghe Company was misappropriated and the shipbuilding contract was not effectively fulfilled. But the Plaintiff was indolent in exercising the contractual rights and ignore the correctness of Zhenghe Company and Zhenghe Company’s improper performance and put the cart before the horse and hope Zhenghe Company break the contract and through the Defendant’s guarantee to get compensation, thus to pass the market transaction risk. The Plaintiff was responsible for the failure to complete construction and advance payment for the shipbuilding of the vessel, the Plaintiff failed the duty of mitigation and there was no right to obtain the payment through the guarantee. The Plaintiff declared the full amount of the claim to Zhenghe Company’s bankruptcy administrator in relation to the advance payment of RMB179,200,000. The bankruptcy proceedings of Zhenghe Company had not been concluded yet, thus the case should be suspended. Even if the Defendant needed to be responsible for the case, the Defendant should bear the suretyship liability on the part of the Plaintiff which had not paid off at the end of the bankruptcy proceedings. The Plaintiff had no right to ask Dinghai Branch to bear the liability for the full advance payment of the vessel. In accordance with the provisions of the Enterprise Bankruptcy Law of the People’s Republic of China, the interest ceases to bear since the application for bankruptcy. Therefore, even if the Plaintiff’s claim was established, the interest should be ceased since the application for bankruptcy date of Zhenghe Company. The effectiveness of the cease should remain in force on the contract of guarantee. Therefore, the Plaintiff claimed that interest was obviously lack of legal basis. In addition, the lawyer’s fee involved in the shipbuilding contract

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had not been agreed upon, and the lawyer’s fee was not covered by the guarantee. Therefore, the Plaintiff’s claim for lawyers’ fee was also unsupported according to law. In conclusion, the Defendant requested the court of first instance to reject the claim of the Plaintiff. The court of first instance found out that: In 2011, Huarong Company began to cooperate with Zhenghe Company in the shipbuilding. The two sides signed three contracts for the construction of 57000-ton bulk carriers, each cost RMB210 million and were all issued a refund guarantee by the Defendant Dinghai Branch. The three vessels have been completed construction and the actual delivery date was July 2012, February 2013 and May 2013 respectively. The name of the ship was “Huarong 1”, “Huarong 2” and “Huarong 3”. On December 10, 2012, the Plaintiff as the lessor and Xinwei Company concluded and signed a contract for financial lease. The subject matter of lease was a CCS Class with Unlimited Navigation Areas 67000 DWT bulk carrier, guarantee speed 14 knot per hour. On the same day, in order to fulfill the above-mentioned financial leasing contract, the Plaintiff concluded and signed a contract of ship construction numbered 1200603104, Huarong Lease (12) Zhijian with Zhenghe Company and Xinwei Company. The contract stipulated that the number of the ship under construction was ZH670069 and the total construction price was RMB224 million, with an average payment of RMB44,800,000 in five installments, the first four payments quality were advance payment of shipbuilding, before the Plaintiff could pay for the first installment for advance payment of shipbuilding, Zhenghe Company should provide the refund guarantee drawn by the bank for advance payment of the shipbuilding in order to ensure that should the Plaintiff terminate the contract in, Zhenghe Company could perform the obligation to refund the Plaintiff. If the contract was discharged in accordance with the provisions of this contract before delivery of the ship, Zhenghe Company should, within 10 working days after receipt of the contract refund notice issued by the Plaintiff and refund of all vessel advance paid by the plaintiff, including interest received from Zhenghe Company until the date of the refund. It was agreed that the date of the delivery of the vessel should be before January 31, 2015, if all permits in total of delivery are delayed was more than 150 days, or more than 180 days allowed for delayed and non-permissible delays, The Plaintiff had the right to terminate the contract. On February 14, 2012, Dinghai Branch issued the refund guarantee under the application of Zhenghe Company and agreements were made between Zhenghe Company for the construction of the above ZH670069 bulk cargo carrier, application for Dinghai Branch issued by the Plaintiff as beneficiary. The payment of the guarantee for ship with a guarantee amount of RMB179,200,000, the rate was 4 ‰ and collected monthly. If the beneficiary claims against the Defendant, the Defendant had the right to independently judge the claim and whether the amount of the claim was in conformity with the agreement of the guarantee; the external payment paid by the Defendant, without the prior consent of Zhenghe Company,

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Zhenghe Company promised not to raise any objection as long as the Defendant paid under the letter of guarantee. Even if the existence of the beneficiary fraud, the contract under the basic contract was not established, not effective, invalid, partially invalid or revoked, was canceled, and any other circumstances, Zhenghe Company was obliged to pay full compensation to Dinghai Branch. Zhenghe Company should, as required, provide truthful, lawful and effective financial statements and related information, as well as all bank name, account number, balance of deposits and other information, accept the supervision of Dinghai Branch on production, operation and financial activities, and should not withdraw funds, transfer funds, or resort to any other means to evade debts, etc. On the same day, Zhenghe Company and the Defendant Dinghai Branch signed another copy of the funds supervision agreement, the contract agreed that the shipbuilding payment which Zhenghe Company received was obligated to earmarked for the fixed purpose. Ensuring that all shipbuilding projects were carried out in accordance with the main contract, Zhenghe Company should submit the overall plan for the shipbuilding and fund support to Dinghai Branch on time, at the end of the month Zhenghe Company should submit monthly progress report and the premise of shipbuilding funds plan for next month. The use of each closing fund was required by Zhenghe Company, and each payment was indicated for real use, attach copies of purchase contract, relevant list of agreements and other documents, and can be paid by the Bank of China until approval by Dinghai Branch. It was the duty of Zhenghe Company to submit the payment application in time to provide the information or information required by Dinghai Branch, so that Dinghai Branch would determine whether the payment was earmarked, Dinghai Branch had the right to approve or disapprove a payment application, had the right to audit and check every sum of money paid, and challenge the personnel concerned, verify the original materials that had been paid for storage, had the right to determine whether the use of the funds of the special account was compatible with the plan for the construction of the vessel. If there was too much deviation from the project, it could have the right to suspend further funds for the project, stop certain payments, or propose measures to reschedule the cash flow. If Dinghai Branch considered any significant deviation from the use of funds or seriously deviated from the funds usage plan, the quality of shipbuilding was a serious problem or failed to comply with the standards of shipbuilding contractor Zhenghe Company breached the contract with another bank, financial deterioration or the provision of false information, data or information, Dinghai Branch had the right to stop Zhenghe Company and the regulatory funds. On the same day, the Defendant Dinghai Branch issued a refund guarantee numbered 2012-028. The beneficiary was Huarong Company, the Defendant voluntarily offered the joint and several liabilities guarantee for the refund of the vessel’s advance payment under the construction contract numbered 1200603104, Huarong lease (12) Zhijian. The maximum amount was RMB179,200,000 and not exceeding the sum paid by the Plaintiff actually received by Zhenghe Company, the validity period of the guarantee was until the delivery of the vessel, and invalid no later than January 31, 2015. In the period of validity of this guarantee, if Zhenghe

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Company was in violation of the shipbuilding contract agreed, and did not return the ship’s advance payments to the Plaintiff, the Defendant promised to pay within 30 working days after receipt of the original and qualified claim of the original letter of guarantee, the amount of the guarantee should be limited to the amount paid by the Plaintiff in connection with the actual contract of the vessel under the contract of shipbuilding involved, and the maximum amount should not exceed RMB179,200,000. After receiving the guarantee, on December 17, 2012, December 27, 2012, July 31, 2013 and January 15, 2014, Huarong Company paid the first RMB179,200,000 advance payments to Zhenghe Company in average RMB44,800,000 each. The Plaintiff made representations repeatedly due to the failure of Zhenghe Company to deliver the vessel on schedule, on October 23, 2014, Huarong Company, Zhenghe Company and Xinwei Company signed with Dinghai Branch on the guarantee agreement of the shipbuilding contract. Confirm that the Plaintiff has paid RMB179.200,000 for the first four part of advance payment of the vessel to Zhenghe Company, the date of delivery of Zhenghe Company was April 30, 2015; Dinghai Branch agreed to continue to provide joint and several liability guarantees for Zhenghe Company to refund the advance payment of shipbuilding, the guarantee period was extended to May 31, 2015, and the Defendant promised to pay RMB179,200,000 unconditionally to the Plaintiff Huarong Company for compensation within 10 working days. On April 20, 2015, a supplementary agreement was signed by the above parties because of the failure of Zhenghe Company to deliver the vessel in time to extend the delivery time of the vessel of Zhenghe Company until August 31, 2015, if Zhenghe Company failed to deliver the vessel at maturity, Huarong Company could unilaterally terminate the contract for the construction of the vessel. The extension of the guarantee period for Dinghai Branch of the vessel was extended to September 30, 2015, and the claim against Huarong Company was unconditionally paid within 10 working days. In March 2015, Zhenghe Company was in bankruptcy liquidation with the court for lack of liquidity in the event that the assets were insufficient to pay off all the debts. On June 30, 2015, the Dinghai Court ruled to accept it. During the time Zhenghe Company organized bankruptcy reorganization, the Defendant Dinghai Branch declared the creditor’s right to the bankruptcy administrator of Zhenghe Company including the guarantee claims in total RMB1,154,515,279.51, the vessel failed to be completed and stopped the construction, it lacked the term of delivery. On September 22, 2015, the Plaintiff Huarong Company lettered to Zhenghe Company and its bankruptcy administrator, Zhenghe Company’s bankruptcy administrator had not notified the Plaintiff to continue performing the construction contract within two months from the date of acceptance of the bankruptcy petition, according to the rules of the Enterprise Bankruptcy Law of the People’s Republic of China, the contract for the construction of the vessel was deemed to be dissolved already. It was requested to indemnify the Plaintiff that Zhenghe Company should immediately pay the Plaintiff shipbuilding advance payment RMB179,200,000 and pay the corresponding interest. On September 24, 2015, the Plaintiff issued a notice of claim to Dinghai Branch, noticed that the contract for the construction of the

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vessel involved was canceled and neither Zhenghe Company press about the delivery of the vessel nor refund the advance payment of the vessel. Therefore, the Defendant was required to pay the Plaintiff RMB179,200,000 within 10 working days. Otherwise, Huarong Company would take legal recourse to require the Defendant to bear the liability for breach of contract and bear the expenses incurred by the Plaintiff for the realization of the claim. In another investigation, on December 12, 2012, Huarong Company enjoyed creditor’s debt in total RMB89,639,425.18 because of the shipping finance leasing contract to the debtor Haijiang Company and the underwriters ZHUANG Lihong, LI Guoliang, GU Yadi and Jiantiaogang Company. In the process of applying to the court for enforcement, Huarong Company signed the agreement on transfer of creditor’s rights to Hongji Company, the transfer price was RMB85 million to Hongji Company. In the end of 2012, Hongji Company transferred RMB85 million to Huarong Company. In addition, on December 17, 2013, Huarong Company also signed a debt transfer agreement with Baijie Company, Huarong Company transferred the creditor’s rights because of shipping finance leasing contract on the relationship between debtor Haiyu Company and their guarantor WANG Jiacheng WU Haina they owned of Haiyu Company at the price of RMB79,990,000 to Baijie Company at the price of RMB63,600,000. In the end of 2013, Baijie Company paid the transfer of RMB63,600,000 of creditor’s rights to Huarong Company. However, the above two cases of the transfer of creditor’s rights had not been notified to the debtor, In the following years, Huarong Company continued to recover from the debtor, the case was still under trial and implementation. The court of first instance considered that this case was a dispute of maritime claims arising from the advance payment of the vessel and the refund guarantee issued by the contract for the construction of the vessel. There was no objection that the Plaintiff signed the ship construction contract with Zhenghe Company and vessel leasing contract with Xinwei Company and the Defendant issued a letter of guarantee, fund supervision agreement, shipbuilding advance payment, refund guarantee. Huarong Company required Dinghai Branch to undertake the refund obligations stipulated in the guarantee. Dinghai Branch argued that Huarong Company and Zhenghe Company had the existence of malicious collusion to raise the price of the vessel, with false claims transfer agreement to withdraw the vessel’s money, to defraud Dinghai Branch guarantee, so the letter of guarantee was invalid. For the issues, the court of first instance analyzed and identified as follows: 1. Whether there was malicious behavior to raise the vessel price of Huarong Company and Zhenghe Company? Huarong Company had a long-term and multi-business cooperation relationship with Zhenghe Company. At the time of negotiations on the related vessel construction, there were “Huarong 1”, “Huarong 2”, “Huarong 3”, three vessels under construction. The related vessel numbered ZH670069 was ten thousand tons bigger than the three others vessels, and the construction costs was increased by RMB14 million, it did not exist any unreasonable places. Moreover, the decision of the cost of ships involved was not only the Plaintiff and Zhenghe Company but also the

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lessee of financing lease Company. If they raised the vessel price, it would directly lead to the damage to the interests of Xinwei Company. The Defendant Dinghai Branch was a financial institution involved in the mortgage business of the vessel, and Dinghai Branch should have a clear understanding of the market and value of the vessel, at the time the Plaintiff entered into a contract for the construction of the vessel with Zhenghe Company, it was agreed that the price of the vessel was open and transparent, Dinghai Branch could independently determine whether the contract vessel price was virtually high at that time and accordingly to decide whether to participate in the provision of vessel advance payment and refund guarantee. However, it was obvious that Dinghai Branch was aware of the accepted vessel price at that time, but now they reckoned the cost of the vessel was maliciously raised and there was no evidence to support it. The decline of BDI would inevitably lead to the decline in the cost of vessels during the same period, and there was no corresponding theoretical and practical basis. The court of first instance would not accept it. 2. Whether the transfer of the two claims was true and relevant to the case? The Defendant Dinghai Branch said Huarong Company had malicious collusion with Zhenghe Company, in the name of the transfer of the creditor’s rights, and act the malicious acquisition of non-performing assets and withdrew RMB 63,600,000 back of the advance payment of the vessel numbered ZH670076/77 and RMB85 million payment of the two vessels numbered ZH670069/70.The court of first instance held that: firstly, the Plaintiff Huarong Company and Haijiang Company and Haiyu Company’s transfer of the original creditor was real, not imaginary, all cases in our court were the basis. Secondly, the Plaintiff and Zhenghe Company and the associated companies had seven large financial leasing and bareboat charter construction business cooperation. Based on mutually beneficial cooperation and continuity business with a long-term nature, the Plaintiff and the positive association between Zhenghe Company and Hongji Company, Baijie Company decided two independent consultation agreement on transfer of creditor’s rights related matters, when the parties signed a debt transfer agreement, the meaning was clear and true, and so far the parties of the contract had no objection to the validity of the transfer agreement. There was no evidence that, in the circumstances, the parties to the transfer of the creditor’s rights had been expressly aware that the transferee of the creditor’s rights would certainly not be repaid by the debtor. Thirdly, the transfer of claims paid RMB85 million was not paid in Zhenghe Company’s special accounts of the shipbuilding, and it was paid by Hongji Company to Huarong Company. There was no evidence that the payment was directly related to the ship’s payment to Zhenghe Company. In the opinion of Zhenghe Company’s bankruptcy administrator, only the description of the authenticity of the aforesaid transfer agreement should be further checked, and not deemed false. Fourthly, the defendant had the right and duty to supervise the advance payment of the ship under the guarantee, Dinghai Branch had the right to control the use and flow of funds, if the Defendant put the supervise into place, the vessel’s specific section should be used either for shipbuilding or for completion of the construction of the vessel to

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Huarong Company, or was still under supervision of special accounts unused, if the funds for the construction of the vessel were safe, it was not necessary for the Defendant to bear any guarantee responsibility. To sum up, the transfer of the creditor’s rights was the true meaning of the transferor, and did not violate the relevant provisions of the laws and regulations of the country, occured between Huarong Company and Hongji Company and Huarong Company and belonged to two different relationship between Huarong Company and Hongji Company, which had no relationship to the case. 3. Whether the case existed to defraud the letter of guarantee? The Defendant argued that the Plaintiff Huarong Company and Zhenghe Company as the main parties to the contract defraud the Defendant Dinghai Branch to offer guarantee, violated the mandatory provisions of laws and administrative regulations, the guarantee should be invalid. The court of first instance believed that the real purpose of the contract signed by the Plaintiff Huarong Company and Zhenghe Company was shipbuilding, the shipbuilding contract was authentic and effective and had been actually fulfilled, as the completed three vessels “Huarong 1”, “Huarong 2”, “Huarong 3”, were all issued the advance payment guarantees by the Defendant Dinghai Branch. The business process and trading habits were formed by the long-term cooperation between the parties. In addition, the letter of guarantee agreement was signed by Zhenghe Company and Dinghai Branch independently. Huarong Company had not participated in the contract. The contract for the construction of the vessel had not been stipulated the letter of guarantee should issue by Dinghai Branch. Dinghai Branch was only one of the lines of opening guarantee between Zhenghe Company. Therefore, there was no evidence that Huarong Company and Zhenghe Company had the existence of fraud, Dinghai Branch of guarantees common intent or behavior. In summary, there was no evidence that Huarong Company and Zhenghe Company have the behavior to raise the price of the vessel, with false transfer of claims to withdraw the ship’s money, to defraud the letter of subjective, intentional or objective behavior. The letter of guarantee involved in the case represented the true intention of the Plaintiff and the Defendant, and was legally valid and legally binding. According to the Enterprise Bankruptcy Law of the People’s Republic of China Article 18: after the people’s court accepts an application for bankruptcy, the administrator shall have the right to decide to rescind or continue to perform a contract that is concluded before the acceptance yet remains to be fulfilled by both the debtor and other party and shall notify the other party of his decision. Where the administrator fails to notify the other party within two months from the date when the bankruptcy application is accepted or fails to give any reply to the exhortation made by the other party within 30 days from the date the exhortation is made, the contract should be deemed to be rescinded. Where the administrator decided that performance of the contract should be continued, the other party should comply. However, the other party should have the right to request the administrator to provide guaranty. Where the administrator

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refused to do so, the contract should be deemed to be rescinded. In this case, Zhenghe Company’s bankruptcy administrator had not informed Huarong Company within two months from the date of acceptance of the bankruptcy petition. Therefore, the contract between Zhenghe Company and Huarong Company involved in the shipbuilding contract had been relieved. According to the law, when the contract had been completed, the parties concerned may request restitution or other remedial measures according to the performance and the nature of the contract, and had the right to claim compensation for the loss. Therefore, Huarong Company had the right to require Zhenghe Company to refund all the shipbuilding proceeds. The advance payment of the shipbuilding payment issued by Dinghai Branch, which the guarantee method stipulated in the letter of guarantee, should be joint and several liability. According to the law, the creditor could ask the debtor to fulfill his obligation, or it could require the guarantor to undertake the suretyship liability within his scope of suretyship, therefore, the Plaintiff had the right to directly claim the right of Zhenghe Company and the guarantor of Zhenghe Company, which was Dinghai Branch. The Plaintiff’s claim had already been provided, and the Defendant’s plea for the invalidity of the letter of guarantee should not be accepted by the court. Moreover, while signing the two vessel construction and guarantee agreements with Huarong Company and Zhenghe Company, Dinghai Branch confirmed the amount of advance payments made by the vessel has been clearly, and it was promised that the Plaintiff’s claim should be liable for unconditional payment within 10 working days. The Defendant refused to pay in this case, and should bear the corresponding legal responsibility. Since the Plaintiff sued the Defendant in accordance with the calculation of the People’s Bank of China benchmark interest rate loans paid for rational from the date the Plaintiff raised the sue, the court of first instance would admit the claim. But for the realization of creditor’s rights, the Plaintiff paid the lawyer’s fee, it was not included in the letter of guarantee which Dinghai Branch had issued, so the court of first instance would not support the claim. Because Zhenghe Company was in bankruptcy reorganization process, although the Plaintiff and the Defendant had declared the case to the bankruptcy administrator in full, the Plaintiff made it clear that if the case had been paid by the Defendant, they agreed to transfer the creditor’s rights limited to the scope of payment to the Defendant. It was impossible for the Plaintiff to get double compensated, Huarong Company directly requested the Defendant to undertake the suretyship responsibility conforms to the regulations of the Article 44 of the Interpretation of the Supreme People’s Court on Several Issues concerning the Application of the Guaranty Law of the People’s Republic of China. To sum up, the portion of the claims raised by the Plaintiff which are reasonable will be supported by the court. According to Article 18 Paragraph 1 of the Enterprise Bankruptcy Law of the People’s Republic of China, Article 94 Paragraph 5 and Article 97 of the Contract Law of the People’s Republic of China, Article 18 of the Guaranty Law of the People’s Republic of China, Article 44 of the Interpretation of the Supreme People’s Court on Several Issues concerning the Application of the Guaranty Law of the People’s Republic of China, and after the discussion by the judicial committee of the court, the judgment was as follows:

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1. confirm the vessel’s advance payment refund guarantee issued by Dinghai Branch numbered 2012-028 as valid; 2. Dinghai Construction Bank should immediately pay the Plaintiff shipbuilding advance payment RMB179,200,000 and the corresponding interest (in accordance with the benchmark lending rate of the People’s Bank of China over the same period, the date of the prosecution should be counted until the date of the performance of the judgment) from September 28, 2015 until the date of the performance of this judgment within 10 days after the judgment comes into effect; 3. reject other claims of the Plaintiff Huarong Company. If the performance was not fulfilled within the time limit specified in this judgment, the monetary obligation should be paid under the stipulates of the Civil Procedure Law of People’s Republic of China Article 253, should pay double the interest on a debt during the delay. Court acceptance fee of first instance in amount of RMB938,300, should be born by the Defendant Dinghai Branch. Dinghai Branch dissatisfied the judgment of first instance, and appealed to the court, that: 1. The fact that Huarong Company raised the cost of the vessel and then withdrew the advance payment of the construction of the vessel existed objectively, the judgment of first instance was only judged from the surface that the cost was reasonable, which was wrong in indemnify with the facts. The written examination opinion issued by the bankruptcy administrator of Zhenghe Company clearly stated that, after Zhenghe Company received RMB85 million of the advance payment of the vessels’ construction numbered ZH670069 and ZH670070, Zhenghe Company divided 85 million yuan into seven parts and transferred the money to Hongji Company and Hongji Company transferred the money to Huarong Company. Therefore, the fact that RMB85 million had been taken back proved that the price of the vessel had been maliciously raised; 2. Whether the two-creditors’ rights transfer was true or not directly affected the validity of the letter of indemnity involved, the judgment of first instance was not examined for the truthfulness of the transfer of creditor’s rights, and that the transfer of creditor’s rights has nothing to do with the case, so the court of first instance reckoned that it belonged to the fact-finding error. Rendering the judgment while the relevant investigation procedure had not ended, it was a violation of procedure; 3. Huarong Company and Zhenghe Company malicious colluded to defraud the letter of guarantee, it was wrong that the court of first instance had not given the recognition; 4. The first instance of trial jurisdiction agreed in the controversial case of Huarong Company to increase the validity of the letter of indemnity under the disputable circumstances, the court tried to be first to judge and it belongs to breach of procedural law. On January 6, 2016, Dinghai Branch co-sued Zhenghe Company and Huarong Company as the co-defendants to confirm the invalidity of the contract, to request for confirmation relates to the invalidity of the guarantee, Dinghai Court accepted the sue on the same day. On February 23, 2016, Huarong Company increased the claim before the court hearing to request

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the confirmation related to the validity of the letter of guarantee. Therefore, the validity of the guarantee should be heard by the Dinghai court, which had accepted the case earlier; 5. The judgment of first instance found that Huarong Company could pay the priority of the guarantor directly without the bankruptcy procedure, which was a mistake in accordance with the law. Huarong Company declared its claim to Zhenghe Company’s bankruptcy administrator for all the prepayment of the shipbuilding, Zhenghe Company’s bankruptcy procedures were uncompleted now and the allocation had not been determined. Therefore, even if Dinghai Branch should bear the guarantee responsibility, it should also undertake the guaranty responsibility of the part of Huarong Company which should be paid off after the bankruptcy proceedings of Zhenghe Company was completed. In addition, the interest of the letter of guarantee involved should be suspended from the date of acceptance of Zhenghe Company’s bankruptcy case, Huarong Company was suing Zhenghe Company after its bankruptcy date, and the interest it advocated from the date of lawsuit should not be supported. In summary, the court should reject Huarong Company’s claims or retry the case. Huarong Company argued in second instance that: 1. The main content of the appeal from Dinghai Branch was that the vessel’s advance payment guarantee involved in the vessel was invalid, therefore it should not bear the payment obligations under the letter of guarantee. According to the principle of “who advocates who gives evidence”, Dinghai Branch had the burden of proof. But so far, Dinghai Branch failed to prove that the letter of guarantee involved in Article 52 of the Contract Law of the People’s Republic of China or Article 30 of the Guaranty Law of the People’s Republic of China, and Dinghai Branch should bear the consequences of the burden of proof; 2. With respect to the jurisdiction, while Huarong Company filed the lawsuit, it did not explicitly specify the case for requesting the confirmation of the invalidity of the bond, but the request for payment of advance includes the review of the validity of the guarantee. As for the validity of the guarantee, the complaint was made by Huarong Company at first, Dinghai Branch sued to the court later. About this case, the Zhejiang High People’s Court made the second instance ruling on the jurisdiction that the Ningbo Maritime Court was deemed to have jurisdiction and it should be deemed to have jurisdiction over the case; 3. Huarong Company had the right to settle directly from Dinghai Branch. The letter of guarantee involved clearly stated that the suretyship provided under the letter of guarantee should be joint and several liabilities guarantees. Therefore, Huarong Company could directly request Dinghai Branch to undertake joint and several liabilities guarantee within its scope of guarantee. Moreover, Dinghai Branch had declared to the creditors and the bankruptcy administrator of Zhenghe Company, the case also included involving payment guarantee. The creditor’s rights declared by Dinghai Branch and Huarong Company were

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suspended to confirm the claim, after Huarong Company obtained the payment of Dinghai Branch, they agreed to transfer the corresponding bankruptcy claims to Dinghai Branch. In conclusion, Huarong Company request the court to dismiss the appeal and affirm the original judgment. In second instance, five new evidence materials were submitted by Dinghai Branch: Evidence 1: information issued by Zhenghe Company’s bankruptcy administrator on the acquisition of bad creditor’s rights with the shipbuilders and associated parties, Zhenghe Company’s bankruptcy administrator presented the notification at a meeting with the creditors’ committee on May 30, 2016, it held that Hongji Company and Baijie Company made the acquisition of Huarong Company’s claim’s recoverable as low, to prove that the creditors could sue for cancellation, in order to prove that the transfer of the creditor’s rights involved in the case was obviously false. Evidence 2: record of the trial of first instance of the case, to prove that the original judgment apply for investigation and evidence collection to Dinghai Bank, during the procedure of the investigation and evidence collection had already started but not ended yet, the court made a sudden decision, thus the procedure was seriously illegal; so Huarong Company had the motivation to deal with bad assets, raise the price of the ship, cheat the letter of guarantee and withdraw the advance payment. Evidence 3: list of the major physical assets of four companies, such as Zhenghe Company, to prove that the principal assets of Zhenghe Company were mortgaged the maximum amount of mortgage to Dinghai Branch, it was impossible for other banks to undertake the guarantee business of this case, Dinghai Branch was not as the judgment of first instance affirmed one of the bank which could issue the letter of guarantee for Zhenghe Company, but the only target bank. Evidence 4: approval of the China Construction Bank’s credit line examination and approval of the extension of the credit limit for Zhenghe Company in order, to prove that before Huarong Company transferred the creditor’s rights to Hongji Company and Baijie Company, credit guarantee for Zhenghe Company’s guarantee business had already been approved by the China Construction bank, therefore Zhenghe Company and Huarong Company issued a letter of guarantee’s target bank was Dinghai Branch. Evidence 5: balance sheet, income statement of Baijie Company, to prove that Baijie Company itself had not the ability to assign this bad debt and the need for it, the source of the transfer of claims came from Zhenghe Company, it was apparent that Huarong Company transferred the claim through Baijie Company was to obtain the advance payment of shipbuilding. Huarong Company cross-examined that: There was no objection to the authenticity of the form of evidence 1, but there was disagreement about the relevancy and the purpose of evidence, the bankruptcy administrator of Zhenghe Company failed to determine the extent to which the claim could eventually be realized. There was no objection to the authenticity of the

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form of evidence 2, but had the objection of the proof, the court record referred that at the court of first instance, before the court, they issued proof of interest to both parties, the court could not fail to give evidence because the parties concerned do not provide evidence. The authenticity of evidence 3 and 4 was confirmed, but there was disagreement about the purpose and relevancy of the evidence, there was no potentially fraudulent condition in this cases. The authenticity of evidence 5 was not recognized, there was only stamped the seal of Baijie Company and the material was not from the audit report, and the assets and liabilities of the case could not be transferred to the purpose of false proof. There was no new evidence been submitted in second instance of Huarong Company. Upon examination, the court holds that the evidence submitted by Dinghai Branch was 1–4, and Huarong Company had no objection to its authenticity; the material of evidence 5 is stamped with the official seal of Baijie Company, although Huarong Company has objection to its authenticity, they cannot provide rebuttal evidence or illustrative reason. Therefore, the form and the authenticity of the above evidence are confirmed. For the purpose of the above evidence, evidence 1, 3, 4 and 5 are used to prove that Huarong Company cheated the letter of guarantee, however, the notification issued by Zhenghe Company’s bankruptcy administrator only shows that the relevant creditor’s rights are bad assets, and the credit is less recoverable, which cannot prove that the transfer of claims is false; other evidence is still insufficient to prove that the transferred creditor’s right is false or that Huarong Company has colluded to defraud the letter of guarantee, therefore, the purpose of the above evidence is not recognized. About evidence 2. The court record of the trial of the first instance reflects that the court of first instance and ordered the parties to provide corresponding evidence, but both parties provided only partial evidence, the court of first instance made a ruling in accordance with the existing evidence, and the procedure was not inappropriate, so the purpose of the evidence was not recognized. As for the facts found in the first instance, the relevant evidence are supported by the relevant evidence, and neither party nor the other party has raised any objection, and the court shall confirm the facts ascertained in the first instance. Another investigation was made by the court: Huarong Company went to court of first instance on September 28, 2015, request to order the payment of Dinghai Branch under the letter of guarantee, on December 21 of the same year, Huarong Company requested the court of first instance increased litigation request, to request for an order involving the letter of guarantee is valid. After Dinghai Branch raised the objection of jurisdiction, the court of first instance ruled that the objection to the jurisdiction of the court was rejected. Dinghai Branch rejected the first instance ruling and appealed, on January 6, 2016, the court made Civil Ruling numbered (2015) Zhe Xia Zhong Zi No.230 to dismiss the appeal and affirm the original ruling. Later Dinghai Branch made Zhenghe Company and Huarong Company as the Defendant, sued under the Dinghai Court on January 6 and requested confirmation case involving the letter of indemnity was invalid.

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The court considers that: according to the reasons for the appeal of Dinghai Branch and the reply made by Huarong Company, the issues of second instance are that: 1. whether the proceedings in the first instance of this case were lawful; 2. whether the letter of indemnity was valid; 3. whether Huarong Company entitled to the direct payment from the guarantor and the calculation of the interest on the bond. The court comments as follows: As for the first issue of the dispute, the court holds that, the civil ruling numbered (2015) Zhe Xia Zhong Zi No.230 of the court made it clear that the court of first instance has jurisdiction over the case. And Huarong Company required in the first instance to judge to Dinghai Branch on the payment requirements for the case involving the guarantee amount under this claim indicates that it considers the case to be valid, the court of first instance should review the validity of the guarantee. Moreover, the first instance of Huarong Company increased the validity of the confirmation letter. Dinghai Branch was further confirmed that the action of the letter of guarantee is a repeated action. Therefore, the court of first instance did not hear the case in a not proper way and the procedure is legal. As for the second issue of the dispute, on the price of vessels, Dinghai Branch held that the vessel price was considered elevated, damage its legitimate interests. The court considers that, the financial leasing contract and the contract for the construction of the vessel in this case are detailed in respect of the specifications, drawings and cost of the vessel, Dinghai Branch shall review the provision of advance payment guarantee, however, no objection were raised at that time. After the contract was unable to be fulfilled, the parties failed to make any objection to the price of the vessel when negotiating with the parties repeatedly. In the course of the first and second instance of this case, Dinghai Branch has not provided the corresponding evidence to prove that the case involved the reasonable price of the vessel being constructed. In the first instance, the three vessels, “Huarong 1”, “Huarong 2” and “Huarong 3”, were compared before the construction was completed, and the cost of the vessels involved in the case is reasonable. About the question of whether the transfer of the two claims involved is true and whether it is related to the cost of the vessel in this case. According to the facts found in the first instance, RMB89,639,425.18 of debt to the debtor Huarong Company will enjoy Haijiang Company and related guarantor, at the price of RMB85 million transferred to Hongji Company; will enjoy RMB79,990,000 debt to the debtor Haiyu Company and related guarantor, transferred to Baijie Company at the price of RMB63,600,000. Dinghai Branch appealed that Hongji Company and Baijie Company are the affiliated companies of Zhenghe Company, the transfer of the creditor’s rights comes from the advance payment of the vessel, which means that Huarong Company would in fact pay RMB63,600,000 and RMB85 millions of ZH670069/70 and ZH670076/77 of the two related vessels withdrawal in shipbuilding advance payment. The court believes that Dinghai Branch claimed that the price of the vessel was inflated by RMB150 million which is equivalent to the amount of the two claims transferred. However, there is no evidence to support the claim. Considering the flow direction of the above mentioned assignment of debtor 85 million and RMB63,600,000 are flowed off from Zhenghe Company and is

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remitted to Baijie Company and Hongji Company account, and Hongji Company and Baijie Company remitted to Huarong Company account, the RMB85 million is remitted from the other accounts of Zhenghe Company (not the shipbuilding prepayment supervision account), which has nothing to do with advances; and Zhenghe Company merged into Baijie Company of RMB63,600,000, though it is from Zhenghe Company’s shipbuilding regulatory accounts in the “remittance” in the name of remittance, but Dinghai Branch is under the supervision agreement between Zhenghe Company, it has the duty to supervise the funds of the special account for shipbuilding, the court of first instance in conjunction with the relevant witness testimony, it is not inappropriate to know this. Moreover, the contract of ship building and the assignment of claims belong to different legal relations, where there is no evidence that the two is related, if Zhenghe Company, Hongji Company, and Baijie Company’s creditors exist the circumstances which the creditor transfer is invalid and may revoke, it can be solved through a solution, such as support for their interests should belong to all creditors. To sum up, the shipbuilding contract signed between Huarong Company and Zhenghe Company is valid, the contract has been partially fulfilled and the failure to continue is due to bankruptcy of Zhenghe Company. Dinghai Branch cannot provide evidence to prove that while Huarong Company signed a contract with Zhenghe Company they have the joint intention or action of defrauding the guarantee of Dinghai Branch. The letter of guarantee referred to in the case shall be lawful and valid. As for the third issue of the dispute, the appeal of Dinghai Branch considered that Huarong Company declared its claim to the bankruptcy administrator of Zhenghe Company, therefore, Huarong Company had no right to ask for the guarantee responsibility before the end of Zhenghe Company bankruptcy procedure. The court holds that: according to Article 44 Paragraph 1 of the Interpretation of the Supreme People’s Court on Several Issues concerning the Application of the Guaranty Law of the People’s Republic of China, “during the guaranty period, if the people’s court accepts the bankruptcy case of the debtor, the creditor may either declare the claim to the people’s court or claim the right from the guarantor”. In this case, the letter of guarantee involved clearly stipulated that the guarantee provided under the letter of guarantee is joint and several liability guarantee, though Huarong Company declared its claim to all shipbuilders in advance despite the bankruptcy of Zhenghe Company, however, the declared creditor’s rights are to suspend the confirmation of the creditor’s rights. Besides, Huarong Company also confirmed that in the case of Dinghai Branch liquidation, it agreed to transfer the corresponding bankruptcy claims to Dinghai Branch. Therefore, Huarong Company directly requested Dinghai Branch to undertake joint and several liabilities within the scope of its guarantee, and the requirement for the guarantee is not contrary to the law. The court of first instance supported it without undue support. As for the interest of the letter of guarantee, the guarantee itself does not stipulate interest payment, according to the supplementary agreement on April 20, 2015, the guarantee period of Dinghai Branch was extended to September 30 of the same year, the claim against Huarong Company shall be paid unconditionally within 10 working

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days. In the case, Huarong Company sued Dinghai Branch in September 28 of the same year, therefore, the court of first instance ordered Dinghai Branch to pay the interest on the loan of Huarong Company since the date of prosecution, it is actually after Huarong Company urged Dinghai Branch to fulfill the payment obligation of the guarantee, Dinghai Branch refused to fulfill or delays the performance of the guarantee. Therefore, the judgment of first instance is not obviously inappropriate and should be affirmed. To sum up, the advance payment, refund guarantee and supplementary agreement issued by Dinghai Branch to Huarong Company are valid, because of the applicant guarantee of Zhenghe Company are unable to fulfill their shipbuilding contract with Huarong Company. Huarong Company has the right to refund the deposit in accordance with the case, require Dinghai Branch to undertake joint and several guarantees responsibilities according to the contract. The reasons for the appeal of Dinghai Branch are untenable, and the court will not support tithe facts of the original judgment are clear, the applicable law is correct, and the entity is handled properly. In accordance with Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee in amount of RMB938,300, shall be born by the Defendant Dinghai Branch. The judgment is final. Presiding Judge: QIU Jianfeng Acting Judge: ZHENG Enliang Acting Judge: CHU Ningyu October 28, 2016 Clerk: DING Lin

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The Supreme People’s Court of the People’s Republic of China Civil Ruling Huarong Financial Leasing Company Limited v. China Construction Bank Zhoushan Dinghai Sub-branch (2017) Zui Gao Fa Min Shen No.2014 Related Case(s) This is the ruling of retrial, and the judgment of first instance and the judgment of second instance are on page 349 and page 375 respectively. Cause(s) of Action 238. Dispute over maritime security. Headnote Supreme People’s Court rejected defendant bank's application for a retrial and affirmed lower courts’ decisions holding plaintiff ship purchaser entitled to recover under refund guarantee provided by defendant bank for advance installments paid to shipbuilder under construction contract that was not completed because of shipbuilder’s bankruptcy, rejecting bank’s argument that plaintiff and shipbuilder had fraudulently colluded to raise the ship's price artificially. Summary The Plaintiff entered into a contract with a shipbuilder to build a new ship. The Defendant bank guaranteed to refund sums paid by the Plaintiff to shipbuilder if the shipbuilder did not complete the construction of the ship in accordance with the timetable set in the contract. After the Plaintiff had paid four of five installments to the shipbuilder, the shipbuilder was declared bankrupt. The shipbuilder’s administrator in bankruptcy did not declare that the contract should be completed, so it was rescinded by operation of law. The Plaintiff demanded payment from the Defendant bank under the refund guarantee. The Defendant bank refused to pay, alleging that the Plaintiff and the shipbuilder had fraudulently colluded to raise the price of the ship under construction. The Court of first instance held that the price set in the construction contract was genuine, and that the Defendant was obliged to honor the refund guarantee. The Defendant appealed. The appeal Court affirmed the judgment of the Court of first instance and held that bank guarantee was legally valid and that the Plaintiff was entitled to the direct payment from the Defendant bank as guarantor. On further appeal, Defendant bank petitioned the Supreme People’s Court for a retrial on the same issues raised on its initial appeal. The Supreme People’s Court

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affirmed the decision of the Court of second instance and dismissed Defendant’s application for retrial.

Ruling The Claimant of retrial (the Defendant of first instance, the Appellant of second instance): China Construction Bank Zhoushan Dinghai Sub-branch Domicile: No.38, West Jiefang Road, Dinghai District, Zhoushan, Zhejiang. Person in charge: Wu Minmin, deputy president of the branch. Agent ad litem: Cao Ziyan, lawyer of Beijing Hengdu Law Firm. Agent ad litem: Yang Liu, lawyer of Beijing Shanghai SG & CO. The Respondent of retrial (the Plaintiff of first instance, the Respondent of second instance): Huarong Financial Leasing Company Limited Domicile: 6th and 7th floor of the World Trade Building, No.122, Shuguang Road, Hangzhou, Zhejiang. Legal representative: Li Peng, chairman of the company. Agent ad litem: Li Zheng, lawyer of Beijing Zhong Yin Law Firm. Agent ad litem: Jia Chunyu, lawyer of Beijing Zhong Yin Law Firm. This case concerns a dispute over maritime claims guaranteed between the Claimant of retrial, China Construction Bank Zhoushan Dinghai Sub-branch (hereinafter referred to as “CCB Dinghai”), and the Respondent of retrial, Huarong Financial Leasing Company Limited (hereinafter referred to as “Huarong”). The Claimant of retrial disagreed with the Zhejiang High People’s Court (2016) Zhe Min Zhong No.357 Civil Judgment, and applied for a retrial. Now, the case has concluded. CCB Dinghai claimed that: firstly, the precondition for CCB Dinghai to undertake the guarantee responsibility under the Ship Advance Payment Refund Letter of Guarantee (hereinafter referred to as “Letter of Guarantee”) and the subsequent supplementary agreement was that Huarong terminated the contract and recovered the shipbuilding advance payment in accordance with the Ship Construction Contract. The shipbuilding contract involved was rescinded in accordance with Article 18 of the Enterprise Bankruptcy Law of the People s Republic of China (hereinafter referred to as the “Enterprise Bankruptcy Law”). Huarong did not have the right to require CCB Dinghai to assume related guarantee responsibilities. Secondly, Zhejiang Zhenghe Shipbuilding Co., Ltd. (hereinafter referred to as “Zhenghe”) refunded 14.86 million yuan to Huarong. CCB Dinghai should not be responsible for the amount of guarantee. The court of second instance confirmed that CCB Dinghai should pay Huarong advance payments for shipbuilding, but the facts and application of law were wrong. Therefore it requested this court to retry the case. Huarong argued that: firstly, the termination of the contract was not a necessary condition for CCB Dinghai to perform its letter of guarantee obligations. When Zhenghe violated the contract and failed to return the advance payment of the ship

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to Huarong, CCB Dinghai should bear the obligation of guarantee. Secondly, Huarong received 14.86 million yuan for the outsider in the case due to the transfer of creditor’s rights, which was not related to this case. The facts confirmed by the court of second instance and the application of law were correct. So, it requested the court to dismiss the application for retrial of CCB Dinghai. CCB Dinghai submitted Zhejiang Zhoushan Dinghai People’s Court (2016) Zhe 0902 Min Chu No.2579 and (2016) Zhe 0902 Min Chu No.2580 Civil Judgments to the court as new evidence, to prove that Zhenghe returned part of the shipbuilding advance payment to Huarong. Huarong recognized the authenticity and legality of the two judgments, but it did not recognize the relevancy. After investigation, the court holds that this case concerns the dispute over a maritime claims guarantee. According to the application for retrial of CCB Dinghai, the issue of the case is whether the confirmation of the court of second instance that CCB Dinghai should bear the responsibility of guaranteeing Zhenghe to return all shipbuilding prepayment obligations is incorrect. According to the facts confirmed by the courts of first and second instances along with the relevant evidence, Huarong and Zhenghe concluded a shipbuilding contract, entrusted Zhenghe to build a ship, and paid 179,200,000 yuan in advance for shipbuilding. According to the stipulations in the shipbuilding contract and the supplementary letter of guarantee, Huarong did not receive the ship if: Zhenghe passed the latest delivery date, or either party proceeded with litigation, or a creditor, stockholder, or any other creditor submitted the above request and was approved by the court. Huarong could then terminate the contract, and Zhenghe would have to refund all advance payments for shipbuilding to Huarong. In March 2015, Zhenghe applied to Zhoushan Dinghai People’s Court for bankruptcy and reorganization. On June 30, the court ruled to accept it. The ship involved was not completed and construction ceased, and it did not meet the delivery conditions. The conditions for cancellation of the contract had been fulfilled, and Huarong had the right to cancel the contract and recover all advance payment for shipbuilding from Zhenghe. On September 22, 2015, Huarong issued to Zhenghe and the bankruptcy administrator the Refund Letter for Shipbuilding Contract Advance Payment (hereinafter referred to as “Refund Letter”), advocating the termination of the contract and the return of advance payment for shipbuilding. The facts and reasons that Huarong proposed to terminate the contract in the Refund Letter not only related to Article 18 of the Enterprise Bankruptcy Law that the bankruptcy administrator does not notify the other party to continue to perform the shipbuilding contract within two months from the date of acceptance of the bankruptcy application which should be deemed as termination of contract, but also included “Zhoushan Dinghai People’s Court ruled that the company was in bankruptcy and reorganization proceedings”” and other contractual cancellation situations. In the event that both the statutory termination of the contract and the agreed termination conditions were fulfilled, Huarong advocated the termination of the contract and requested Zhenghe to return the shipbuilding advance, which does not violate the laws. CCB Dinghai issued the Letter of Guarantee, etc., to provide joint and several liability guarantees for the repayment obligations of Zhenghe. Since Zhenghe did

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not fulfill the corresponding repayment obligations, Huarong has the right to claim rights directly from CCB Dinghai. CCB Dinghai refused to assume the responsibility of guarantee on the ground that Huarong did not terminate the contract as agreed, which lacks factual basis. The court of second instance confirmed that CCB Dinghai should assume the responsibility of guaranteeing the return of shipbuilding prepayment obligations, which is not inappropriate. CCB Dinghai advocated that Huarong recovered the advance payment of RMB 148.6 million in the form of high-priced transfer of claims to outsiders Qingdao Hongji Materials Co., Ltd. (hereinafter referred to as “Hongji”) and Zhoushan Baijie Trading Co., Ltd. (hereinafter referred to as the “Baijie”), which returned 148,600,000 yuan. However, the shipbuilding contract involved, and the contract for Huarong to transfer claims to outsiders belong to different legal relationships. There is no evidence to prove that the transaction between Huarong and the outsiders is called the transfer of creditor’s rights and that the advance payment for the shipbuilding contract is recovered. The two civil judgments submitted by CCB Dinghai show that the agreement of Huarong to transfer the creditor’s rights to Hongji and Baijie has been canceled by the court of first instance. It cannot prove CCB Dinghai’s claim that Huarong withdrew part of the advance payment for ship construction through the transfer of creditor’s rights, and it could not overturn the facts determined in second instance. In conclusion, the application for retrial of CCB Dinghai is not consistent with the Civil Procedure Law of the People s Republic of China Article 200. According to the Civil Procedure Law of the People s Republic of China People’s Republic of China Article 204 Paragraph 1, the Interpretation of the Supreme People’s Court Concerning the Application of the Civil Procedure Law of the People’s Republic of China Article 395 Paragraph 2, the ruling is as follows: Dismiss the application for retrial of China Construction Bank Zhoushan Dinghai Sub-branch. Presiding Judge: HU Fang Acting Judge: HUANG Xiwu Acting Judge: ZHANG Kexin June 29, 2017 Clerk: LI Na

Wuhan Maritime Court Civil Judgment Hubei Branch of China Pacific Property Insurance Co., Ltd. v. SIPG Yangtze River Logistics Co., Ltd. (2014) Wu Hai Fa Shang Zi No.00906 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 407. Cause(s) of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote the Defendant held to be NVOCC, rather than forwarding agent, and so held liable for total loss of the Plaintiff’s cargo; observations on the difference between forwarders and NVOCCs. Summary The Plaintiff cargo insurer claimed for total loss of two containers of medical operation towels, which became wet during carriage from China to Tokyo and could not be used under Japanese law. The Defendant argued that it should not be responsible for the loss because it was merely the cargo agent and not the NVOCC. The court held that the non-vessel shipping business and the freight-forwarding business were two different categories, and determined from looking at the contract, the method of payment, the bill of lading, and the business operating model, that the defendant was properly regarded as an NVOCC and so was liable for the loss of the Plaintiff’s cargo.

Judgment The Plaintiff: Hubei Branch of China Pacific Property Insurance Co., Ltd. Domicile: No.847, Hankou Building Avenue, Wuhan City, Hubei. Legal representative: YU Baoyu, general manager. Agent ad litem: ZHANG Jianxin, lawyer of Shanghai Haifu Law Firm. Agent ad litem: ZHANG Zhenlong, lawyer of Shanghai Haifu Law Firm.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_16

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The Defendant: SIPG Yangtze River Logistics Co., Ltd. Domicile: Floor 7th, Building 4, Fuxing City Garden, No.186, Xinhua Road, Jianghan District, Wuhan, Hubei. Legal representative: X Xwei, general manager. Agent ad litem: QIN Xiao, lawyer of Hubei Sensheng Law Firm. Agent ad litem: ZHAO Yanping, staff of the company. With respect to the case arising from dispute over contract of carriage of goods by sea, the Plaintiff Hubei Branch of China Pacific Property Insurance Co., Ltd. (hereinafter referred to as Insurance Company) field an action against the Defendant SIPG Yangtze River Logistics Co., Ltd. (hereinafter referred to as SIPG Company), before the court on July 17, 2014. Because this case was dispute over contract of carriage of goods by sea, which fell under the jurisdiction of the Maritime Court, and the place of shipment was in the area under the jurisdiction of the court. So according to Article 6 Paragraph 2 Sub-paragraph 2 of the Special Maritime Procedure Law of the People’s Republic of China, the court had the right of jurisdiction. The court entertained the case on July 29, 2014 and appropriate in light of law, the case judged by Judge WU Hao. On September 2, the court constituted a trial bench in light of law and held an open hearing. ZHANG Jianxin, agent ad litem of the Plaintiff Insurance Company, QIN Xiao, agent ad litem of the Defendant SIPG Company, appeared in court and participated in the action. The case has been concluded. The Plaintiff Insurance Company claimed that: in June 2013, the Wuhan Di Yuan Investment Co., Ltd. (hereinafter referred to as Di Yuan Company) entrusted SIPG Company to carry two containers of operation towels from Wuhan China to Tokyo. The Defendant issued two sets of B/L No.SIPG2013083 and No.SIPG2013084. In July, once the cargo arrived in the destination, the wet cargo had been found. The cargo concerned was medical operation towels, they would be useless once were wet. And they could not be used for any other ways according to the Japanese law, so the cargo in concern was identified as total losses. The Plaintiff as the cargo transportation insurer, to ask the consignee Hakujuji for guarantee deposits USD199,796.55 on March 25, 2014, and obtained the right of subrogation. The Defendant was the carrier in the sea cargo concerned who should carry the cargo carefully and deliver the sound cargo to the consignee. The cargo losses in concern were happened in the period of responsibility of carrier, so the Defendant should bear the losses of the Plaintiff. As a result, the Plaintiff required the court to order the Defendant to compensate the guarantee deposit USD199,796.55 and interest (interest therefore calculated at the loan interest rate published by the People’s Bank of China from the date of insurance paying on March 25, 2014 to the date when the Defendant actually paid), and the Defendant should bear the court costs. The Defendant argued that: the two sets of B/L No.SIPG2014083 and No. SIPG2013084 which claimed by the Plaintiff were both advanced B/L which signed for handling the credit letter and according to the requirement of the shipper Di Yuan Company. The Defendant was cargo agent and ship agent not the carrier, so the Defendant should not bear the responsibility of compensating the cargo loss

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concerned. Moreover, the claim amount of the Plaintiff had no enough evidence to be proved. To sum up, the Defendant demanded the court to reject the claims of the Plaintiff. The Plaintiff submitted the following evidence to support its claims: Evidence 1: Sales Contract signed between Di Yuan Company and SIPG Company, and the two sets of B/L (No.SIPG2013083 and No.SIPG2013084), to prove that although the contract named as a sales contract, the specific articles of this contract are transportation contract articles. The Defendant was the carrier of the cargo in concern, and was the proper liability subject. The Defendant had no objection to the authenticity of this evidence, but could not identify the prove aims. The Defendant held it was just ship agent not the actual carrier. Evidence 2, arrival notice and import permission notice from the Japan Kanto Customs, to prove Hakujuji was the consignee and insurer of the cargo in concern. The Defendant had no objection to the authenticity of this evidence, but held that the ocean bill of loading number was noted on the arrival notice, so the Plaintiff should know the Defendant not the carrier of the cargo concerned and this evidence could not prove Hakujuji was the consignee. Evidence 3, an assessment which issued by the Japan Maritime Supreme & Measures Association and the tally sheet, to prove that assessment institution held the cargo total loss, and the loss happened in the period of the Defendant’s liability. The Defendant had objection to the authenticity of this evidence, it held that there were no its staff to attend the process of loss adjusting and cargo handling, so the prove aims of the Plaintiff could not be identified. Evidence 4, cargo restitution, to prove the consignee claimed the cargo total loss, because the destroying expense in Japan was higher than that in China, so the cargo concerned would be returned and destroyed in China. The Defendant held it did not know the details of the cargo return process, so it had no ideas of this evidence. Evidence 5, commercial invoice and packing list, to prove the gross invoice price of the cargo in concern was USD188,034.56. The Defendant had no objection to the authenticity of this evidence, but held that the claim amount of the Plaintiff was higher than the gross cargo price. Evidence 6, cargo transportation insurance policy, insurance payment voucher, receipt, the letter of subrogation and the consignee’s power of attorney, to prove that the Plaintiff underwrote the cargo concerned and the insured amount totally USD206,838.02. After the notice of cargo loss, the Plaintiff negotiated with Hakujuji and compensated USD199,796.55 and obtained the right of subrogation. The Defendant had no objection to the authenticity of this evidence, but proposed that name of the actual carrying vessel was different from that on the policy. The court’s confirmation of the submitting evidence: evidence 1, 2, 5 and 6, the Defendant had no objection to the authenticity of the four groups evidence, and they can be taken as the basis of trial. Evidence 3 and 4 both identified by the notarization, although the Defendant did not approve their authenticity, it had no enough evidence to disclaim, so the court holds that the two groups evidence can be taken as the basis of trial.

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The Defendant submitted the following evidence to support its pleas: Evidence 1, Sales Contract signed between Di Yuan Company and SIPG Company. The evidence was to prove that the Defendant was the ocean freight forwarder of Di Yuan Company, and Di Yuan Company approved the Defendant had right to sign the B/L acted as shipowner. Evidence 2, Agency Agreement signed between Shanghai Hai Hua Shipping Co., Ltd. (hereinafter referred to as HASCO) and the Defendant, to prove the Defendant was the ship agency of HASCO, and the carrier of the cargo concerned was HASCO. Evidence 3, Service Agreement signed among HASCO, Shanghai Haihua Shipping Company (hereinafter referred to as Haihua Shipping Company) and the Defendant SIPG, to prove that HASCO was the carrier of the cargo concerned. Evidence 4, Service Agreement signed between HASCO, Shanghai Haihua Shipping Company and the Defendant SIPG Company, to prove that HASCO was the carrier of the cargo concerned in the shipping lines. Evidence 5, Feeder Services Transportation Agreement of Containers signed between SIPG Yangtze Ports Logistics Co., Ltd. (hereinafter referred to as SIPGY) and the Defendant SIPG Company, to prove that SIPGY was the carrier in the branch. The Plaintiff’s cross-examination opinions of evidence 1–5: the Plaintiff transferred the right was the right of the consignee in destination port, while the B/L flew under the international trade which all signed by the Defendant. The ocean bill of loading of HASCO did not appear in the trade flowing process. Sales Contract signed between the Defendant and Di Yuan Company could express the Defendant was the carrier and it should bear the liability of compensation of the cargo loss in concern. Therefore, the Plaintiff identified the authenticity of these evidence, but had objection to the relevancy and the prove aims of the evidence. Evidence 6, equipment interchange receipt (No.TGHU9601020 and No. GVCU5355084), B/L which signed by HASCO (No.HHWUH130XXXX1901 and No.HHWUH130XXXX2101), to prove that the container number on the receipt were same as those on the B/L which signed by HASCO, also to prove that the container number, issuance times and the ship name on the B/L all in accord with those on the arrival notice which supported by the Plaintiff. All those proved that HASCO was the carrier of the cargo concerned. The Plaintiff had no objection to the authenticity of this evidence, but held that the Defendant just avoided the ship and cargo relationship and obtained freight post through the two sets of B/L, its behavior in accord with the operation model of NOVCC, so it was the NOVCC. Evidence 7, packing list, invoice and delivery receipt at destination, to prove that the cargo detail and value which Di Yuan Company entrusted SIPG Company to carry, and to prove that the delivery receipt at destination was a receipt of clean. The Plaintiff had no objection to the authenticity of this evidence, but put forwarded that the receipt could only prove the container surface was sound, while could not prove the cargo was in good condition.

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Evidence 8, agreement signed between Nuovan Shipping Co., Ltd. and the Defendant, the L/G of advanced B/L which provided by Wuhan Diyuan Medical Material Co., Ltd., the B/L of Nuovan Shipping Co., Ltd. (No.SIPG2013083 and No.SIPG2013084), to prove that the B/L of Nuovan Shipping Company was advanced B/L which signed according to the requirement of Wuhan Diyuan Medical Material Company, not the original B/L. The Plaintiff had no objection to the authenticity of this evidence, but held that cargo loss in concern was not related with the advanced B/L, so the Defendant should bear the loss responsibility. The court’s confirmation of the submitting evidence: the Plaintiff had no objection to the authenticity of evidence 1–8, the evidence can be taken as the basis of trial. After trial, the court recognized the case fact as follows: on January 1, 2013, the Defendant SIPG Company signed agency agreement with the third party HASCO. According to the agreement, SIPG Company was the cargo carrying agency of HASCO’s ship route in Hubei which sailed from Hubei (transferred in Shanghai) to Japan, Taiwan region, Hong Kong region and Southeast Asia. At the same day, Feeder Services Transportation Agreement of Containers signed between SIPGY and the Defendant SIPG Compnay. According to the agreement, SIPGY should be responsible for the container and cargo of the Defendant in feeder carry process from Shanghai Port to Wuhan, Huangshi and Jiujiang. On March 22, 2013, the Defendant SIPG Company (Party B) signed Sales Contract with the third party Di Yuan Company (Party A). According to the contract, SIPG Company “shall take charge of carrying the container and cargo of the Party A to the destination port transferred through the transfer port from the SP and the SIPG shall sign TBL in the destination port”. Di Yuan Company should pay the freight and additional charge to the Party B in terms of cargo. And then, SIPG carried two votes goods that manufactured with cotton and gauze, which entrusted by Di Yuan Company to Tokyo from Wuhan. The invoice were No.WDC130612 (1) and No.WDC130613 (1), which noted the seller was Diyuan Investment (Hong Kong) Co., Ltd. (hereinafter referred to as Diyuan Hong Kong Company), and the buyer was Hakujuji, the gross CIF price of cargo was USD188,034.56. On June 14, 2013, SIPG Company issued two M.V. B/L (No.SIPG2013083 and No. SIPG208084) with title was Nuovan Shipping Company. These two B/L noted the carrier was Diyuan Hong Kong Company, the consignee to the order of the shipper, the notify party was Hakujuji, and the carrying vessel number was XUTONGJI6, the container number were TGHU3698555 and TGHU3698987. Those cargoes were carried to Shanghai Port by SIPG Company, and then the cargo in concern carried to Japan by HASCO. On June 27, 2013, HASDCO issued two sets of B/L (No.HHWUH130XXXX1901 and No.HHWUH130XXXX2101). The carrier and cargo invoice number on the two B/L were the same as those on Nuovan Shipping Company B/L which signed by the Defendant SIPG Company. But the consignee and notify party both were Nuovan Shipping Company, the carrying vessel number was FUHAI9HA0 and container number were TGHU9601020 and GVCU5355084.

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On June 9 and 20, 2013, Diyuan Hong Kong Company insured freight transport insurance for the cargo in concern from Insurance Company. The Plaintiff issued two insurance policies (No.AWUHA2624213Q001602A andNo. AWUHA2624213Q001516V), the insurance amount was USD206,838.02. On July 15 and 17, 2013, Nuovan Shipping Company issued arrival notice to Hakujuji, which noted the carrying vessel number was XUTONGJI6. The Japan Kanto Customs issued import permission notice for the cargo concerned, that notice also noted that the consignee was Hakujuji. The heavy cargo wet damage found by Hakujuji after its receiving, and then it entrusted the NKKK to authenticate the wet damage. The NKKK issued a report on September 10, 2013, it said that the cargo loss was caused by the fresh water seeped into the container from the bottom. The most possible happening area was where in the feeder transportation zone from Wuhan to Shanghai or the container yard. At the same time, NKKK reported that the cargo concerned was medical tools, which would loss the value in use and also could not be recycled once the cargo had been wet damaged, and the cargo only was handled as litter. Because the destroying expense in Japan is higher than that in China, so the consignee Hakujuji applied the cargo concerned returned and destroyed in China on February 24, 2014. According to above all, Hakujuji entrusted Sojitz to ask claim from the Plaintiff Insurance Company in terms of the cargo loss concerned and received the insurance compensation. After negotiating with the insured, the Plaintiff should compensate the insurance compensation USD199,796.55 in terms of the cargo loss concerned, and Hakujuji issued the receipt and the letter of subrogation. The court holds this case is dispute over contract of carriage of goods by sea. The cargo concerned was carried from Wuhan Port to Tokyo Port. So the dispute over this case involving foreign elements. During the court hearing, the Plaintiff and the Defendant both chose the Chinese Law as the appropriate law to deal with this case, so the court identified the Chinese Law as the Proper Law to adjust dispute concerned. According to the claim and disclaim of the Plaintiff and the Defendant, the court summarizes the outstanding issues in this case as follows: 1. whether the Defendant should bear the liability of compensation of the cargo loss concerned; 2. whether the claim amount of the Plaintiff is proper. 1. To verdict whether the Defendant SIPG Company should bear the liability of compensation of the cargo loss concerned, the key is identified the legal status of SIPG in the process of carrying cargo. The Plaintiff held, the Defendant SIPG Company was the NVOCC who organized the whole carrying process of the cargo concerned. The cargo concerned damaged during the period of carrying, so the Defendant should bear the liability of compensation of carrier. While the Defendant held that the cargo loss was happened during the carrying process, so the liability of compensation should be born by the actual carrier HASCO. The Defendant was the freight forwarder of cargo, should not bear the liability of compensation of the cargo loss.

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According to Article 7 Paragraph 2 of the Regulations of the People’s Republic of China on International Ocean Shipping: the “non-vessel shipping business” as used in the preceding paragraph refers to the international ocean shipping business operations of a non-vessel shipping business operator to accept the cargo of the shipper as the carrier, take the freight charges from the shipper by issuing his own bills of loading or other transport documents, ship the international goods through international shipping operators and bear the responsibilities of the carrier”, and Article 2 of the Regulations of the People’s Republic of China on the Administration of International Freight Forwarding Industry: “the international freight forwarders referred to in the provisions mean those trades entrusted by consignors and consignees of exports and imports conduct international freight forward and related businesses for their clients and collect enumerations for their services in their own names or in the name of their consignors”. From the above regulations, non-vessel shipping business and the freight forward business are two different categories in the international freight forwarders. The cargo shipping agent is the agent of the carrier, conduct international freight forward and related businesses for their clients and collect enumerations for their services in their own names or in the name of their consignors. While the NVOCC accepts the cargo of the shipper as the carrier, take the freight charges and issues his own bills of loading, and then ships the international goods through the actual carrier. The NVOCC was in the position between the shipper and carrier during the cargo carrying process, and obtained the freight difference by masking the connection between the vessel and cargo. To discriminate the NVOCC and the cargo shipping agent, should verdict from the following elements: the contract agreement, the method of getting income, the B/L issuing and the model of business operating. From the factor of the contract agreement and the method of getting income, although Sales Contract signed between the Defendant SIPG and Di Yuan Company named as Sales Contract, the content did not involve cargo sealing while signed for the carrying things of the cargo concerned. According to Paragraph A of Article 6 of this contract “the Party B shall take charge of carrying the container and cargo of the Party A to the destination port transferred through the transfer port from the port of loading”, the Defendant put forward that this contract was cargo transportation agent contract according to this article. But according to Paragraph B of Article 6 of this contract “the Party A (Di Yuan Company) shall pay the cargo freight and addition charges to the Party B (SIPG)”, the charges took from the shipper by the Defendant was not agency fees or commission, but freight or addition charges. Meanwhile, according to Paragraph 4 of Article 9 of this contract “the Party B shall finish ship assignment and container allocating according to the requirement of the Party A. If the cargo damage will happen in the period of Party B’s responsibility, the relative liabilities should be born by the Party B (except for the force majeure).” Therefore, the liability of Party B in the contract is also the liability of the carrier under the transportation contract. From the factor of issuing B /L, the B/L signed by the Defendant SIPG Company for the shipper was not its own B/L or the B/L of the actual carrier HASCO, but the B/L whose title was Nuovan Shipping Company. Although the B/

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L noted that the Defendant was agent of Nuovan Shipping Company, the Defendant did not support evidence to prove that Nuovan Shipping Company had authorized the Defendant to sign the B/L. The Defendant did not support evidence to prove that its behavior had been admitted by Nuovan Shipping Company, so its behavior of signing the B/L was defined as unauthorized agency. According to Article 48 of the Contract Law of the People’s Republic of China: “Contract by Unauthorized Agent Absent ratification by the principal, a contract concluded on his behalf by a person who lacked agency authority, who acted beyond his agency authority or whose agency authority was extinguished is not binding upon the principal unless ratified by him, and the person performing such act is liable”, the Defendant should be identified that the B/L it signed was its own B/L, the Defendant should bear the relative legal result which caused by its behavior. The Defendant submitted the L/G of advanced B/L of Wuhan Diyuan Medical Material Co., Ltd. to prove that the B/L of Nuovan Shipping Company was advanced B/L not the original B/L. Whether the B/L was advanced B/L or not, which will not exonerate the care responsibility of cargo of carrier. The L/G of shipper will not influence the consignee asked the carrier for claim for the cargo loss which happened during the responsibility period of carrier. Moreover, the Defendant signed advanced B/L according to the requirement of shipper and without the admission of Nuovan Shipping Company, which proved the legal position of the NVOCC of the Defendant. From the factor of the business operating model, the NVOCC was carrier for shipper, while was shipper for the actual carrier. The actual carrier released cargo in the destination port according to the requirements of the NVOCC that is the NVOCC controlled the cargo in the destination actually. The business nature and profit model of the cargo shipping agent which decided whether it had the necessary to release cargo. In this case, the consignee was Nuovan Shipping Company which noted on the B/L of the actual carrier HASCO. The consignee could ask Nuovan Shipping Company for exchanging B/L according the B/L which signed by the Defendant, and then the consignee could release cargo. While according to the court claim of the Defendant, Nuovan Shipping Company was the B/L exchanging agent of the Defendant in the destination port that is Nuovan Shipping Company released cargo to the consignee according to the pointing of the Defendant. That meant although the Defendant not the shipper on the B/L of HASCO, it controlled the cargo in the destination port by the above operating, and its behavior was conformed to the business operating model of the NVOCC. Considering from the above elements, the Defendant SIPG Company more worked as the NVOCC in the cargo concerned shipping process, and its legal position was identified as a NVOCC, therefore the carrier responsibility under the cargo transportation contract of the cargo loss concerned should be born by the Defendant. According to Article 311 of the Contract Law of the People’s Republic of China: Carrier Liable for Damage or Loss during Carriage; Exceptions The carrier is liable for damages in case of damage to or loss of the cargo in the course of carriage, provided that it is not liable for damages if it has established that such damage to or loss of the cargo was caused by force majeure, the intrinsic characteristics of the cargo, reasonable depletion, or the fault of the consignor or

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consignee”, the cargo loss happened during the shipping process so the Defendant could not be exonerated the responsibility as a carrier and should bear the liability of compensation. According to the assignment which issued by the Japan Maritime Supreme & Measures Association, the cargo loss happened in the carrying area, and the Defendant did not support evidence to prove the cargo loss caused by the force majeure, the nature of cargo or proper loss or the default of shipper, consignee, so the liability of compensation of the cargo loss concerned should be born by the Defendant. 2. Whether the claim amount of the Plaintiff is proper. Diyuan Hong Kong Company insured cargo transportation in terms of the cargo concerned. After the cargo loss happening, the Plaintiff Insurance Company paid insurance deposit to Hakujuji according the insurance contract, and obtained the right of subrogation. The right of subrogation of the Plaintiff was on the basis of the right to claim indemnity of the carrier, the claim amount should not more than the compensation amount of the Defendant who worked as the carrier. The cargo concerned lost its value by the wet damage, and was identified as total loss by the Assignment Institution. According to Article 55 Paragraph 1 of the Maritime Code of the People’s Republic of China “the amount of indemnity for the loss of the goods shall be calculated on the basis of the actual value of the goods so lost, while that for the damage to the goods shall be calculated on the basis of the difference between the values of the goods before and after the damage, or on the basis of the expenses for the repair” and Paragraph 2 “the actual value shall be the value of the goods at the time of shipment plus insurance and freight”, the claim amount of the cargo loss concerned paid by the Defendant SIPG Company should be the CIF price of cargo that is meant USD188,034.56. Therefore, the claim amount of the Plaintiff should be USD188,034.56, the part of insurance compensation beyond the claim amount which paid by the Plaintiff could not be protected by the court. About the interest loss which claimed by the Plaintiff. The court holds that, in the period from compensating the insurance compensation to obtaining the right of subrogation, the responsibility of recourse still was uncertain so that the creditor’s right created by that responsibility could not be certain. Whether the responsible should bear the responsibility and how much, both are uncertain. The problem of delaying in performance once the party had no objection to the liability and debt, or the party did not fulfill its duty after the court having judgment. Therefore, in the period from compensating the insurance compensation to obtaining the right of subrogation, the claim amount should not be calculated the interest. The interest loss claimed by the Plaintiff cannot be supported by the court. In conclusion, the Plaintiff is the insurer of the cargo concerned to pay the insurance compensation to the insurant that is the consignee, it can exercise the right of subrogation to ask the carrier the Defendant SIPG Company to compensate

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its loss. The Defendant was the NVOCC should bear the responsibility of compensation of the cargo loss concerned, and the claim amount was USD188,034.56. According to Article 311 of the Contract Law of the People’s Republic of China, Article 55 Paragraph 1 and 2 of the Maritime Code of the People’s Republic of China, Article 93 of the Special Maritime Procedure Law of the People’s Republic of China and the Article 142 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: 1. The Defendant SIPG Yangtze River Logistics Co., Ltd. shall compensate the Plaintiff Hubei Branch of China Pacific Property Insurance Co., Ltd. for USD188,034.56, and this amount should be paid off in one lump sum within 10 days after the judgment comes into effect; 2. Reject other claims of the Plaintiff Hubei Branch of China Pacific Property Insurance Co., Ltd. Court acceptance fee in amount of RMB15,596, because this case dealt by applying the summary procedure, so court acceptance fee shall be halved as RMB7,978, RMB567 shall be born by the Plaintiff and RMB7,411 shall be born by the Defendant. The Defendant shall pay the Plaintiff court acceptance fee and claim amount together. If the duty of paying claim amount cannot be fulfilled within the period which this judgment ordered, the debt interest would be doubled according to Article 253 of the Civil Procedure Law of the People’s Republic of China. If not satisfy with this judgment, any parties shall within fifteen days as of the service of this judgment, submit an appeal to the court, with duplicates in the number of the opposing parties, so as to make an appeal to the Hubei High People’s Court. Appeal acceptance fee shall be paid in advance according to Article 13 Paragraph 1 of the Legal fee Paying Means when submitting the Statement of Appeal. Name of account: the non-tax revenue settlement account of Hubei Finance Department (number of account: 05XXX69. Deposit bank: Donghu, Wuhan branch of Agricultural Bank of China. The payers shall note “Hubei High People’s Court” in bank transfer document). If the fee is not paid within seven days after the period of appeal expire, the appeal will be automatically recalled. Judge: WU Hao October 19, 2014 Clerk: MO Junchao

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Hubei High People’s Court Civil Judgment Hubei Branch of China Pacific Property Insurance Co., Ltd. v. SIPG Yangtze River Logistics Co., Ltd. (2014) E Min Si Zhong Zi No.00075 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 397. Cause(s) of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote Affirming lower court judgment holding the Defendant to be NVOCC, rather than forwarding agent, and so liable for total loss of the Plaintiff’s cargo; observations on the difference between forwarders and NVOCCs. Summary The Plaintiff cargo insurer claimed for total loss of two containers of medical operation towels, which became wet during carriage from China to Tokyo and could not be used under Japanese law. The Defendant argued that it should not be responsible for the loss because it was merely the cargo agent and not the NVOCC. The court held that the non-vessel shipping business and the freight-forwarding business were two different categories, and determined from looking at the contract, the method of payment, the bill of lading, and the business operating model, that the Defendant was properly regarded as an NVOCC and so was liable for the loss of the Plaintiff’s cargo. The Defendant appealed. The appeal court affirmed, holding that the Defendant’s behavior in signing the bills of lading confirmed that it was an NVOCC.

Judgment The Appellant (the Defendant of first instance): SIPG Yangtze River Logistics Co., Ltd. Domicile: Floor 7th, Building 4, Fuxing City Garden, No.186, Xinhua Road, Jianghan District, Wuhan, Hubei. Legal representative: X Xwei, general manager. Agent ad litem: QIN Xiao, lawyer of Hubei Sensheng Law Firm. Agent ad litem: ZHAO Yanping, staff of the company.

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The Respondent (the Plaintiff of first instance): Hubei Branch of China Pacific Property Insurance Co., Ltd. Domicile: No.847, Hankou Building Avenue, Wuhan City, Hubei. Legal representative: YU Baoyu, general manager. Agent ad litem: ZHANG Jianxin, lawyer of Shanghai Haifu Law Firm. Agent ad litem: YING Songbo, lawyer of Shanghai Haifu Law Firm. Dissatisfied with the Civil Judgment (2014) Wu Hai Fa Shang Zi No.00906 of the Wuhan Maritime Court of the People’s Republic of China in respect of the case of dispute over contract of carriage of goods by sea, the Appellant SIPG Yangtze River Logistics Co., Ltd. (hereinafter referred to as SIPG Company) filed an appeal against the Respondent Hubei Branch of China Pacific Property Insurance Co., Ltd. (hereinafter referred to as Insurance Company) before the court. The court entertained the case on April 23, 2015 and constituted a collegiate panel in light of law. Judge GUO Zaiyu worked as Presiding Judge, Judge CHEN Zhuo and Acting Judge HU Zhengwei constituted this trial. And the court held a hearing in public on May 21, 2015. QIN Xiao and ZHAO Yanping, agents ad litem of the Appellant SIPG Company, ZHANG Jianxin and YING Songbo, agents ad litem of the Respondent Insurance Company, appeared in court and participated in the action. The case has been concluded. Insurance Company claimed that: in June 2013, the Wuhan Di Yuan Investment Co., Ltd. (hereinafter referred to as Di Yuan Company) entrusted SIPG Company to carry two containers of operation towels from Wuhan China to Tokyo. SIPG Company issued two sets of B/L No.SIPG2013083 and No.SIPG2013084. In July, once the cargo arrived in the destination, the wet cargo had been found. The cargo concerned was medical operation towels, they would be useless once were wet. And they could not be used for any other ways according to the Japanese law, so the cargo in concern was identified as total losses. Insurance Company as the cargo transportation insurer, to ask the consignee Hakujuji for guarantee deposits USD199,796.55 on March 25, 2014, and obtained the right of subrogation. SIPG Company was the carrier in the sea cargo concerned who should carry the cargo carefully and deliver the sound cargo to the consignee. The cargo losses in concern were happened in the period of responsibility of carrier, so SIPG Company should bear the losses of the Insurance Company. As a result, Insurance Company required the court to order SIPG Company to compensate the guarantee deposit USD199,796.55 and interest (interest therefore calculated at the loan interest rate published by the People’s Bank of China from the date of insurance paying on March 25, 2014 to the date when SIPG Company actually paid), and SIPG Company should bear the court costs. SIPG Company argued that: the two sets of Clean B/L No.SIPG2014083 and No.SIPG2013084 which were both advanced B/L which signed for handling the credit letter and according to the requirement of the shipper Di Yuan Company. SIPG Company was cargo agent and ship agent not the carrier, so SIPG Company should not bear the responsibility of compensating the cargo loss concerned. Moreover, the claim amount of Insurance Company had no enough evidence to be

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proved. To sum up, SIPG Company demanded the court to reject the claims of Insurance Company. The court of first instance ascertained the facts as follows: on January 1, 2013, SIPG Company signed agency agreement with the third party HASCO. According to the agreement, SIPG Company was the cargo carrying agency of HASCO’s ship route in Hubei which sailed from Hubei (transferred in Shanghai) to Japan, Taiwan region, Hong Kong region and Southeast Asia. At the same day, Feeder Services Transportation Agreement of Containers signed between SIPGY and SIPG Company. According to the agreement, SIPGY should be responsible for the container and cargo of SIPG Company in feeder carry process from Shanghai Port to Wuhan, Huangshi and Jiujiang. On March 22, 2013, SIPG Company (Party B) signed Sales Contract with the third party Di Yuan Company (Party A). According to the contract, SIPG Company “shall take charge of carrying the container and cargo of the Party A to the destination port transferred through the transfer port from the SP and SIPG Company shall sign TBL in the destination port”. Di Yuan Company should pay the freight and additional charge to Party B in terms of cargo. And then, SIPG Company carried two votes goods that manufactured with cotton and gauze, which entrusted by Di Yuan Company to Tokyo from Wuhan. The invoice were No.WDC130612 (1) and No.WDC130613 (1), which noted the seller was Diyuan Investment (Hong Kong) Co., Ltd. (hereinafter referred to as Diyuan Hong Kong Company), and the buyer was Hakujuji, the gross CIF price of cargo was USD188,034.56. On June 14, 2013, SIPG Company issued two M.V. B/L (No.SIPG2013083 and No. SIPG208084) with title was Nuovan Shipping Company. These two B/L noted the carrier was Diyuan Hong Kong Company, the consignee to the Order of the shipper, the notify party was Hakujuji, and the carrying vessel number was XUTONGJI6, the container number were TGHU3698555 and TGHU3698987. Those cargoes were carried to Shanghai Port by SIPG Company, and then the cargo in concern carried to Japan by HASCO. On June 27, 2013, HASDCO issued two sets of B/L (No.HHWUH130XXXX1901 and No.HHWUH130XXXX2101). The carrier and cargo invoice number on the two B/L were the same as those on Nuovan Shipping Company B/L which signed by SIPG Company. But the consignee and notify party both were Nuovan Shipping Company, the carrying vessel number was FUHAI9HA0 and container number were TGHU9601020 and GVCU5355084. On June 9 and 20, 2013, Diyuan Hong Kong Company insured freight transport insurance for the cargo in concern from Insurance Company. Insurance Company issued two insurance policies (No.AWUHA2624213Q001602A and No. AWUHA2624213Q001516V); the insurance amount was USD206,838.02. On July 15 and 17, 2013, Nuovan Shipping Company issued arrival notice to Hakujuji, which noted the carrying vessel number was XUTONGJI6. The Japan Kanto Customs issued import permission notice for the cargo concerned, that notice also noted that the consignee was Hakujuji. The heavy cargo wet damage found by Hakujuji after its receiving, and then it entrusted the NKKK to authenticate the wet damage. The NKKK issued a report on September 10, 2013, it said that the cargo

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loss was caused by the fresh water seeped into the container from the bottom. The most possible happening area was where in the feeder transportation zone from Wuhan to Shanghai or the container yard. At the same time, NKKK reported that the cargo concerned was medical tools, which would loss the value in use and also could not be recycled once the cargo had been wet damaged, and the cargo only was handled as litter. Because the destroying expense in Japan was higher than that in China, so the consignee Hakujuji applied the cargo concerned returned and destroyed in China on February 24, 2014. According to above all, Hakujuji entrusted Sojitz to ask claim from Insurance Company in terms of the cargo loss concerned and received the insurance compensation. After negotiating with the insured, Insurance Company should compensate the insurance compensation USD199,796.55 in terms of the cargo loss concerned, and Hakujuji issued the receipt and the letter of subrogation. The court of first instance held this case was dispute over contract of carriage of goods by sea. The cargo concerned was carried from Wuhan Port to Tokyo Port. So the dispute over this case involving foreign elements. During the court hearing, Insurance Company and SIPG Company both chose the Chinese Law as the appropriate law to deal with this case, so the court identified the Chinese Law as the Proper Law to adjust dispute concerned. According to the claim and disclaim of the Insurance Company and SIPG Company, the court of first instance summarized the outstanding issues in this case as follows: 1. whether SIPG Company should bear the liability of compensation of the cargo loss concerned; 2. whether the claim amount of Insurance Company was proper. 1. Whether SIPG Company should bear the liability of compensation of the cargo loss concerned. To verdict this problem, the key was identified the legal status of SIPG Company in the process of carrying cargo. Insurance Company held that, SIPG Company was the NVOCC who organized the whole carrying process of the cargo concerned. The cargo concerned damaged during the period of carrying, so SIPG Company should bear the liability of compensation of carrier. While SIPG Company held that the cargo loss was happened during the carrying process, so the liability of compensation should be born by the actual carrier HASCO. SIPG Company was the freight forwarder of cargo, should not bear the liability of compensation of the cargo loss. According to Paragraph 2 of Article 7 of the Regulations of the People’s Republic of China on International Ocean Shipping: the “non-vessel shipping business” as used in the preceding paragraph referred to the international ocean shipping business operations of a non-vessel shipping business operator to accept the cargo of the shipper as the carrier, take the freight charges from the shipper by issuing his own bills of loading or other transport documents, ship the international goods through international shipping operators and bear the responsibilities of the carrier”, and Article 2 of the Regulations of the People’s Republic of China on the Administration of International Freight Forwarding Industry: “the international freight forwarders referred to in the provisions mean those trades entrusted by consignors and consignees of exports and imports conduct international freight

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forward and related businesses for their clients and collect enumerations for their services in their own names or in the name of their consignors”. From the above regulations, non-vessel shipping business and the freight forward business were two different categories in the international freight forwarders. The cargo shipping agent was the agent of the carrier, conduct international freight forward and related businesses for their clients and collect enumerations for their services in their own names or in the name of their consignors. While the NVOCC accepted the cargo of the shipper as the carrier, took the freight charges and issues his own bills of loading, and then shipped the international goods through the actual carrier. The NVOCC was in the position between the shipper and carrier during the cargo carrying process, and obtained the freight difference by masking the connection between the vessel and cargo. To discriminate the NVOCC and the cargo shipping agent, should verdict from the following elements: the contract agreement, the method of getting income, the B/L issuing and the model of business operating. From the factor of the contract agreement and the method of getting income, although Sales Contract signed between SIPG Company and Di Yuan Company named as seals contract, the content did not involve cargo sealing while signed for the carrying things of the cargo concerned. According to Paragraph A of Article 6 of this contract “the Party B shall take charge of carrying the container and cargo of the Party A to the destination port transferred through the transfer port from the port of loading”, SIPG Company put forward that this contract was cargo transportation agent contract according to this article. But according to Paragraph B of Article 6 of this contract “the Party A (Di Yuan Company) shall pay the cargo freight and addition charges to the Party B (SIPG Company)”, the charges took from the shipper by SIPG Company was not agency fees or commission, but freight or addition charges. Meanwhile, according to Paragraph 4 of Article 9 of this contract “the Party B shall finish ship assignment and container allocating according to the requirement of the Party A. If the cargo damage will happen in the period of Party B’s responsibility, the relative liabilities should be born by the Party B (except for the force majeure).” Therefore, the liability of Party B in the contract was also the liability of the carrier under the transportation contract. From the factor of issuing B /L, the B/L signed by SIPG Company for the shipper was not its own B/L or the B/L of the actual carrier HASCO, but the B/L whose title was Nuovan Shipping Company. Although the B/L noted that SIPG Company was agent of Nuovan Shipping Company, SIPG Company did not support evidence to prove that Nuovan Shipping Company had authorized SIPG Company to sign the B/L. SIPG Company did not support evidence to prove that its behavior had been admitted by Nuovan Shipping Company, so its behavior of signing the B/L was defined as unauthorized agency. According to Article 48 of the Contract Law of the People’s Republic of China: “Contract by Unauthorized Agent Absent ratification by the principal, a contract concluded on his behalf by a person who lacked agency authority, who acted beyond his agency authority or whose agency authority was extinguished is not binding upon the principal unless ratified by him, and the person performing such act is liable”, SIPG Company should be

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identified that the B/L it signed was its own B/L, SIPG Company should bear the relative legal result which caused by its behavior. SIPG Company submitted the L/ G of Advanced B/L of Wuhan Diyuan Medical Material Co., Ltd. to prove that the B/L of Nuovan Shipping Company was advanced B/L not the original B/L. Whether the B/L was advanced B/L or not, which would not exonerate the care responsibility of cargo of carrier. The L/G of shipper would not influence the consignee asked the carrier for claim for the cargo loss which happened during the responsibility period of carrier. Moreover, SIPG Company signed advanced B/L according to the requirement of shipper and without the admission of Nuovan Shipping Company, which proved the legal position of the NVOCC of SIPG Company. From the factor of the business operating model, the NVOCC was carrier for shipper, while was shipper for the actual carrier. The actual carrier released cargo in the destination port according to the requirements of the NVOCC that was the NVOCC controlled the cargo in the destination actually. The business nature and profit model of the cargo shipping agent which decided whether it had the necessary to release cargo. In this case, the consignee was Nuovan Shipping Company which noted on the B/L of the actual carrier HASCO. The consignee could ask Nuovan Shipping Company for exchanging B/L according the B/L which signed by SIPG Company, and then the consignee could release cargo. While according to the court claim of SIPG Company, Nuovan Shipping Company was the B/L exchanging agent of SIPG Company in the destination port that was Nuovan Shipping Company released cargo to the consignee according to the pointing of SIPG Company. That meant although SIPG Company not the shipper on the B/L of HASCO, it controlled the cargo in the destination port by the above operating, and its behavior was conformed to the business operating model of the NVOCC. Considering from the above elements, SIPG Company SIPG more worked as the NVOCC in the cargo concerned shipping process, and its legal position was identified as a NVOCC, therefore the carrier responsibility under the cargo transportation contract of the cargo loss concerned should be born by SIPG Company. According to the regulation of Article 311 of the Contract Law of the People’s Republic of China: “Carrier Liable for Damage or Loss during Carriage; Exceptions The carrier is liable for damages in case of damage to or loss of the cargo in the course of carriage, provided that it is not liable for damages if it has established that such damage to or loss of the cargo was caused by force majeure, the intrinsic characteristics of the cargo, reasonable depletion, or the fault of the consignor or consignee”, the cargo loss happened during the shipping process so SIPG Company could not be exonerated the responsibility as a carrier and should bear the liability of compensation. According to the assignment which issued by the Japan Maritime Supreme & Measures Association, the cargo loss happened in the carrying area, and SIPG Company did not support evidence to prove that the cargo loss caused by the force majeure, the nature of cargo or proper loss or the default of shipper, consignee, so the liability of compensation of the cargo loss concerned should be born by SIPG Company.

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2. Whether the claim amount of Insurance Company was proper. Diyuan Hong Kong Company insured cargo transportation in terms of the cargo concerned. After the cargo loss happening, Insurance Company paid insurance deposit to Hakujuji according the insurance contract, and obtained the right of subrogation. The right of subrogation of Insurance Company was on the basis of the right to claim indemnity of the carrier, the claim amount should not more than the compensation amount of SIPG Company who worked as the carrier. The cargo concerned lost its value by the wet damage, and was identified as total loss by the Assignment Institution. According to Article 55 Paragraph 1 of the Maritime Code of the People’s Republic of China (hereinafter referred to as Maritime Code) “the amount of indemnity for the loss of the goods shall be calculated on the basis of the actual value of the goods so lost, while that for the damage to the goods shall be calculated on the basis of the difference between the values of the goods before and after the damage, or on the basis of the expenses for the repair” and Paragraph 2 “the actual value shall be the value of the goods at the time of shipment plus insurance and freight”, the claim amount of the cargo loss concerned paid by SIPG Company should be the CIF price of cargo that was meant USD188,034.56. Therefore, the claim amount of Insurance Company should be USD188,034.56, the part of insurance compensation beyond the claim amount which paid by Insurance Company could not be protected by the court of first instance. About the interest loss which claimed by Insurance Company. The court of first instance held that, in the period from compensating the insurance compensation to obtaining the right of subrogation, the responsibility of recourse still was uncertain so that the creditor’s rights created by that responsibility could not be certain. Whether the responsible should bear the responsibility and how much, both are uncertain. The problem of delaying in performance once the party had no objection to the liability and debt, or the party did not fulfill its duty after the court having judgment. Therefore, in the period from compensating the insurance compensation to obtaining the right of subrogation, the claim amount should not be calculated the interest. The interest loss claimed by Insurance Company cannot be supported by the court. In conclusion, Insurance Company was the insurer of the cargo concerned to pay the insurance compensation to the insurant that was the consignee, it could exercise the right of subrogation to ask the carrier SIPG Company to compensate its loss. SIPG Company was the NVOCC should bear the responsibility of compensation of the cargo loss concerned, and the claim amount was USD188,034.56. According to the Article 311 of the Contract Law of the People’s Republic of China, Article 55 Paragraph 1 and 2 of the Maritime Code of the People’s Republic of China, Article 93 of the Special Maritime Procedure Law of the People’s Republic of China and Article 142 of the Civil Procedure Law of the People’s Republic of China, the judgment was as follows: 1. SIPG Yangtze Ports Logistics Co, Ltd. should compensate Hubei Branch of China Pacific Property Insurance Co., Ltd. for USD188,034.56 and this amount should be paid off in one lump sum within 10 days after the judgment came into force; 2. reject other claims of Hubei Branch

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of China Pacific Property Insurance Co., Ltd. Court acceptance fee of first instance in amount of RMB15,596, because this case dealt by applying the summary procedure, so court acceptance fee was halved as RMB7,978, RMB567 should be born by Insurance Company and RMB7,411 should be born by SIPG Company. SIPG Company should pay Insurance Company the court acceptance fee and claim amount together. If the duty of paying claim amount could not be fulfilled within the period which this judgment ordered, the debt interest would be doubled according to the Article 253 of the Civil Procedure Law of the People’s Republic of China. SIPG Company disagreed with the judgment of first instance, so it asked the court to reject the original judgment, and dismiss the claims of the Insurance Company and the all entertainment fee of this case should be born by the Insurance. The reasons were as follows: 1. the first instance did not ascertain the facts and identified that SIPG Company was the NVOCC of the cargo in concern wrongly. Firstly, according to Article 6 of Sales Contract, SIPG Company did not accept the cargo of the shipper as a carrier, so SIPG Company could not decide the transportation line. SIPG Company was only the cargo shipping agent of the shipper, the shipping agent of the carrier. The fee obtained from the shipper was just the acting commission and the acting freight. Secondly, on the premise of the shipper asked and issued the L/G of advanced B/L, SIPG Company signed the advanced B/L before shipment. There were different legal result between the advanced B/L and the master B/L, so SIPG Company could not be identified as carrier just according to the facts. The actual carrier HASCO in concern entrusted SIPG Company to sign two telex release of B/L of master reflected the fact of identifying the international cargo shipping process and responsibility of cargo concerned. And according to the telex release of B/L of master, the carrier bore the risks of cargo which was put on from board to board. Thirdly, SPIG Company did not have the qualification of being a NVOCC according to the regulation under the Regulations of the People’s Republic of China on International Ocean Shipping, so SIPG Company could not work on the non-vessel shipping business. Fourthly, Nuovan Shipping Company was the cargo shipping agent of SIPG Company in Japan, its behavior of exchanging B/L in the destination port was for finishing the trade procedure, which did not mean that SIPG Company controlled the cargo in the destination port. 2. Insurance Company had no right of subrogation. The telex release of B/L of HASCO noted that the consignee and notify party both was Nuovan Shipping Company, which had no relevant to what Insurance Company claimed that “Hakujuji was the consignee”. Therefore, Hakujuji was not the legal consignee which noted on the telex release of B/L, it had no right to transfer the right of subrogation to Insurance Company. SIPG Company had finished the contract duty of booking agent, because it was not the carrier, so there were two problems it could not defend. The shipping vessel of the compensation target on the secluded policy was not conformed to the actual shipping vessel, and the problem that how to certain the compensation amount. In the court of second instance, SIPG Company added the above reasons: this case was dispute over contract of international cargo transportation, the signed B/L was M.V. B/L, and the loss caused by the improper

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management should be born by the cargo manager. SIPG Company was not the responsibility subject of cargo management, so it should not bear the compensation responsibility. Insurance Company defended that: The facts ascertained by the first instance were clearly and the law was correctly applied in the original judgment, so it asked the court to dismiss the appeal of SIPG Company and affirm the original judgment. Firstly, SIPG Company was the carrier not the agent in the transportation concerned. According to Sales Contract, the duty bore by SIPG Company was that of the carrier. SIPG Company did not submit evidence to prove the existence of Nuovan Shipping Company and obtain the authorization of Nuovan Shipping Company when it signed the B/L. Although SIPG Company claimed that it was the ship agent, which exposed in the lawsuit in the first instance, so Insurance Company could choose to claim right to SIPG Company. Secondly, SIPG Company claimed it had no qualification of being NVOCC would not influence it bore the responsibility of carrier. Thirdly, the right of subrogation of Insurance Company was based on the consignee not the shipper, it was irrelevant with this case whether the B/L was advanced B/L or not, and the consignee had no resource to know. Therefore, although the signed B/L was advanced B/L which claimed by SIPG Company, which could not exonerate the duty of SIPG Company as a carrier in the cargo transportation concerned. Within the time period for producing evidence, SIPG Company submitted the following group of evidence: Value-added tax, invoice list and tax invoice. On the Value-added tax noted that the charges item was acting business fee, which would prove that SIPG Company was only the cargo shipping agent not the NVOCC. So SIPG Company could not issue the freight invoice, and the freight concerned was turned over the actual carrier HASCO by SIPG Company. After crossing examination, Insurance Company had no objection to the authenticity of this evidence, but would not identify the prove aims. The legal position of SIPG Company in the shipping concerned cannot be identified according to the title on the invoice. SIPG Company paid the actual carrier after getting all charges, this behavior conformed to the operating model of NVOCC. The court holds that: The both parties had no objection to the authenticity of the above bills, the court also identifies its formal authenticity. But SIPG Company was a cargo shipping agent only identified by this evidence. Insurance Company did not submit new evidence. After the court ascertaining facts, the facts ascertained by the first instance are correct, and the court identifies the facts. According to the appeal and defense of the two parties, the court summarizes the outstanding issues in this case as follows: 1. the legal position and responsibility of SIPG Company in the shipping concerned; 2. whether Insurance Company had the right of subrogation or not.

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1. The legal position and responsibility of SIPG Company in the shipping concerned. SIPG Company claimed that it was only the cargo transportation agent and shipping agent of Di Yuan Company, so it should not bear the responsibility of compensation in terms of the cargo loss concerned. The court holds that, the contract content and fulfilled schedule, the B/L signing and the business operating model took into consideration, SIPG Company could be identified as M.V. operator in the cargo transportation concerned. According to Article 102 Paragraph 1 of the Maritime Code: “a multimodal transport contract as referred to in this Code means a contract under which the multimodal transport operator undertakes to transport the goods, against the payment of freight for the entire transport, from the place where the goods were received in his charge to the destination and to deliver them to the consignee by two or more different modes of transport, one of which being sea carriage.” In this case, According to the agreement of the Sector 6 of Sales Contract that signed between SIPG Company and Di Yuan Company, the “responsibility and duty” agreed “A: the Party A (Di Yuan Company) entrusted the Party B (SIPG Company) to carry the container and cargo to the destination port transferred through the transfer port from the shipment port. And signed the whole process B/L in the shipment port; B: the Party A paid the Party B freight and additional charges in terms of the cargo”, the Sector 9 “when dealing with the operation of the specific business, the two parties need obey” the fourth agreement “the Party B shall finish ship assignment and container allocating according to the requirement of the Party A. If the cargo damage will happen in the period of Party B’s responsibility, the relative liabilities should be born by the Party B (except for the force majeure).” The contract also agreed the freight that “the responsibility of transportation and operating fee from the Yangluo Factory of the Party B to the destination port in Japan.” From those, although the contract concerned Sales Contract named as seals contract, the contract did not involve the circulation of ownership. According to the contract, SIPG Company took charge of the whole process of the cargo transportation concerned, including carrying from Wuhan Port and transferring through Shanghai Port to the destination port in Japan. The shipping line of the cargo concerned included the Yangtze River water carrying and marine transportation. The above agreement of whole shipping procedure, signing B/L and paying the freight, bearing the responsibility of cargo loss all conformed to the M.V. contract under Article 102 of the Maritime Code, so Sales Contract was M.V. contract. This is the first fact. Secondly, about the fulfillment of the cargo shipping concerned, SIPG Company had signed the M.V. B/L from the shipment port Wuhan Port and transferred through Shanghai Port to the destination port in Japan according to the pointing of Di Yuan Company. And SIPG Company had signed Service Agreement with HASCO, and signed Feeder Services Transportation Agreement of Containers with SIPGY. SIPG Company entrusted SIPGY and HASCO to finish the feeder carrying and ocean shipping respectively. The behavior of SIPG Company to sign the M.V. B/L, sign the following agreement and entrust other parties to carry all conformed to the M.V. contract. Thirdly, as for the report of SIPG Company

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claimed it signed the M.V. B/L was on the name of Nuovan Shipping Company and it was the agent of Nuovan Shipping Company. The court holds that, on the one hand, SIPG Company claimed that it was the agent of Nuovan Shipping Company but it did not submit the effective certification of Nuovan Shipping Company and the evidence to prove it was the agent. On the other hand, SIPG Company expressed that it was the B/L exchange agent of Nuovan Shipping Company in the destination port, and submitted the court the agreement which signed between Nuovan Shipping Company. According to the agreement, “the Party A (SIPG Company) agreed the Party B (Nuovan Shipping Company) was its cargo shipping agent in the destination port”, this could also prove that Nuovan Shipping Company was the cargo shipping agent of SIPG Company in the destination port. And then SIPG Company could be identified as the M.V. operator according the signing of the M.V. B/L. According to Article 104 Paragraph 1 of the Maritime Code of the People’s Republic of China: “the multimodal transport operator shall be responsible for the performance of the multimodal transport contract or the procurement of the performance therefor, and shall be responsible for the entire transport” and Article 104 Paragraph 2 of the Maritime Code of the People’s Republic of China: “the multimodal transport operator may enter into separate contracts with the carriers of the different modes defining their responsibilities with regard to the different sections of the transport under the multimodal transport contracts. However, such separate contracts shall not affect the responsibility of the multimodal transport operator with respect to the entire transport”, though SIPG Company was the M.V. operator and signed sectional transport contract with HASCO and SIPGY, it still shall be responsible for the entire transport. No matter the cargo loss happened in which one transportation section, SIPG Company should bear the responsibility of the compensation of the cargo loss concerned. 2. Whether Insurance Company had the right of subrogation. SIPG Company held that the B/L signed by HASCO noted the consignee was Nuovan Shipping Company not Hakujuji. That meant that after Insurance Company paying Hakujuji compensation, Hakujuji had no right to transfer the right of subrogation. The court holds that, the operating procedure were as follows, SIPG Company accepted the cargo of Di Yuan Company and issued the transport document to the shipper. And then SIPG Company arranged the actual carrier SIPGY and HASCO to carry the cargo from Wuhan Port and transferred Shanghai Port to the destination port in Japan. The B/L signed by SIPG Company whose title was Nuovan Shipping Company included the domestic feeder shipping and ocean shipping. And this B/L noted the consignee was Hakujuji. According to Article 106 of the Maritime Code “if the section of transport in which the loss of or damage to the goods occurred could not be ascertained, the multimodal transport operator shall be liable for compensation in accordance with the stipulations regarding the carrier’s liability and the limitation thereof as set out in this Chapter”, SIPG Company was the M.V. operator who organized the transportation of cargo concerned shall be responsible for the entire transport, and if the section of transport in which the loss of or damage to the goods occurred could not be ascertained, SIPG Company

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should bear the responsibility of the carrier. After the consignee accepted the wet damaged cargo in the destination port, the consignee obtained the compensation through asking claim from the Insurance, and issued the letter of subrogation. And then Insurance Company could act the right of the consignee to ask compensation from the liable person SIPG Company. To sum up, the appeal reasons of SIPG Company cannot be established. The facts ascertained by the court of first instance are correct, and the trial procedure is legally and handled properly. According to Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of RMB15,956, shall be born by SIPG Company. The judgment is final. Presiding Judge: GUO Zaiyu Judge: CHEN Zhuo Acting Judge: HU Zhengwei July 27, 2015 Clerk: CHEN Yinhua

Wuhan Maritime Court Civil Judgment Jiangsu Shuntian Marine Development Co., Ltd. v. Nanjing Yhao Shipbuilding Co., Ltd. (2013) Wu Hai Fa Shang Zi No.00414 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 435. Cause(s) of Action 207. Dispute over shipbuilding contract. Headnote Dispute over ownership of two barges built by the Defendant according to contract with the Plaintiff resolved by concluding that one barge was owned by the Plaintiff and the other by a third party. Summary The Plaintiff and the Defendant entered into a ship building contract, in which the Plaintiff was to pay the Defendant for building two barges by a stipulated time. The Defendant did not deliver the barges to the Plaintiff within the time frame and the Plaintiff sued under breach of contract. Two barges exist and are at the center of dispute. In order to determine the validity of the claims, the court analyzes: (1) the validity of the contract and the legal relationship between the Plaintiff and the Defendant; (2) the existence and validity of a contract between a third party and the Defendant; (3) the ownership of the two vessels in the Defendant’s factory; (4) whether the Defendant should fulfill the ship delivery duty. The court held: due to termination, a legal relationship does not exist between the Defendant and the Plaintiff; the Defendant was a shipbuilder for the third party; one vessel properly belonged to third party, the Defendant, and the other to the Plaintiff; and, the Plaintiff may retrieve from the Defendant’s factory the ship properly belonging to the Plaintiff.

Judgment The Plaintiff: Jiangsu Shuntian Marine Development Co., Ltd. Domicile: Building A, No.21, Software Avenue, Yuhua District, Nanjing, Jiangsu. Organization Code: 69130254–1. Legal representative: WANG Junmin, chairman. © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_17

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Agent ad litem: LIANG Kun, lawyer of Jiangsu Suyuan Law Firm. Agent ad litem: ZONG Xiaojian, male, Han, born on July 26, 1976, living in Baixia District, Nanjing, Jiangsu, staff of the company. The Defendant: Nanjing Yhao Shipbuilding Co., Ltd. Domicile: Caotang Road, Wujiang Town, Pukou District, Nanjing, Jiangsu. Organization Code: 77704856–4. Legal representative: TONG Rengui, chairman. Agent ad litem: YANG Shuqiao, lawyer of Jiangsu Hezhong Law Firm. Agent ad litem: TONG Renhua, male, Han, born on August 5, 1964, living in Pukou District, Nanjing, Jiangsu, staff of the company. The Third Party: Nanjing Du-Hope International Group Co., Ltd. Domicile: No.199, Jianye Road, Jianye District, Nanjing, Jiangsu. Organization Code: 1349316-X. Legal representative: XIE Tao, chairman. Agent ad litem: YAN Chunjiao, lawyer of Jiangsu Du-Hope Law Firm. Agent ad litem: YU Yang, male, Han, born on August 11, 1973, living in Jianye District, Nanjing, Jiangsu, staff of the company. With respect to the case arising from dispute over shipbuilding contract, the Plaintiff, Jiangsu Shuntian Marine Development Co., Ltd. (hereafter referred to as “Shuntian Company”) field an action against the Defendant, Nanjing Yhao Shipbuilding Co., Ltd. (hereafter referred to as “Yhao Company”) and the Third Party, Nanjing Du-Hope International Group Co., Ltd. (hereafter referred to as “Du-Hope Company”) before the court on April 15, 2013. This case fell into the dispute over a shipbuilding contract, it was under the jurisdiction of maritime court, and the domicile of the Defendant, Nanjing Jiangsu fell within the district of the court jurisdiction. According to Article 23 of the Civil Procedure Law of the People’s Republic of China, the court had the jurisdiction to this case. The court entertained the case, constituted a collegiate panel with Presiding Judge HOU Wei, Judge YANG Qing and Acting Judge DENG Yi. The court held hearings on December 13, 2013, September 14, 2014 and October 27, 2014. LIANG Kun and ZONG Xiaojian, agents ad litem of the Plaintiff, YANG Shuqiao and TONG Renhua, agents ad litem of the Defendant, YAN Chunjiao and YU Yang, agents ad litem of the Third Party appeared in court and participated in the action. The case has been concluded. The Plaintiff Shuntian Company claimed that: the Plaintiff entered into two Cooperation Agreements (contract number: Shun Chuan Fa 12 No.013, 014) with the Defendant to define each other’s rights and obligation on February 10, 2012. They agreed that the Defendant Yhao Company accepted the Plaintiff’s entrustment to build two barges with the size of 300ft*80ft*18ft (yard number and ABS number were SAM11028N and YY237806, SAM12012N and YY244899, respectively). The two sides agreed respective rights and interests. The agreement agreed that the ownership of the two vessels and all materials, equipment which used to build them (whether the material and equipment had been used or not) owned by the Plaintiff from the day of the agreement coming into force to the day when the Plaintiff

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accepted all shipbuilding payment from the ship owner. In Article 3 Sub-paragraph 7 of the agreement: the construction deadline of the two vessels shall be no later than August 30, 2012, and the final delivery date shall be no later than September 15, 2012. The Plaintiff paid all shipbuilding payment to the Defendant in accordance with Cooperation Agreement. But the Defendant failed to deliver the deck barges to the Plaintiff within the stipulated time, which constituted a breach. The Plaintiff sued the Defendant to the court and required the court to judge that: (1) confirm that the ownership of the two deck barges (construction number: SAM11028N, ABS number: YY237806, construction number: SAM12012N ABS number: YY244899) that the Plaintiff entrusted the Defendant to build was owned by the Plaintiff and demand the Defendant to deliver; (2) the Defendant should bear the legal costs and preservation fee. The Defendant Yhao Company argued that, of the two vessels which the Plaintiff requested, one located in the 50 tons gantry crane in the Yhao Company’s factory was owned by the Third Party Du-Hope Company. And the other deck barge located in the 20 tons crane was owned by Shuntian Company. Another vessel which entrusted to build by Shuntian Company had not been finished. The Defendant Yhao Company had finished the building work of the deck barge located in the 20 tons gantry crane in the factory, and regarded Shuntian Company as the shipowner to apply for the ship identification number. The Defendant urged the Plaintiff to take over the deck barge, while the Plaintiff did not get it. The Defendant requested the court to reject the claims of the Plaintiff Shuntian Company. The Third Party Du-Hope Company stated that, the deck barge with size of 300ft*80ft*18ft, in the Defendant’s factory, which requested to be detained by the Plaintiff was the Third Party Du-Hope Company’s property. This vessel was under Building and Purchase Contract of 300 Feet Deck Cargo Barge which was signed by the Third Party and the Defendant in June 2012. This vessel had been applied for the ship identification and passed the examination of MSA on March 14, 2013, and was given the ship identification number of CN2013802829. The Third Party had handled the transfer procedures with the Defendant in terms of this vessel thereon, and the Third Party was the legal owner of this vessel. The Third Party requested the court to reject the claims of the Plaintiff, and judge that the Defendant should deliver the deck barge with size of 300ft*80ft*18ft, ship identification number of CN 2013802829, to the Third Party Du-Hope Company. In order to support the claims, the Plaintiff submitted the following evidence to the court: Evidence 1: cooperation agreement and supplemental agreement submitted by the Plaintiff, the originals, to prove that the shipbuilding contract relationship existed between the Plaintiff and the Defendant. The ownership of vessels and all materials and equipment belonged to the Plaintiff as per the agreement. The delivery date was on August 30, 2012, and the grace period was 15 days and other bilateral rights and obligation. The Defendant Yhao Company had no objection to the authenticity of this group of evidence.

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The Third Party Du-Hope Company had no objection to the authenticity of this group of evidence, but did not admit the aims of proof. The court holds that the Defendant and the Third Party had no objection to the authenticity of this group of evidence. The proving content of evidence was related to the disputed truth concerned, and can be taken as a basis for finding the facts in light of law. Evidence 2: sales contract of industrial goods, bank payment slip, transportation document, covering letter and authority to pay. They were all originals except for the sales contract of industrial goods, they were copies. The evidence was to prove that the Plaintiff had provided all steel for building the vessels concerned to the Defendant and paid the relevant funds. The Defendant had no objection to the authenticity of the seals contract of industrial goods, covering letter, authority to pay and the bank payment slip. It could not identify the authenticity of the transportation document. The Defendant thought that the authority to pay could not prove whether Shuntian Company had paid it, and this group of evidence proved that the steel not provided by Shuntian Company. The Third Party Du-Hope Company had no objection to the authenticity of the sales contract of industrial goods, covering letter and the authority to pay, and could not identify the authenticity of the bank payment slip and transportation document. The Defendant thought that this group of evidence could not prove that the steel which used to build the vessels concerned was owned by the Plaintiff. The court holds that this group of evidence could not prove that the Plaintiff’s payment and steel were used for building the two deck barges in the Plaintiff’s claim. Therefore, the court does not identify the relevancy of this evidence, this evidence cannot be taken as a basis for finding the facts. Evidence 3: ABS certification and ship building inspection form of yard number SAM12012N both were copies and sealed by ABS, to prove that 300 feet deck cargo barge the ownership of which was claimed by the Third Party Du-Hope Company was the Plaintiff Shuntian Company built by the Defendant Yhao Company. The Defendant and the Third Party had no objection to the authenticity of ABS seal in the evidence, but had objection to the authenticity, relevancy and purpose of proof of this group of evidence. The Defendant and the Third Party held that this group of evidence had no originals and ABS Company did not ask staff to exam the vessels, and the Defendant did not seal the inspection thereon. The court holds that although this group of evidence sealed by ABS, but through the court’s examination, the ABS did not reserve the original inspection so this evidence cannot be verified with the original. The Defendant and the Third Party had objection to the authenticity of this evidence and the Plaintiff did not submit any other evidence. Therefore, the court did not identify the authenticity of this evidence, and ruled that this evidence cannot be taken as a basis for finding the facts. Evidence 4: picture of the vessel in question arrested by the court, original, to prove that when the vessel in question was arrested, the disputed vessel had not been finished.

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The Defendant and the Third Party had objection to the authenticity of this evidence. The court holds that this evidence was created unilaterally and its recording date could not be identified. The Defendant and the Third Party had objection to the authenticity of this evidence, therefore, this evidence cannot be taken as a basis for finding the facts. Evidence 5: lawyer’s letter, original, to prove that the Plaintiff sent the lawyer’s letter to the Defendant and forwarded copies to the Third Party on March 8, 2012. In the lawyer’s letter, the Plaintiff stated the ownership of the vessel to the Defendant and disclosed the fact that the ship-owner of the vessel in question was Shuntian Company to the Third Party. The Defendant had no objection to the authenticity of the lawyer’s letter, but had objection to the content of the lawyer’s letter. The Third Party Du-Hope Company held that they were not the addressee and had not accepted the lawyer’s letter, so it could not identify the authenticity of this evidence. The court holds that the Defendant had no objection to the authenticity of this evidence, therefore the court recognized that the Defendant had accepted the lawyer’s letter. The Third Party had objection to the authenticity of this evidence, the Plaintiff had no evidence to prove that the Third Party had accepted the lawyer’s letter. Therefore, the Plaintiff’s claim that the Third Party had accepted the lawyer’s letter is not verified by the court. The Defendant submitted the following evidence to the court to defense the Plaintiff’s claims: Evidence 1: presentation of the Plaintiff, original, to prove that the Plaintiff claimed that it provided 4,000 tons steel to the Defendant. The Plaintiff required the court to arrest the vessel under-construction, while the steel quantity he provided was less than one needed for constructing the vessel. So, the Plaintiff had no enough evidence to arrest the vessel under-construction. The Plaintiff had no objection to the authenticity of this evidence, but had objection to the relevancy. The Third Party had no objection to the authenticity of this evidence, but held that this had no connection with the Third Party. Evidence 2: reminder letter sent by the Defendant, original, to prove that the Plaintiff did not handle the formalities of taking over the deck barge after accepting notification by the Defendant. The Third Party had no objection to the authenticity of this evidence, but held that this had no connection with the Third Party. Evidence 3: sales contract of purchasing ship building material, original, to prove that the time of payment should be the same as the time in sales contract and the authorization to pay. However, the Plaintiff’s actual payment time was delayed at least 20 days than that in the authorization to pay. The Plaintiff did not pay for on time, so it had no right to demand the Defendant to delivery ship. The Plaintiff had no objection to the authenticity, while had objection to the relevancy.

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The Third Party had no objection to the authenticity of this evidence, but held that this has no connection with the Third Party. Evidence 4: statement of appeal of the Plaintiff, original, to prove that the Plaintiff did not bear its shipowner liability and was not entitled to the ownership of the ship. The Plaintiff had no objection to the authenticity of this evidence, but had objection to the aims of proof. The Third Party had no objection to the authenticity of this evidence, and held that this evidence revealed that the Plaintiff were not entitled the ownership of the ship. Evidence 5: picture and ship design paper, to prove that the appearance and design paper were both different from the two ships in the Defendant’s factory. But the ships’ appearance and design paper should be fully aligned with those of the Plaintiff’s claims. And one of the ships which claimed by the Plaintiff was owned by the Third Party. The Plaintiff had objection to the authenticity and relevancy of this evidence. The Third Party held that the picture and design paper of the ship which was located in the 20 tons gantry crane should be directed against the Plaintiff’s ship, and the Third Party could not identify the authenticity. And it had no objection to the authenticity of the ship which was in the 50 tons gantry crane, and held the picture and design paper were the same as the ship ordered by him. Evidence 6: corporate agreement signed between the Plaintiff, ShunTian Company and Dongfeng Company, to prove the contract signed between the Defendant and the Plaintiff was a standard contract supported by the Plaintiff. When there were disputes over the contract articles, the unfavorable statement should made for the Plaintiff. That meant that the agreement of the ownership of the ship which was an article that increased obligation to the Defendant disclaimed the Plaintiff’s duty. Therefore, it was invalid. The Plaintiff had no objection to the authenticity but had objection to the aims of proof. And the Plaintiff held that the contract provided by them was just a model, and was not one printed in advance. So, the contract was not a standard form of contract and was legal and valid. The Third Party had no objection to the authenticity of this evidence. Evidence 7: Civil Ruling, to prove that the Defendant was not informed by the court when the court obtained evidence from ABS. Therefore, this procedure was illegal, and could not be taken as a basis for finding the facts. The Plaintiff had no objection to the authenticity of this evidence. The Third Party had no objection to the authenticity of this evidence. Evidence 8: payment order, to prove that the Plaintiff made unilateral amendment on the Defendant’s authorization to pay. The Plaintiff had no objection to the authenticity of this evidence. The Third Party had no objection to the authenticity of this evidence. Evidence 9: payment voucher and the steel sales contract, to prove that the Defendant applied for a loan of RMB9,000,000 from bank during the period of signing the shipbuilding contract with the Third Party. The Defendant used this

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money to buy steel, and the steel was enough for the Defendant to build the vessels which the Plaintiff and the Third Party required. The Plaintiff could not identify the authenticity of the payment voucher’s copy on September 15, 2012, while had no objection to the authenticity of the other evidence, and had objection to the aims of proof. The Plaintiff held that this evidence could not verify that the loan was used for buying steel by the Defendant to build ship for the Third Party, and the time of steel sales contract did not accord with the time of ship building. The Third Party had no objection to the authenticity of this evidence, and held that this evidence could prove there was no sole corresponding relation between the shipbuilding of the Defendant and the shipbuilding contract provided by the Plaintiff. It was reasonable that the Defendant bought steel during the period of negotiating shipbuilding with the Third Party. Evidence 10: hearing notes, to prove the fact that the Plaintiff’s view that the relevant material of ABS could only verify the fact of ship building, but could not verify the ownership of the ship. And the Defendant did not use the steel provided by the Plaintiff to build the ships of other companies. The Plaintiff had no objection to the authenticity of this evidence, but had objection to the relevancy. The Third Party had no objection to the authenticity of this evidence. This evidence could prove that the relevant material provided by ABS could not be served as the basis to identify the ownership of the ship. The court holds that the Plaintiff and the Third Party both had no objection to the authenticity of evidence 1 to 4, evidence 6 to 8 and evidence 10 which was provided by the Defendant. The evidence above was relevant with this case, so it can be taken as a basis for finding the facts. The shooting time and location of the picture cannot be identified in evidence 5 provided by the Defendant. And the Plaintiff had objection to the authenticity of evidence 5, so the court cannot identify probative force. The ship design paper was the same as the drawing provided by the Plaintiff and the Third Party and as the ABS material which was obtained by the court, so it can be taken as a basis for finding the facts. Evidence 9 of the Defendant in which the Plaintiff and the Third Party both had no objection to the authenticity also can be taken as a basis for finding the facts. In order to support the claims, the Third Party submitted the following evidence to the court: Evidence 1: building and purchasing contract of the 300 feet deck barge, original, to prove that the ship purchasing contract relationship existed between the Third Party and the Defendant. The number, size and shape of the ship located under the 50 tons gantry crane in the Defendant’s factory met the demand in the contract. The Plaintiff had no objection to the authenticity of the evidence, but held that this contract was part of the shipbuilding contract, the time for commencement of the ship located under the 50 tons gantry crane in the Defendant’s factory was on June 10, 2012, while the time of signing contract was on June 11, 2012. This stated the contract was not about the above ships, so this evidence was not relevant to this case.

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The Third Party had no objection to the authenticity of this evidence. Evidence 2: application table of ship identification number, to prove that the vessel located under the 50 tons gantry crane in the Defendant’s factory, had got the ship identification number that was identified by the maritime sector. The customer who was identified by the ship identification number was the Third Party, and this vessel had been examined by ABS. The Plaintiff had no objection to the authenticity of this evidence, but held that this evidence could not prove that the ship was located under the 50 tons gantry crane in the Defendant’s factory. The Third Party had no objection to the authenticity of this evidence. Evidence 4: promissory note, bank money order and the application of settlement operation, original, to prove that the Third Party had paid the ship building instalment as per the agreement. The Plaintiff had no objection to the authenticity of this evidence, but had objection to the relevancy. The Third Party had no objection to the authenticity of this evidence. Evidence 5: ABS approved drawing, to prove that the approved drawing of the vessel which was bought by Du-Hope Company was as same as that of the vessel they claimed. The name, shape and the ship identification number all proved that this vessel was owned by the Third Party. The Plaintiff had no objection to the authenticity of this evidence, but had objection to the aims of proof. And the Plaintiff held that the shape of the ship in the picture could be changed at any time, and the steel of the identification number also can be replaced. The Defendant had no objection to the authenticity of this evidence. Evidence 6: representation of TAN Zaichun, to prove that the ship located under the 50 tons gantry crane in the Defendant’s factory was owned by the Third Party. The Plaintiff held that this evidence was part of witness testimony, the witness should appear in the court, and otherwise, this evidence was wrongful. The Defendant had no objection to this evidence. The court holds that the Plaintiff and the Defendant both had no objection to the authenticity of evidence 1 to 5 which was provided by the Third Party. And the five evidence were relevant to this case, so it can be taken as a basis for finding the facts. As for evidence 6 which was submitted by the Third Party, this evidence should be identified as the witness testimony in terms of the evidence form. But the witness did not appear in the court, so the court cannot identify the probative force of evidence 6. In order to find the facts, the court went to ABS’s office in Nanjing to get the ship building inspection of which building number was DH12Q2007. However, ABS did not reserve the original, and just provided a copy one to the court. This evidence stated that as of March 29, 2013, the ship whose building number was DH12Q2007 and the ABS classification number was YY245947 had been partial examined. The Plaintiff had no objection to the authenticity of this evidence.

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The Defendant had objection to the authenticity of this evidence, and held that the ABS did not ask staff to examine this ship, and the signature of “LIU Zuobing” was not real. The Third Party had objection to the authenticity and relevancy of this evidence. The Third Party held that only the Defendant contacted the ABS and examined the ship. The Third Party just had the obligation to pay the installment, so this evidence was not relevant to the Third Party. The court holds that although the inspection was got from ABS by the court, ABS did not reserve the original. So, this evidence cannot be used to check the original, and the Defendant and the Third Party both had objection to the authenticity, therefore the court cannot identify the authenticity. The court, based on the proof, cross-examination of the Plaintiff, the Defendant and the Third Party, and effective evidence confirmed by the court, finds the following facts: On February 10, 2012, the Plaintiff Shuntian Company as Party A and the Defendant Yhao Company as Party B signed a cooperation agreement whose contract number was Shun Chuan Fa 12 No.013. The contract purpose was regulating Party A and Party B as the common seller to sale the deck barge with size of 300ft*80ft*18ft (the building number was SAM11028N) to the SCOTIMEARINELTD (hereinafter referred to as “foreign shipowner”). The main content in the contract was as following: Article 1, General article: (1) Party A and Party B as the common seller should sign the ship building contract with the foreign shipowner in the name of Party A. (2) Party A is in charge of the export procedure of the ship and import procedure of material and equipment, and resolve the relevant payment as per the agreement. (3) Party B is responsible for full installment of building, ship delivery and warranty of quality in the shipbuilding contract except the obligations of Party A, and bear relevant responsibility and obligations. (4) If the imported material and equipment is involved, the party agrees to act for Party B to sign the import contract of the ship’s material and equipment in the name of buyer. And Party B agrees to execute and bear the buyer’s duties and obligations under the import contract. Article 2: The rights and obligations of Party A in the import contract. (1) Party A undertakes the export procedure of this ship and the import procedure of material and equipment, and conducts the settlement of exchange and foreign exchange payment procedure in the name of Party A. and the service charge should be beard by Party B. (2) Party A should be responsible for the installment which is needed in the ship building process under this agreement. The gross working capital is no more than RMB5,180,000. The prepayment of the shipowner in the building contract, which is the 5 percent of the total amount in the contract, is about RMB340,000, and this fund is not included into gross working capital of Party A. Because Party A had paid Party B for RMB2,000,000, and RMB3,000,000 on August 1, 2011 and August 2, 2011 respectively. And Party A still needed to pay Party B RMB520,000. (3) Party A has the right to supervise Party B’s money using, and Party B only uses the working capital for the direct fees of ship building. (4) The ship and all material, equipment are owned by Party A from the effective day of the agreement to the day of this ship fulfillment and the

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Party gets all installment from the shipowner. (5) The 4 percent of this corporate price of the ship should be taken as the due profit of Party A by mutual consent in this corporate project. This profit should be one-off deducted when Party A pays Party B spare money after the exchange collection of this ship. And this profit should not be automatically increased or decreased as the construction contract prices increase or decrease in final ship delivery, while it can be changed after bilateral common negotiate when delivering the ship. After Party A accepting the full balance payment of the shipowner, the two parties can conduct the final calculation. After accomplishing the calculation and the full VAT invoice is given by Party A to Party B, Party A should pay Party B full balance payment within 7 days. Article 3: the rights, responsibilities and obligations of Party B. (1) Party B undertakes and fulfills all responsibilities which should be undertaken and fulfilled by the seller and buyer in the construction contract. And Party B should finish the design, building and technology quality of this ship as scheduled (except for which have been appointed in the agreement). If this ship building includes purchase import equipment, the responsibilities and obligations of the buyer under the import equipment contract should be beard by Party B. (2) After the Play A’s final due profit is deducted, the Party can bear and is entitled to all losses and profits of this ship (including all the losses and profits which is caused by changing of exchange rate). (3) The ship delivery date should be no later than August 30, 2012, the grace period is 15 days. If Party B cannot finish building the ship before September 15, 2012, Party A has right to terminate the contract. Then Party B should pay back Party A all installment and due profits, Party A has right to handle the ship. (4) The legal presentation of Party B TONG Renhua is willing to provide personal guarantee to Party A for Party B’s obligations fulfillment under the contract. And he will bear the guarantee responsibilities as per the guarantee contract (contract number: Shun Chuan Fa 12 No.017) which is signed by the two parties. The Defendant TONG Renhua had signed every page of this corporation agreement. At the same day, Party A and Party B signed supplemental agreement in terms of the corporation agreement above, the contract number of the supplemental agreement was 12 No.013/BC1 and the agreement was as follows: (1) advanced payment by Party A for Party B is no more than RMB5,180,000 during the ship building process, and the interest should be beard by Party B (the interest will be calculated from the day when Party A pays the installment to the day when Party A gets the settlement of exchange payment of this ship). The interest rate should be calculated on the basis of 0.78% per month (the interest rate should be changed if the interest rate of the People’s Bank of China changes during the period). The ship-owner’s advanced payment of around RMB340,000 was not included in the total working capital which was beard by Party A, and Party B did not have to bear the interest of this part capital. Because Party A had paid Party B RMB2,000,000, and RMB3,000,000 on August 1, 2011 and August 2, 2011 respectively. And Party A still needed to pay Party B RMB520,000. (2) If a letter of credit is needed issuing by Party A in the purchasing or equipment purchasing, then the L/C guarantee deposit is 20 percent of the credit deposits. The advanced guarantee deposit interest made by Party B should be calculated as per the interest rate above. (3) Party B

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should bear the tax rebate interest of three months which is also calculated as per the interest rate above. (4) Party A’s final actual due profits consist of the advanced fund interest and the tax rebate interest and this due profit should be one-off deducted when Party A paid Party B spare money after the exchange collection of this ship. At then day, the Plaintiff signed Shun Chuan Fa 12 No.014 and Shun Chuan Fa 12 No.014/BC1 Corporation Agreements with the Defendant in terms of the other deck barge with size of 300ft*80*ft.*18ft. The content of the two agreements were in consistent with the contract 12 No.013 and 12 No.013/BC1, while the agreement had obviously recorded Party A had paid RMB5,000,000 in 2011. On June 11, 2012, Du-Hope Company as Party A signed Building and Purchase Contract of 300 Feet Deck Cargo Barge with the Defendant as Party B, and the contract number was Ning Dong Pei 12Q2007. They agreed that the ship under this contract should be built by the Defendant and then delivered to the Third Party. The main content of this contract was as follows: Article 1, specification, data and class: (1) the specification: the length overall is 300 feet, the breadth is 18 feet, the depth is 18 feet, the deadweight on the deck is 7 tons/square meters, and the coaming height is 12feet. (2) The class survey of this ship in ABS should be applied by Party A, and Party B should apply the seaworthiness certificate of CCS and the interim certificate of nationality. (3) The ship skin number: DH12Q2007. Article 2, building basis: (1) Party B must act in strict accordance with the ABS approved drawing which is provided Party A and the full ship specification which is signed by the two parties to build the ship. (2) The vessel outfitting should include anchors, chains, diesel hydraulic winch, navigation lights and towing arrangement, the detailed specification and quantity can be seen in the Specification signed by the two parties. Article 3, material and building demand. Article 4, contract price and method of payment: (1) contract price: RMB7,780,000, delivering the ship at Shanghai battery anchorage. (2) This contract price includes Party A’s transaction fees of every certification and the tug fire. (3) Method of payment: the first installment: Party A pays Party B 20 percent of the contract price within 10 days from the contract signed by the two parties; the second installment: Party A pays Party B 20 percent of the contract price to purchase the building material with 10 days from the date of Party B starting to build. The third installment: Party A pays Party B 20 percent of the contract price to purchase the building material with 10 days from the date of basing the bottom plate; the fourth installment: Party A pays Party B 20 percent of the contract price with 10 days from the date of completing and launching, and Party B should provide the VAT invoice to Party A. the fifth installment: Party A should pay the full amount within one month from the date of delivering the ship to Shanghai; and the first to fourth installment and other steel purchasing fees paid by Party A are all loan made by Party A for Party B, so Party B should pay interest which is calculated on the basis of 9% per month to Party A, and the calculated time is calculated from the pay day to the day after delivering the ship for one month. The interest should be deducted from the final payment after the parties’ identification. Party A can raise the interest rate of 10% per month from the first 30 days of delay in delivery of the vessel beyond the

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delivery date, if Party B cannot deliver vessel on time. Article 5, delivery date and delivery and acceptance of vessel: November 20, 2012. Article 6, property right and ownership: in the process of ship building or before the Delivery Date, if there are debt disputes or the shipowner abandons the ship which is caused by Party B, and Party B cannot pay back Party A the prepayment, the ship and other material, equipment under the ship are all owned by Party A. The Third Party had paid the Defendant shipbuilding installment of RMB6,600,000 from July 6, 2012 to March 7, 2013. The Defendant started shipbuilding work since contract between the Plaintiff and the Third Party was signed. As of March 7, 2013, the Plaintiff applied to arrest the two deck barges with size of 300ft*80ft*18ft which was located in the Defendant’s factory and the court approved. The court published (2013) Wu Hai Fa Bao Zi No.00106 and No. 00107 Civil Judgments, and arrested the 300 feet deck barges which was located under the 20 tons gantry crane and the 50 tons gantry crane respectively. The Plaintiff sent the lawyer’s letter to the Defendant on March 8, 2013, to state that the deck barge with shipbuilding number SAM12012N and ABS number YY244899 was owned by the Plaintiff, so the Defendant had no right to sell it to the Third Party. The Defendant signed the ship delivery and acceptance certificate with the Third Party in terms of the 300ft deck barge whose Chinese name was Du-Hope 130 and English name was SOEKAWATU369, ship identification number was CN20123802829 and the factory code was DH12Q2007 on March 15, 2013. The ship delivery and acceptance certificate specified that this vessel was built in July 2012 and had condition of delivery, so the two parties conducted the delivery and acceptance procedure on March 15, 2013, and this vessel was owned by the Third Party. At the same time, the court finds out the Third Party applied ship identification number for the ship whose Chinese name was Du-Hope 130 and inspection number was YY245947, ship skin number was DH12Q2007 and shipbuilding contract number was Ning Du-Hope 12Q2007 on March 11, 2013. The ship identification number was CN20123802829 which was distributed by Chinese MSA. The court also finds out there were two accomplished deck barges located in the Defendant’s factory, of which one was located in the 20 tons gantry crane and other was located in the 50 tons gantry crane with ship skin number CN20133802829. The court summarizes issues as follows: (1) the identification of the validity of contract and the legal relationship between the Plaintiff and the Defendant; (2) the identification of the validity of contract and the legal relationship between the Third Party and the Defendant; (3) identification of the shipowner of the two ships which was located in the Defendant’s factory; (4) whether the Defendant should fulfill the ship delivery duty. 1. Identification of the validity of contract and the legal relationship between the Plaintiff and the Defendant.

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According to Corporation Agreement signed by the Plaintiff and the Defendant, the Plaintiff and the Defendant as the common seller negotiated with the shipowner that they would sign the ship building contract with the shipowner in the name of the Plaintiff. Analyzing from the two parties’ rights and obligations under the Agreement, the Plaintiff shall take charge of supporting ship building fund, and the Defendant was in charge of building ship. And the contract purpose was selling ship to the foreign shipowner. From analysis of the two parties’ rights and obligations under the Agreement, the two parties were not typical relationship of the ship building contract, but the relationship of technological and fund corporation caused by selling ships to outsiders. And the Plaintiff shall take charge of providing fund, the Defendant was in charge of building ship. The two parties were entitled to common risks and profits. From the analysis of contract articles, the contract profits of the Plaintiff consisted of 3 parts: the certain proportion fixed profits of the ships’ gross selling price; the Defendant’s prepayment interest; the export tax rebate interest of the Defendant’s prepayment. Whether the contract belonged to loan rather than cooperation, whether it violated the obligatory provisions of the country’s financial regulation, whether it was legal or not. According to the Regulation 2 of the Question 4 of the Interpretation of the Supreme People’s Court on Several Issues concerning Hearing the Case of Joint Contract Dispute (Fa [Jing] Fa (1990) No.27): the business entity and institutional legal person invest the joint venture as one party of the joint ventures, but they are not involved in the common operation, and not bear the joint risk responsibility. Whether gain or loss, the Party gets back the principal and interest on time, or gets back the fixed profit on time. This violates relevant financial regulation, so the contract should be identified null and void. Except the principal can be returned, the interest which was got or was agreed to get by the investor should be taken over, while the other party shall be imposed on a fine which amounted to the interest of bank. In this case, the liabilities of the Plaintiff included providing fund and signing contract with the foreigners. And the Plaintiff took part in the ship supervising and beard relevant contract risks. Therefore, Corporation Agreement signed by the Plaintiff and the Defendant was not part of the contract regulated by this judicial interpretation. At the same time, fund provided by the Plaintiff to the Defendant for ship building was part of common financial behavior which was needed for the producing and operating. The interest of due prepayment was no more than the relevant regulation, meanwhile, the Plaintiff did not take financing as the regular profession. Therefore, the contract signed between the Plaintiff and the Defendant did not violate the mandatory regulation of the national financial regulations, and it was valid in light of law. The Plaintiff signed Corporation Agreement with the Defendant to fulfill the liability of signing Shipbuilding Contract with the foreigners, and the contract was the real meaning of the Plaintiff. It was established and valid in light of law. However, the Shipbuilding Contract had been terminated, so aims of the contract in Corporation Agreement cannot be realized. There is no agreement on how to calculate the shipbuilding installment and deal with the ship in this situation under Corporation Agreement. Therefore, under the condition where there was no

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agreement between the Plaintiff and the Defendant on how to calculate the shipbuilding installment and deal with the ship, the cooperation agreement cannot continue to be fulfilled. 2. Identification of the contract relationship between the Third Party and the Defendant. Building and Purchase Contract of 300 Feet Deck Cargo Barge signed between the Third Party and the Defendant is a ship contract relationship. According to the contract, the Third Party should provide the drawing which was approved by the Class, including the general arrangement, basic structure drawing, the body plan and the full ship specification which were identified by the Plaintiff and the Defendant. The Defendant shall build the ship according to the drawing and the specification, and delivery of the ship to the Third Party. The Third Party shall pay the shipbuilding installment to the Defendant as per the building schedule. This contract was part of situation where the contractor finishes working and delivers outcome according to the customer’s requirement, while the customer pays the contractor. This contract was the contract for work, so it should be identified as shipbuilding contract. Therefore, the court cannot support the Defendant’s plea that this contract was a ship sales contract. Building and Purchase Contract of 300 Feet Deck Cargo Barge signed between the Third Party and the Defendant was a real meaning of the parties, it was established and valid in light of law. Each party of the contract should exercise civil rights in accordance with the contract agreement and legal regulations strictly, and every party should fulfill civil liability. 3. Shipowner identification of the two ships which were located in the Defendant’s factory. There were two finished vessels located in the Defendant’s factory, of which one was under the 20 tons gantry crane and other was under the 50 tons gantry crane with ship skin number CN20133802829. The three parties of this case all identified that the ship number of the deck barge which was under the 20 tons gantry crane was SAM11028N, and the ship was one that under the Shun Chuan Fa 12 No.013 Corporation Agreement. According to this agreement, this ship was owned by the Plaintiff Shuntian Company and the cooperation agreement stipulated that the Plaintiff had fulfilled most of the prepayment under the agreement. Therefore, the court holds the Plaintiff was the owner of the ship whose ship number was SAM11028N; ABS number was YY237806, which was under the 20 tons gantry crane in the Defendant’s factory. The Plaintiff and the Third Party both claimed that the deck barge under the 50 tons gantry crane was built for them. The Plaintiff held that ship number and ABS class number were SAM12012N and YY244899 respectively, while the Third Party held that ship number and ABS class number were DH12Q12N and YY245947 respectively. The Plaintiff provided the ship inspection of the ship whose ship number and ABS class number were SAM12012N and YY244899 respectively which proved this ship was to be finished. However, the ship inspection of the ship

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whose ship number and ABS class number were DH12Q12N and YY245947respectively proved that the ship under Building and Purchase Contract of 300 Feet Deck Cargo Barge signed between the Third Party and the Defendant was still in the sub-progress. According to these, the Plaintiff claimed that the finished deck barge which was located under the 50 tons gantry crane in the Defendant’s factory was entrusted by the Plaintiff to build, while the ship of the Third Party was still in the sub-progress. But both of the two ships had no original ABS inspection to be checked, and the Defendant and the Third Party both had objection to the authenticity of this evidence. Because the Plaintiff had no other evidence to support this one, so the court cannot identify this evidence in light of law. The court cannot support the Plaintiff’s claims, because the Plaintiff could not submit enough evidence to prove the finished deck barge which was located in the 50 tons gantry crane was entrusted by the Plaintiff to build. The Defendant as the contractor had identified that this ship was built for the Third Party, and had applied ship identification number for this ship. And the Defendant had signed delivery and acceptance with the Third Party, so this ship was one that was signed under Building and Purchase Contract of 300 Feet Deck Cargo Barge between the Third Party and the Defendant. Meanwhile, compared with the ship drawing and the ship current situation which was submitted by the Plaintiff and the Third Party, this ship accorded with the drawing from the Third Party, while it was different from the anchor recess in the drawing from the Plaintiff. According to this, it can be identified that the ship which was located under the 50 tons gantry crane in the Defendant’s factory was one under the contract signed by the Third Party and the Defendant. According this contract agreement, this ship was owned by the Third Party. The Third Party had fulfilled the payment obligation, so the Defendant shall deliver the ship to the Third Party according to the agreement. Because the two parties had signed the protocol of delivery and acceptance, so the court cannot support the Third Party’s claim that it required the Defendant to deliver the ship. 4. Whether the Defendant should fulfill the ship delivery duty. As to the deck barge which located under the 20 tons gantry crane in the Defendant’s factory, the corporation agreement which was signed by the Plaintiff and the Defendant only agreed that the two parties only had the common obligation to deliver the ship to the foreign shipowner, while it did not agree that the Defendant had obligation to deliver the ship to the Plaintiff. The Plaintiff had no right to require the Defendant to deliver ship according to the corporation agreement. And the shipbuilding installment cannot be identified before the two parties came to a new agreement. So, the Plaintiff claim’s that the Defendant should deliver ship cannot be supported by the court in light of law. According to Article 60 Paragraph 1, Article 107 Paragraph 1 of the Contract Law of the People’s Republic of China, Article 142 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows:

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1. The deck barge with ship number SAM12012N under the 20 tons gantry crane in the factory of the Defendant Nanjing Yhao Shipbuilding Co., Ltd. is owned by the Plaintiff Jiangsu Shuntian Marine Development Co., Ltd.; 2. The Defendant Nanjing Yhao Shipbuilding Co., Ltd. shall deliver the deck barge whose ship identification number was CN20123802829 which located under the 50 tons gantry crane in the factory of the Defendant to the Third Party Nanjing Du-Hope International Group Co., Ltd. within 10 days after the judgment comes into force; 3. Reject other claims of the Plaintiff Jiangsu Shuntian Marine Development Co., Ltd. Court acceptance fee in amount of RMB81,800 and application fee in amount of RMB10,000, add up to RMB91,800, RMB45,900 shall be born by the Plaintiff Jiangsu Shuntian Marine Development Co., Ltd., and RMB45,900 shall be born by the Defendant Nanjing Yhao Shipbuilding Co., Ltd. Court acceptance fee RMB33,130 required by the Third Party Nanjing Du-Hope International Group Co., Ltd. shall be born by the Plaintiff Jiangsu Shuntian Marine Development Co., Ltd. If not satisfy with this judgment, any party shall within fifteen days after the service of this judgment, submit an appeal to the court, with duplicates in the number of the opposing parties, so as to make an appeal before Hubei High People’s Court. (Appeal entertainment fee shall be paid in advance according to Article 13 Paragraph 1 of the Legal Fee Paying Means when submitting the appeal. Deposit bank: Donghu, Wuhan branch of Agricultural Bank of China Wuhan Branch. Name of account: the non-tax revenue settlement account of Hubei Finance Department; number of account: 05XXX69. The payers pay in the form of bank transfer and bank exchange, the payers shall note “Hubei High People’s Court” or the code of the Hubei High People’s Court “103,001” in money order or bank transfer document. If the fee is not paid within seven days after the period of appeal expire, the appeal will be automatically recalled). Presiding Judge: HOU Wei Judge: YANG Qing Acting Judge: DENG Yi November 30, 2014 Clerk: YANG Cheng

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Hubei High People’s Court Civil Judgment Jiangsu Shuntian Marine Development Co., Ltd. v. Nanjing Yhao Shipbuilding Co., Ltd. (2015) E Min Si Zhong Zi No.00067 Related Case(s) This is the judgment of second instance and the judgment of first instance is on page 419. Cause(s) of Action 207. Dispute over shipbuilding contract. Headnote Affirming lower court judgment that contract to build ships and sell them to foreigners was not a typical shipbuilding contract but a cooperation agreement that had been terminated by one party’s failure to perform, but modifying the amount awarded as damages by the lower court. Summary The Plaintiff brought a claim against the Defendant seeking the lifting of two cooperation agreements signed by the parties and to have the Defendant return the Plaintiff’s payment for the construction of ships, along with payment of associated damages plus interest. The Plaintiff contracted with the Defendant to construct a number of ships which were then to be sold to foreign purchasers. The contract between the parties listed in detail the responsibilities of the parties however after the ships were not constructed, the Plaintiff sought to terminate the contract and recover the payments made. Therefore, the Plaintiff brought suit against the Defendant. The court of first instance found that based on the rights and obligations of the two parties in the cooperation agreement, the Plaintiff was responsible for providing ship construction funds, and the Defendant was responsible for the construction of the ship. The purpose of the contract was to sell the ship to foreign shipowners. Based on the rights and obligations in the cooperation agreement, the two parties did not have a typical shipbuilding contractual relationship but had a relationship of funds and technical cooperation in order to sell ships to the foreigners, and the two parties shared the risk and profits together. The court of first instance held that due to the Defendant’s failure to perform its obligations the two cooperation agreements were terminated, and the Defendant must return to the Plaintiff a total RMB8,160,000. Given that the Defendant’s legal representative guaranteed this payment, they were jointly and severally liable. The Defendant appealed. The appellant court held that the original judgment should be affirmed in part, the alteration being that the Defendant should pay the Plaintiff RMB7,460,000 (plus interest running from September 1, 2012 to the date of

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payment) and RMB1,000,000 (plus interest running from November 29, 2012 to the date of payment). Additionally, the two parties were required to split the court acceptance fees of both the court of first instance and appeal, with the Defendant bearing the bulk of this payment.

Judgment The Appellant (the Plaintiff of first instance): Jiangsu Shuntian Marine Development Co., Ltd. Domicile: Building A, No.21, Software Avenue, Yuhua District, Nanjing, Jiangsu. Organiƶation Code: 69130254-1. Legal representative: BIAN Zhonglou, general manager. Agent ad litem: HU Xiangling, lawyer of Hubei Zhongsan Law Firm. Agent ad litem: WU Simeng, lawyer of Hubei Zhongsan Law Firm. The Respondent (the Defendant of first instance): Nanjing Yhao Shipbuilding Co., Ltd. Domicile: Caotang Road, Wujiang Town, Pukou District, Nanjing, Jiangsu. Organiƶation Code: 77704856-4. Legal representative: TONG Rengui, chairman. Agent ad litem: TONG Renhua, male, Han, born on August 5, 1964, living in Pukou District, Nanjing, Jiangsu, staff of the company. Agent ad litem: YANG Shuqiao, lawyer of Jiangsu Hezhong Law Firm. The Respondent (the Third Party of first instance): Nanjing Du-Hope International Group Co., Ltd. Domicile: No.199, Jianye Road, Jianye District, Nanjing, Jiangsu. Organiƶation Code: 1349316-X. Legal representative: XIE Tao, chairman. Agent ad litem: YAN Chunjiao, lawyer of Jiangsu Du-Hope Law Firm. Agent ad litem: HE Yunming, lawyer of Hubei Guosen Law Firm. With respect to the case arising from dispute over shipbuilding contract between the Appellant, Jiangsu Shuntian Marine Development Co., Ltd. (hereinafter referred to as Shuntian Company), and the Respondents, Nanjing Yhao Shipbuilding Co., Ltd. (hereinafter referred to as Yhao Company) and Nanjing Du-Hope International Group Co., Ltd. (hereinafter referred to as Du-Hope Company), the Appellant disagreed with the Wuhan Maritime Court (2013) Wu Hai Fa Shang Zi No.00414 Civil Judgment and appealed to the court. After accepting it, the court form a collegiate bench according to law, and held a hearing in public on May 6, 2015. Agents ad litem of Shuntian Company, HU Xiangling and WU Simeng, agents ad litem of Yhao Company, TONG Renhua and YANG Shuqiao, agents ad litem of Du-Hope Company, YAN Chunjiao and HE Yunming, appeared in court to attend the hearing. Now the case has been concluded.

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Shuntian claimed in first instance that: (1) confirm that the ownership of the two deck barges 300ft*80ft*18ft (construction number: SAM11028N, ABS number: YY237806, construction number: SAM12012N ABS number: YY244899) should be the above ship that Shuntian Company entrusted Yhao Company to build and demanded Yhao Company to deliver; (2) Yhao Company should bear the litigation costs and preservation fee. The Third Party claimed in first instance that, reject the claims of Shuntian Company and Yhao Company should deliver the deck barge with size of 300ft*80ft*18ft, ship identification number of CN 2013802829, to Du-Hope Company. The court of first instance found out that: on February 10, 2012, Shuntian Company as the Party A and Yhao Company Yhao Company as the Party B signed a cooperation agreement whose contract number was Shun Chuan Fa 12 No.013. The contract purpose was regulating the Party A and the Party B as the common seller to sale the deck barge with size of 300ft*80ft*18ft (the building number was SAM11028N) to SCOTIMEARINELTD (hereinafter referred to as foreign shipowner). The main contents in the contract were as follows: Article 1, General article: (1) the Party A and the Party B as the common seller should sign the ship building contract with the foreign shipowner in the name of the Party A. (2) the Party A was in charge of the export procedure of the ship and import procedure of material and equipment, and resolved the relevant payment as per the agreement. (3) The Party B was responsible for full installment of building, ship delivery and warranty of quality in the shipbuilding contract except the obligations of the Party A, and bear relevant responsibility and obligations. (4) If the imported material and equipment was involved, the Party A agreed to act for the Party B to sign the import contract of the ship’s material and equipment in the name of buyer. And the Party B agreed to execute and bear the buyer’s duties and obligations under the import contract. Article 2: the rights and obligations of the Party A in the import contract. (1) The Party A undertook the export procedure of this ship and the import procedure of material and equipment, and conducted the settlement of exchange and foreign exchange payment procedure in the name of the Party A. And the service charge should be beard by the Party B. (2) The Party A should be responsible for the installment which was needed in the ship building process under this agreement. The gross working capital was no more than RMB5,180,000. The prepayment of the shipowner in the building contract, which was the 5 percent of the total amount in the contract, was about RMB340,000, and this fund was not included into gross working capital of the Party A. Because the Party A had paid the Party B for RMB2,000,000, and RMB3,000,000 on August 1, 2011 and August 2, 2011 respectively. And the Party A still needed to pay the Party B RMB520,000. (3) The Party A had the right to supervise the Party B’s money using, and the Party B only used the working capital for the direct fees of ship building. (4) The ship and all material, equipment were owned by the Party A from the effective day of the agreement to the day of this ship fulfillment and the Party got all installment from the shipowner. (5) The 4 percent of this corporate price of the ship should be taken as the due profit of Party A by mutual consent in this corporate project. This

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profit should be one-off deducted when the Party A paid the Party B spare money after the exchange collection of this ship. And this profit should not be automatically increased or decreased as the construction contract prices increase or decrease in final ship delivery, while it could be changed after bilateral common negotiation when delivering the ship. After the Party A accepting the full balance payment of the shipowner, the two parties could conduct the final calculation. After accomplishing the calculation and the full VAT invoice was given by the Party A to the Party B, the Party A should pay the Party B full balance payment within 7 days. Article 3: the rights, responsibilities and obligations of the Party B. (1) The Party B undertook and fulfilled all responsibilities which should be undertaken and fulfilled by the seller and buyer in the construction contract. And the Party B should finish the design, building and technology quality of this ship as scheduled (except for which had been appointed in the agreement). If this ship building included purchase import equipment, the responsibilities and obligations of the buyer under the import equipment contract should be beard by the Party B. (2) After the Play A’s final due profit was deducted, the Party could bear and was entitled to all losses and profits of this ship (including all the losses and profits which was caused by changing of exchange rate). (3) The ship delivery date should be no later than 30 August 2012, the grace period was 15 days. If the Party B could not finish building the ship before 15 September 2012, the Party A had right to terminate the contract. Then the Party B should pay back the Party A all installment and due profits, the Party A had right to handle the ship. (4) The legal presentation of the Party B TONG Renhua was willing to provide personal guarantee to the Party A for the Party B’s obligations fulfillment under the contract. And it would bear the guarantee responsibilities as per the guarantee contract (contract number: Shun Chuan Fa 12 No.017) which was signed by the two parties. Yhao Company TONG Renhua had signed every page of this corporation agreement. At the same day, the Party A and the Party B signed supplemental agreement in terms of the corporation agreement above, the contract number of the supplemental agreement was 12 No.013/BC1 and the agreement was as follows: (1) advanced payment by the Party A for the Party B was no more than RMB5,180,000 during the ship building process, and the interest should be born by the Party B (the interest should be calculated from the day when the Party A paid the installment to the day when the Party A got the settlement of exchange payment of this ship). The interest rate should be calculated on the basis of 0.78% per month (the interest rate should be changed if the interest rate of the People’s Bank of China changes during the period). The ship-owner’s advanced payment of around RMB 340,000 was not included in the total working capital which was born by the Party A, and the Party B did not have to bear the interest of this part capital. Because the Party A had paid the Party B RMB2,000,000, and RMB3,000,000 on August 1, 2011 and August 2, 2011 respectively. And the Party A still needed to pay the Party B RMB520,000. (2) If a letter of credit was needed issuing by Party A in the purchasing or equipment purchasing, then the L/C guarantee deposit was 20 percent of the credit deposits. The advanced guarantee deposit interest made by the Party B should be calculated as per the interest rate above. (3) The Party B should bear the tax rebate interest of three months which

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was also calculated as per the interest rate above. (4) The Party A’s final actual due profits consisted of the advanced fund interest and the tax rebate interest and this due profit should be one-off deducted when the Party A paid the Party B spare money after the exchange collection of this ship. On the same day, Shuntian Company signed Shun Chuan Fa 12 No.014 and Shun Chuan Fa 12 No.014/BC1 Corporation Agreements with Yhao Company in terms of the other deck barge with size of 300ft*80*ft.*18ft. The content of the two agreements were in consistent with the contract 12 No.013 and 12 No.013/BC1, while the agreement had obviously recorded the Party A had paid RMB5,000,000 in 2011. On June 11, 2012, Du-Hope Company as the Party A signed the Building and Purchase Contract of 300 Feet Deck Cargo Barge with Yhao Company as the Party B, and the contract number was Ning Dong Pei 12Q2007. They agreed that the ship under this contract should be built by Yhao Company and then delivered to Du-Hope Company. The main contents of this contract were as follows: Article 1, specification, data and class: (1) the specification: the length overall was 300 feet, the breadth was 18 feet, the depth was 18 feet, the deadweight on the deck was 7 tons/square meters, and the coaming height was 12 feet. (2) The class survey of this ship in ABS should be applied by the Party A, and the Party B should apply the seaworthiness certificate of CCS and the interim certificate of nationality. (3) The ship skin number: DH12Q2007. Article 2, building basis: (1) the Party B must act in strict accordance with the ABS approved drawing which was provided the Party A and the full ship specification which was signed by the two parties to build the ship. (2) The vessel outfitting should include anchors, chains, diesel hydraulic winch, navigation lights and towing arrangement, the detailed specification and quantity could be seen in the Specification signed by the two parties. Article 3, material and building demand. Article 4, contract price and method of payment: (1) contract price: RMB7,780,000, delivering the ship at Shanghai battery anchorage. (2) this contract price included the Party A’s transaction fees of every certification and the tug fire. (3) Method of payment: the first installment: the Party A paid the Party B 20 percent of the contract price within 10 days from the contract signed by the two parties; the second installment: the Party A paid the Party B 20 percent of the contract price to purchase the building material with 10 days from the date of the Party B starting to build. The third installment: the Party A paid the Party B 20 percent of the contract price to purchase the building material with 10 days from the date of basing the bottom plate; the fourth installment: the Party A paid the Party B 20 percent of the contract price with 10 days from the date of completing and launching, and the Party B should provide the VAT invoice to the Party A. The fifth installment: the Party A should pay the full amount within one month from the date of delivering the ship to Shanghai; and the first to fourth installment and other steel purchasing fees paid by the Party A were all loan made by the Party A for the Party B, so the Party B should pay interest which was calculated on the basis of 9% per month to the Party A, and the calculated time was calculated from the pay day to the day after delivering the ship for one month. The interest should be deducted from the final payment after the parties’ identification. The Party A could raise the interest rate of 10% per month

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from the first 30 days of delay in delivery of the vessel beyond the Delivery Date, if the Party B could not deliver vessel on time. Article 5, Delivery Date and Delivery and Acceptance Vessel: November 20, 2012. Article 6, Property right and ownership: in the process of ship building or before the Delivery Date, if there were debt disputes or the shipowner abandoned the ship which was caused by the Party B, and the Party B could not pay back the Party A the prepayment, the ship and other material, equipment under the ship were all owned by the Party A. Du-Hope Company had paid Yhao Company shipbuilding installment of RMB 6,600,000 from July 6, 2012 to March 7, 2013. Yhao Company started ship building work since contract between Shuntian Company and Du-Hope Company was signed. As of March 7, 2013, Shuntian Company applied to arrest the two deck barges with size of 300ft*80ft*18ft which was located in Yhao Company’s factory and this court approved. The court made (2013) Wu Hai Fa Bao Zi No.00106 and No.00107 Civil Judgments, and arrested the 300 feet deck barge which was located under the 20 tons gantry crane and the 50 tons gantry crane respectively. Shuntian Company sent the lawyer’s letter to Yhao Company on March 8, 2013, to state that the deck barge with shipbuilding number SAM12012N and ABS number YY244899 was owned by Shuntian Company, so Yhao Company had no right to sell it to Du-Hope Company. Yhao Company signed the ship delivery and acceptance certificate with Du-Hope Company in terms of the 300ft deck barge whose Chinese name was Du-Hope 130 and English name was SOEKAWATU369, ship identification number was CN20123802829 and the factory code was DH12Q2007 on 15 March 2013. The ship delivery and acceptance certificate specified that this vessel was built in July 2012 and had condition of delivery, so the two parties conducted the delivery and acceptance procedure on March 15, 2013, and this vessel was owned by Du-Hope Company. Meanwhile, the court of first instance found out Du-Hope Company applied ship identification number for the ship whose Chinese name was Du-Hope 130 and inspection number was YY245947, ship skin number was DH12Q2007 and shipbuilding contract number was Ning Du-Hope 12Q2007 on March 11, 2013. The ship identification number was CN20123802829 which was distributed by the China MSA. The court of first instance also found out that there were two accomplished deck barges located in Yhao Company’s factory, of which one was located in the 20 tons gantry crane and other was located in the 50 tons gantry crane with ship skin number CN20133802829. The court of first instance summarized issues as follows: firstly, the identification of the validity of contract and the legal relationship between Shuntian Company and Yhao Company. Secondly, the identification of the validity of contract and the legal relationship between Du-Hope Company and Yhao Company. Thirdly, identification of the shipowner of the two ships which was located in Yhao Company’s factory. Fourthly, whether Yhao Company should fulfill the ship delivery duty.

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Firstly, the identification of the validity of contract and the legal relationship between Shuntian Company and Yhao Company. According to Corporation Agreement signed by Shuntian Company and Yhao Company, Shuntian Company and Yhao Company as the common seller negotiated with the shipowner that they would sign the ship building contract with the shipowner in the name of Shuntian Company. Analyzing from the two parties’ rights and obligations under the Agreement, Shuntian Company should take charge of supporting ship building fund, and Yhao Company was in charge of building ship. And the contract purpose was selling ship to the foreign shipowner. From analysis of the two parties’ rights and obligations under the Agreement, the two parties were not typical relationship of the ship building contract, but the relationship of technological and fund corporation caused by selling ships to outsiders. And Shuntian Company shall take charge of providing fund, Yhao Company was in charge of building ship. The two parties were entitled to common risks and profits. From the analysis of contract articles, the contract profits of Shuntian Company consisted of 3 parts: the certain proportion fixed profits of the ships’ gross selling price; Yhao Company’s prepayment interest; the export tax rebate interest of Yhao Company’s prepayment. Whether the contract belonged to loan rather than cooperation, whether it violated the obligatory provisions of the country’s financial regulation, whether it was legal or not. According to the Regulation 2 of the Question 4 of the Interpretation of the Supreme People’s Court on Several Issues Concerning Hearing the Case of Joint Contract Dispute (Fa [Jing] Fa (1990) No.27): the business entity and institutional legal person invest the joint venture as one party of the joint ventures, but they were not involved in the common operation, and not bear the joint risk responsibility. Whether gain or loss, the Party got back the principal and interest on time, or got back the fixed profit on time. This violated relevant financial regulation, so the contract should be identified null and void. Except the principal could be returned, the interest which was got or was agreed to get by the investor should be taken over, while the other party should be imposed on a fine which amounted to the interest of bank. In this case, the liabilities of Shuntian Company included providing fund and signing contract with the foreigners. And Shuntian Company took part in the ship supervising and beard relevant contract risks. Therefore, Corporation Agreement signed by Shuntian Company and Yhao Company was not part of the contract regulated by this judicial interpretation. At the same time, fund provided by Shuntian Company to Yhao Company for ship building was part of common financial behavior which was needed for the producing and operating. The interest of due prepayment was no more than the relevant regulation, meanwhile, Shuntian Company did not take financing as the regular profession. Therefore, the contract signed between Shuntian Company and Yhao Company did not violate the mandatory regulation of the national financial regulations, and it was valid in light of law. Shuntian Company signed Corporation Agreement with Yhao Company to fulfill the liability of signing Shipbuilding Contract with the foreigners, and the contract was the real meaning of Shuntian Company. It was established and valid in light of law. However, Shipbuilding Contract had been terminated, so aims of the

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contract in Corporation Agreement cannot be realized. There was no agreement on how to calculate the shipbuilding installment and deal with the ship in this situation under the Corporation Agreement. Therefore, under the condition where there was no agreement between Shuntian Company and Yhao Company on how to calculate the shipbuilding installment and deal with the ship, the cooperation agreement could not continue to be fulfilled. Secondly, the identification of the contract relationship between Du-Hope Company and Yhao Company. Building and Purchase Contract of 300 Feet Deck Cargo Barge signed between Du-Hope Company and Yhao Company was a ship contract relationship. According to the contract, Du-Hope Company should provide the drawing which was approved by the Class, including the General Arrangement, Basic Structure Drawing, the Body Plan and the Full Ship Specification which was identified by Shuntian Company and Yhao Company. Yhao Company should build the ship according to the Drawing and the Specification, and delivery of the ship to Du-Hope Company. Du-Hope Company should pay the shipbuilding installment to Yhao Company as per the building schedule. This contract was part of situation where the contractor finishes working and delivered outcome according to the customer’s requirement, while the customer paid the contractor. This contract was the contract for work, so it should be identified as shipbuilding contract. Therefore, the court of first instance could not support Yhao Company’s claims that this contract was a ship sales contract. Building and Purchase Contract of 300 Feet Deck Cargo Barge signed between Du-Hope Company and Yhao Company was a real meaning of the parties, it was established and valid in light of law. Each party of the contract should exercise civil rights in accordance with the contract agreement and legal regulations strictly, and every party should fulfill civil liability. Thirdly, the shipowner identification of the two ships which were located in Yhao Company’s factory. There were two finished vessels located in Yhao Company’s factory, of which one was under the 20 tons gantry crane and other was under the 50 tons gantry crane with ship skin number CN20133802829. The three parties of this case all identified that the ship number of the deck barge which was under the 20 tons gantry crane was SAM11028N, and the ship was one that under the Shun Chuan Fa 12 No.013 Corporation Agreement. According to this agreement, this ship was owned by Shuntian Company and the cooperation agreement stipulated that Shuntian Company had fulfilled most of the prepayment under the agreement. Therefore, the court of first instance held that Shuntian Company was the owner of the ship whose ship number was SAM11028N; ABS number was YY237806, which was under the 20 tons gantry crane in Yhao Company’s factory. Shuntian Company and Du-Hope Company both claimed that the deck barge under the 50 tons gantry crane was built for them. Shuntian Company held ship number and ABS class number were SAM12012N and YY244899 respectively, while Du-Hope Company held ship number and ABS class number were DH12Q12N and YY245947 respectively. Shuntian Company provided the ship

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inspection of the ship whose ship number and ABS class number were SAM12012N and YY244899 respectively which proved this ship was to be finished. However, the ship inspection of the ship whose ship number and ABS class number were DH12Q12N and YY245947 respectively proved that the ship under Building and Purchase Contract of 300 Feet Deck Cargo Barge signed between Du-Hope Company and Yhao Company was still in the sub-progress. According to these, Shuntian Company claimed that the finished deck barge which was located under the 50 tons gantry crane in Yhao Company’s factory was entrusted by Shuntian Company to build, while the ship of Du-Hope Company was still in the sub-progress. But both of the two ships had no original ABS inspection to be checked, and Yhao Company and Du-Hope Company both had objection to the authenticity of this evidence. Because Shuntian Company had no other evidence to support this one, so the court of first instance could not identify this evidence in light of law. This court of first instance could not support Shuntian Company’s claims, because Shuntian Company could not submit enough evidence to prove the finished deck barge which was located in the 50 tons gantry crane was entrusted by Shuntian Company to build. Yhao Company as the contractor had identified that this ship was built for Du-Hope Company, and had applied ship identification number for this ship. And Yhao Company had signed delivery and acceptance with Du-Hope Company, so this ship was one that was signed under Building and Purchase Contract of 300 Feet Deck Cargo Barge between Du-Hope Company and Yhao Company. Meanwhile, compared with the ship drawing and the ship current situation which was submitted by Shuntian Company and Du-Hope Company, this ship accorded with the drawing from Du-Hope Company, while it was different from the anchor recess in the drawing from Shuntian Company. According to this, it could be identified that the ship which was located under the 50 tons gantry crane in Yhao Company’s factory was one under the contract signed by Du-Hope Company and Yhao Company. According this contract agreement, this ship was owned by Du-Hope Company. The Du-Hope Company had fulfilled the payment obligation, so Yhao Company should deliver the ship to Du-Hope Company according to the agreement. Because the two parties had signed the protocol of delivery and acceptance, so the court of first instance could not support Du-Hope Company’s claim that required Yhao Company to deliver the ship. Fourthly, whether Yhao Company should fulfill the ship delivery duty. As to the deck barge which located under the 20 tons gantry crane in Yhao Company’s factory, the corporation agreement which was signed by Shuntian Company and Yhao Company only agreed that the two parties only had the common obligation to deliver the ship to the foreign shipowner, while it did not agree that Yhao Company had obligation to deliver the ship to Shuntian Company. Shuntian Company had no right to require Yhao Company to deliver ship according to the corporation agreement. And the shipbuilding installment cannot be identified before the two parties came to a new agreement. So, Shuntian Company claim’s that Yhao Company should deliver ship cannot be supported by the court of first instance in light of law.

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According to the Contract Law of the People’s Republic of China Article 60 Paragraph 1, Article 107 Paragraph 1, the Civil Procedure Law of the People’s Republic of China Article 142, the judgment of first instance was as follows: (1) the deck barge with ship number SAM12012N under the 20 tons gantry crane in the factory of Yhao Company should be owned by Shuntian Company; (2) Yhao Company should deliver the deck barge whose ship identification number was CN20123802829 which located under the 50 tons gantry crane in the factory of Yhao Company to Du-Hope Company within 10 days after the judgment came into effect; (3) reject other claims of Shuntian Company. Court acceptance fee in amount of 81,800 yuan, preservation application fee in amount of 10,000 yuan, in aggregate amount of 91,800 yuan, Shuntian Company should bear 45,900 yuan; Yhao Company should bear 45,900 yuan; acceptance fee of Du-Hope Company in amount of 33,130 yuan, should be born by Shuntian Company. Shuntian Company disagreed with the above judgment and appealed to the court that: firstly, revoke the second and third items of the Wuhan Maritime Court (2013) Wu Hai Fa Shang Zi Di No.00414 Judgment, change to judge that Shuntian enjoyed the ownership of the two 300ft*80ft*18ft deck barges, and Yhao Company should deliver the two 300ft*80ft*18ft deck barges to Shuntian Company; secondly, reject other claims of Du-Hope Company; thirdly, court acceptance fee of first and second instance should be born by Yhao Company and Du-Hope Company. Facts and reasons: firstly, Shuntian Company enjoyed the ownership of the two 300ft*80ft*18ft deck barges. (1) The two deck barges involved were ships under construction, and neither had registered ownership with the maritime department. To determine the ownership of the ships under construction, first make a comprehensive judgment based on the contract of the ship under construction. If there was no agreement in the contract, made a comprehensive judgment based on the facts about the source of funding for the ship under construction and the provision of equipment. In this case, Cooperation Agreement entered into between Shuntian Company and Yhao Company stipulated that the ownership of the ship and all materials and equipment used to construct the ship (regardless of whether the materials and equipment have been used) belonged to Shuntian Company, the owner of the two 300ft*80ft*18ft deck barges involved should be Shuntian Company. Meanwhile, most of the funds required for the construction of the ship involved were also provided by Shuntian Company. (2) The application for the commencement of the involved deck barge (build number SAM12012N) and the ship construction inspection certificate could prove that the deck barge involved was constructed by Yhao Company in accordance with Cooperation Agreement entered into with Shuntian Company. On the ship construction inspection list, the construction numbers indicated by Yhao Company when reporting to ABS were the construction numbers of Suntian Company. The court of first instance failed to accept the above-mentioned application for commencement of construction and the ship construction inspection certificate on the grounds that there was no original, which lacked legal basis. (1) The application for start of construction and the ship construction inspection order were retrieved by the judge of the court of first instance to ABS, and the sources were legal. When the court of first instance

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retrieved the materials, ABS confirmed that the material was original. (2) ABS affixed an official seal to the above materials, confirming that these materials were original and authentic, and never provided contrary evidence to deny the authenticity of these materials. (3) The court of first instance confirmed that there was no original, which lacked basis. (4) ABS informed Shuntian Company by phone that its staff had issued a written document to the court of first instance as requested by the court of first instance to assist in the investigation letter. In this material, ABS staff recognized that the application for the start of the deck barge involved (build number SAM12012N) and the ship construction inspection form were the original (submitted by Yhao Company to ABS). After the inspection was completed and signed by the inspector, all the originals were returned to Yhao Company. It was sufficient to prove that the application for the start of the involved deck barge (build number SAM12012N) and the ship construction inspection form were both original, and the original was kept at Yhao Company. The Several Provisions of the Supreme People’s Court on Evidence in Civil Procedure Article 75 stipulated that, “if there is evidence to prove that one party refuses to provide evidence without proper reasons, if the other party claims that the content of the evidence is not conducive to the evidence holder, it can be presumed that the claim is valid”, so the claims of Shuntian Company should be established. (5) According to the industry practice and regulations of world-class classification societies such as ABS and BV, the inspection documents of ship construction and other information, the inspection staff of classification societies generally did not keep the originals after signing, and the relevant originals were retained by the shipyard. After the ship was constructed, the shipyard applied for a classification certificate from the classification society. The shipyard kept the originals to prove that the classification society had carried out the inspection of the relevant ship construction process. So ABS in this case did not keep the originals in line with international practices and related regulations. (6) ABS, an international first-class classification society, was established in 1862 and enjoyed a very high reputation internationally. ABS would not provide false evidence and it was impossible to fabricate facts. It should be applied by ABS stamp to confirm the authenticity of the start application and ship construction inspection form. 3. On March 8, 2013, the certificate provided by ABS to Shuntian Company also clarified the status of the two deck barges with construction numbers of SAM11028N and SAM12012N in this case. The certificate could also prove that the two basically completed barges involved were built by Yhao Company in accordance with Cooperation Agreement entered into with Shuntian Company. The hull numbers and survey numbers of the two barges are the ships that Shuntian Company claimed to enjoy ownership, which were completely different from the hull numbers and survey numbers of the deck barges proposed by Du-Hope Company. Secondly, the claims of the Respondent Du-Hope Company should not be protected. (1) The vessels involved in Construction Contract for the Construction of 300-foot Deck Freight Barge entered into by Du-Hope Company and Yhao Company were not related to the two 300ft*80ft*18ft deck barges involved claimed by Shuntian Company. The ABS inspection number of the deck barge commissioned by Du-Hope Company constructed by Yhao Company was

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YY245947 and the hull number was DH12Q2007. The evidence obtained by the court of first instance from ABS proved that the ships under the ABS inspection number only completed part of the inspection work on March 29, 2013. Namely, the ship was only sharded, and the shards were not welded to become the entire ship. According to the certificate issued by ABS, the hull construction of the two deck barges involved had been completed on March 8, 2013, and the tightness tests had been completed. At the time of the seal and detention of the court of first instance, the two deck barges involved were basically completed. Obviously, the deck barges claimed by Du-Hope Company in the litigation request were completely unrelated to the two deck barges claimed by Shuntian Company. (2) The court of first instance did not determine that the ABS inspection number retrieved from the court to ABS according to its authority was YY245947, and the ship construction report was DH12Q2007, which lacked legal basis. Thirdly, the court of first instance did not support Suntian Company’s lawsuit requesting Yhao Company to deliver the ship, which lacked factual and legal basis. (1) The judgment of the first court confirmed that Shuntian Company enjoyed ownership of the ship under the 20-ton gantry crane in the factory area of Yhao Company. Shuntian Company exercised the ownership as the owner, and required the delivery of the ship involved to have sufficient facts and legal basis. If the owner could not possess the subject matter, ownership no longer had any meaning. (2) Shuntian Company and Yhao Company signed Cooperation Agreement, stipulating that the purpose of co-building the ship was to deliver to the foreign party, at present, Yhao Company did not deliver the ship involved to Shuntian Company, Shuntian Company could not deliver to the foreign party, which totally departed from the original intention of Cooperation Agreement. (3) If Yhao Company claimed any rights and benefits in respect of the ship involved, it should also be exercised only after the ship involved was delivered to the foreign party and Shuntian Company received the payment from the ship. Yhao Company argued that: firstly, Yhao Company signed shipbuilding contract with Du-Hope Company and Shuntian Company. One of the ships built for Shuntian Company had been completed and one was under construction. A ship built for Du-Hope Company had been completed and a ship handover agreement had been signed. Secondly, the cooperation agreement signed by Yhao Company and Shuntian Company was a contract repeatedly used by Shuntian Company for the same purpose. According to legal regulations, the contract had a different understanding and should be interpreted against the party providing the contract. Thirdly, there was no objection to the disputed two ships, one of which was owned by Du-Hope Company, and the other one was owned by Shuntian Company. Fourthly, Shuntian Company claimed that the funds paid for fulfilling the agreement with Yhao Company could not correspond to the ships it claimed. Yhao Company also cooperated with several companies at the same time. In the process of implementing the agreement involved, Yhao Company also received funds and materials from other companies. Therefore, Shuntian claimed that it had paid the funds and materials and enjoyed ownership. The evidence submitted by Shuntian Company could not prove that the funds paid correspond to the ships it claimed. Fifthly, among the two ships involved, the ship constructed for Shuntian Company

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was consistent with the ABS reexamination plan, the ship constructed for Du-Hope Company was consistent with the ABS reexamination plan, and according to regulations, the identification number had been obtained for the ship constructed by Du-Hope Company. Sixthly, the confirmation of evidence by the court of first instance was correct. The court of first instance confirmed that Yhao Company should not deliver the barges to Shuntian Company, which was correct, the reasons of appeal of Shuntian Company should not be established. So it required the court of second instance to dismiss the appeal of Shuntian Company. Du-Hope Company argued that: firstly, the 300-foot ship involved was owned by Du-Hope Company, and the judgment of first instance was not inappropriate. (1) Du-Hope Company and Yhao Company entered into a ship construction acquisition contract, which had the legal and factual basis for legally owning the ship ownership in dispute. (2) The shipbuilding acquisition contract between Du-Hope Company and Yhao Company, though the same was a 300-foot deck barge, but the price of the ship was 1 million yuan higher than the ship price under the contract of Shuntian Company. The ship reexamination plan was obviously different from the ship retreat plan of Shuntian Company. The ship in dispute in this case was built by Yhao Company in accordance with the contract agreement with Du-Hope Company and the specifications of the ship construction drawings, which completely corresponded to the ABS withdrawal plan of Du-Hope Company, which under the cooperation agreement of shipbuilding with Yhao Company was significantly different. (3) The ship identification number registered with the maritime safety administration of the disputed ship showed that Du-Hope Company was the sole legal owner of the ship, and the ship identification number was also the initial registration number. (4) Du-Hope Company handled the ship transfer certificate according to the contract with Yhao Company. (5) Yhao Company was the ship builder. It was the most clear counterpart of ship construction. Since the first instance, Yhao Company had recognized that the disputed ship was built by Du-Hope Company. Secondly, Shuntian Company’s reason that the disputed ship was built by Yhao Company for it was not established, and its appeal should be dismissed. (1) Shuntian Company held that the materials and equipment used to construct the disputed ship were in its possession, and this claim lacked evidence to prove. (2) Shuntian Company claimed that most of the funds required for the vessels in dispute were provided by the company, and this claim lacked evidence. (3) Shuntian Company based on a copy of the ship construction inspection form provided by ABS and YIN Qingfu's written materials, and a copy of the ship construction inspection form retrieved by the court, to prove that the two vessels built by Yhao Company were completed, while the vessels built by Yhao Company for Du-Hope Company were still fragmented, the reason could not be established. Thirdly, Shuntian Company could not use its cooperation agreement with Yhao Company to oppose the ownership acquired by Du-Hope Company based on the shipbuilding acquisition contract. Fourthly, Shuntian Company used the original copy as the main basis for its ownership of the vessel in dispute, which should not be supported. So it required the court of second instance to dismiss the appeal and affirm the original judgment.

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Shuntian Company submitted the following evidence within the period of submitting evidence: 1. Notarization issued by Nanjing Notary Office of Nanjing, Jiangsu on April 27, 2015 (with a Chinese translation), to prove that: (1) “the classification society only keeps a copy of the ship construction inspection form, and the original is handed over to the shipyard for its own preservation” was the common practice of ship inspection authority; (2) as the manufacturer of the ship involved, Yhao Company should keep the original ship construction inspection order in Yhao Company; 2. ABS Surveyor YIN Qingfu’s reply to the court of first instance’s Notice of Assistance in Enforcement on November 17, 2014, to prove that: (1) surveyor YIN Qingfu inspected three vessels involved, including two vessels built by Shuntian Company (construction number SAM12012N/ABS number YY244899, construction number SAM11028N/ABS number YY237806) and one vessel (construction number DH12Q2007)/ABS number YY245947); (2) after the ABS surveyor signed on-site the original paper ship construction inspection form provided by Yhao Company, the original ship construction inspection form was handed over to Yhao Company, and ABS only kept a copy of the ship construction inspection form; 3. Application started from Nanjing Maritime Safety Administration of the People’s Republic of China (hereinafter referred to as Nanjing Maritime Safety Administration) (June 13, 2012), to prove that Yhao Company applied to ABS on June 13, 2012 for its 300-foot deck barge constructed for Du-Hope Company and started construction on June 20, 2012. 4. Brief Specification of 300’steel Deck Barge Retrieved from Nanjing Maritime Safety Administration, to prove that one of the delivery conditions recognized by Yhao Company in the application information for the application of Du-Hope Company 130 ship identification number was that: “before delivery, all ship tests and accessory tests continue to meet the requirements of the classification society and/or on-site survey division’s requirements”, but Yhao Company’s delivery of 130 ships to Du-Hope Company did not meet the delivery conditions; 5. Investigation forensics application and on-site inspection application, apply for the permanent representative offices of members of the International Association of Classification Societies in China, including ABS, LR, DNV-GL, CCS, BV, NK, RINA, a total of seven classification societies investigated and verified the relevant procedures for on-site inspection of new ships; the court applied to ABS to investigate the hull number SAM12012N (ABS class number YY244889) and hull number DH12Q2007 (ABS class number YY245947) for the application for construction inspection of the two ships in accordance with the law. The surveyor of ABS jointly conducted on-site surveys and specified the position of the ship corresponding to the ship construction survey.

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Yhao Company cross-examined that: it had no objection to evidence 1, but did not recognize the content of notarization and the purpose of proof. Shuntian Company should provide translations in accordance with legal requirements. Email reply was testimony of witnesses, and witnesses should testify in court. It did not recognize the authenticity and legality of evidence 2, the evidence was a personal statement by YIN Qingfu, who should testify in court. Evidence 3 and 4 was drawn from maritime safety administration, so it recognized the authenticity, but did not recognize the purpose of proof, and no relevancy. As to evidence 5, Shuntian Company’s application did not meet legal requirements. The company had no right to file an application in the second instance. The investigations they requested were not necessary to investigate. Du-Hope Company cross-examined that: (1) it had no objection to the formal authenticity of evidence 1, but the notarized document had not been translated by a qualified agency and did not meet the legal requirements. It did not recognize the authenticity, relevancy and purpose of proof of the content of evidence. (2) It had no objection to the formal authenticity of evidence 2, but the evidence 2 was not new evidence. It had objection to the relevancy and purpose of proof. (3) It had no objection to form of evidence 3, but the evidence was not new evidence, and the purpose of proof of Shuntian Company could not be reached. (4) It had no objection to form of evidence 4, but had objection to the content and purpose of proof. (5) Shuntian Company’s application to the classification society for investigation and site inspection were not within the scope of court investigation and evidence collection, which should not be approved. The court confirms that: evidence 1 is produced by a national notary office, and is authentic and legal. As to the translation of the email in English, the Interpretations of the Supreme People’s Court on the Application of the Civil Procedure Law of the People’s Republic of China (hereinafter referred to as Civil Procedure Law Interpretation) Article 527 stipulated that, if the written materials submitted by the parties to the people’s court are in a foreign language, they shall also submit Chinese translations. If the parties have objection to the Chinese translation, they shall jointly entrust a translation agency to provide a translation. If the parties cannot reach an agreement on the choice of the translation agency, the people’s court should determine it. Part of the mail in the notarization of this case is expressed in English, and Shuntian Company submitted a Chinese translation. As explained by the court, Yhao Company and Du-Hope Company did not apply to jointly commission a translation agency with Shuntian Company to perform translation. Therefore, the court confirms the authenticity and legality of the translation according to law. For the purpose of the notarization, the court will certify it together with other relevant evidence later. Evidence 2 is the written response of the ship surveyor YIN Qingfu to the court of first instance, which is legal. Whether the authenticity of the reply is sufficient to achieve the purpose of Suntian Company’s purpose of proof will be discussed by the court. Evidence 3 and 4 was drawn by Shuntian Company from Nanjing Maritime Safety Administration. The source of the evidence is legal, and neither Yhao Company nor Du-Hope Company denied its authenticity. The court confirms the authenticity and legality.

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Evidence 3 can prove that the time when Yhao Company submitted the application for the start of construction of Du-Hope Company’s ship and the time it was planned to start. Evidence 4 can prove that Yhao Company and Du-Hope Company agreed in the ship specification that “all ship tests and accessory tests will continue to meet the requirements of the classification society and/or the requirements of the site surveyor before delivery”. In second instance, Yhao Company submitted the email sent by it to Shuntian Company (November 28, 2012), to prove that in the process of cooperation between Yhao Company and Shuntian Company and the status of the shipyard of Yhao Company. The company had built a total of five ships for Shuntian Company, and had already built four ships. Suntian Company had already pulled away, so the 300-foot ship in dispute was Du-Hope Company. The evidence had been notarized, and notarization had not been produced, but there was an invoice for notarization costs. The e-mail was submitted as evidence in another case, and an agent of Shuntian Company recognized the authenticity of the email in the other case. Shuntian Company cross-examined that: (1) the evidence was a printed document, which did not have the formal requirements stipulated by law. The notarization fee bill could not prove the authenticity of evidence. (2) The evidence had no relevancy to the case. (3) In first instance, the evidence provided by Yhao Company (Page 108 of the dossier) clearly stated that the ship under the 014 contract had been completed. Du-Hope Company cross-examined that: it did not recognize the authenticity of evidence, if the notarization issued could correspond to the cost, the formal requirements of the evidence were not denied. It had no objection to the content of proof. After the trial, Yhao Company submitted the notarization to the court within seven days in accordance with the requirements of the court during the hearing. Shuntian Company cross-examined on the notarization that: it recognized the authenticity of notarization, but did not recognize the content of notarization. The evidence had no relevancy to the case. Du-Hope Company cross-examined on the notarization that: no objection. The court holds that: the notarization submitted by Yhao Company was produced by the national notary office according to law, and its authenticity and legality should be confirmed. The notarization can only prove that Yhao Company once requested the company of “Mr. Chen” to take the ship via e-mail, and copied the email to a staff member of CHAI Yuxin from Shuntian Company. In the hearing of second instance, Du-Hope filed a public condemnation letter from the Shenzhen Stock Exchange, to prove that Shuntian Company was an irresponsible company. Five executives were suspected of defrauding customers, and they were likely to commit acts that harm Du-Hope Company’s interests in this case. Shuntian Company cross-examined that: the condemnation letter did not meet the elements of the evidence and had no relevancy to the case. Shuntian Company did not recognize the authenticity, relevancy or purpose of proof.

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Yhao Company cross-examined that: it recognized the authenticity and purpose of proof. The court holds that: the condemnation letter is not relevant to the facts in this case, so the court does not accept it. As to the application of investigation of Shuntian Company, the court holds that, Shuntian Company’s application was submitted to the court before the expiry of the proof period, which complies with the law. Moreover, the evidence that Suntian Company applied for is evidence that it cannot collect on its own for objective reasons, so its application for investigation and evidence collection is allowed. From May 18 to May 19, 2015, the court successively addressed French Register of Shipping Co., Ltd., American Register of Shipping (China) Co., Ltd. and China Classification Society Jiangsu Branch conducted investigations and inquiries. Regarding the question of the ship construction inspection process, the respondent’s response was basically the same, namely the shipyard applied for inspection and submitted the ship construction inspection form to the classification society, and the classification society signed the inspection opinion and signed the inspection form based on the inspection results. Regarding the retention of ship construction inspection sheets, according to the answers of various classification societies, there was no consistent approach. On May 19, 2015, under the auspices of the court, the surveyor YIN Qingfu identified the scene. YIN Qingfu stated that from 2012 to 2013, he had inspected a ship under the 50-ton portal crane of Shuntian Company, with the serial number SAM12012N. The last inspection was closed, and the serial number was told to him by the shipyard. He inspected two ships for Du-Hope Company under fragmentation and closing. At that time, it was under the current 20-ton and 50-ton portal cranes. A ship was inspected for Du-Hope Company, which was in a fragmented state. The fragments were scattered and could not be determined. At the request of Du-Hope Company, YIN Qingfu compared Du-Hope Company’s ABS reexamination plan with the ship under the 50-ton portal crane on site. YIN Qingfu said that the drawing was the retired drawing on April 15, 2013. Only the ship’s side walls, hatch coamings and anchor points were compared with the ship under the site’s 50-ton portal crane. The anchor point of the retrial plan was on the left, but the actual location of the scene was on the right. The structure of the ship’s side walls and hatches seen at the scene was the same as the structure of Du-Hope Company’s DH12Q2007 (hull number) withdrawal plan. On June 8, 2015, Yhao Company submitted a written application to the court for Tan Mou and Liu Mou to testify in court, to prove that the surveyor’s testimony, YIN Qingfu, was not true or objective. The court holds that, according to the Interpretation of the Supreme People’s Court Concerning the Civil Procedure Law of the People’s Republic of China Article 117, a party’s application for a witness to appear in court shall be submitted before the expiry of the proof period. After Yhao Company applied for witnesses to testify in court, it does not meet the requirements of Article 117. However, the fact that the witness intended to prove is related to the facts to be proved in this case. From the perspective of comprehensively ascertaining the facts, the court agrees to question TAN Mou and LIU Mou.

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After inquiring, TAN Mou stated to the court that all the ships he constructed were constructed according to the drawings, and the drawing number was DH12Q2007. After questioning, LIU Mou stated to the court that: “from the moment we took the ship, from fragmentation, construction, and closing, YIN Qingfu was responsible for the inspection. During the closing process, YIN Qingfu was transferred and ZHENG Wei was transferred. It is the head of the inspection department of Yhao Company, and TAN Mou was the construction staff of Yhao Company. All the ship construction inspection forms are photocopies, I am not sure if I signed it. Before page 74 of the dossier, from the handwriting, follow me, the handwriting is similar. The words on page 74 and after are definitely not my signature. The original of the shipbuilding inspection form was handed over to ABS, and we did not keep the original. A copy is definitely available, but it is too long, no I can definitely find it. I am not sure of the authenticity of the copy. The signature on the ship inspection form of DH12Q2007 should be signed by me, but this is also a copy. I cannot recognize the authenticity, but I signed the signature on the copy. The original of this inspection form was handed over to ABS, and there should be a copy, but for so many years, I cannot guarantee that I can still find it.” Shuntian Company cross-examined that: it recognized the authenticity, legality and relevancy of the six investigation records produced by the court. Yhao Company responded in court that the ship had not been moved. During the on-site identification process, YIN Qingfu recognized that the ship of Shuntian Company was inspected under a 50-ton portal crane, and the number was the same as that of Shuntian Company. Therefore, the ship on the site should be a ship under the contract of Shuntian Company. The drawing date of Du-Hope Company’s comparison was April 15, 2013, which indicated that the ship was modified after the preservation, namely the drawing was the revised drawing for review. Regarding the transcripts of Tan Mou’s and Liu Mou’s inquiries, Tan Mou and Liu Mou were construction workers of Yhao Company and had a stake in Yhao Company. Their testimony could not be used alone as the basis for determining the facts of the case. According to Liu Mou’s testimony, Yhao Company had at least a copy of the ship construction inspection form, and Yhao Company should submit the ship construction inspection form, otherwise it should bear adverse consequences. Yhao Company did not provide evidence to prove that the closed ship was Du-Hope Company’s ship. The burden of proof lied on Du-Hope Company or Yhao Company. Yhao Company cross-examined that: the authenticity, objectivity and relevancy of the six investigation records produced by the court were not fully recognized. For the testimony of TAN Mou and LIU Mou, the two witnesses had no interest in Yhao Company, and their testimony should be accepted. Du-Hope Company cross-examined that: the authenticity and objectivity of the contents recorded in the six transcripts were not recognized. The above-mentioned transcript could also prove that there was no industry practice of “retaining only a copy of the ship construction inspection form”. For the testimony of witnesses LIU Mou and TAN Mou, because the witness and Yhao Company had no interest relationship, the authenticity objectivity and relevancy were recognized. The

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testimony could prove that the copy of the ship construction inspection form submitted by Shuntian Company was not true and objective, and the disputed ship was built for Du-Hope Company. The court confirms that: (1) testimonies of TAN Mou and LIU Mou. Both witnesses have a stake in Yhao Company, and their testimony cannot be used as a basis for determining the facts of the case. Among them, LIU Mou’s statement on the ship construction inspection order is inconsistent with the statement made by Yhao Company in the second instance hearing. The court holds that, the ship construction inspection form is a record of the ship inspection process. For the shipyard, the retention of the ship construction inspection certificate is to prove to the classification society that it has applied for various inspections to the classification society, and requires the classification society to issue a corresponding certificate. For classification societies, the ship construction inspection list is a record of its inspection work and is one of the basis for issuing corresponding certificates. According to the ship inspection process and daily life experience, combined with Liu Mou’s testimony, Yhao Company should keep at least a copy of the ship construction inspection form. (2) Six investigation transcripts produced by the court. (1) The court conducted investigation and evidence collection based on Shuntian Company’s application, and formed investigation transcripts, which is in compliance with legal requirements. (2) Regarding whether the classification society only kept a copy of the ship construction inspection form. The answers from different classification societies are inconsistent, and the classification societies accepted by the court do not cover all the classification societies. Therefore, the purpose of evidence of the company’s relevant “the classification societies only keep a copy of the ship construction inspection certificate is a common practice in the ship inspection agency industry” will not be confirmed. However, according to the replies of classification societies, it is one of the practices adopted by ship inspection agencies to keep a copy of the ship construction inspection slip. (3) Civil Procedure Law Article 70 stipulates that, documents shall be submitted in original. The physical evidence shall be submitted to the original. If it is really difficult to submit the original, the party can submit copies, photos, copies, and excerpts. Accordingly, the documentary evidence in the form of a copy can also be accepted. In addition, there are no laws, regulations or inspection rules on whether the classification society must keep the original ship construction inspection order, and the classification societies interviewed in this case have recognized that the classification society only keeps a copy of the ship construction inspection, so ABS can only provide a copy, which does not constitute a reasonable cause of unacceptable copy. (4) The ship construction inspection sheet in this case was produced by Yhao Company and submitted to ABS for inspection. Yhao Company denied in first instance to apply for or apply for inspection to ABS. During the trial of the second instance, it was stated that the original was handed over to ABS, and ABS did not return the materials to the company. Without the original, it was not clear whether it had a copy. ABS stated that the original was returned to Yhao Company after the inspection, and only a copy was kept. Yhao Company’s statement is completely contrary to ABS’s statement and cannot be verified. However, Yhao Company is

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the party in this case and has a stake in the handling of this case, and ABS is a third party that has no interest in this case. The proof of ABS’s statement is stronger than Yhao Company’s statement. Moreover, Yhao Company’s statement on the same issue is inconsistent and lacks proof. Yhao Company should at least keep a copy, but Yhao Company refused to submit on the grounds that it was not clear or not, and should bear the burden of proof. (5) Interpretation of the Supreme People’s Court Concerning the Civil Procedure Law of the People’s Republic of China Article 115 stipulates that, the certification materials submitted by the company to the people’s court shall be signed or sealed by the person in charge of the company and the person who produced the certification materials, and affixed with the company seal. The people’s court may investigate and verify the certification materials issued by the company and the personnel who produced the evidence materials. When necessary, the person who produced the supporting documents can be required to testify in court. In this case, ABS is the survey agency of the ship involved, and it is a third party agency or company that has no interest in this case. The copies provided by ABS with the ABS seal can prove the authenticity of the copies provided by ABS. When accepting the investigation of the court, ABS also recognized the authenticity of the copy and stated that it had only kept a copy of its inspection of the ship involved. According to the ship inspection process, ABS is responsible for its own inspections, and is its own signature after the corresponding inspection items are inspected, not the inspection results of the shipyard quality inspection section and the signatures of relevant personnel. Therefore, LIU Mou’s signature on the ship construction inspection list Whether it is true is not related to ABS and does not affect ABS’s recognition of its own inspection content. In this case, ABS not only recognized its signature on each ship construction inspection form, but also recognized its inspection of the SAM12012N weld on January 6, 2013, and when it was in fragmented state on March 29, 2013. in conclusion, the court holds that, ABS ship construction inspection form in the form of a copy shall be accepted. After investigation, the court finds out that, the original court took security measures for the two vessels involved on March 22, 2013, and the time for delivery of security materials to ABS was March 29, 2013. The original court’s statement about the time of the preservation measures is wrong, and the court corrects it according to law. Other facts confirmed by the court of first instance are true, so the court confirms them. The court also finds out that, the ship numbered SAM12012N was closed when it was surveyed on March 8, 2013. The ship numbered DH12Q2007 was fragmented when surveyed on March 29, 2013. The court holds that, the issues of second instance can be summarized as follows: firstly, ownership of the ship under the 50-ton portal crane; secondly, whether ships under the 50-ton and 20-ton gantry cranes should be delivered to Shuntian Company. The court analyzes them as follows: Firstly, ownership of the ship under the 50-ton portal crane. The court holds that, the ship under the 50-ton gantry crane is owned by Du-Hope Company, and Shuntian Company does not own the ship. Reasons are as

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follows: (1) the ship is basically the same as Du-Hope Company’s drawings. (2) Yhao Company stated that the ship was built for Du-Hope Company. (3) Du-Hope Company paid the shipbuilding amount in full. (4) Yhao Company applied for a ship identification number for Du-Hope Company, and the identification number was printed on the disputed ship of the second instance. (5) The Property Law of the People’s Republic of China Article 23 stipulates that, the creation and transfer of the right to a chattel shall take effect upon delivery, unless otherwise provided by law. In this case, Yhao Company and Du-Hope Company signed a ship handover certificate to transfer the ship, and Du-Hope Company acquired the ownership of the ship since the handover. Shuntian Company held that the ship construction inspection sheet could prove that the controversial ship was built by Yhao Company in order to fulfill the contract of Shuntian Company. The court also confirms that the ship under the contract of Shuntian Company was closed during the inspection on March 8, 2013. However, the survey of the ship is only part of the performance of the contract and cannot cover all the acts of the performance of the contract. The fact that Yhao Company built the ship in accordance with Du-Hope Company’s drawings, applied for an identification number for Du-Hope Company, and handed over the ship to Du-Hope Company was sufficient to prove that the disputed ship was built by Du-Hope Company. The state of survey of the ships under the contract of Shuntian Company is not enough to deny Du-Hope Company’s ownership of the vessels in dispute. The appeal of Shuntian Company lacks factual and legal basis, so the court does not support it. Secondly, whether ships under the 50-ton and 20-ton gantry cranes should be delivered to Shuntian Company. The ownership of the ship under the 50-ton gantry is owned by Du-Hope Company, so the ship should be delivered to Du-Hope Company, not Shuntian Company. For the ship under the 20-ton door crane, the court of first instance confirmed that the ship was owned by Shuntian Company, and the parties did not appeal against it, and it is deemed that the parties had no objection to the ownership of the ship. Shuntian Company appealed to the court to order Yhao Company to deliver the ship to it, and in the proxy statement, it also proposed the takeover of the ship. The court holds that, according to Cooperation Agreement Article 2 Paragraph 5 between Shuntian Company and Yhao Company, the premise of Shuntian Company taking over the ship is that Yhao Company is unable to perform the contract, however, the disputed ship in this case has been completed, so Shuntian Company’s claim to take over the ship lacks contractual basis. And this claim was not made in the first instance, the second instance appeal and the court trial, so the court does not support it. Cooperation Agreement stipulates that Yhao Company and Shuntian Company would jointly deliver the ship to the foreign party, but does not stipulate that Yhao Company would deliver the ship to Shuntian Company. According to the Cooperation Agreement Article 2 Paragraph 6, Article 3 Paragraph 7, the contractual conditions for Shuntian Company to exercise ownership and dispose of the ship are that Yhao Company cannot deliver the ship on time and the agreement is terminated. However, in this case, Shuntian Company did not

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terminate the agreement, so the company requested Yhao Company to deliver the ship to it, which lacks contractual basis. In addition, though Shuntian Company agreed on the ownership of the equipment, materials and ships through the contract, it must pay the consideration before it can exercise the ownership. The evidence submitted by Shuntian Company, including the payment entrustment and bank payment water bill, is intended to prove that it provided Yhao Company with all the steel materials used to construct the disputed ship and paid the corresponding amounts, but the above evidence failed to convert the corresponding steel and amounts specific to the ship in dispute, the company failed to prove in this case that it paid the consideration agreed in the contract. Moreover, Shuntian Company and Yhao Company cooperated to build the ships. The contract stipulates that the amount of funds provided by Shuntian Company to Yhao Company is not the total construction amount of the disputed ship, and the total amount of the ship construction funds is not determined, so Shuntian also failed to prove that it had paid for the construction of the disputed ship. Therefore, Shuntian Company required the delivery of the disputed ships, which lacks basis, so the court does not support it. Pulling the threads together, the facts confirmed by the court of first instance are clear, and the application of law is correct, the procedure is legal. The appeal of Shuntian Company cannot be established. According to the Civil Procedure Law of the People’s Republic of China Article 170 Paragraph 1 Sub-paragraph 1, the judgement is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee in amount of 116,360 yuan, shall be born by Jiangsu Shuntian Marine Development Co., Ltd. The judgment is final. Presiding Judge: SU Jiang Acting Judge: OU Haiyan Acting Judge: HU Zhengwei October 8, 2015 Clerk: CHENG Jianxiao

Guangzhou Maritime Court Civil Judgment Jiangxi Group Co., Ltd. for the Import & Export of Rare-Earth Metal Tungsten Industry v. RCL Feeder Pte. Ltd. et al. (2009) Guang Hai Fa Chu Zi No.493 Related Case(s) This is the judgment of first instance and the judgment of retrial is on page 478. Cause(s) of Action 199. Dispute over liability for damage to property on the sea or sea-connected waters. Headnote Plaintiff cargo owner failed to recover damages for short and defective delivery of cargo of scrap copper, as court held that most likely cause was interference by a third party, rather than failure on the part of the carrier. Summary Plaintiff contracted to buy and deliver 6,000 tons of Scrap Copper No. 2, to be delivered by defendants. The first installment to be delivered was 500 tons of Scrap Copper No. 2. The bill of lading for the first instalment listed 503.46 tons of Scrap Copper No. 2. However, upon delivery there was 8.82 tons less than what the bill of lading stated. Additionally, the goods delivered were clay, stone, iron, and non-conforming copper. Finally, the delivery did not come with agreed upon inspection certificates of quality and quantity for the metal. Plaintiffs claimed Defendants should be found jointly and severally liable for value of shipped goods at $2,084,973.86; insurance on the goods at $1,376.08; cost of freight at $11,400; inspection fees at RMB 24,770; port fees at RMB 85,500; and legal fees of RMB 800,000. The court held that Plaintiff’s claims were unsupportable and awarded RMB 113, 227 in court and legal fees. The court reasoned the most likely causation for the nonconforming goods was due to a fraudulently established company interfering with transit prior containers arriving at port of loading; additionally, Plaintiffs were unable to support their claims with sufficient evidence.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_18

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Judgment The Plaintiff: Jiangxi Group Co., Ltd. for the Import & Export of Rare-Earth Metal Tungsten Industry Domicile: No. 118 West Beijing Road, Nanchang, Jiangxi Province, the People’s Republic of China. Legal representative: ZHONG Xiaoyun, chairman of the company. Agent ad litem: LAI Jingwei, lawyer of Guangdong Jun Yan Co. Law Firm. Agent ad litem: WANG Yingbo, lawyer of Beijing Dentons Law Firm. The Defendant: RCL Feeder Pte. Ltd. Domicile: 11 Keppel Road, #08-00 RCL Centre, Singapore. Legal representative: LIU Xiulian (Margaret Lau Siew Noy), director of the company. Agent ad litem: CHEN Xiangyong, lawyer of Wang Jing & Co. The Defendant: RCL FEEDERS PHILS., INC. Domicile: 10th Floor, Ayala Life FGU Centre, 6811 Ayala Avenue, Makati City, Philippines. Legal representative: Jesus B. Sedano, director of the company. Agent ad litem: CHEN Xiangyong, lawyer of Wang Jing & Co. The Defendant: Regional Container Lines Pte. Ltd. Domicile: 11 Keppel Road, #08-00 RCL Centre, Singapore. Legal representative: ƵHAO Zhongyun (Kenneth Chiu Chung Wan.), director of the company. Agent ad litem: CHEN Xiangyong, lawyer of Wang Jing & Co. Agent ad litem: WANG Jun, lawyer of Wang Jing & Co. With the respect to the case arising from the dispute over the liability for damage to maritime property, the Plaintiff, Jiangxi Group Co., Ltd. for the Import & Export of Rare-Earth Metal Tungsten Industry, filed an action against the three Defendants, RCL Feeder Pte. Ltd. (hereinafter referred to as Honghai Company), RCL Feeders PHILS., INC. (hereinafter referred to as Honghai Philippines Company), and Regional Container Lines Pte. Ltd. (hereinafter referred to as Honghai Private Company), before this court on 3 August 2009. This trial bench included Presiding Judge: Song Weili, Judge: Song Ruiqiu, and Acting Judge: Li Zhengping. On November 4, Honghai Company together with Honghai Private Company, challenged the jurisdiction of the court. On 21 January 2010, after hearing the objection to the jurisdiction, our court ruled against it. The two Defendants refused to accept the ruling of the court and appealed to the Guangdong High People’s Court. However, the Guangdong High People’s Court ruled on 25 June 2010, to uphold our court’s ruling. On November 4, the court organized the parties to exchange evidence before the court and held open hearings on 16 November 2010, 11 January 2011, and 15 May 2012. Two attorneys of the Plaintiff Lai Jingwei, Zhang Zezhong and one joint attorney of three

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Defendants Wang Jun participated in the exchange of evidence before the court. Two attorneys of the Plaintiff, Lai Jingwei and Zhang Ji, participated in the first two trials, and the attorney of the Plaintiff, Wang Yingbo, participated in the third trial. Two joint attorneys of the three Defendants, Chen Xiangyong and Wang Jun, participated in the third trial. The Plaintiff revoked the authorization of three attorneys, Lin Qisui on 4 November 2010, Zhang Zezhong on 10 November 2010, and Zhang Ji on 6 April 2012. The three Defendants applied for a court appearance of the investigator of Philippines National Bureau of Investigation, Dennis S Siyhian and the employee of Honghai Company, Jesus B. Sedano. LI Xianxia, the professional translator of Wang Jing & Co., was hired to translate during the trial. After trial, the case was concluded. The Plaintiff claimed that: on 4 May 2009, the Plaintiff signed a sale contract for scrap copper with Amaxus International, LLC (hereinafter referred to as Ahmad Company). The Plaintiff agreed to purchase 6,000 tons of Ahmad Company’s No. 2 scrap copper, the first batch would be 500 tons, which was delivered in May 2009. The price of it was 93% of spot average settlement price of Copper Grade A, published by London Metal Exchange (LME), CFR in Xiamen or Guangzhou, the credit price for the quote period (L/C) was the price 6 days before issuing. Before shipment, the goods at the port of shipment shall have the certificate of inspection and quantity and quality confirmation of the raw materials of waste materials issued by SGS-CSTC Standards Technical Services Co. Ltd. (SGS), Chinese Certification and Inspection Company (Group) Co., Ltd. (CCIC) (hereinafter referred to as Chinese Certification Inspection Group) or other equivalent test institutions. This certificate was to be paid by Ahmad Company. On 7 June 2009, Honghai Company and Honghai Philippines Company issued No. MNLCB09000545 clean on-board bill of lading. According to this bill of lading, the consignee was the Plaintiff, and the goods were 503.46 tons of No. 2 scrap copper and 19 containers. Transport ships were OTANA BHUM, the port of loading was Philippines Manila Port, and port of discharge was Nanhai Pingzhou Port in Guangdong Province. This bill of lading and its attached pages also recorded the ship title of each container and seal number and customs seal number of China Certification & Inspection Group Philippines Co., Ltd. (hereinafter referred to as the Chinese Certification Inspection Group Philippines Company). On 5 June 2009, Jiangxi Branch of People’s Property Insurance Company of China (hereinafter referred to as the PICC Jiangxi Branch) issued the cargo transportation insurance policy to the Plaintiff, insurance included All Risks and War Risk and the amount of the insurance was $2,293,471.25. On 13 July 2009, the goods arrived at the Nanhai Pingzhou Port. After the joint inspection, Jiangxi Group Co., Ltd for the Import & Export of Rare-Earth Metal Tungsten Industry found that the goods in the containers were clay, stone, iron, copper, instead of No. 2 scrap copper, and the weight was 8.82 tons less than that of the bill of lading. Additionally, there was no seal number nor customs seal number of Chinese Certification Inspection Group Philippines Company to be found (except that one container had seal affixed by that company due to damage and was changed to another container in Hong Kong). After the inspection, the Nanhai Entry and Exit

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Inspection and Quarantine Bureau issued a notice of inspection and quarantine, and requested that these goods should be returned directly. As per the above inspection and the result of treatment, the cargo had total loss. The carrier, Honghai Company and the actual carrier’s company Honghai Private Company, did not undertake the responsibility of the care, and the custody of goods, which led to the loss of the container’s seal by Chinese Certification Inspection Group Philippines Company, resulting in the loss of the goods of the Plaintiff. These two companies shall bear tort liability. Even when containers were received, there was no seal of Chinese Certification Inspection Group Philippines Company, so Honghai Company, before issuing the bill of lading, incorrectly records the seal of Chinese Certification Inspection Group Philippines Company, which was false information, resulting in the payment under the letter of credit payment. So Honghai Company should bear tort liability. On 9 July 2009, the Plaintiff issued a claim letter to the three Defendants and asked the three Defendants to compensate the Plaintiff for the loss and they did not reply. In order to safeguard the legitimate interests of the Plaintiff, according to the Article 55 of the Maritime Code of the People’s Republic of China, requesting an order: (a) the three Defendants jointly and severally compensate the Plaintiff $2,097,749.94 and interest (from 13 July 2009 until the date of payment, according to the calculation of the same period of foreign exchange of the dollar loan interest), which included the value of shipped goods $2,084,973.86; $1,376.08 of insurance and freight of $11,400; (b) the three Defendants jointly and severally pay inspection fees and fees of RMB 24,770; 85,500 of port fees and legal fees of RMB 800,000; (c) the three Defendants jointly and severally undertake the litigation costs including the case acceptance fees and litigation preservation application fee. During the first trial, after the interpretation of this court, the Plaintiff insisted on choosing tort liability as the basis for the prosecution of three Defendants. On 23 April 2012, after the two trials, the Plaintiff asserted a claim for deferring of sentence, and on 15 May 2012, the Plaintiff applied for a change the basis of the liability of the three Defendant to default. The three Defendants did not accept the Plaintiff’s change of the basis of liability again and refused to take breach of contract as a defense. The Plaintiff provided the following evidence in time limit: 1. Scrap Copper Sales Contract, purporting to prove that the Plaintiff bought the goods involved from Ahmad Company. 2. Bill of lading purporting to prove the relationship of contract of carriage of goods by sea, the Plaintiff was in possession of the goods involved. 3. The inquiry records of the container numbers of bills of lading, purporting to prove the shipment of the goods involved. 4. The certificate by Chinese Certification Inspection Group Philippines Company, purporting to prove that the goods involved had this seal at the port of loading. 5. Cargo insurance policy of freight risk purporting to prove that the goods involved had been insured and valued at $229,3471.25.

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6. The arrival and inspection of goods confirmation purporting to prove the damage facts, there were no seal and customs seal on nineteen containers involved of Chinese Certification Inspection Group Philippines Company. 7. The inspection report and on-site inspection of the photos issued by Nanhai Entry and Exit Inspection and Quarantine Bureau, purporting to prove that when the goods were at the port of discharge, goods had been damaged. 8. The inspection dealing notice issued by Nanhai Inspection and Quarantine Bureau purporting to prove that the goods were claimed to be returned due to not conformity with Chinese law. 9. Proof to the title of the ship, purporting to prove that the carrying vessel was in the possession of the Honghai Private Company, Honghai Private Company was the actual carrier of goods involved. 10. Packing list and invoice, purporting to certify the value of the goods when they were loaded. 11. The invoice of Inspection fee, agency contract and lawyer's fee purporting to prove that the Plaintiff had actually paid the cost. 12. Notice of claim, purporting to prove that the Plaintiff claimed the three Defendants to compensate for the loss of the goods. 13. The reply of the Defendant Honghai Private Company, purporting to prove that the Defendant refused to perform the obligations of compensation. 14. The authentic act, purporting to prove that the Plaintiff had sent bill of lading to Honghai Philippines Company. 15. Sale catchment bills, purporting to prove that the actual payment of the purchase price. 16. The establishment of a letter of credit notices, purporting to prove the payment amount of the Plaintiff by L/C and other fees. 17. The transshipment bill of lading, purporting to prove that the Plaintiff and the Defendant’s carriage of goods by sea, the Plaintiff’s title of the goods involved. 18. The external payments/notice of acceptance, purporting to prove that the Plaintiff had received the payment notices. After the deadline for evidence proof, the Plaintiff also provided the following evidence: 19. The bank's payment certificates, purporting to prove the amount of the Plaintiff's payment. 20. The emails of Honghai Company, notifying the goods exchanged to another container, purporting to prove that it had notified the Plaintiff the goods on 30 June 2009. 21. The notice of a letter of credit to the issuing bank and a remittance (internal debit) notice, purporting to prove that the Plaintiff had paid the sum to the beneficiary of the L/C in accordance with the stipulations of the credit. 22. The correspondence and claim letter of the Plaintiff and the Ahmad Company, purporting to prove that the Plaintiff presented a claim to the beneficiary of letter of credit.

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23. On 18 June 2009, the Plaintiff received the mail to prove the carrier’s transshipment without permission, unreasonable detention in Hongkong, and that it did not notify that the containers involved had no China Inspection Certification Group’s seal. 24. On 30 June 2009, the Plaintiff received the mail, purporting to prove that the payment had been made upon receipt of the notices, and that the goods in the container had been found to be mud during the period of container change. 25. On 2 July 2009, e-mails sent by the Plaintiff to the carrier, purporting to prove that the Plaintiff had repeatedly asked to inspect the goods in Hongkong and these claims were refused. The three Defendants argued that: 1. The Plaintiff did not suffer from the actual loss, and was not the proper Plaintiff, the Plaintiff had no evidence to prove that it had paid for the goods to the seller and had the title of the goods involved in this case, the Plaintiff did not suffer losses because of goods involved. 2. The goods involved were not in accordance with the contract because of trade fraud; the Plaintiff signed and performed the trade contract without careful attention to the obligations, Chinese Certification Inspection Group Philippines Company had fault liability on the occurrence of fraud. 3. The Plaintiff was still responsible for the payment of his own malpractice when it noticed that the goods had been exchanged. 4. The loss of the goods involved occurred during the period of the carrier's liability, and the Defendant was not liable for any of the liability, and the goods had been changed before reaching the loading yard. 5. The ship seal regarding the containers at the port of discharge was in accordance with that at the port of shipment, the Defendant had completed the performance of obligations to deliver the goods. The containers involved only had ship seal without the seal and customs seal issued by Chinese Certification Inspection Group Philippines Company. In the process of containers’ transportation, the numbers of the containers and the ship seal could complete a specific statement of goods, and contents attached in bill of lading did not constitute the evidence to prove the acceptance of goods of the Plaintiff. 6. Honghai Philippines Company and Honghai Private Company were not in liability for the loss of goods, because the ship involved was ran by Honghai Company, Honghai Private Company was not engaged in shipping activities. As the agent of the Honghai Company, Honghai Philippines Company did not assume the liabilities of compensation for the loss of goods. 7. Even if they shall bear damage liability, the defendant was also entitled to limitation of liability. The three Defendants provided the following evidence within the period of burden of proof: 1. The investigation records and attached records issued by Philippines National Bureau of Investigation purporting to prove that the container goods had been

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replaced before arriving at the port of loading, the goods at the port of discharge was in accordance with the port of loading to receive goods. This case was the trade fraud. The evidence attached was as follows: (1) Case handling sheet; (2) The inspection application and its attachment Honghai Company; (3) The testimony of Ruby Ann C. Liwag; (4) The testimony of Marianne Selvina; (5) The testimony of Mark Anthony J. Camacho; (6) The equipment receipt of 19 empty containers involved issued by the ACJ Container Terminal Company; (7) The testimony of Mario B. Manuel; (8) The testimony of Winston S. Alejo; (9) The testimony of Gerry H. Ocang (10) The testimony of Fernado C. Mendinueta; (11) The testimony of Elmer G. Moso; (12) The summons of Lorna Palma; (13) summons of Nestor Sabior Ybanez; (14) Summons of Hoi Chung Lim and others; (15) The application for reconsideration of survey by Lawyer Atty•Raul A•Mora; (16) The summons of Felixsixmo Erne et al.; (17) The summons of Felixsixmo and others; (18) The summons of Imelda Ortega; (19) Department of trade and industry (DTI) certificate; (20) photos of No. 282, District 1, Waterway, Lucia, Pasig City and Azgard Company’s registered address; (21) booking bill on 27 May 2009; (22) the booking bill (the second time); (23) the take-container authorization on 27 May 2009; (24) the take-container authorization on 4 June 2009; (25) Aerial map; (26) channel pictures; (27) a lease agreement signed by Nelson Lim and Ronald Lim; (28) the registration certificate of the Maabilidad Company; (29) Registration Regulations of the Maabilidad Company; (30) The information table of the Maabilidad Company; (31) the inspection results of Ronald Lin; (32) the certificate issued by the Philippines traffic and transportation department Lu Yunban (LTO) purporting to prove the driver's license information; (33) Wang Yonghai's phone card; (34) The application form issued by Ocean Honour International Limited (hereinafter referred to as the Deming Company) to Chinese Certification Inspection Group Philippines Company; (35) the quality certificate; (36) the container list; (37) import scrap metal recycling Chinese shipment inspection certificate; (38) The Confirmation receipt; (39) the letters sent by Jinqiu Company to Chinese Certification Inspection Group Philippines Company; (40) letters sent by the Deming Company to Ahmad Company; (41) letters sent by the Deming Company to Chinese Certification Inspection Group Philippines Company; (42) credit requirements; (43) the summons of Wang Yonghai; (44) the business Licences of Chinese Certification Inspection Group Philippines Company; (45) aerial map; (46) 8 Jeanne Street pictures; (47) the ship seal and seal pictures of the containers; (48) the scrap copper pictures taken in warehouse on Jeanne Street by Jay Campos, inspector of Chinese Certification Inspection Group Philippines Company; (49) the pictures of goods after the containers arrived at China; (50) the certificate of The Ministry of Trade and Industry of Goldsphere Metal Marketing Company (hereinafter referred to as the Jinqiu Company); (51) summons used to summon Renato Besa Banal; (52) the certificate issued by Town Committee Barangay Aybunga; (53) aerial map; (54) certificate issued by the Philippines Department of Transportation and Land Office to prove the driver's license information of Renato Besa Banal; (55) photos of Renato Besa Banal; (56) summons used to summon Renato Besa Banal; (57) The photos of the No. 285, Eastern

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Bank Road, Santa Lucia, Pasig City; (58) survey results on Renato Besa Banal; (59) the suspect's photo; (60) The certificate issued by Santa Lucia Town Committee on whether Aziz Gardner Transportation Service Company had the legal registration; (61) the survey results of Lorna Palma; (62) the survey results of the driver; (63) letters of Reina C. Portos of the Maabilidad Company; (64) list of charges sent by Man’s Cargo Company to the Maabilidad Company; (65) The equipment receipt issued by Manila International Container Terminal (MICT) (hereinafter referred to as Manila Terminal); (66) The shipping documents issued by the Container Car Company; (67) the weighing receipt submitted by the Container Car Company; (68) The request letter to Chinese Certification Inspection Group Philippines Company; (69) the endorsement of the securities and Exchange Commission (SEC); (70) A letter of request to the Land Transport Office of the Ministry of Communications and Transport of the Philippines; (71) A letter of request to the Ministry of Trade and Industry; (72) A letter of request to the Ministry of Trade and Industry. The testimony and its attachment of Marianne Selvina, business manager of Smart Logistics Company (hereinafter referred to as Smart Company), purporting to prove that the Jinqiu Company was the shipper in this case. As the freight forwarder of the Jinqiu Company, the Smart Company made the booking as an agent. The testimony of Aurelio Garcia, a wharf manager at International Container Terminal Service Company. The testimony of and its attachment of Jesus B. Sedano, regional general manager of Cargo Department in Honghai Philippines Company, purporting to prove that according to business practice, Honghai Company shall not be responsible for the claims of Plaintiff, and the goods that made declaration to the Customs had a very low value. The testimony of Padoongkiat Punthong, the chief mate of M.V. “Hongzhong”, purporting to prove that the carrier had performed the obligations of carriage of goods and these goods did not suffer damage during transportation. The testimony of Chen Shubing, general manager of RCL (Hongkong) Co., Ltd. (hereinafter referred to as the Honghai Hongkong Company) and the report from Hong Kong Police Force, purporting to prove that what the buyer / consignee did was not in accordance with international trade practices, the wrong information / documentation they submitted was not accepted. The testimony of Feng Jiajun, shipping department manager of Honghai Hongkong Company purporting to prove that the containers involved was not moved in the whole process of shipping. The certificate of inspection issued by Standard Surveyor Co., Ltd. (Asia) (hereinafter referred to as the Standard Surveyor), purporting to prove that in Hongkong transfer process, No. REGU4999571 container was damaged, the goods inside were all transferred to the safety code for No. REGU4213152 container, the goods were not damaged in cargo forwarding process.

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9. The letter of presentation by China Merchants Container Service Co., Ltd., Purporting to prove that the containers involved in Hong Kong were safely transferred with no damage. 10. On 2 July 2009, the fax sent by the Jinqiu Company to RCL FEEDERS PHILS., INC., purporting to prove that the shipper, the Jinqiu Company did not allow the carrier to open package for inspection in HongKong, and made sure that the shipper would bear all costs and risks in cargo transportation. 11. On 7 July 2009, the fax sent by the Jinqiu Company to the Smart Company and RCL FEEDERS PHILS., INC., purporting to prove that the shipper would not allow the carrier to continue the shipment of the goods involved to Pingzhou Port, China, and claimed that all postponed and storage costs would be paid by the consignee. 12. On 2 July 2009, the fax from Deming Company to Honghai Private Company, purporting to prove that the Deming company said that the delegation of the consignee, the seller and the Chinese Certification Inspection Group would do container inspection on July 3rd after arriving at the port. 13. On 20 July 2009, the letter sent by the Plaintiff to Honghai Company, purporting to prove that the fraud which the plaintiff owed the accident to the Jinqiu Company. 14. The letter of presentation of Deng Dongsheng, master of M. V. “Xinghang 921”, purporting to prove that the containers involved had no abnormal in appearance and intact ship seal in the transfer from Hongkong to Pingzhou Port and finally arrived safely at Pingzhou port. 15. The common inspection certificate of the arrival of the goods, purporting to prove that all the goods involved were safe to the port of discharge, and all containers involved were clean and well-sealed. 16. The inspection report issued by the Guangzhou Henghai Insurance Assessment Co., Ltd., purporting to prove that the cargo containers at the port of discharge was clean and not damaged with no breaking marks and intact seals by checking the appearance of the containers involved. 17. The investigation report by New Marine Technology consulting (Shanghai) Co., Ltd., purporting to prove that the box structure, box door components of the 19 containers involved were not damaged and the goods cannot be stolen or replaced without breaking the seal. After the court hearing, as the Plaintiff had no original bills, three Defendants did not confirm the evidence No.16 credit notification provided by the Plaintiff, with respect to evidence of 21, the notice issued by issuing bank and payment letter (internal debit), the evidence provided by the Plaintiff in 23, 24, 25, three Defendants held that the managers involved had been suspended from office and these emails were unable to be opened, so these evidences were not recognized. For other evidence provided by the Plaintiff, the Defendants made the confirmation. The court held that the notice of opening letter of credit (containing the contract number, port of loading, port of discharge and goods conditions) and the letter to issuing bank (containing the letter of credit number, the issuing bank, the beneficiary, the

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amount, payee in the payment notice (internal debit), the account for payment and amount of debit were consistent with other evidence other after examination, so those two pieces of evidence had the probative force; 24 and 20 was evidence of the same email, 23 and 25 of the evidence of email address was the same as before two, and the message was all about bill of lading number and the container contents, after reviewing, this court confirmed the authenticity of evidence of 23, 24, and 25. As for the evidence of the Plaintiff confirmed by the three Defendants, the court confirmed its probative force after examination. With respect to the evidence provided by the three Defendants: evidence 10 the fax sent by the Jinqiu Company to the Smart Company and RCL FEEDERS PHILS., INC., evidence 11 the fax sent by the Jinqiu Company to the Smart Company and RCL FEEDERS PHILS., INC., evidence 12, the fax from Deming Company to Honghai Company and evidence 13, the letter sent by the Plaintiff to Honghai Company, the Plaintiff held that these were not the original and cannot be recognized. The court holds that the four evidences were all about the containers involved, and can be confirmed with other evidence. So without the contrary evidence, the court confirmed its probative force. For the letter of presentation provided by three Defendants of Deng Dongsheng, master of M.V. “Xinghang 921,” the Plaintiff did not accept due to not having the transshipment bill of lading, but the three Defendants recognized the transshipment bill of lading provided by the Plaintiff. Therefore, for this evidence, the court found its probative force after examination. For other evidence provided by the three Defendants, the Plaintiff shall confirm it and, after examination, the court found its probative force. In accordance with the above evidence and the court hearing, the court confirmed the following facts: a) The facts of the contract for the sale of scrap copper: On 9 May 2009, the Plaintiff entered into a sales contract of scrap copper with the Ahmad Company. The Plaintiff agreed to purchase 6000 tons in 2 batches from Ahmad Company scrap copper, the first batch of 500 tons, and this purchase was completed in May 2009. The price of it was 93% of spot average settlement price of Copper Grade A, published by London Metal Exchange (LME), CFR in Xiamen or Guangzhou, the credit price for the quotational period (L/C) was the price 6 days before being issued. Before shipment, the goods at the port of shipment which was shipped to China shall have the certificate of inspection and quantity and quality confirmation of the raw materials of waste materials issued by SGS, CCIC or other equivalent test institutions. And Ahmad Company shall pay for it. On 15 May 2009, Ahmad Company entered into the No. JXTC-IMPB309003 supplementary contract terms of scrap copper with the Plaintiff, and they agreed that the Ahmad Company shall bear the costs of the Plaintiff’s loss because of the invalidation and cease of the inspection, Ahmad Company’s export agent Deming company provided overseas imported waste materials suppliers registration certificate (AQSIQ) and the certificate of inspection before shipment issued by Chinese Certification Inspection Group Philippines Company. Ahmad Company and its agent, Deming Company shall ensure the validation of the registration certificate of

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foreign enterprises and Chinese Certification Inspection Group pre-shipment inspection certificate, except for customs clearance or additional taxes because the overseas enterprise registration certificate was invalid or suspend. The Plaintiff agreed to be responsible for the import of all customs clearance procedures in accordance with the contract fifteenth and paid for port of discharge/destination taxes. b) The facts of booking, trucking empty containers, loading in port, container delivery: On 14 August 2009, through its legal adviser Del Rosario & Del Rosario Law Company, Honghai Philippines Company made requirements of investigation about case in which the 19 containers were shipped to Nanhai Pingzhou Port by M.V. “Hongzhong” under the requirement of the Philippines National Bureau of Investigation, the Republic of the Philippines Department of Justice, purporting to identify whether there were violations of the provisions of the Criminal Law in relevant parties’ actions. On 24 August 2009, the Republic of the Philippines National Bureau of Investigation appointed investigator Denis stern to be responsible for investigating the case and asked to make relevant reports. On 8 February 2010, the Philippines National Bureau of Investigation issued a survey report (Denis stern took the oath of office of the investigation report on ensuring the specific investigation, asking the relevant parties and reviewing the relevant data). The relevant facts of the survey report were as follows: 1. Booking facts According to Ruby Ann Liwag’s testimony, Marianne Selvina’s testimony, booking bill on 27 May 2009, the second booking bill, the authorization on 4 June 2009 and on 27 May 2009 and other materials, the report said that on 27 May 2009, the Honghai Philippines Company received the booking from the Smart Company and requested that the carrier shall ship by M.V. “Hongzhong” 17 forty–foot containers with the scrap metal loaded inside to Nanhai Pingzhou Port on 7 June 2009. Subsequently, the Smart Company revised 2 forty-foot containers on the same voyage, and asked the Man’s Cargo Company to take the empty containers. After that, Honghai Company faxed the authorization letter to the Smart Company. The Smart Company was a representative of the Maabilidad Company booking. And the Smart Company also copied a certificate of taking container by fax to the Maabilidad Company. 2. Facts about the Container Car Company According to the equipment receipt of 19 empty containers issued by ACJ Container Terminal Company, the report held that during the period from 29 May 2009, to 4 June 2009, 19 containers were taken from ACJ Container Terminal Company No. 112, North Bay Avenue, Nervosas city by truck drivers. Every time an empty container was taken, the container driver received a container transfer order (EIR). The equipment handover sheet records information about containers,

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including container numbers, truck drivers, license plate numbers used for trucks, and ship seal number. According to the Man’s Cargo operator Mario Manuel’s testimony, the report said that one day on the first week of June 2009, Mario Manuel received the appointment freight transport service provided by Maabilidad Company. Maabilidad Company gave the container taking certificate by fax to him and asked him to take the empty containers to Pasig City’s channel (Floodway). According to Winston Alejo’s testimony, Gerry Ocang’s testimony, the testimony of Fernado Mendinueta and Elmer Moso’s testimony, the report said that empty containers were transported to the Pasig City’s channel and the driver transferred exchange bill and seal together to the channel of the staff. Later, the driver also carried the loaded containers to Manila Terminal. However, the driver Winston Alejo has received instructions of a staff of the channel to ship an empty container to a warehouse in Mercedes Avenue in Pasig City. 3. Facts about waterways According to the aerial map, channel pictures, the lease contract signed between Nelson Lin and Ronald Lin, the Maabilidad Company Information table, and the results of the survey of Ronald Lin, the report said that the channel was located at 3333 EastBank Road, Barangay St. Lucia, Pasig City. And the opposite was called piocque District 1 squatter areas and was part of a large parking lot of Isuzu accessories company. According to the parking lot administrator, the building was rented to Ronald woods for his recycling business. Ronald Lin was a pseudonym used by Lin Haochun, Chairman of Maabilidad Company. Investigators found a lot of simple sheds while walking into waterways. That day a container car of Aziz Gardner Transportation Service Company was parked inside, license plate number was RAU-275, and the car once went to the ACJ Container Terminal Company for taking of empty containers, and also delivered loaded container’s to Manila Terminal. The driver of the container vehicle was named Roberto B. Ybanez according to the contents of the equipment handover order of ACJ Container Terminal Company and Manila Terminal. He was not on the spot. And he was out for lunch according to the man in charge of the container car. Investigators waited to stay, but did not see the man back, and then found the container car guarder missed. Investigators further found an excavator parked inside, with a mass of suspected slag next to it. Next to the mound there were large bags filled with these substances. In addition, there was a bridge scale in the building. There was a big filling bag on the bridge scale, which seemed to be black mud. Next to it was a mass of empty bags and yards of scrap metal. The investigator went to the office and found that it was empty, and the people inside the building did not answer any questions.

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4. The facts concerning the inspection of the goods by Chinese Certification Inspection Group Philippines Company. Chinese Certification Inspection Group Philippines Company was a representative office of China Inspection Certification Group accredited in Philippines. It mainly provided inspection and certification service for goods shipped to china. According to the survey, inspector Jay Campos of Chinese Inspection Certification Group Philippines Company was present when 19 involved containers being loaded/ shipped. On 23 October 2009, investigators met with Wang Yonghai, general manager of the Chinese Inspection Certification Group Philippines Company and Campos, the inspector general. According to Wang Yonghai introduction, Chinese Certification Inspection Group Philippines Company received a letter of application letter before the inspection, the application of 500 tons of iron free copper for the inspection of mail, the applicant was Deming Company, San Pedro City, the location was the National Highway Philippines Building (La Filipina Compound, National Highway, San Pedro, Laguna). On 1 June 2009, Aziz Gardner Transportation Services Company’s operator Imelda Ortega and the driver, Chinese Certification Inspection Group Philippines Company took the inspector Jay Campos away, but sent him to the Jeanne Street, Pasig City, in a nearby warehouse. The investigator then found out that the warehouse was now leased to a telecommunications company. After the visit, he found that the warehouse was not an ordinary warehouse, but it was more like a row of buildings with a small warehouse. Jay Campos said that not all the packing bags were in the warehouse, because the charging bags were transported to the warehouse while being shipped out of the warehouse, Because the it can not hold 500 tons of copper, it's an area of only 100 square meters (Jay Campos made the warehouse scrap pictures). According to Jay Campos photographs, container loading, the Chinese Certification Inspection Group Philippines Company seal and another unknown seal were sealed, but there was no ship company seal. On 8 June 2009, on behalf of the Jinqiu Company, Imelda Ortega took the certificate of quantity, quality and environmental impact assessment issued by Chinese Certification Inspection Group Philippines Company. According to the certificate of quality and quantity records, supplier was the Jinqiu Company, the shipper was Deming Company, the consignee was the Plaintiff. Wang Yonghai said the company did not participate in the sale involved, the Jinqiu Company just borrowed its Chinese overseas suppliers license for imports of scrap metal. However, it is not possible to determine whether the Jinqiu Company had obtained the license to use the license. 5. Facts about the Jinqiu Company According to the Department of trade and industry of Philippines records, the Jinqiu Company was in the possession of Renato Besa Banal, the company was located at 75 Eusebio Avenue, Pasig City. But after investigation, the address was purely fictitious. The company was located at No.73-A Eusebio Avenue, Maybunga, Pasig City. Investigators found a house for 73 house (Josefa St.) in the corner of Eusebio

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Street and the Joseph. The residents nearby said this was the third time they accepted the investigation, it was not the Jinqiu Company's location and they never know a man named Renato Besa Banal. In addition, a certificate issued by the Police Station of Barangay Mebonga displayed that Jinqiu Company did not register in the area. There was a Magnificent Metal Trading Company that had registered at the police station, the registration person was Renato Besa Banal and the registered address was Eusebio Street No. 77. And the address was fictional. According to the staff of Police Station of Barangay Mebonga, there was a National Bureau of investigation officers who went to the police station to ask them a “business address for the Eusebio 73-A, Mei Street, Poincare, Pasig City.” The reason was that this enterprise sold scrap copper to a Korean, but after the arrival of the ship, it was not scrap copper. The staff member further introduced that the detective who had come to investigate was John Johnny Logrono of the special operations unit of the National Bureau of investigation. Through communication with John Rogge, he said the investigation was from a Korean complaint that it signed a sales contract with Philippines copper company and planned to scrap shipped to South Korea, but found only after the arrival of scrap metal in general, the sale of the shipper's address was “Eusebio 73-A, Mei Street, Poincare, Pasig City,” registered the street address for enterprises was “magnificent Metal Trading Corp” (the South Koreans and provides a trading person photo). 6. The fact that the goods involved were delivered at the wharf in Manila Terminal From 2 June 2009 to 6 June 2009, 19 containers were shipped to the Manila Terminal. According to the equipment receipt records of Manila Terminal, all cargo containers arrived in Manila only with ship seal and no seal was issued by Chinese Certification Inspection Group Philippines Company (container numbers REGU4999484, REGU4995766, and REGU4224814 were found another letter “SSSI” seal no). By investigating the shipping order issued by the Container Car Company, it was found that the container only recorded the title of the ship seal, and there was no seal issued by Chinese Inspection Certification Group Philippines Company. Between 2 June 2009, and 6 June 2009, 19 containers were loaded on M.V. “Hongzhong”. 7. The fact that the goods involved arrived at the destination of the Nanhai Pingzhou Port On 13 July 2009, 19 containers arrived at Pingzhou Port. When unpacking for inspection, they found that the goods loaded in the containers were dirt, rocks, corrosion of iron, and slag instead of scrap copper. 8. The situation discussed in the investigation report The investigation report held that, according to the circumstances, several people conspired to defraud the Plaintiff. Shipper Jinqiu Company was established fraudulently. The owner Renato Besa Banal registered in the Department of trade and industry in Philippines with a false company and office address. The scrap loading address was 8 Jeanne Street, Pasig City and the address was not for

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long-term business use. The owner of the scrap metal business simply rented the building for a short period of time (about two months). The residents inside worked at night and rested in the platoon during the day. Moreover, the container loading route issued by the Container Car Company was the waterway, not the actual loading Jeanne Street. In addition, the application of Chinese Inspection Certification Group Philippines Company inspection site was the city of Philippines, San Pedro national highway, and the actual test site was at Jeanne Street. Store goods warehouse was a small warehouse, which obviously cannot store 500 tons of copper, and through photo observation, the small warehouse had no storage of copper. The large trucks filled with Scrap material shipped. After the containers filled with bags of scrap material, it was sealed with a “SSSI” seal, and there was no Honghai Company ship seal, after Jay Campos sealed the Chinese Certification Inspection Group Philippines Company’s seal. Because of only caring Chinese Certification Inspection Group Philippines Company’s seals, Jay Campos did not notice this seal on the containers. The company ship was sealed on other seals, he took pictures of the seals. After the container was loaded, container car immediately moved to Manila Port, and it was available at other places. The loading date was from 1 June 2009 to 4 June 2009, and the last one container arrived at Manila Port on 6 June 2009. When the container car went to other places, Chinese Certification Inspection Group Philippines Company’s seals were destroyed, and the container scrap was replaced with other substances. The situation showed that the replacement behavior occurred at the Jeanne Street, 3 km away from the channel. Man’s Cargo driver was in a watercourse to take container, rather than at Jeanne Street where the good were loaded and on display at a waybill was the channel instead of Jeanne Street; the filling bag and residual material in the channel proved this point. The Plaintiff mentioned in the letter that container was loaded with a substance. The substance was a byproduct of metal melting slag, coincidentally, investigators found that on the inside of the waterway was a slag heap. In addition, the fraudsters calculated the weight of the replacement material through the bridge scales inside the channel, making them roughly equal to the weight of the goods to be loaded. The channel was managed by Lin Haochun, he was the chairman of the Maabilidad Company and engaged in scrap metal import and export business. This also explained why the maybe company’s employees were involved in the case. After replacement of the scrap copper, they closed and sealed the container and the container was delivered to Manila Port. Container seal was ship seal. Sealing ship seal was the key, when the goods were filled into the container, the Jinqiu Company deliberately did not affixed the seal Chinese Certification Inspection Group Philippines Company which was of the main reasons why it was unable to determine whether the goods replaced them. If the goods were sealed from the warehouse to the wharf, in transit, any attempt to replace the goods will inevitably destroy ship seal, and these damaged seals can easily be found in the port of shipment. Investigators summoned Aziz Gardner Transportation Service Company’s drivers Felixsixmo Erne, Roberto B. Ybanez and Neal Ybanez and Maabilidad Company’s Nestor Sabior Ybanez, but they did not come to accept the investigation, so container and the goods cannot be tracked

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through them. Aziz Gardner Transportation Services Company operator Imelda Ortega was representative of the Jinqiu Company that applied to Chinese Certification Inspection Group Philippines Company at the loading of the goods for inspection certificate and got the inspection certificate from Chinese Certification Inspection Group Philippines Company, so she was not only a container truck operator, but also involved in the case of colluded fraud. It is very important to obtain inspection certificate from Chinese Certification Inspection Group Philippines Company, because of the need to submit it to the Chinese Customs, but it is unclear of the person to whom the certificate was referred by Imelda Ortega. Until today, it was still impossible to determine how the consignee’s Plaintiff contacted the shipper Jinqiu Company because the consignee’s company was located outside the territory and had no representative office in Philippines. The court holds that the Philippines National Bureau of Investigation was under the jurisdiction of the Ministry of justice, whose main function was to proactively investigate crimes and other activities that violated the legal provisions of the Philippines and safeguard public interests. In addition, it was responsible for assisting other law enforcement authorities in conducting investigations or criminal investigations. The investigation report by investigator Denis stern through the concrete investigation, inquiries by asking the relevant parties and the review of relevant data and other methods of investigation was detailed with the objectivity and rationality. In the absence of evidence to the contrary, the court confirmed the authenticity of the relevant facts investigation report of the National Bureau of Investigation in Philippines. In addition, the survey report found that the goods involved were exchanged before delivery at the port of loading. The court holds that although there was no direct evidence of substitution to prove that the goods involved had been exchanged before the delivery at the port of loading, the investigation report was based on the detailed and clear facts with objective and reasonable analysis. Judging by the high degree of probability, it should be identified that the goods involved had been exchanged before the delivery at the port of loading. c) The facts of the bill of lading issued On 9 June 2009, after the Smart Company repeatedly modified the confirmation, Honghai Philippines Company’s representative issued the company's bill of lading with title of MNLCB09000545 and its attachment. The bill of lading recorded: The Shipper was Deming Company, referred to the Jinqiu Company (C/O) company, the consignee was the Plaintiff, notify party was the Plaintiff, the ship was named M.V. “Hongzhong” and voyage was “039N”, the port of shipment was Philippines Manila Port, the discharge port was Chinese Nanhai Pingzhou Port receipt Difei Philippines Manila container yard for shipment, Nanhai Pingzhou Port container yard. The container had 19 forty foot containers with the seal packing, inventory, and seal. According to the description of the shipper, the container's cargo was 503.46 tons of 2 copper, copper level was 96%, the lowest copper content was 94%, the container number/seal must indicate the mark and number. This column

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indicated the seal number and the seal number of 19 containers. And it also should indicate the integrity of the container information, please see the attachment. The attachment of the bill of lading recorded the container number of the 19 containers, the ship seal of the vessel, the seal of Chinese Certification Inspection Group Philippines Company, the other seals and the weight of each container. d) The relevant facts that the goods were in the process of the transportation and arrival in Hongkong On 9 June 2009, the ship involved arrived in Hongkong. On 15 June 2009, and it was found container REGU4999571 was accidentally damaged in transit. On 17 June 2009, under the supervision of standard notarization of three representatives entrusted by Honghai Hongkong Company, the container cargo was transferred to the REGU4213152 container, and was sealed a seal with number of 075153 China certification inspection group of the seals, and in the inspection certificate issued by the surveyor, the record that the good was like “soil and stones” mixed content. On 30 June 2009, the Plaintiff received an email of shipment of damaged containers in Hongkong, accompanied by a shipment of photographs showing the suspected mud. Combined with the fact confirmed in the pleadings by the three Defendants that inspection personnel and Chinese Certification Inspection Group Philippines Company found the goods for sediment mixture and iron, copper rather than fact, it can be found that the three Defendants and Chinese Certification Inspection Group Philippines Company had installed the container with the knowing of the goods for sediment mixture and iron, and copper. On 12 July 2009, 19 containers including REGU4213152 Container, by M.V. “Xinghang 921” moved from Hongkong to Pingzhou Port. On 13 July 2009, M.V. “Xinghang 921” arrived in Pingzhou Port. Three Defendants claimed that the Plaintiff noticed the exchange before the payment. The Plaintiff denied and said he knew it after the credit payment. Three Defendants had no evidence to prove so the court did not recognize it. The goods REGU4999571 container loading has been found that the loaded was not the goods of the bill of lading in Hongkong, the company just notified the relevant information to the carrier and did not notify the consignee. The Jinqiu Company sent a letter to the Honghai Philippines Company that they were not allowed to open package for inspection in Hongkong, and ensured that they would bear all costs and risks during the cargo transportation involved. The three Defendants provided the testimony of Feng Jiajun, shipping department manager of Honghai Hongkong Company, the certificate of inspection issued by the Notary Inspection Certificate, China Merchants Container Service Co. Ltd. note, M. V. “Xinghang 921” Deng Dongsheng description and arrival of common inspection confirmation to prove from in transfer from Hongkong to Pingzhou Port, there was no abnormal appearance of the container, ship seal was integrity, and was arrived in the Nanhai Pingzhou Port. The three Defendant provided inspection report issued by Guangzhou Henghai Insurance Assessment Co., Ltd. and the New Maritime Technology Consulting (Shanghai) Co., Ltd. investigation report to prove that the

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container in the port of discharge had clean appearance and was not damaged (with no breaking marks), seal was intact, and box structure, door and components were not damaged, stolen or replaced, so in the sealed box the goods may not be damaged. The court holds that the above facts and evidence of the three Defendants are sufficient, and the relevant evidence shall be mutually verified and affirmed. e) The facts that the goods arrived at the port of destination for joint inspection On 14 July 2009, the Plaintiff, Chinese Certification Inspection Group Philippines Company, PICC Jiangxi Branch, Nanhai Inspection and Quarantine Bureau, the Foshan Customs Nanhai Office Pingzhou Supervision Department and Pingzhuo Police Station jointly conducted unpacking and inspection. After the inspection, each container ship was sealed, including the REGU4999484 container and SSSIA04027 container and seal, REGU4995766, SSSIA04017, REGU4213152, and China sealed container certification inspection group No. 075153 seals. The package inspection on the spot, each container shipment was dirt, stones, rust and waste slag, instead of scrap copper of the bill of lading of. The Plaintiff paid RMB 24,550 for the entry inspection and quarantine fee to the Nanhai Exit Inspection and Quarantine Bureau. The Plaintiff proved there was no relevance for the fixed invoices provided for the fees of RMB 220 yuan, and it shall not be determined without further evidence. f) Whether the Plaintiff paid the purchase price On 19 May 2009, under the requirements of the China Construction Bank Corporation Nanchang Hongdu Branch (hereinafter referred to as the Hongdu Branch of CCB) issued the No. 36053010001650 irrevocable letter of credit. The credit specified in the documents a full set of clean on board bill of lading (showing freight prepaid and notify the consignee and the name of the ship, as the applicant for the credit), signed commercial invoice (3 originals and 3 copies, according to standard display company, the calculated total value of the invoice by China certification inspection group or other institutions as port of shipment certificate of record of the quality and quantity, the invoice also needed to record price of $4,141.29 per metric ton), signed packing list (3 originals and 3 copies), the quantity and quality standards issued by the company, Chinese Certification Inspection Group or the loading port of other similar institutions to prove (1 the original, 3 copies), China certification inspection group before shipment inspection certificate required by Chinese Customs (original), beneficiary's certificate of origin (1 originals and 3 copies) and checked Certificate of registration of overseas enterprise. On 15 June 2009, Hongdu Branch of CCB received the letter and the attached documents (credit requirements document) by negotiating bank, Cathay Bank. The Plaintiff provided settlement vouchers and the certificate issued by Hongdu Branch of CCB and internal withholding notice to prove that it had paid Hongdu Branch of CCB on 20 June 2009, and achieved the original bill of lading. Three

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Defendants said the Plaintiff did not provide proof of payment of the loan, so they did not recognize that the Plaintiff paid the purchase price. The court holds that the exchange settlement account receivables and internal withholding notice recorded in account debit was identical which indicated that on 20 June 2009, Hongdu Branch of CCB had deducted the bank’s internal account, meaning that the Plaintiff had paid for the goods on that day. On 11 August 2009, the Plaintiff put forward real estate property preservation application against the Honghai Company’s property at Room 2603, 2601 and 2602, No. 18 Tibet Road, Ganglu Plaza, Huangpu District, Shanghai City, and provided the letter of undertaking issued by the Bank of China Joint Stock Co., Ltd. Jiangxi Branch limited to RMB 23,000,000 for property preservation. The court ruled on 25 August 2009 that the Plaintiff's application for the property the preservation was allowed, and it seized the property. On 31 August 2010, the company provided letter of undertaking issued by the People’s Property Insurance Company of China Guangdong Branch limited to RMB 20,000,000 to relieve real estate under property preservation measures, this court ruled on 1 September 2010, lifting of the seizure of the company’s property. The Plaintiff paid the application fee of 5,000 yuan for property preservation. The Plaintiff's agent in this case has produced a lawyer fee of RMB 800,000. The Plaintiff did not provide proof of the insurance premium, freight charges and incidental expenses of the port, and the case was not recognized by the Plaintiff concerning the fact that the insurance premium was $1,376.08, freight was $11,400 dollars and the incidental expenses was RMB 85,500, claimed by the Plaintiff claims, which was denied by the court. Another investigation: Deming company was a Hongkong company, with the registration certificate of People's Republic of China State Administration of Quality Supervision Inspection and Quarantine of imported waste materials audit issued by overseas supplier enterprises, registered products included scrap metal, the certificate was valid from 1 January 2008 to 31 December 2010. During the transportation of goods involved, Honghai Private Company was in possession of M.V. “Hongzhong.” The court holds that the case was a dispute over liability for damage to marine property. As the consignee of the bill of lading, as the consignee involved in the bill of lading, when it claimed the goods from the carrier, and the Plaintiff had established marine goods transportation contract legal relationship with the carrier, the Plaintiff was the consignee, the Defendant was the contractual carrier, the Defendant's Private Companies was the actual carrier. In the event of damage, the Plaintiff had the right to file a lawsuit on the basis of liability of prosecution; Plaintiff can also file a lawsuit as the holder of the bill of lading due to rights under Bill of lading being violated on the basis of liability for prosecution. In the first trial, the plaintiff sued on the basis of tort liability basis against three Defendants, after two trials, the Plaintiff tuned to sue for breach of contract responsibility against the three Defendants. According to Article 13 of the Interpretation I of the Supreme People’s Court on Several Issues concerning the Application of the Contract Law of the People’s Republic of China (I), if the claimant choose the claimbasis when filing

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the case in accordance with the provisions of Article 122 of the Contract Law, but before the first trial altered the claim basis, the people's court shall allow. So, applying for change of claim basis of liability shall be filed before the first trial. Therefore, the court did not support the Plaintiff’s application for changing the responsibility basis, and the case should be trialed according to tort liability basis chosen by Plaintiff. The goods at the port of destination, Pingzhou Port, was found damaged, meaning that tort took place at the port of destination. According to Article 146 (1) of General Principles of Civil Law of the People’s Republic of China (which says that regarding the loss compensation for tortious actions, the law of the place of tious actions shall be applied; if parties have same nationality on domicile in same country, the law of that home on same domiciled country.) and Article 187 of Opinions of the Supreme People’s Court on Several Issues Concerning the Implementation of the General Principles of the Civil Law of the People’s Republic of China (which says that the law of the place of tortious actions includes the law of the place where the actions were made and the law of the place where the damage resulted; if those two laws are different, the people’s court can choose which law to apply.), the case shall be governed by the law of the People's Republic of China. The Plaintiff entered into a contract of sale, opened a letter of credit, paid the bill to the bank and got the bill of lading in which the Plaintiff was the consignee, which was legally obtained and held the bill of lading, and obtained the relevant rights under the bill of lading. The Plaintiff claims that the Defendants committed two infringement aspects: one was the destruction of the container seal issued by China certification inspection group, so the Plaintiff cannot take the goods under the bill of lading at the port of destination; second was failure to issue bills of lading, causing the Plaintiff to pay the payment under the credit, resulting in a loss. According to the facts, the cargo in the port of departure had been exchanged before delivery, and there was no seal of China certification and inspection group at the time of delivery, the three Defendants did not implement the tort of China certification inspection group. Therefore, the Plaintiff claimed that three Defendants involved damaged seals of container China certification inspection group, so the Plaintiff cannot take the goods under the bill of lading at the port of destination, there was no factual basis, so the court did not support. Because of the lack of Chinese Certification Inspection Group’s container seal number, attachment of bill of lading recorded it, it can be found that the Honghai Philippines Company issued the bill of lading by mistake. Because the Honghai Philippines Company issued a bill of lading is an act indicating an accept of commission of Honghai action, therefore, the Defendant's company should bear the legal responsibility of the bill of lading issued by mistake. In the absence of evidence to prove the existence of fault, the Honghai Philippines Company did not assume responsibility. The Defendant's Private Company did not implement the bill of lading issued by the behavior, did not bear responsibility for issuing bills of lading. The Plaintiff requested the Defendant and the Honghai Philippines

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Company and Private Company to bear the tort liability, there is no factual basis, so it was not supported. The requirement for bill of lading in document needed for the payment of letter of credit referred to full set of clean on board bill of lading (showing freight prepaid, the name of the vessel, the notify party and the consignee being the Plaintiff), but did not require the records of seal issued by Chinese Certification Inspection Group, which meant that whether the bill of lading recorded a seal of Chinese Certification Inspection Group did not affect the credit payment. So there was no causal relationship between the Defendants’ infringement in issuing the bill of lading by mistake and the payment under letter of credit. Therefore, the Plaintiff requested the Defendants to assume the tort liability had no factual basis and no legal basis, so the court shall not support. In summary, according to the provisions of Paragraph 1 of Article 64 of the Civil Procedure Law of the People’s Republic of China, the judgement is rendered as follows: Dismissing the Plaintiff’s claims. The Court fee for the case is RMB113,227, which shall be borne by the Plaintiff. If dissatisfied with this Judgment, the Plaintiff shall submit a Statement of Appeal to this court within 15 days, and three Defendants shall submit a Statement of Appeal to this court within 30 days as of the service of this Judgment, with duplicates in the number of the opposing parties, so as to make an appeal before the Guangdong. Presiding Judge: SONG Weili Judge: SONG Ruiqiu Acting Judge: LI Zhengping December 2, 2012 Acting Clerk: ZHU Mingfang

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Guangdong High People’s Court Civil Judgment Jiangxi Group Co., Ltd. for the Import & Export of Rare-Earth Metal Tungsten Industry v. RCL Feeder Pte. Ltd. et al. (2016) Yue Min Zai No.69 Related Case(s) This is the judgment of retrial and the judgment of first instance is on page 457. Cause(s) of Action 199. Dispute over liability for damage to property on the sea or sea-connected waters. Headnote Affirming lower court decision that plaintiff cargo owner not entitled to recover damages for short and defective delivery of cargo of scrap copper, as court held that most likely cause was interference by a third party, rather than failure on the part of the carrier. Summary Plaintiff sued defendants over failing to perform contractual obligations. Plaintiff and defendants contracted to buy and deliver 6,000 tons of Scrap Copper No. 2. The first installment to be delivered was 500 tons of Scrap Copper No. 2. The bill of lading for the first instalment listed 503.46 tons of Scrap Copper No. 2. However, upon delivery there was 8.82 tons less than what the bill of lading stated. Additionally, the goods delivered were clay, stone, iron, and nonconforming copper. Finally, the delivery did not come with agreed upon inspection certificates of quality and quantity for the metal. This court held that the defendant was not liable, affirming the court of second instance in all respects.

Judgment Retrial Applicant (Plaintiff in the first instance, Appellant in the second instance): Jiangxi Group Co., Ltd. for the Import & Export of Rare-Earth Metal Tungsten Industry. Domicile: No.118 West Beijing Road, Nanchang, Jiangxi Province, the People’s Republic of China. Legal Representative: MIU Xingeng, Chairman of this company.

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Agent ad litem: ZHANG Zhenan, lawyer of Shanghai Co-effort Law Firm LLP. Agent ad litem: ZHANG Ji. Respondent (Defendant in the first instance, the Respondent in the second instance): RCL Feeder Pte. Ltd. Domicile: 11 Keppel Road, #08-00 RCL Centre, Singapore. Legal Representative: Chu Chung-Po, director of the company. Agent ad litem: CHEN Xiangyong, lawyer of Wang Jing & Co. Agent ad litem: WANG Jun, lawyer of Wang Jing & Co. Respondent (Defendant in the first instance, the Respondent in the second instance): RCL FEEDERS PHILS., INC. Domicile: 10th Floor, Ayala Life FGU Centre, 6811 Ayala Avenue, Makati City, Philippines. Legal Representative: Jesus B. Sedano, director of the company. Agent ad litem: CHEN Xiangyong, lawyer of Wang Jing & Co. Agent ad litem: WANG Jun, lawyer of Wang Jing & Co. Respondent (Defendant in the first instance, the Respondent in the second instance): Regional Container Lines Pte. Ltd. Domicile: 11 Keppel Road, #08-00 RCL Centre, Singapore. Legal Representative: Lu Yean Tin, director of the company. Agent ad litem: CHEN Xiangyong, lawyer of Wang Jing & Co. Agent ad litem: WANG Jun, lawyer of Wang Jing & Co. With respect of the case arising from the dispute over a maritime property damage liability, the petitioner for retrial, Jiangxi Group Co., Ltd. for the Import & Export of Rare-Earth Metal Tungsten Industry (hereinafter referred to as Jiangxi Rare Earth Company) filed an application for retrial with the Supreme People's Court against the Respondents, RCL Feeder Pte. Ltd. (hereinafter referred to as Regional Company), RCL Feeders Phils., Inc. (hereinafter referred to as Regional Company in Philippines), and Regional Container Lines Pte. Ltd. (hereinafter referred to as Regional Pte. Company), as it refused to accept the civil judgment made by this court in (2013) Yue Gao Fa Min Si Zhong Zi No. 31. The Supreme People’s Court rendered a civil ruling (2014) Min Shen Zi NO.687 on 26 November 2014 to order this court to rehear this case. The court formed a collegiate bench according to the law and docketed the case, which conducted a public trial. The agents ad litem of the Applicant, Zhang Zhenan and Zhang Ji and the agents ad litem of the Respondents Chen Xiangyong and Wang Jun attended the hearings. Now the case has been concluded. On 3 August 2009, the plaintiff in the first instance, namely, Jiangxi Rare Earth Company issued to Guangzhou Maritime Court and alleged that it had concluded the contract about scrap copper dealing with Amaxus International, LLC (hereinafter referred to as Amaxus Company). The contract provided that Jiangxi Rare Earth Company would buy No. 2 scrap copper about 6000 tons, including 500 tons in the first batch from Amaxus Company and this would be completed in May

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2009. The price takes 93% of the average settlement price of the Grade A copper spot published by London Metal Exchange during the quotational period. The trade mode use CFR Xiamen or Guangzhou. The quotational period was six working days before opening the Letter of Credit. Before shipping, the goods shall have the inspection certificate, the confirmation of quantity and quality of scrap raw material shipped to China made by SGS (hereinafter referred to as General Standard Company), CCIC (hereinafter referred to as China Inspection Certification Group) or other inspection institutions with same level in the loading port. The inspection fee would borne by Amaxus Company. On 7 June 2009, Regional Company and Regional Company in Philippines issued the clean on board bill of lading numbered as MNLCB09000545. This bill of lading recorded that the consignee was Jiangxi Rare Earth Company, cargo was No. 2 scrap copper which weighed 503.46 tons in 19 containers, the transport ship was OTANABHUM, the port of shipment was Manila Port (or Terminal) in Philippines, and the port of discharge was the Nanhai Pingzhou Port in Guangdong. This bill of lading and its appendix also recorded the ship titles, the seal numbers of every containers issued by the subsidiary of China Inspection Certification Group in Philippines (hereinafter referred to as China Inspection Certification Group in Philippines) and the Customs. On 5 June 2009, the People’s Property Insurance Company of China Jiangxi Branch issued the cargo transport policy to Jiangxi Rare Earth Company. And the insurance covered all risks and war risks which the insured amount was $2,293,471.25. On 13 July 2009, the cargo was shipped to Pingzhou Port. With the joint inspection, it was found that what shipped in container were all the mud, stone, and scrap metal and so on, but not No. 2 scrap copper. The weight of these was 8.82 tons lighter than the stated in bill of lading. And they had no seal made by China Inspection Certification Group in Philippines and the Customs (Except one container was sealed after it was changed to another in Hong Kong by China Inspection Certification Group in Philippines because of its breakage). After inspection, the Nanhai Entry-Exit Inspection and Quarantine Bureau issued inspection and quarantine processing notice, which required return directly the cargo said above. The cargo had been total loss according to the quarantine and processing results said above. The carrier, Regional Company and the actual carrier, Regional Pte. Company shall take liability of infringement compensation because they failed to take care of the cargo during period of liability so that to result the loss of seal from China Inspection Certification Group in Philippines, and then the cargo of Jiangxi Rare Earth Company suffered loss. The Regional Company shall also take liability of infringement compensation because it took wrongly the seal number from China Inspection Certification Group in Philippines when issued the bill of lading, even though there was no seal issued by China Inspection Certification Group in Philippines in the surface when they receive containers. So this also the payment of goods has been paid. On 20 July 2009, Jiangxi Rare Earth Company send claim letter to Regional Company, Regional Company in Philippines and Regional Pte. Company, requiring the compensation of its loss, but it failed.

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To safeguard its lawful rights and interests, according to Article 50 of the Maritime Code of the People’s Republic of China, Jiangxi Rare Earth Company sued and required this court to rule that: 1. the Regional Company, the Regional Company in Philippines and Regional Pte. Company jointly compensate to Jiangxi Rare Earth Company which in total was $2,097,749.94 and interest (the interest should be calculated on the basis of the foreign currency interest rate of the dollars from 13 July 2009 to payment day designed by the judgment) including value of cargo $2,097,749.94 when it was shipment, the premium fee $1,376.08 and the freight fee $11,400. 2. The Regional Company, the Regional Company in Philippines and Regional Pte. Company shall pay the inspection fees and incidental fees about RMB 24,770, the port handling fees about RMB 85,500, and lawyer fees about RMB 800,000. 3. The Regional Company, the Regional Company in Philippines and Regional Pte. Company shall pay litigation costs including the fees for accepting the case and the fees for application of the litigation preservation. Defendants in the first instance, namely the Regional Company, the Regional Company in Philippines and Regional Pte. Company jointly argued that: 1. Jiangxi Rare Earth Company had not suffered any actual loss, and it was not the proper plaintiff in this case. Jiangxi Rare Earth Company cannot prove that it has acquired the ownership of the cargo by paying the seller. It did not suffer the profit loss because of no cargo loss in this case. 2. The cargo in this case does not conform the contract, which is due to trade fraud. Jiangxi Rare Earth Company did not take the responsibility of caring when issuing and performing the contract. And China Inspection Certification Group in Philippines had made fault in the fraud. 3. Jiangxi Rare Earth Company should take its responsibility of the wrong paying because it still paid when knowing the cargo had already changed. 4. The involved loss of cargo happened during the liability period of Regional Company, the Regional Company in Philippines and Regional Pte. Company would not take responsibility, and the cargo had already changed before it arrived the port of loading yard. 5. The port of destination has the same ship seal of the container with the port of loading. The Regional Company, the Regional Company in Philippines and Regional Pte. Company have already completed the task of delivering the cargo correctly. The containers in this case only have ship seal in the port of loading, having no seals and custom seals from China Inspection Certification Group in Philippines. In the transportation of containers, the specific expressions can be done through the containers number and ship seal, and the contents in the attached page of the bill of lading can not be taken as the evidences of delivering cargo. 6. The Regional Company in Philippines and Regional Pte. Company would not take the responsibility for the loss of cargo in this case, which is because the

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ship was operated by the Regional Company. Regional Pte. Company does not transport cargo, and the Regional Company in Philippines is the agent of Regional Company, taking no responsibility of paying the loss. 7. The Regional Company, the Regional Company in Philippines and Regional Pte. Company shall also take the limited responsibility even if they have to take the responsibility. Guangzhou Maritime Court found the facts in the first instance as following: 1. The fact of the contract of scrap copper: On 9 May 2009, Jiangxi Rare Earth Company concluded the contract of the scrap copper deals with Amaxus Company numbering JXTC-IMPB309003. The contract provided that Jiangxi Rare Earth Company would buy No. 2 scrap copper about 6000 tons, including 500 tons in the first batches from Amaxus Company and this would complete in May, 2009. The price takes 93% of The average settlement price of the Grade A copper spot published by London Metal Exchange during the Quotational period. CFR Xiamen or Guangzhou. The quotational period was six working days before opening the Letter of Credit. Before shipping, the goods shall have the inspection certificate, the confirmation of quantity and quality of scrap raw material shipped to China made by General Standard Company, China Inspection Certification Group or other inspection institutions with same level in the loading port. On 15 May 2009, Jiangxi Rare Earth Company concluded the supplementary terms of the scrap copper deals with Amaxus Company numbering JXTC-IMPB309003, including the loss of Jiangxi Rare Earth Company shall be taken by Amaxus Company because the certification of registration for scrap raw material import in foreign suppliers provided by the export agent of Amaxus Company, Ocean Honor International Limited (hereinafter referred to as Ocean Honor Company) and the certification of inspection before shipping provided by China Inspection Certification Group in Philippines are valid or validity suspended. Amaxus Company and its agent, Ocean Honor Company shall guarantee the validity of the certification of registration for scrap raw material import in foreign suppliers and the certification of inspection before shipping provided by China Inspection Certification Group. Jiangxi Rare Earth Company agrees to take charge of the formalities of clearance import and pay the tax fees at the discharge port and the destination port according to Article 15 in the contract except the extra clearance formalities or the tax fees caused by the invalidity of the certification of registration for scrap raw material import in foreign suppliers and the certification of inspection before shipping. 2. The facts of delivery of the booking space, empty containers, packing, heavy box in port of loading: On 14 August 2009, the Regional Company in Philippines asked for investigating the case of 19 containers shipped to the Nanhai Pingzhou Port of China by M.V. “Hongzhong” to ascertain if the behaviors offended the Criminal Law in Philippines

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by the legal adviser, Del rosario and the Del rosario law firm subordinated to National Investigation Bureau of the Department of Justice in Philippines. On 24 August 2009, the National Investigation Bureau in Philippines appointed investigator, Denis Sinn to survey this case and were asked to report. On 8 February 2010, National Investigation Bureau of Philippines issued the report (Denis Sinn made a vow that the report was real). The facts in the report are as following: (1) The facts of booking space The report deems that the Regional Company in Philippines received the booking space from Smart Logistics Company (hereafter referred to as Smart Company), being asked to put 17 containers longing 40 foots carrying scrap metal on M.V. “Hongzhong” to ship to the Nanhai Pingzhou Port of China on 27 May 2009, according to the testimonies from Ruby Ann C. Liwag and Marianne Selvina, the booking order on 27 May 2009 and the second order, the container release authorization on 27 May 2009 and on 4 June 2009. Later, Smart Company added two containers longing 40 foots on the same ship, and asked Man’s Cargo to take this empty container. Later, the Regional Company fax the container release authorization to Smart Company. The booking of Smart Company was done by Maabilidad Company. Smart Company also fax a container taking evidence to Maabilidad Company. (2) The facts of container cars The report deems that the 19 containers in this case were taken by ACJ Container Terminal Company at No.112 on North Gulf Avenue, Navotas City by driver from 29 May 2009 to 4 June 2009, according to the equipment receipt of 19 empty containers issued by ACJ Container Terminal Company. The drivers of container cars would receive an EIR when they took one empty container. And the EIR records some relevant container information, including the container number, car drivers, license number of the used cars and serial number of ship seal. The report deems that Mario B. Manuel received the appointment of providing transportation service from Maabilidad Company on one day in the first week in June, 2009, according to the testimony from Mario B. Manuel, operator of Man’s Cargo. Maabilidad Company fax the fax credentials of containers to it and asked it to transport the empty container to Floodway in Pasig City. The report deems the receipt and seal were handed to the staff from Floodway by the driver after being transported to Floodway in Pasig City, according to the testimonies from Winston S. Alejo, Gerry H. Ocang, Fernado C. Mendinueta and Elmer G. Moso. However, the driver, Winston Alejo received the instruction from Floodway staffs to carry one empty container to the warehouse in Mercedes Avenue, Pasig City. (3) The facts of Floodway The report deems that the Floodway is located at 3333 EastBank Road, Barangay St. Lucia, Pasig City, and its opposite is Squatter area, which is called Proctor 1,

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part of the parking lot belonging to “Fifty Bell Accessories Company,” according to the aerial and Floodway photo, the lease contract issued by Nelson Lin and Ronald Lin, the information from Maabilidad Company and the instructions to Ronald Lin. According to the managers in the parking lot, this place is rented to Ronald Lin to make him do the recycling. Ronald Lin is the alias of Hoi Chung Lim, chairman of Maabilidad Company. The investigators found many simple shed in Floodway. There was a container car from Azgard Company, with RAU-275 as the license plate. This car once went to ACJ Container Terminal Company to take empty container, and also transported the shipped container to Manila Port. According to the contents on equipment receipt order from ACJ Container Terminal Company and Manila Port, the driver of this container names Roberto B. Ybanez. He was not on spot because he had gone out to eat lunch according to the keeper of containers. Therefore, the investigators choose to wait, but they failed. The keepers also disappeared later. The investigators continue to work, finding there was an excavator in there, slag alike also exited. There were many big bags beside the mound, filling with the substances said before. Furthermore, there was a weighbridge in the building, carrying a big bag which was filled with black slay. Beside it, there scattered some scrap metals. When investigator came to office, they found nobody was there and the people in the building refused to reply. (4) The facts of inspections of cargo from China Inspection Certification Group in Philippines China Inspection Certification Group in Philippines is the representative from China Inspection Certification Group, providing the service of cargo’ inspection and certification shipping to China. After inspection, the inspector from China Inspection Certification Group in Philippines, Jay Campos was on spot during the shipping period of 19 containers. On 23 October 2009, investigators met its premier Wang Yonghai (transliteration) and the inspector, Jay Campos in San Juan City, the location of China Inspection Certification Group in Philippines. According to Wang Yonghai, China Inspection Certification Group in Philippines received an application letter before inspection, which applied to inspect 500 tons scrap copper containing no iron. And the applicant is Deming Company and the place is La Filipina Compound, National Highway, San Pedro, Laguna. On 1st June, Imelda Ortega, manager of Azgard Company and other drivers picked inspector Jay Campos in the office of China Inspection Certification Group in Philippines, but he was sent to one warehouse near Jenny’s Avenue in Pasig City. Later, the investigator surveyed this warehouse which was leased to a telecom company. This warehouse is not a common one after investigation, more like a terrace construction with a small warehouse. Jay Campos claimed that not all the bags were in the warehouse because bags were shipped out at the same time shipped into warehouse. The warehouse cannot take 500 tons scrap copper because this area only takes 100 square kilometers. (Jay Campos took the scrap copper photo in this warehouse). According to the photo from Jay Campos, the containers were sealed twice, one from China Inspection Certification Group in Philippines and the other from a not-known after loading, but there was no seal from ship company.

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On 8 June 2009, Imelda Ortega took away the certification of quality, quantity and assessment certificate to environment from China Inspection Certification Group in Philippines on the representative of Goldsphere Metal Marketing Company (hereafter referred to as Gold Company). According to the certification of quality and quantity, the supplier is Gold Company, the shipper is Deming Company and the receiver is Jiangxi Rare Earth Company. Wang Yonghai claimed that Deming Company did not participate the relevant dealing from Jiangxi Rare Earth Company and Gold Company was just borrowed the overseas supply license of copper. But it cannot be sure if the Gold Company acquired the authorization of this license. (5) About the fact of Gold Company According to the record from Philippines Trade Industry Department, Gold Company is owned by Renato Besa Banal, and locates 75 Eusebio Avenue in Pasig City. But after surveying, this place is an imagination. The communication place of Gold Company located No.73-A Eusebio Avenue, Maybunga, Pasig City. The investigators found a house (JosefaSt) on the crossing of Eusebio Street and Joseon Street. Residents from this place claimed that it was already the third time to be investigating. This place is not the location of Gold Company and they did not know Renato Besa Banal. Furthermore, evidence issued by Police Station of Barangay Mebonga showed Gold Company was not registered in this area. There was a Magnificent Metal Trading Company registering in police station and the register is Renato Besa Banal and the register place is No. 77 Eusebio Avenue, which is also imaginary. According to the staffs in police station, there was one agent from National Investigation Bureau went their police station asking some situations of the enterprises locating No.73-AEusebio Avenue, Maybunga, Pasig City. The reason is because that the enterprise sold scrap copper to one Korean, but it was found that it was the normal metal not scrap copper. The staffs introduced furtherly that the agent was Johnny Logrono in special action team of National Investigation Bureau. He said that the investigation was caused by one Korean’s complains after communicating with Johnny Logrono. He claimed that he issued the scrap copper dealing contract with one of companies in Philippines and panned to ship the scrap copper to Korea. But he found it was just the normal scrap metal after receiving. The address of the shipper is No.73-AEusebio Avenue, Maybunga, Pasig City and the registered company is Magnificent Metal Trading Company. (This Korean provided a photo about the dealers). (6) About the facts of delivery in Manila Terminal From 2 June 2009 to 6 June 2009, 19 containers were shipped to Manila Terminal. According to the records of delivery receipt of this batch of container issued by Manila Terminal, all of the containers only have ship seal when they arrived Manila Terminal, but don’t have seal from China Inspection Certification Group in Philippines. (Seal numbers are REGU4999484、REGU4995766 and REGU4224814 and there was SSSI seal). The containers only have seal number but no seal number from China Inspection Certification Group in Philippines according

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to the orders issued by container company. From 2 June 2009 to 6 June, 19 containers were shipped on M.V. “Hongzhong”. (7) About the facts of cargo’ arriving in the Nanhai Pingzhou Port On 13 July 2009, 19 containers arrived at Pingzhou Port. It was found that all of the cargo were soil, stone, rust, and slag, but not scrap copper when inspecting. (8) About the facts of discussion of reports The report deems that several people conspired to cheat Jiangxi Rare Earth Company according to the situations. The shipper, Gold Company was established for creaming. The place was a fake one registered by the owner, Renato Besa Banal. It did not have a sale department. The scrap copper was shipped at one rented building located at No. 8, Jeanne Street, Pasig City. And this place was not used for long business. According to residents near this building, the boss, engaging scrap copper dealing rented this building for a short term (about two months). The workers will work in night time and rest in day. And the loading place recorded in the shipper order issued by Container Cart Company was the Floodway, but not the actual place, Jeanne Street. Furthermore, the place which would be inspected by China Inspection Certification Group in Philippines was the Philippine building of the SAN Pedro National Highway in Laguna, but the actual place was Jeanne Street. The warehouse is a small one, and it cannot store 500 tons of scrap copper. And the small warehouse did not store scrap copper at all, according to the photos. A truck without cover carried big bags which were used for shipping scrap cooper after the containers were shipped away. After loading the scrap copper, the containers were sealed with SSSI, but not with the ship seal from Regional Company. Later, Jay Campos put the seal from China Inspection Certification Group in Philippines again. Jay Campos did not notice that the containers were sealed with others but not from Regional Company because he only cared the seal from China Inspection Certification Group in Philippines again, and he took the photos about sealing. The container carts should drive to Manila Terminal as soon as loading, but they went to other places. The loading date went from 1 to 4 June 2009, but the last container arrived at Manila Terminal on 6 June 2009. The seal from China Inspection Certification Group in Philippines and the faked seals were damaged after the containers drove to other places and the scrap copper in the containers were changed to other materials. The facts show that this changing action were done at the Floodway far away from Jeanne street about 3 km. The driver of Man’s Cargo took the containers at Floodway, but not Jeanne street and the place of departure recorded in order was the Floodway, but not Jeanne street, which can be proved by the bags in the Floodway and the residual materials. The correspondence sent by Jiangxi Rare Earth Company mentioned that one of the materials in containers was waste slacks, which was the by-product slag when melting. A coincident was that the investigators found the slag too.

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Furthermore, the deceivers weighed the changed matters by weighbridge in Floodway so that the weight can be the same with the matters before. The Floodway was managed by LinHaochun, who is the chairman of Marbida Company engaging the export and import of scrap cooper, which also showed that the staffs in Marbida Company participated in this. After changing the scrap copper, the containers were shut off and sealed from Regional Company in Philippines. Therefore, what sealed on containers were all the ship seal after arriving at Manila Terminal. The ship seal is the key. After loading into the containers, Gold Company intend not to seal besides the seal from China Inspection Certification Group in Philippines, which was a main reason if the cargo were changed by the Regional Company. If the containers were sealed as soon as the cargo load, any attempt of changing cargo will damage the ship seal, and these damaged seals would be found at the port of shipment. The investigators summoned the drivers from Aziz Gardner Transportation Service Company, Felixsixmo Erne, Roberto B. Ybanez and Neal Ybanez and Maabilidad Company’s Nest or Sabior Ybanez. But they did not come, so it cannot be known where the containers and cargo went. The manager Imelda Ortega from Azgard Transport Service Company applied to China Inspection Certification Group in Philippines to inspect at the loading place and get the inspection certification from China Inspection Certification Group in Philippines representing the Gold Company. Therefore, Ortega is not only the manager of the container car company but also the deceiver in this case. It is very important to get the inspection certification from China Inspection Certification Group in Philippines because it is needed to send to Chinese Customs. But we do not know the certifications were sent to whom by Imelda Ortega. Until now, it cannot be sure how the consignee, Jiangxi Rare Earth Company, made contact with the Gold Company because the consignee is located overseas, without any representative agency in Philippines. The court in the first instance deems that the National Bureau of Investigation is part of the Department of Justice and its main function is to investigate the criminals and other activities violating the legal regulations of Philippines so as to maintain the public interest. Furthermore, it also takes in charge of helping other Law-Enforcing Department to do some inspections. The report issued by Denis Sinn by investigating, asking relevant and reading some information can be authoritative. The attachment has detailed evidence. And we can be sure of its authenticity without the contrary evidence. Furthermore, the report deems that cargo in this case had already been changed before delivering at the loading port. The court in the first instance deems that even though there is no evidence of proving the cargo had been changed before delivering, there is an objective, fair, and reasonable analysis on the report. And this fact has been identified according to the high probability. 3. About the Fact of Issuing the Bill of Lading On 9 June 2009, Regional Company in Philippines issued No. MNLCB09000545 bill of lading heading Regional Company and its attachment representing Regional Company after many times’ confirmations from Smart Company. The bill of lading records that the shipper is Deming Company, the consignee and the notifier is

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Jiangxi Rare Earth Company, the name of the ship is M.V. “Hongzhong,” the voyage is “039N”, the loading port is Manila Port in Philippines, the discharging port is Nanhai Pingzhou Port. And there are 19 containers longing 40 feet. The containers were loaded, checked and sealed by the shipper. There are 503.46 tons of No.2 purple copper. The content of standard copper is 96% and the lowest is 94%. It is necessary to write the marks and quantity of cargo and container and seal number down on the bill of lading. The relevant column writes the container numbers and seal numbers of 29 containers and complete information of containers. Please refer to the attachment. The attachment of the bill of lading records the container and ship seal numbers, the seal number from China Inspection Certification Group in Philippines, other seal number of the 19 containers and the weight of every container. 4. About the fact in the process of delivering: On 9 June 2009, the ships in this case arrived in HongKong. On 15 June 2009, No. REGU4999571 container was accidentally damaged in the transport. On 17 June 2009, under the supervising of Standard Notary Bank (Asia) Limited Company (hereinafter referred to as Standard Notary Bank) entrusted by the agent, the Regional Transportation Company (hereinafter referred to as the Regional Company in HK) of the Regional Company, the Regional Company in Philippines and Regional Pte. Company, these cargo were transported to No.REGU4213152 container and sealed with No.075153 from China Inspection Certification Group in Philippines. And in the inspection certification issued by Standard Notary Bank, it records that the cargo look like the mixture of soil and stone. On 30 June 2009, Jiangxi Rare Earth Company received the mail that the damaged cargo in HK had been transported, with photos of transshipment showing the cargo look like soil. According to the inspectors from the Regional Company, the Regional Company in Philippines and Regional Pte. Company and the facts that the cargo are mixture and iron found by China Inspection Certification Group in Philippines, it cannot be sure that the Regional Company, the Regional Company in Philippines and Regional Pte. Company and China Inspection Certification Group in Philippines had already known the cargo were not scrap copper. On 13 July 2009, 19 containers including No. REGU4213152 container were shipped from Hong Kong to Pingzhou Port by M.V. “Xinghang 1”. On 13 July 2009, M.V. “Xinghang 1” arrived at the Pingzhou Port. The Regional Company, the Regional Company in Philippines and Regional Pte. Company think that Jiangxi Rare Earth Company had already known the real situation before paying. But Jiangxi Rare Earth Company denied that and claimed that they knew the truth after paying by credit. The Regional Company, the Regional Company in Philippines, and Regional Pte. Company cannot prove it, so the court in the first instance did not identify this. After being found that the cargo in No. REGU4999571 were not the cargo in the bill of lading, the Regional Company only notified the shipper, not the consignee. Gold Company email to the Regional Company in Philippines not allowing to inspect in Hong Kong, and ensuring they will take all the payments and dangers in this transportation.

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The Regional Company, the Regional Company in Philippines and Regional Pte. Company provided the testimony from Feng Jiajun, manager of the shipping department of the Regional Company in HK, the inspection certification from Standard Notary Bank, the presentation from Merchant Bureau Container Cervices Co., LTD and Deng Dongsheng, the shipper owner of M.V. “Xinghang 1” and the Confirmation of goods inspection, which are to prove the containers are normal and the seal is complete from Hong Kong to Pingzhou Port, arriving at the Pingzhou Port successfully. The Regional Company, the Regional Company in Philippines and Regional Pte. Company provided the inspection report issued by Guangzhou Henghai Insurance Assessment Co., LTD. and the report from Xinhai Maritime Technology Consulting (Shanghai) Co., LTD., which are to prove the containers in this case were undamaged with no leverage, complete seal and undamaged box structure, door and components in the port of discharge, and the cargo cannot be steal or changed under the complete seal. The court in the first instance deems that facts from the Regional Company, the Regional Company in Philippines and Regional Pte. Company can be proven and can be proven with relevant evidence, so it gave identity. 5. About the facts of the joint inspection after arriving at the port of destination: On 14 July 2009, the representatives from Jiangxi Rare Earth Company, China Inspection Certification Group in Philippines, the Regional Company, the People's Property Insurance Company of China Jiangxi Branch, the Nanhai Entry-Exit Inspection and Quarantine Bureau of the People's Republic of China, Foshan Customs Nanhai office and Pingzhou Police Station opened the containers and made appearance inspection jointly. Every container has the ship seal after identity and besides, there is No.027 seal in No. REGU4999484 container, and 017 seal in No.766 container, and No.075153 seal from China Inspection Certification Group in Philippines in No.REGU4213152 container. There was soil, stones, rust blocks, and scrap metal in every container after inspection, not the scrap copper in the bill of lading. Jiangxi Rare Earth Company paid 24,550 yuan for the entry inspection and quarantine fees to the Nanhai Entry-Exit Inspection and Quarantine Bureau. The court cannot identify without other evidence. 6. About the fact of whether Jiangxi Rare Earth Company paid On 19 May 2009, Nanchang Hongdu Branch of China Construction Bank Co., LTD. (hereinafter referred to as CCB Hongdu) issued the irrevocable letter of credit numbering 36053010001650 from the request of Jiangxi Rare Earth Company. This credit of letter has listed what it needed, including the full set of clean bill of lading on board (it shows the freight prepaid and shipping name, notify party and consignee is the letter of credit applicant), signed commercial invoice (3 originals and 3 copies, showing the invoice shall specify the price is $4,141.29 per metric ton on the basis of total value calculated from the quality and quantity on the recording issued by Standard Notary Bank, China Inspection Certification Group or other equivalent loading port agency), signature packing list (3 originals and 3 copies), certifications of quality and quantity issued by Standard Notary Bank, China

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Inspection Certification Group or other equivalent loading port agency (1 original and 3 copies), the inspection certification before shipping issued by China Inspection Certification Group requested by Chinese Customs (Original), certificate of origin issued by the beneficiary (1 original and 3 copies) and the certificate of registration of foreign enterprise of shipper. On 15 June 2009, CCB Hongdu received the enclosed documents and accompanying documents (requested by the credit letter) from the negotiating bank, Cathay BANK. Jiangxi Rare Earth Company provided the proof issued by the settlement of exchange memo and CCB Hongdu, the Letter to the issuing bank and the notice of internal withholding to approve that it had paid to CCB Hongdu on 20 June 2009, and it had already got the original bill of lading. The Regional Company, the Regional Company in Philippines and Regional Pte. Company claimed that Jiangxi Rare Earth Company did not provide the credentials of paying, so they would not accept Jiangxi Rare Earth Company had paid. The court in the first instance deems that the collection account number of the settlement of exchange memo is the same with the debit account number of notice of internal withholding, which explained that CCB Hongdu had included the account of Jiangxi Rare Earth Company on 20 June 2009, namely, Jiangxi Rare Earth Company had paid on this day. On 11 August 2009, Jiangxi Rare Earth Company applied the Real Estate property preservation locating Room 2601, 2602, 2603 on Ganglu Square, No. 18 on the middle road of Tibet, Huangpu district, Shanghai from the Regional Company, and provided the letter of undertaking limited 23,000,000 yuan issued by Bank of China Co., Ltd. Jiangxi Branch. The court of the first instance permitted this application on 25 August 2009 and sealed off those property. On 31 August 2010, the Regional Company provided the letter of undertaking valuing 20,000,000 yuan issued by the People's Property Insurance Company of China Guangdong Branch to apply the removing of the seal and the court of the first instance remove that seal on 1 September. Jiangxi Rare Earth Company paid the application fee of 5,000 yuan for this property preservation. Jiangxi Rare Earth Company entrusted agent to the litigation and produced 800,000 yuan of the layer fee. Jiangxi Rare Earth Company did not provide evidence of the insurance, freight and port charges, so the court in the first instance denied the facts of the insurance fee about $1,376.08, freight $11,400 and the port charges 85,500 yuan claiming by the Jiangxi Rare Earth Company. There are other facts from the first instance: Deming Company comes from Hong Kong, having the registered certification for import waste raw materials overseas supply issued by General Administration of Quality Supervision, Inspection and Quarantine of the People’s Republic of China. The products include scrap metal and the validity of certificate started from 1 January 2008 to 31 December 2010. In the transportation of the cargo, the ship owner of M.V. “Hongzhong” was the Regional Pte. Company.

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The Guangzhou Maritime Court deems in the first instance that this case is a dispute about maritime property. As the consignee, Jiangxi Rare Earth Company made a maritime cargo transportation contract law contact with the carrier when asking to take cargo from carrier. Jiangxi Rare Earth Company is the consignee, the Regional Company is the contract carrier and the Regional Pte. Company is the actual carrier. When the damage appeared, Jiangxi Rare Earth Company has the right to sue on the basis of default. Jiangxi Rare Earth Company can also sue for infringement act as the holder of bill of lading. Jiangxi Rare Earth Company chose to sue the Regional Company, the Regional Company in Philippines and Regional Pte. Company on the basis of infringement. And this case should be trialed on this basis. The cargo was found damaged on the Pingzhou Port in the People’s Republic of China, namely the place of infringement is the port of destination. In accordance with Article 146 Paragraph 1 of the General Principles of the Civil Law of the People's Republic of China, the court should apply the law of the location of the tortious action. If both parties are citizens of the same country or have established domicile in same country, the court can also apply the law of their own country. As per Article 187 of the Opionions of the Supreme People’s Court on Several Issues concerning the Implementation of the General Principles of the Civil Law of the People’s Republic of China (for Trial Implementation), the Law of location of the tortious action includes the Law where the action occurred or its result appeared. So this case shall be applied by the Chinese law. Jiangxi Rare Earth Company signed external sales contract, issuing the letter of credit, and pay to the bank to get the straight bill of lading as the consignee, namely legally acquired and held the bill of lading and to obtain the related rights under the bill of lading. There are two reasons claimed by Jiangxi Rare Earth Company: One is the damaged container seal of China Inspection Certification Group so that Jiangxi Rare Earth Company cannot take the goods under the bill of lading at the port of destination; the other is the wrong issuing of the bill of lading which caused the payment of Jiangxi Rare Earth Company and resulted the loss. According to the fact, the cargo has been exchange before delivery in the port of departure, and there is no seal number from China Inspection Certification Group. The Regional Company, the Regional Company in Philippines and Regional Pte. Company did not damage the seal from China Inspection Certification Group. Therefore, the claim from Jiangxi Rare Earth Company cannot be supported. The bill of lading has recorded that the container had no seal number from China Inspection Certification Group, it can be sufficient to determine that the Regional Company in Philippine has issued the bill of lading wrongly. The issuing of the bill of lading from the Regional Company in Philippine is entrusted by the Regional Company, so the Regional Company shall be liable for the error of issuing the bill of lading. In the absence of evidence, the Regional Company is not responsible. The Regional Pte. Company has not carried out the issuing of the bill of lading, so it would not responsible for the issue of the bill of lading. Jiangxi Rare Earth

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Company demand the Regional Company in Philippines and Regional Pte. Company to assume liability for tort compensation, but it would not be supported without the facts. The request to the bill of lading is only a full set of clean on board bill of lading (showing prepaid freight and name of vessel, and the notify party and consignee is Jiangxi Rare Earth Company), not requesting the seal number from China Inspection Certification Group, namely whether the bill of lading records the seal number from China Inspection Certification Group will not affect the payment by the letter of credit. So, the infringement from the Regional Company did not cause the payment of the letter of credit of Jiangxi Rare Earth Company. Therefore, Jiangxi Rare Earth Company cannot be supported without evidence of facts and law. In conclusion, Guangzhou Maritime Court made the civil judgment (2009) Guang Hai Fa Chu Zi No.493 on 2 December 2012 according to the provisions of Article 64 Paragraph 1 of the Civil Procedure Law of the People's Republic of China to refuse the request from Jiangxi Rare Earth Company. The cost of the first instance was 113,227 yuan, which was borne by Jiangxi Rare Earth Company. Jiangxi Rare Earth Company refuses to accept the first-instance judgment, and appealed to the court to request canceling the first-instance judgment. And the Regional Company, the Regional Company in Philippines and Regional Pte. Company should compensate about $2,084,973.86 and the interests (the actual payment of foreign exchange in the same period the dollar loan interest calculation from 13 July 2009 to the actual pay day), and the Regional Company, the Regional Company in Philippines and Regional Pte. Company shall bear the litigation costs in the first and second instance. Facts and reasons are as follows: First, the report issued by the Philippines National Investigation Bureau provided by the Regional Company, the Regional Company in Philippines and Regional Pte. Company cannot be taken as the effective evidence to determine this case. 1. According to the provisions of Article 77 of the Maritime Code of the People's Republic of China, the carrier, the Regional Company cannot defend or discharge on the basis of the investigation report. 2. The report lacks objectivity, certainty, and neutrality. The evidence based on the investigation lacks authenticity and legitimacy. There are serious discrepancies and contradictions between the documents and the testimony of the relevant personnel. And in addition to the documents provided by China Inspection Certification Group, photos got by investigators and documents kept by official agencies, most of the files were provided by the Regional Company, the Regional Company in Philippines and Regional Pte. Company. And people who provide testimonies are the private agents or employees, the manager of the port container yard, or transportation company driver from the Regional Company, the Regional Company in Philippines and Regional Pte. Company. And they

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have stakes with the Regional Company, the Regional Company in Philippines and Regional Pte. Company. 3. The facts and findings of the claims made by the Regional Company, the Regional Company in Philippines and Regional Pte. Company have not been proved by any valid legal documents of the Philippine Department of Justice. The witness statements confirmed by the investigation report do not meet the requirements of the laws of China on the evidence of criminal prosecution. The investigation report was issued by the Philippines National Investigation Bureau and the first instance court directly refused. 4. The report is an internal reporting document, not a formal official document with legal force. Only the personal signature of the investigator was found in the investigation report, without the signature of the Philippines National Investigation Bureau and other officials involved in the investigation. The investigation report is the witness testimony of the investigator at most, and the testimony is not in conformity with the provisions of the laws of China, and should not be believed. 5 In addition to the investigation report, the Regional Company, the Regional Company in Philippines and Regional Pte. Company are unable to prove the fact that the goods were exchanged before the carrier took control of the goods. Second, the Regional Company, the Regional Company in Philippines and Regional Pte. Company have carried out the infringement of the rights and interests of Jiangxi Rare Earth Company, and have made great mistakes of the loss of goods. 1. The bill of lading is in line with the lead seal shown in the pre-shipment of China Inspection Certification Group. The Regional Company, the Regional Company in Philippines and Regional Pte. Company issued the bill of lading truthfully. When the Regional Company, the Regional Company in Philippines and Regional Pte. Company delivered the goods to the Jiangxi Rare Earth Company, 18 containers lack the seal from China Inspection Certification Group, and the seal of 1 container seal was switched. The goods are not recorded in the bill of lading of goods in the container. As a result, the Regional Company, the Regional Company in Philippine Company, and the Regional Pte. Company have not done their legal duty to properly manage the goods and cannot deliver the goods to Jiangxi Rare Earth Company, resulting in the loss of the goods. 2. Even if the goods were exchanged before they arrive at the container depot, the Regional Company, the Regional Company in Philippine company and the Regional Company issued the bill of lading and this acting is a fraud. The Regional Company, the Regional Company in Philippines and Regional Pte. Company have not carefully checked the physical appearance of the shipment, and did not issue or approve the bill of lading truthfully, violating the basic obligations of the carrier. The Regional Company, the Regional Company in Philippines and Regional Pte. Company did not check whether the China Inspection Certification Group, clean bill of lading is issued by the carrier the goods involved and, in violation of mandatory provisions on the carrier

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transport imported waste in our country. The Regional Company, the Regional Company in Philippine and the Regional Pte. Company laissez-faire shippers are overweight and assist in the wrong labeling. Therefore, the Regional Company, the Regional Company in Philippines and Regional Pte. Company have made a major mistake in issuing the bill of lading, which infringes the legitimate rights and interests of Jiangxi Rare Earth Company. 3. According to the international practice of shipping, when the goods are shipped on board, the risk of loss or loss will be borne by the holder of the bill of lading or the consignee. The carrier shall be responsible to the consignee on the way of the goods. The Regional Company, the Regional Company in Philippines and Regional Pte. Company are deliberately detained in Hong Kong. In Hong Kong, damage to the goods involved, the Regional Company, the Regional Company in Philippines and Regional Pte. Company intentionally omitted to inform the goods did not comply with the bill of lading, Jiangxi Rare Earth Company has violated the shipping practice and the carrier under the bill of lading to the named consignee's obligation. 4. The adjudication of the judgment is applicable to legal errors. The review of the rights and obligations between the Regional Company, the Regional Company in Philippines and Regional Pte. Company and Jiangxi Rare Earth Company shall be based on the relevant provisions of the Maritime Business law of the People's Republic of China. According to the Maritime Code of the People's Republic of China, the Regional Company, the Regional Company in Philippines and Regional Pte. Company should prove their for damaged goods loss without fault, can be exempted from the liability for compensation. The Philippines National Investigation Bureau’s report is lack of certainty, impartiality, objectivity, authenticity and is violation of Article 77 of Maritime Code of the People's Republic of China, So the report should not be trusted. Therefore, the Regional Company, the Regional Company in Philippines and Regional Pte. Company cannot prove that there is no fault of them in the loss of the goods and they should be liable for compensation. The Regional Company, the Regional Company in Philippines and Regional Pte. Company replied in written pattern: First, Jiangxi Rare Earth Company, believed that the first trial court had wrongly adopted the investigation report by the Philippine National Investigation Bureau and concluded that the goods were exchanged before delivery of the port of loading, without the facts and legal basis. 1. Investigators from the Philippines National Investigation Bureau have made it clear that the Philippine National Investigation Bureau is a statutory body under the Justice Department and does not charge fees. The Regional Company, the Regional Company in Philippines and Regional Pte. Company think that Philippines National Investigation Bureau’s investigation procedure and report are justified, and the findings from the investigation are based on the Criminal Law’s “beyond reasonable doubt” standard of proof.

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2. The investigation report of the Philippines National Investigation Bureau is the type of evidence, not the judgment of a foreign court, which does not require recognition and enforcement. 3. The National Bureau of Investigation's investigation did not deny that the containers were originally loaded with copper scrap. Jiangxi Rare Earth Company proof of container when shipper warehouse packing in copper scrap, and report the copper scrap before arriving terminal delivery carrier switched conclusions without contradictions. Second, The long staying in Jiangxi Rare Earth Company is due to the temporary suspension of scrap metal from the unloading port designated by Jiangxi Rare Earth Company. The transport contract in this case has clearly stipulated that the carrier has the right to transport the ship. The transport of goods in Hong Kong to coastal boats to the pearl river delta is the standard, usual mode of transport. Third, the transport contract between the carrier and the consignee shall be in an uncertain state before the consignee shall present the bill of lading to the carrier at the discharge port. The shipper has control over the goods, and the carrier has no obligation to notify the consignee. The notice issued by the notify party of the bill of lading shall also be limited to the notice of the port, not including the damage of the container in the port of midway. In the case of delivery of the whole container, the carrier has no obligation to control the container load and the bill of lading. In Hong Kong, the test of the damaged container is only to ensure that the goods in the container are transferred to the new container. Therefore, the Regional Company, the Regional Company in Philippines and Regional Pte. Company do not have the obligation to inform Jiangxi Rare Earth Company in transit port. According to the common sense of international trade, the carrier is not responsible for the goods contained in the container, but is responsible for the container and lead seal. When the carrier delivers the goods, the container and the seal are in good condition, that is, completion of the delivery obligation. Jiangxi Rare Earth Company advocates the carrier to change the goods during the transportation process, should bear the strict burden of proof. The court confirms the facts identified by the first instance. Separately, Jiangxi Rare Earth Company stated that the letter of credit (“L/C” or “l/c”) only required for clean bill of lading, and did not require for lead seal. This case after the accident, Jiangxi Rare Earth Company sent Amaxus Company claim. According to its reply the main responsibility for loss of goods is the negligence of Regional Company and China Certification Inspection Group, but Amaxus Company is willing to compensate the loss caused by the first container and pay $100,000 to Jiangxi Rare Earth Company immediately. Jiangxi Rare Earth Company replied that, according to preliminary judgment, Amaxus Company needs to bear the full responsibility for loss of goods, shall immediately repay $100,000 to compensate for the loss of the first container, but that does not mean that the Jiangxi Rare Earth Company gives up the rights stipulated in the contract. The Philippines National Investigation Bureau investigator Dennis Sien appeared in court to explain the investigation report issued by the Philippines

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National Investigation Bureau and accepted the inquiries from both parties. The Philippines National Investigation Bureau is a subsidiary of the Philippines Department of Justice, which has the authority to investigate criminal offences and other violations of Philippine law. The report is the official report by the National Investigation Bureau of the Philippines for the launch of the investigation, which can be submitted to the court as evidence. Jiangxi Rare Earth Company recognized the authenticity of the investigation report during the trial, and did not dispute the identity of Dennis and the above statement. When the goods were transhipped in Hong Kong, the REGU4999571 container was accidentally damaged in the transit unloading process. Certificate of inspection issued by the standard notary office, which confirms the fact that the REGU4999571 container has been damaged. The container services company of China merchant’s bureau issued a report showing that 19 containers including the REGU4999571 container were unloaded from the ship to the dock with intact lead seals to be stored and transferred. After the goods arrive at the port of destination, the inspection certificate issued by the Nanhai Entry-Exit Inspection and Quarantine Bureau records: in addition to a tank container number, sealing of extra, the remaining 18 container the container number and seal number and Regional Company provide container number, sealing number of bills of lading. Violating its cargo ownership by the Regional Company, the Regional Company in Philippines and Regional Pte. Company. The goods were shipped from Manila, Philippines to Nanhai Pingzhou Port of China, where the infringement occurred in the Nanhai Pingzhou Port of China. According to the People's Republic of China Civil Procedure Law (revised in 2007), Article 29 and the Supreme People’s Court on Implementation of the Supreme People’s Court concerning the Application of the Civil Procedure Law, Article 28, the first-instance court has jurisdiction over this case. According to the General Principles of the Civil Law of the People's Republic of China, the first Paragraph of Article 164 and the Opinions of the Supreme People’s Court on Several Issues concerning the Implementation of the General Principles of Civil Law of the People’s Republic of China, Article 187 should be applied with the law of the People's Republic of China. As Pleded by the two parties, the focus of the second instance is: whether the Regional Company, the Regional Company in Philippines and Regional Pte. Company infringed Jiang Rare Earth Company’s ownership of the goods with fault to damage the goods. Jiangxi Rare Earth Company purchased the goods from Amaxus Company. Deming Company, an agent of that company, commissioned Regional Company to ship the goods from Manila, Philippines to the Nanhai Pingzhou Port of China. After the company commissioned its freight forwarder to take the container from the dock, it loaded the container into the container and sealed it, then sent the container back to the Regional Company. After arriving at the port of destination, the goods in the containers are not the goods purchased by Jiangxi Rare Earth Company. Jiangxi Rare Earth Company claims, as the goods being handled by the

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Regional Company, the Regional Company in Philippines, those three Companies should bear tort liability to pay compensation. The Regional Company, the Regional Company in Philippines and Regional Pte. Company argue that, in respect of goods before delivery, carrier the Regional Company has swapped damage will not occur during the period of its responsibility, and submit the notarization authentication of the Philippines National Investigation Bureau report. The Philippines National Investigation Bureau is the Philippines’ authority to investigate criminal and other violations of Philippine law. According to the Regional Company’s application, the Philippines National Investigation Bureau initiated the investigation and issued the investigation report. The survey report is the Philippines National Investigators Bureau in the field survey, ask the related parties and review relevant materials, on the basis of making the report of the investigator and the execution of the Philippines National Investigation Bureau officials signed on the report. Investigators also took an oath of their identities, the functions of the national bureau of investigation and the authenticity of the report. Jiangxi Rare Earth Company authenticity of the report shall be approved in the first trial, and none of them has to make a report of the identity of the investigators and the function of the Philippines National Investigation Bureau of dissent, and again in a second trial evidence of effectiveness, denied the report but no contrary evidence is put forward. Therefore, the court of first instance to the Philippines National Investigation Bureau report to collect the letter, and all. The time of delivery stipulated in the bill of lading is CY/CY, that is, when the carrier's responsibility is to deliver the goods from the stacking of the loading port to the port of destination. According to the survey findings, the container is switched prior to return the goods in the container wharf, and only the ship seal of container without the seal of China Inspection Certification Group in Philippines. According to the facts identified in this case, the goods in the container were loaded, counted and sealed by the shipper. In the bill of lading’s relevant column indicate the description of goods “shipper packing, points, seal, and declare the container cargo”, and clearly stated at the bottom of the container column “the content is provided by the shipper. The above record shows that the description of the bill of lading and the details of the container are recorded by the Regional Company according to the shipper's request. In addition, the attached page of the bill of lading contains the relevant lead seal Numbers, but the attached page does not indicate that the number is the lead seal of the China Inspection Certification Group in Philippines. In addition, the delivery method stipulated in the bill of lading is FCL/FCL, that is, the carrier receives the whole container of goods at the loading port and delivers the whole container of goods at the port of destination. Under the container transportation, the Regional Company as the carrier Deming Company after delivery of the whole container goods, without inspection deming company check the goods whether agree with the goods to declare, Regional Company only responsible for the condition of container FCL.

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When the container arrived at the port of destination, it was delivered to Jiangxi Rare Earth Company, and the exterior part was clean and not damaged, the container was not damaged, the seal was sealed. The statutory inspection agency confirmed that the container number and seal number of 18 containers are in accordance with the bill of lading. The other container was damaged in transit, and the contents of the box were re-packed and sealed under the witness of the inspection agency. It is confirmed by the relevant authorities that the container number and seal number are consistent with the bill of lading. The above facts combined with the contents of the report shows that Jiangxi Rare Earth Company fails to submit the evidence to prove the container, at the time of shipment the goods specific conditions, can maintain the Regional Company has complete delivery as a record of the bill of lading. Jiangxi Rare Earth Company signed a contract with Amaxus Company to obtain the documents of the goods after payment by L/C of Jiangxi Rare Earth Company. In such a way, Jiangxi Rare Earth Company shall pay for the payment in accordance with the letter of credit, provided that the company has submitted the documents conforming to the letter of credit. Jiangxi Rare Earth Company, also admitted during the trial, whether the bill of lading of this case documents the lead seal of the China Inspection Certification Group in Philippines, and does not affect payment by l/c. Regional Company, therefore, the bill of lading was issued by Regional Company in Philippines, the China Inspection Certification Group company seal number, and loading of the cargo to the container had no seal of China Inspection Certification Group in Philippines, this does not affect the Jiangxi Rare Earth Company paying to Amaxus Company. At the same time, Jiangxi Rare Earth Company did not further to submit other evidence of the Regional Company, the Regional Company in Philippines and Regional Pte. Company after receiving the goods in the container to violate the act of the ownership of the goods. Therefore, there is no violation of the ownership of the goods of Jiangxi Rare Earth Company during the period of their responsibility. In addition, the structure of the deal, in this case, does not request that as to transshipment goods if there is a transport delay, the Regional Company shall notify the Jiangxi Rare Earth Company during the period of cargo damage problem, and there is no causal relationship between the notification and the Retrial Applicant’s payment by L/C. Therefore, Jiangxi Rare Earth Company appeal advocating the Regional Company, the Regional Company in Philippines and Regional Pte. Company implemented a violation of the ownership of the goods during transport and its claim are without facts and legal basis so shall not be supported. Thus, the judgment of the first instance determines the facts clearly, the application of the law is correct, the processing result is appropriate, the court is maintained in accordance with the law. Jiangxi Rare Earth Company's appeal request, the reason is insufficient, the court rejected. According to Civil Procedure Law of the People’s Republic of China Article 170 Paragraph 1, the court of second instance on 13 September 2013 rejected the appeal. The second instance Court fee 113,227 yuan is a burden on Jiangxi Rare Earth Company.

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Jiangxi Rare Earth Company is not satisfied and applies to the Supreme People's Court for retrial. Verdict after examination, the Supreme People's Court considers that, as the structure of the deal in documents, whether Jiangxi Rare Earth Company damage notice, and there is no causality between Jiangxi Rare Earth Company in accordance with the payment by l/c, the lack of adequate facts and legal basis. The retrial application of Jiangxi Rare Earth Company is in accordance with Article 200 of the Civil Procedure Law of the People's Republic of China. In accordance with the Civil Procedure Law of the People's Republic of China Article 204 and Article 206, the Supreme People's court on 26 November 2014 made (2014) No.687 Civil Ruling, requesting this court for case retrial. Jiangxi Rare Earth Company alleged that the first instance and second instance trials were wrong in facts finding and law application, which caused incorrect ascertainment of the issue whether the Respondents were liable for tort compensation liability. Due to lower courts’ wrong decision, the request was made to cancel the original trial verdicts, and to support the Jiangxi Rare Earth Company’s claims of trial. The main facts and reasons are: 1. The investigation report of the Philippine ombudsman has no effect. (1) The first instance and the second trial court found that Jiangxi Rare Earth Company recognized the investigation report as a distortion of the meaning of Jiangxi Rare Earth Company in the first instance. Jiangxi Rare Earth Company in the first instance evidence exchange and expression of trial, is just a notarized certification of the survey report, meet the requirements of the extraterritorial evidence form validation, is only to the authenticity of the document itself formally approved, that is not proof of its content, confirmation, Jiangxi Rare Earth Company in first instance trial clearly described the report of no relevance to the case, and agent in submitted to the court's opinion, clearly expressed his opinion on the report. (2) The first and second instance will “ombudsman” confusion of the report to the study by the investigating authorities, and identified as “FBI official report, can be used as evidence to be presented to court” is no legal basis. In the form of an investigation report, it is an internal reporting document, not an official document issued by the National Investigation Bureau of the Philippines. The fact that the report tried to prove that the facts had not been verified by any legal documents of the Philippines Department of Justice, including the bureau of investigation, was therefore not a basis for determining the facts. Dennis is not an experienced person, he does not meet the requirements of our country's law for qualified witnesses. (3) The report covered by the investigation is a criminal case and the rules of evidence in criminal cases apply to the relevant provisions of the criminal procedure law of our country. In criminal lawsuit, the adoption standard of proof is “really” fully, and the case/fact proof standard can be expressed as “beyond a reasonable doubt”, according to the above standard, ombudsman report cannot be an effective evidence.

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2. The shipper shall deliver the goods in container with the China Inspection Certification Group in Philippine’s seal and the shipper lead seal, and the goods are not replaced before being handed over to the Respondents. The Respondents knew that the container has the seal of China Inspection Certification Group in Philippine, and printed it on the attached page of the bill of lading. Ocean bills of lading in the container number and seal a bar on a notation: container detail information refer to the attached sheet, the notation itself shows the container number and seal at the back of the ship document is China Inspection Certification Group’s seal and the shipper’s seal in the Philippines. At the same time, the title of the bill of lading has “Container No./Seal No. Mark & Numbers”, which can prove that the container number is behind the seal, not described by the Respondents. The attachment of equipment in the attachment of the investigation report has been recorded the question of the lead seal of China Inspection Certification Group in Philippines. The equipment handover list is chaotic and arbitrary, and it is completely untenable to infer that there is no lead seal from the China Inspection Certification Group in Philippines. The Respondents were aware that the scrap copper needs to be inspected by the China Inspection Certification Group in Philippines and issue a certificate for clearance. There shall have no effect of the Philippines National Investigation Bureau report on a survey of the ombudsman to deny this situation, it is not in the bill of lading, also does not conform to the provisions of the People's Republic of China Maritime Code Article 77. 3. The Respondents knew that the goods have a problem. First of all, according to the bill of lading, the goods should be shipped from Manila in the Philippines to the Nanhai Pingzhou Port in China, but it is not allowed to transport the goods in Hong Kong without reason. Secondly, according to the international practice of shipping, after the shipment of the goods, all the risk of loss and loss will be borne by the holder of the bill of lading or the receiver. This case container to the consignee and notify consignee and clear the carrier on the goods in transit shall be responsible for the definite consignee, once appear, influential to the goods, shall timely notify the consignee. In Hong Kong on 15 June 2009 container breakage during the transfer process, the Respondents on 17 June 2009 test and inspection agencies to the scene, and on 17 June 2009, the inspection report, that the Respondents long knew that the status of the goods, not what the Respondents said on 30 June 2009, only to find that the goods has a problem. 4. The doc-doc and doc-l/c consistency principle of the l/c and the fraud exception principle. Jiangxi Rare Earth Company does not recognize the first instance and second instance courts’ cognizance of the Respondents’ wrong issuance of the bill of lading, but thought that the Respondents received China Inspection Certification Group’s sealed containers. Even if such as the first trial, second trial court decided that the Respondents error issued a China Inspection Certification Group company seal of the bill of lading in the Philippines, the issuance of the bill of lading of the error and Jiangxi Rare Earth Company

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inevitable cause-and-effect relationship between the loss of the company. The Respondents knew the rules in China for waste transportation and carriage of goods by long engaged in southeast Asia (including waste materials) of the shipping company, should be based on the principle of caution, the discovery of the container without China Inspection Certification Group in Philippines’ company seal and shipper’s, notation on the bill of lading turned the clean bill of lading to unclean bill of lading, and Jiangxi Rare Earth Company can refuse to pay payment for goods. The Respondents should put the China Inspection Certification Group in Philippines’ seal on the bill of lading, even if they did not do notation on the bill of lading, because the container seal number of China Inspection Certification Group in Philippines is for delivery under the bill of lading an important identity (that is not the same as inspection certificate), and bank will be based on that and the l/c documents consistent principle to put forward substantial discrepancies to allow Jiangxi Rare Earth Company to refuse to pay for goods. Besides, because the Respondents did inform Jiangxi Rare Earth Company of the fraud of goods with the subjective existence of concealing facts deliberately, causing Jiangxi Rare Earth Company cannot stop payment according to payment by L/C, they should also bear all the liability to pay compensation. Evidence that a third party is good at negotiation should not be cited by Jiangxi Rare Earth company. 5. The original judgment has the issue of wrong application of the law, and the case shall be applied by the law of the People's Republic of China. Shipping carrier under the Maritime Code of the People's Republic of China is special duties and responsibilities, according to the stipulations of this law Articles 47 and 48, carrier for airworthiness obligation and the obligation of tube goods, these two obligations in contract theory known as the compulsory responsibility of shipping. In the carriage of goods by sea, when the ship after the damage to the goods, the consignee can require the carrier to assume tort liability, at this point the two contractual obligations at the same time has the properties of the no-fault liability in tort law. The Maritime Code of the People’s Republic of China Article 46 shows that carrier under in the responsibility of the infringement of no-fault liability, therefore, should by the Respondents to prove for the damaged goods loss without fault, otherwise it shall bear tort liability to pay compensation. For now, the Philippines National Investigation Bureau report on a survey of the ombudsman is by the Respondents to prove is no fault of the most important piece of evidence, as mentioned earlier, the evidence because of the lack of objectivity, authenticity, sufficiency, certainty and fairness and in violation of the Maritime Code of the People's Republic of China, the provisions in Article 77 should not be trusted. Inter alia, to “high probability” standard as the Respondents to provide the basis of a survey report is inappropriate, highly probability can only be applicable to civil cases, may not apply to criminal cases, this is the basic common sense.

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6. Even if the goods are exchanged before arriving at the container depot, the Respondents shall be liable for compensation. If the container without the seal of China Inspection Certification Group in Philippines, the Respondents is recorded in the bill of lading sheet contains China Inspection Certification Group in Philippines’ company seal is not in conformity with the actual situation of content, this is a serious fault behavior of the Applicant. The Respondents has endorsed bill of lading should be issued, but in this case because of the clean bill of lading issued by the Respondents (either intentionally or negligently) that result in Jiangxi Rare Earth Company, under the credit amount should be paid to the Respondents error behavior and Jiangxi Rare Earth Company bill of lading payment loss had obvious causal relationship between the two. The Respondents Regional Company, Regional Company in the Philippines and Regional Pte. Company argued: 1. The Retrial Applicant Jiangxi Rare Earth Company is infringement suit, the cause of action for maritime property damage compensation disputes, Jiangxi Rare Earth Company cope with the fact of infringement, tort and causality between harmful consequences to undertake the legal burden of proof. 2. There is no evidence that damage occurred during the period of liability of the carrier, its that the carrier have not been though cargo obligation, China Inspection Certification Group in Philippines to seal loss causes damage, the lack of facts and legal basis. Jiangxi Rare Earth Company purchased goods before sent to the Applicant has been replaced, the ownership of the goods has been infringed, the Applicant for any behavior has nothing to do with the invasion of Jiangxi Rare Earth Company ownership of the goods. Involved goods by the shipper to pack and seal, the Respondents received stuffed container and in fact also did not check the cargo quantity, quality, condition, content, therefore, the Respondents put in a bill of lading “packing and counting the shipper, the shipper seal, is said to have built-in” notation, the effect is that the notation for written in the bill of lading of commodity name, logo, packaging, and the number is not in conformity with the actual receiving goods “not check”, at the same time recorded in the bill of lading the above details are provided by the shipper, this notation is in accordance with the People's Republic of China Maritime Code Article 75 and also conforms to the customs and practice of container transportation. In view of the above notation of the Respondents held that about the cargo, the records specified on a bill of lading between the Applicant and the Jiangxi Rare Earth Company is not evidence of the goods having been shipped and there is no binding on the Respondents. The Respondents shall have the right to present evidence that the delivered goods is the actual loaded goods. As long as the container is not broken during the carrier's responsibility, the container door is not opened, and the carrier completes the burden of proof. Jiangxi Rare Earth Company can use the evidence to prove that the state of the goods in the container only China

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Inspection Certification Group in Philippines to inspection certificate before shipment, because the shipper only after packing in container with the company seal of China Inspection Certification Group in Philippines did not seal aboard seal, so the inspection certificate can only show the state of the cargo is loaded into the container in storage, and cannot prove that the container when received by the Respondents. Jiangxi Rare Earth Company container ship when receiving container seal in good condition, the container body nor sort of damage as a result, goods exchange behavior does not occur during the period of the carrier to receive the goods to the delivery of the goods, could only happen in the packing container shipped to the port of loading to container yard. The Philippine National Investigation Bureau’s investigation confirmed this. Report and the attachment is the testimony of witnesses, documentary evidence, material evidence and audio-visual material record, examination, and other types of evidence and formed a set of the chain of evidence, evidence is not a single document documentary evidence, the first-instance judgment does not leave the report as the supreme people's court, the provisions about the civil action evidence under Article seventy-seven of the official document documentary evidence directly determined its probative value, the first-instance judgment is report also stated that the “facts” rather than the official document expression contents of documentary evidence. Judgment of first instance and second instance in Jiangxi Rare Earth Company to survey does not provide any counterevidence, according to the comparative advantage of evidence rules and highly probability standard to judge the facts, fully comply with the regulations of evidence rule for the allocation of burden of proof. On the evidence in the form of legitimacy, the survey report and attachment is the notarial certificate in accordance with the provisions of the rules of evidence, investigators also testify questioned, Jiangxi Rare Earth Company in the criminal appeal and retrial application still wrong to insist that the survey report and accessories must be equivalent to a foreign court verdict, must first get the recognition and implementation of Chinese court, there is no legal basis. There is no fault in the issuance of the bill of lading by the Respondents. Jiangxi Rare Earth Company thinks the Respondents have an obligation in the annotate on the bill of lading container without the seal of China Inspection Certification Group in Philippines, make it a clean bill of lading, but resistance under the l/c payment. Considered by the Respondents, the proposition of Jiangxi Rare Earth Company erred and the Respondents did not have obligation in annotate on the bill of lading without China Inspection Certification Group company seal in the Philippines, and whether there is the seal on the bill of lading does not affect the Retrial Applicant’s obligations to make payment in l/c. At the same time, it is not related to the ownership of goods and damage to the goods. First of all, according to the provisions of the People's Republic of China Maritime Code Articles 73 and 75, the unclean bill of lading remarks limited to the name of the goods, mark, number, weight, volume and did not include the container appearance and status of the shipment. China Inspection Certification Group in Philippines or any other organization inspection seal information before shipment,

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the goods do not belong to the maritime law provisions of exterior condition, do not amount to unclean bill of lading with notation. Second, during the period of carrier's liability for the loading port yard to the port of discharge yard under the mode of transportation, the carrier is only responsible for the container surface condition and the integrity of the shipping company seal logo, is not responsible for checking the so-called China Inspection Certification Group in Philippines sealing of obligations. Third, the lead seal of China Inspection Certification Group in Philippines is neither the content that the carrier needs to check, nor is it known to the carrier. The final bill of lading is issued after the ship is sailing. Bill of lading heads and attached pages shall be listed in the “container number/seal number, shipping mark and quantity column” of bill of lading. According to the contents of the attached page of the bill of lading, it can be seen that the number beginning with “REGU” is the container number of the cargo identification column (Container No.), and the number beginning with “PHMNL” is the only seal number. According to the usual understanding, the other two Numbers should be the marks and numbers corresponding to the bill of lading column. Fourth, Jiangxi Rare Earth Company said, according to the packing list provided by the bill of lading can know the attached ship titles after the two numbers is the China Inspection Certification Group in Philippines company titles and goods titles. But the packing list is a trade document rather than a shipping document. The packing list is not received by the Respondents when the bill of lading is issued. Take a step back, even if the Respondents know seal of China Inspection Certification Group in Philippines on the attached sheet, due to that seal number is not goods contents on condition, the measures taken can only be refusal to record the number, rather than put unclean notation on the bill of lading. Documentary letter of credit transactions involved Ming of the following terms of payment for the full set of clean on board b/l, was not on the bill of lading the China Inspection Certification Group in Philippines company seal information requirements, and Jiangxi Rare Earth Company in to this fact also confirmed, so even if the bill of lading excluding China Inspection and Certification Group in Philippines seal, also does not constitute a violation of “documents”. 3. The Respondents does not have the fault to conceal the fact that the goods are not available in the port of midway. Jiangxi Rare Earth Company offered to inspect containers in Hong Kong on July 2, 2009. Due to the goods involved has not yet arrived at the port of destination, according to the contract of carriage of goods by sea between the carrier and the shipper, the carrier must agree the requirements of the shipper rather than Jiangxi Rare Earth Company requirements. Because Jiangxi Rare Earth Company no legal rights to during the port container, and the shipper refused to check clearly, so the Respondents can only refuse to Jiangxi Rare Earth Company in Hong Kong to check the requirement of the container. Because the transportation is FCL/FCL, the intermediate port container damaged need to switch box, the carrier only care about the goods is overweight and need overweight guarantee, and if there is a notary public to

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witness the goods the same turn into a new container, there is no need to pay attention to the contents of the container. Regional Company in HK before getting inspection reports have learned all the concerned information, on 22 June, you just need to archive for future reference, after get test report was not without carefully reading the inspection report, so the Regional Company by 30 June in Hong Kong companies are not aware of the goods did not agree with the bill of lading shows the goods in the container. In addition, the bill of lading does not stipulate that the carrier shall have the obligation to notify the consignee of the status of the cargo in the port of call. 4. Even if the Respondents were in Hong Kong during the intermediate port container at fault, the fault did not damage the Jiangxi Rare Earth Company on the ownership of the goods, and had no causal relationship with the loss of the company. According to the Provisions of the Supreme Court on Some Issues Concerning the Trial of Cases of Disputes over Letter of Credit Article 8, Article 9, and of Article 10, if Jiangxi Rare Earth Company wants to apply to stop payment order, it must prove existence of the L/C fraud case, also needs to prove that there is no “the negotiating bank’s negotiation”. According to the evidence provided by Jiangxi Rare Earth Company, on 15 June 2009, the shipper made the payment to Cathay Bank, and Cathay Bank made negotiation. Since the inspection in Hong Kong was conducted on 17 June 2009, it was evident that the Cathay Bank's negotiating letter of credit was in good faith. Even if Jiangxi Rare Earth Company can learn that the goods do not agree with the bill of lading in the first time after the inspection of the goods, the court has no right to issue a stop payment order. 5. There is a fault in the occurrence of the loss of goods by Jiangxi Rare Earth Company. The market access system for imported waste materials is implemented in China. As the contract seller of overseas supply enterprises, the seller must hold the registration certificate of foreign enterprises, and the seller must be the actual exporter. Jiangxi Rare Earth Company as the seller should do not have overseas enterprise registration certificate, company and signed with the “copper scrap business contract”, supplementary agreement is further evidence that the Jiangxi Rare Earth Company agreed to Amaxus Company to borrow deming company's overseas business registration certificate of export copper scrap, involved in violation of the stipulations of relevant laws and regulations. To sum up, the first instance and second-instance judgments decided facts clearly, and the application of the law was correct, and the Respondents to maintain them. In the retrial, the Respondents the Regional Company, the Regional Company in Philippines and Regional Pte. Company filed two new evidence: 1. The evidence provided by Standard Surveyor to the Regional Company on 22 January 2015; the container transhipment test, to prove that on 22 June 2009, the Regional Company in HK received Standard Surveyor inspection report in English, in view of the real condition of the goods is not in the scope of this inspection, so people did not put its notice “the spillage of damaged packaging

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for the similar soil and rocks” written into the report in English, on 20 January 2010, standard notarized in check the Regional Company in HK to its Chinese version of the inspection report, standard notarized Chinese version in the second page of the add annotations for cargo status. 2. Evidence on 2 July 2009, the Regional Company in HK (Sammy’s) and the Regional Company in Philippines (Bing's) email contacts, to prove that the Regional Company in HK till 30 June 2009, at the request of Jiangxi Rare Earth Company provide switch box photos, became to realize the goods might have a problem. The Regional Company, the Regional Company in Philippines and Regional Pte. Company do not know and have no access to information about the goods not conforming with the bill of lading records. Jiangxi Rare Earth Company expressed cross-examination opinion as follows: As to evidence 1, the form of evidence is improper as the witnesses of the testimony, who should, but did not appear in court for cross-examination. About the contents, as the evidence was submitted in hearing, So cross-examination could not be made in hearing due to lack of time and cross-examination opinion could only be made after trial. Evidence 2 does not conform to the evidence rules, and should not be admitted at all. In trial, both parties thereto confirm Jiangxi Rare Earth Company to CCB Hongdu under the l/c payment time (i.e., Jiangxi Rare Earth Company payment time) is 26 June 2009, not the original one as the second instance decided to be 20 June 2009. The time of confirmation between the two parties is consistent with the time of the settlement of the sale of foreign exchange of the Hongdu Branch of Jiangxi Rare Earth Company, which is confirmed by the court. The time of the original and second instance to pay for the payment of Jiangxi Rare Earth Company was wrong, and the court retried to correct it. In case of any other facts that have been identified by the first and second instance, the court shall reexamine the facts. Another finding is that Jiangxi Rare Earth Company during the first trial provides China Inspection Certification Group’s issued inspection certificate regarding waste raw materials before shipment as evidence to prove that the goods involved in delivery at the port of loading with the seal of China Inspection Certification Group in Philippines. The certificate stated as follows Shipper: Deming Company; Types of goods: scrap nonferrous metals; Number: 19 boxes; Date of inspection: 1 June 2009; Inspection site: Philippines; Goods packing: the goods after the inspection location is available the following identifiers of the container transport, are presented in order to “REGU” and the numbers of container, and the corresponding with “PH” and digital representation of seal number. China Inspection Certification Group in Philippines. Jiangxi Rare Earth Company during the first trial also showed a negotiating bank, Cathay Bank made negotiation with the issuing bank on 15 June 2009 with evidence and the translation (the letter and payment notice) to prove it paid up according to the regulations of the L/C to the L/C beneficiary. This letter has the following statement: “INSTRUCTIONS: according to the l/c

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INSTRUCTIONS, I can handle the claim to your bank…. we hereby certify that the amount of negotiation has been properly endorsed on the original l/c. (INSTRUCTIONS: AS IN STRUCTED BY YOUR CREDIT, WE CLAIM REIMBURSEMENT FROM YOU…. WHEREBY CERTIFY THAT AMOUNT NEGOTIATED WAS DULY ENDORSED ON THE REVERSE OF THE ORIGINAL CREDIT.)” In the first instance trial on 15 May 2012, the Regional Company, the Regional Company in Philippines and Regional Pte. Company believe that Jiangxi Rare Earth Company claiming the reasons lead to the loss of opportunity to stop the carrier, but according to Jiangxi Rare Earth Company above evidence provided by the company, under the condition of the negotiating bank payment has no chance to stop; A trial judge asked Jiangxi Rare Earth Company about the letter of credit, and Jiangxi Rare Earth Company said the foreign negotiating bank could not operate it clearly. The court in retrial believes that as to the case for maritime property damage liability disputes, according to the Jiangxi Rare Earth Company’s application the Regional Company, the Regional Company in Philippines and Regional Pte. Company's pleas, this retrial’s focus is: whether the Regional Company, the Regional Company in Philippines and Regional Pte. Company should bear tort liability to pay compensation to the Jiangxi Rare Earth Company. Jiangxi Rare Earth Company claims the Regional Company, the Regional Company in Philippines and Regional Pte. Company assume tort liability to pay compensation, the Jiangxi Rare Earth Company shall provide evidence that the Regional Company, the Regional Company in Philippines dence that the Jiangxi Rare Earth Company property rights and interests are harmed, and implemented Regional Pte. Company property rights and interests of Jiangxi Rare Earth Company behavior, the behavior and Jiangxi Rare Earth Company property rights damage causation, and the person at fault. Jiangxi Rare Earth Company proves the fact that, the company and Amaxus Company signed in May 2009 the copper scrap business contract, Jiangxi Rare Earth Company agreeing to buy copper scrap. Mode of shipment and the conditions are CFR Guangzhou or Xiamen, and manner of payment is l/c. On 26 June 2009, Jiangxi Rare Earth Company paid for the payment of the credit under the L/C and obtained the original bill of lading. 13 July 2009, the goods arrived at the port of destination, the next day, after opening, found 19 container shipping is a lot of mud, stone, rust and iron slag, not Jiangxi Rare Earth Company to buy copper scrap. Jiangxi Rare Earth Company paid for the goods but received the worthless goods, the property rights and interests of Jiangxi Rare Earth Company were damaged, the court confirmed this. Jiangxi Rare Earth Company claims that the infringement actions carried out by the Regional Company, the Regional Company in Philippines and Regional Pte. Company caused damage to its property rights and interests. In the retrial, Jiangxi Rare Earth Company claims the Regional Company, the Regional Company in Philippines and Regional Pte. Company have three: One is the as carrier and actual carrier the Regional Company, the Regional Company in Philippines and Regional Pte. Company during the period

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responsibility did not fulfill the duty to look after, storage of goods, the container of China Inspection Certification Group seal, which caused Jiangxi Rare Earth Company’s loss of the goods; Second, if the carrier received the container without China Inspection Certification Group in Philippines’ company seal number, unclean bill of lading should be issued, but the Regional Company issued, without China Inspection Certification Group in Philippines seal, issued clean bill of lading, and such erroneous behavior caused Jiangxi Rare Earth Company pay for goods and suffered loss; Third is in Hong Kong when the damaged container transfer, the Regional Company, the Regional Company in Philippines and Regional Pte. Company already know that the goods did not confirm with the bill of lading, but its deliberately not inform the Jiangxi Rare Earth Company, causing Jiangxi Rare Earth Company unable to apply for to stop payment. About Jiangxi Rare Earth Company claims the first tort, whether because of carrier and actual carrier the Regional Company, the Regional Company in Philippines and Regional Pte. Company during its responsibility does not fulfill the duty to look after, storage of goods, the container of China Inspection Certification Group’s company seal, Jiangxi Rare Earth Company loss of the goods. As the carriage of goods is the container shipment of the goods, the Maritime Code of the People's Republic of China Article 46 Paragraph 1: the carrier of the responsibility of the container shipment of the goods, is refers to from the port of loading to receive the goods when delivered the goods to the port of discharge, the carrier is in charge of the goods during all.” Jiangxi Rare Earth Company during the period of first instance submitted the inspection certificate issued by the China Inspection Certification Group in Philippines as evidence to prove that the goods involved in delivery at the port of loading of the sealed with the seal of China Inspection Certification Group in Philippines. From Jiangxi Rare Earth Company submit China Inspection Certification Group in Philippines to China waste raw materials before shipment Inspection certificate, the certificate indicating the inspection date is on 1 June 2009, the date before the container arrive in Manila; Stated in the certificate of 19 container identifiers are expressed in terms of a “REGU” with digital container number and the corresponding expressed in “PH” and digital China Inspection Certification Group in Philippines’ seal number, not stated shipping company seal number. As a result, the inspection certificate can only prove that the goods before shipment after China Inspection Certification Group in Philippines and after an inspection packing was sealed with the seal of China Inspection Certification Group in Philippines, but it can’t prove that 19 in delivery at the port of loading of the container sealed with the seal of China Inspection Certification Group in Philippines. The Regional Company, the Regional Company in Philippines and Regional Pte. Company argue that the container goods before delivery of the carrier has swapped damage will not occur during its responsibility, and they during the period of first instance submitted the notarised report of the Philippines National Investigation Bureau.

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In a trial hearing on 16 November 2010, Jiangxi Rare Earth Company confirmed the authenticity of the report, but disputed its relevance, saying the evidence was not related to the case. The Philippines National Investigation Bureau is part of the Philippine Department of Justice, which is the authority to investigate criminal offences and other violations of the Philippine law. Dennis said, the national bureau of investigation investigator who was in charge of the investigation, made the report through a specific investigation, asking relevant parties and reviewing the relevant information. The report after the notarial certification, Dennis, investigators in the first-instance court and accepted the parties’ inquiry, Dennis, grace said it is in the trial should be the Regional Company’s application on behalf of the Philippines National Investigation Bureau to appear in court, in court after the Philippines National Investigation Bureau for approval. The report with the authority of the official, the detailed and specific evidence of attachment, attached, objectivity and rationality in Jiangxi Rare Earth Company provided no contrary evidence, the original probability according to the height of civil lawsuit proof standard, inter alia, to report, and when all things. Inter alia, based on the survey and decide the booking, drag the fact of empty containers, packing, loading port and delivery, the goods at the port of loading is switched before delivery, and at the time of delivery does not bear the seal of China Inspection Certification Group in Philippines, the Regional Company, the Regional Company in Philippines and Regional Pte. Company without affixture of China Inspection Certification Group’s lead seal, the seal and the goods cause loss of infringement. Therefore, Jiangxi Rare Earth Company advocated the Regional Company and the actual carrier the Regional Pte. Company during its responsibility does not fulfill the duty to look after, storage of goods, the container of China Inspection Certification Group in Philippines’ seal loss of the goods loss, Jiangxi Rare Earth Company, not based on facts, not support. About Jiangxi Rare Earth Company claims that the second tort, whether the error issued by the Regional Company with China Inspection Certification Group’s seal number, clean bill of lading, in the Philippines in Jiangxi Rare Earth Company payment, loss problem. As the container does not have the lead seal of the China Inspection Certification Group in Philippines, the Regional Company in Philippines has recorded in the attached page of the bill of lading issued by the Regional Company, which is indeed wrong. CCB Hongdu at the request of Jiangxi Rare Earth Company to open the L/C, l/c payment of the required documents, to the requirements of the bill of lading is full set of clean on board bill of lading (showing freight prepaid and name of vessel, notify party and consignee for Jiangxi Rare Earth Company), does not require the seal of China Inspection Certification Group in Philippines. Therefore, whether the bill of lading had China Inspection Certification Group’s company seal does not affect the payment made by L/C, the original misidentified the behavior of the bill of lading and there is no causation with Jiangxi Rare Earth Company payment by L/C.

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Therefore, Jiangxi Rare Earth Company maintains that the Regional Company, the Regional Company in Philippines and Regional Pte. Company shall be liable for the wrong issue of the bill of lading, which has no legal basis and will not be supported by the court. About Jiangxi Rare Earth Company claims the third tort, whether because of the Regional Company, the Regional Company in Philippines and Regional Pte. Company did not inform the Jiangxi Rare Earth Company the goods did not agree with the bill of lading, lead to the Jiangxi Rare Earth Company fails to apply for, to stop the losses. It has been found that on 15 June 2009, the negotiating bank issued a letter of compensation to the Hong Kong branch of the issuing bank. On 17 June 2009, the Regional Company, the Regional Company in Philippines and Regional Pte. Company standard notary done under the supervision of loading, entrusted by the Hong Kong company in Hong Kong transit accidentally damaged in the process of unloading box REGU4999571 shipment of our container was transferred to REGU4213152 container, goods inspection researchers found that by rotating cylinder as a mixture of soil and rocks. On 26 June 2009, Jiangxi Rare Earth Company paid the payment under the L/C and got the original bill of lading. On 30 June 2009, Jiangxi Rare Earth Company received the mail and attached photos of the damaged containers. According to the facts identified above, Jiangxi Rare Earth Company has yet to get the original bill of lading when the damaged container turns in, and Jiangxi Rare Earth Company was only the consignee of the bill of lading. “The rights and obligations of the carrier to the consignee and the holder of the bill of lading shall be determined in accordance with the provisions of the bill of lading.” In the retrial, the court shall ask the parties concerned whether the carrier has the obligation to notify the consignee if the carrier finds the goods are not in conformity with the bill of lading. Jiangxi Rare Earth Company said that the other party had notified the other party to provide a guarantee for the container change box. In this sense, a party was obligated to notify the other party. The Applicant said that the carrier was not obliged to notify the Jiangxi Rare Earth Company, and the bill of lading of the container did not specify the obligation of the carrier to inform the consignee of the goods in the port of port. Further, the Provisions of the Supreme Court on Some Issues Concerning the Trial of Cases of Disputes over Letter of Credit. Article 9: “the L/C applicant and the issuing bank or any other interested party found a situation described in Article 8, and that would give its cause irreparable damage, can apply to the people's court having jurisdiction for suspended under the l/c payments.”; Article 8: “every one of the following circumstances, shall be deemed as there are: (1) the l/c fraud beneficiary fake documents or submit written content false documents; (2) the beneficiary malicious don’t deliver the goods or delivery of the goods without value;…”; Article 10: “that is the l/c fraud, the people's court shall rule to suspend payment or termination decision under a credit available by payment, except where any of the following circumstances: (a) the issuing bank's nominee, licensor has been carried out in accordance with the issuing bank's instruction kindly payment;… gently in the (4) the negotiating bank.” According to the above provisions, Jiangxi Rare Earth

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Company in this case because the Applicant did not inform the cargo without causing its failure to apply for a single, to stop the Jiangxi Rare Earth Company shall proof to prove if the Respondents was found in 17 June 2009, cargo timely notify the Jiangxi Rare Earth Company when no single company, Jiangxi Rare Earth Company application conforms to the circumstances provided for in Article 8 of the L/C fraud to stop and do not exist except as stipulated in Article 10. According to the facts ascertained, on 15 June 2009, the negotiating bank Cathay Bank issued a letter of recourse to the issuing bank, CCB Hongdu, and said the amount of the agreed amount had been endorsed in the original letter of credit. On 17 June 2009, the Applicant found that the goods were not in conformity to the documents. The date was after the date of the letter of recourse the negotiating bank. The Applicant on the basis of claim, the negotiating bank for negotiation and friendly negotiation has case, according to the Provisions of the Supreme People’s Court on Some Issues Concerning the Trial of Cases of Disputes over Letter of Credit, Article 10, Jiangxi Rare Earth Company even if apply for stop payment, also does not conform to the conditions of stopping payment. Jiangxi Rare Earth Company in the retrial court according to its different expression is negotiated in the letter of credit, but provided no proof to prove that on 17 June 2009, the respondent found goods not single, the negotiating bank for negotiation or not has not been in good faith negotiation. So, Jiangxi Rare Earth Company’s claim that the Regional Company, the Regional Company in Philippines and Regional Pte. Company did not inform it that the goods did not comply with the bill of lading so they should take tort liability to pay compensation is not based on facts and has no legal basis and shall not be supported. To sum up, the Jiangxi Rare Earth Company’s claims against the Regional Company, the Regional Company in Philippines and Regional Pte. Company for tort liability are lack of facts and legal basis. The second instance judgment is correct in finding of facts and the application of law is also correct. According to the provisions of Article 207 and First Paragraph of Article 170 of the Civil Procedure Law of the People's Republic of China, the judgment is as follows: affirm the civil judgement of second instance (2013) Yue Gao Fa Min Si Zhong Zi No. 31. This judgment is final. Presiding Judge: TAN Zhen Judge: LAI Shangbin Acting Judge: ZHONG Xiangfen July 18, 2016 Acting Clerk: SHAO Weiling (Editor’s Note: The judgment of second instance is not released to the public domain, so cannot be included. That said, this judgment of retrial affirms the judgment of second instance and is the final judgment in this case.)

Qingdao Maritime Court Civil Judgment Joho Trading Corporation v. New Unite (HK) Marine Shipping Co., Ltd. (2012) Qing Hai Fa Hai Shang Chu Zi No.958 Related Case(s) This is the judgment of first instance, and the judgment of second instance and the judgment of retrial are on page 527 and page 540 respectively. Cause(s) of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote The Plaintiff shipper held entitled to recover some, but not all, losses incurred as a result of refusal by defendant to sign and issue bills of lading prepared by the Plaintiff. Summary The Plaintiff, Joho Trading Corp. (Joho), which was shipper of a cargo of coal to be carried from North Korea to China, prepared bills of lading relating to carriage of the cargo, but the Defendant refused to sign and issue them. The Plaintiff sued the Defendant for damages resulting from the Defendant’s refusal to issue the bills. The damages claimed included port fees, and delay damages caused by the decrease in value of coal which the Defendant carried. The Defendant argued that there was no contractual relationship between it and the Plaintiff, whereby the Plaintiff was entitled to demand issue of the bills of lading. At trial, the court held that: (1) the Plaintiff, as consignor and shipper of the goods, had the right to receive the bill of lading, (2) the Defendant was liable to the Plaintiff for the customs delay fees incurred. All other claims for damages by the Plaintiff were rejected.

Judgment The Plaintiff: Joho Trading Corporation Domicile: Qianjin Cave, Lelang District, Pyongyang, Korea. Legal representative: DONG Jinyu, chairman of the corporation. Agent ad litem: GAO Liangchen, lawyer of Shandong Wincon Law Firm. Agent ad litem: GUO Enzhong, lawyer of Shandong Wincon Law Firm. © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_19

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The Defendant: New Unite (HK) Marine Shipping Co., Ltd. Domicile: Room 19C, Rock Centre, 301–307 Lockhart Road, Wan Chai, Hong Kong. Legal representative: LIU Xiangyang, chairman of the company. Agent ad litem: CHEN liang, lawyer of Shanghai Allbright (Nanjing) Law Offices. With respect to the case arising from dispute over contract of carriage of goods by sea between the Plaintiff, Joho Trading Corporation (hereinafter referred to as the Plaintiff), and the Defendant, New Unite (HK) Marine Shipping Co., Ltd. (hereinafter referred to as the Defendant), after the court accepted it, the Plaintiff filed an application for property preservation and provided guarantee to the court on October 16, 2012, claiming to arrest M/V RICHOCEAN, which was owned by the Defendant according to the law, and the court ruled to approve the application. On January 17, 2013, the Plaintiff applied for the release of the arrest of M/V RICHOCEAN on the ground that the Defendant provided the guarantee recognized by the Defendant, and the court ruled to approve the Plaintiff’s application and release the arrest of the ship. On January 4, 2013, the Plaintiff applied to add Qingdao Guangya International Shipping Co., Ltd. (hereinafter referred to as Qingdao Guangya) as the co-Defendant in the case. On July 2, 2013, the Plaintiff applied to withdraw the lawsuit against Qingdao Guangya, and the court ruled to approve. The court formed a collegiate panel and held a hearing in public. Agents ad litem of the Plaintiff, GAO Liangchen and GUO Enzhong, agent ad litem of the Defendant, CHEN liang, appeared in court to attend the hearing. Now the case has been concluded. The Plaintiff claimed that: on March 3, 2012, the Plaintiff and the Hong Kong Iron and Steel Union International Trade Co., Ltd. (hereinafter referred to as Hong Kong Iron and Steel Union) concluded a coal sales contract, and Hong Kong Iron and Steel Union and Qingdao Quantum Jinyuan Energy Development Co., Ltd. (hereinafter referred to as Qingdao Quantum Jinyuan) concluded a coal purchase and sale contract, and Qingdao Quantum Jinyuan was the ultimate consignee of the goods involved. According to the contract, the Plaintiff loaded 3,782 tons of coal on board M/V RICHOCEAN at Da’an Port in North Korea. After the goods was loaded on the ship, the Defendant issued a full set of original bills of lading which recorded that the shipper was the Plaintiff and the notifying party was Hong Kong Iron and Steel Union on May 20, 2012. Although the Plaintiff repeatedly asked for the bill of lading, the Defendant rejected it on various untenable reasons. According to the instructions of the Plaintiff, Qingdao Quantum Jinyuan also paid the ocean freight and reasonable demurrage, and paid the full payment for the goods involved. The Defendant should immediately deliver the full set of original bill of lading No. D-1 to the Plaintiff or the final consignee designated by the Plaintiff, Qingdao Quantum Jinyuan; the Defendant should bear the delayed declaration payment, storage fee and other loss totaling RMB 1,057,725.17 of goods at Qingdao Port caused by the arrest of the bill of lading; and bear the costs of litigation fee and preservation fee in the case. During the trial of the case, the Plaintiff changed claims three times. The court explained and the Plaintiff clearly stated that claims were

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that: 1. the Defendant should deliver the full set of original bill of lading No.D-1 to the Plaintiff or a person designated by the Plaintiff; 2. the Defendant should compensate the Plaintiff for 312,393.20 yuan for the storage fee of goods happened at Qingdao port caused by the arrest of the bill of lading; 3. the Defendant should compensate the Plaintiff for 501,426 yuan for the customs delayed declaration fee, the port fee 105,896 yuan of goods happened at Qingdao port caused by the arrest of the bill of lading, totaling 607,322 yuan; 4. the Defendant should compensate the Plaintiff for liquidated damages 567,300 yuan for the Plaintiff’s failure to perform the delivery obligation to the buyer due to the arrest of the bill of lading; 6. the Defendant should compensate the Plaintiff for interest loss 213,904.63 yuan; and the Defendant should bear the litigation fee and preservation fee of the case. The Defendant claimed that, firstly, there was no contractual relationship of carriage of goods by sea between the Plaintiff and the Defendant, and the Defendant had no obligation to deliver the bill of lading to the Plaintiff. Of the evidence submitted by the Plaintiff to the court, only two pieces of evidence was used to prove that the Defendant was the carrier in the case. However, the copy of the bill of lading did not state that the Defendant was the carrier of the goods. Although the copy of the bill of lading was stamped with the seal of M/V RICHOCEAN, it only indicated that the Defendant was the bareboat charterer of M/V RICHOCEAN. The captain’s signature was only used as proof of receipt of the goods, and could not be used as evidence that the Defendant was the carrier. As for the evidence submitted by the Plaintiff evidence 4 North Korea’s Da’an Port Certificate, judging from the content of the certificate, it only proved that M/V RICHOCEAN went through the border control procedures with the relevant North Korean authorities when entering Da’an Port, instead of evidence of the Defendant and North Korea’s official confirmation of the identity of the Plaintiff shipper and the Defendant carrier. The content of the document did not have any probative force of the identity of the Defendant as the carrier. In the case, the owner of the ship was Zhoushan Gaodi Shipping Co., Ltd., and the Defendant was the bareboat charterer of M/V RICHOCEAN. The Defendant entrusted M/V RICHOCEAN to Jiangsu NEW UNITE MARINE SHIPPING CO., LTD. (“Jiangsu New Unite”) to manage. The vessel was time chartered to Qingdao Guangya, and Qingdao Guangya concluded a voyage charter party with Taiyuan Shipping Co., Ltd. According to the Maritime Code of the People’s Republic of China, the nature of the time charter party and the bareboat charter party was a ship charter party, while the voyage charter party was a contract of carriage of goods by sea. In the case, the Defendant was both the ship’s lessor and not the party to the contract for the carriage of goods by sea. The evidence provided by the Plaintiff could not prove the existence of a contractual relationship of carriage of goods by sea between the Plaintiff and the Defendant. Secondly, the bill of lading involved did not clearly state the identity of the carrier. However, the bill of lading clearly stated that it was a charter party bill of lading. According to the Maritime Code Article 95, for a bill of lading issued according to a voyage charter party, if the bill of lading holder was not the charterer, the right and obligation relationship between the carrier and the bill of lading holder should be governed by the agreement of the bill of lading. However, if the bill of

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lading stated the it was applied with voyage charter party terms, the voyage charter party terms should apply. In the voyage charter party, it was clear that Qingdao Guangya was the owner and the freight was also collected by Qingdao Guangya, so it was certain that Qingdao Guangya was the actual carrier of the goods. The Plaintiff submitted the following evidence to prove its claims: Evidence 1. Bill of lading (copy), to prove that: the fact that the Defendant M/V RICHOCEAN carried the goods involved. The bill of lading stated that the Plaintiff was the shipper and the Defendant was the carrier, and the Defendant should deliver the bill of lading to the Plaintiff. Evidence 2. Origin certificate, to prove that: the Plaintiff, as the shipper, sold the goods involved to Hong Kong Iron and Steel Union. Evidence 3. Inspection certificate, to prove that: the Plaintiff, as the shipper, sold the goods involved to Hong Kong Iron and Steel Union. Evidence 4. Certificate of Da’an Port of North Korea, to prove that: the Defendant and North Korean officials recognized the identity of the Plaintiff shipper and the Defendant carrier. Evidence 5. Statement of the situation, to prove that: after the goods were loaded on the ship, the Plaintiff, as the shipper, claimed the rights of the bill of lading against the Defendant. When the Defendant refused to deliver the bill of lading, the Plaintiff also entrusted Iron and Steel Union to claim the bill of lading against the Defendant. Evidence 6. Coal sales contract, to prove that: the price of North Korean anthracite was declining, and the Defendant should bear the loss of the decline in the market. Evidence 7. Coal sales contract, to prove that: the price of North Korean anthracite was declining, and the Defendant should bear the loss of the decline in the market. Evidence 8. Charging standards of Qingdao Customs, to prove that: The standard of delayed declaration fee charged by Qingdao Customs was 0.05%. Evidence 9. Statement of the situation (original) and three invoices (original) issued by Qingdao Quantum Jinyuan on August 1, 2013, to prove that because the goods was stored in the destination port for a long time, the customs delayed declaration fee and storage fee were increasing day by day, and the goods were at risk of being confiscated by the customs due to the long parking time. In order to avoid the expansion of loss, the Plaintiff and Qingdao Quantum Jinyuan and other related parties firstly took the goods, and then resolved the subsequent disputes. In the case, customs declaration and delivery procedures were carried out in an unconventional manner. The amount of customs delayed declaration fee and port fee was clarified, to prove the loss of customs delayed declaration fee and port fee caused by the Defendant’s failure to issue the bill of lading. Evidence 10. Two calculation tables for interest loss. One is the interest loss of the Plaintiff’s receivables; the other is the interest loss of the 1.3 million yuan deposit paid by the Plaintiff in the case. If the Defendant in the case issued the bill of lading normally, the Plaintiff would receive the payment soon, and there would

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be no loss of interest on the payment, and no subsequent loss of interest of deposit on the arrest of the ship. The aforementioned interest loss should be born by the Defendant. Evidence 11. Statement of the situation issued by Qingdao Quantum Jinyuan on August 8, 2013 (original), to prove that the Defendant did not issue a bill of lading to the Plaintiff, and the Plaintiff could not perform the subsequent sales contracts. The goods were stored in the port of destination for a long time, resulting in huge expenses. The huge expenses were paid by Qingdao Quantum Jinyuan on behalf of the Plaintiff. The right to claim for these loss should be exercised by the Plaintiff to the shipowner. Evidence 12. Statement of claim and deduction notice issued by Hong Kong Iron and Steel Union to the Plaintiff, to prove that the Plaintiff sold the goods involved to the Hong Kong Iron and Steel Union, but the Plaintiff was unable to perform the delivery obligations to the Hong Kong Iron and Steel Union because the Defendant did not issue the bill of lading, resulting in the goods being stored at the destination port for a long time, and then the price fell, resulting in losses in the market and liquidated damages. Part of the loss has indeed happened, which could be mutually proved with the statement issued by Qingdao Quantum Jinyuan. Evidence 13. Fact that the goods involved were loaded on a ship at Da’an Port in North Korea, to prove that the Plaintiff was the shipper of the goods involved, and the captain YANG Binghe received the goods delivered by the Plaintiff on behalf of the Defendant and was the carrier of the goods involved. Therefore, the Defendant should deliver the original bill of lading to the Plaintiff, not Guangya, after the goods were loaded. Evidence 14. Coal purchase and sale contract concluded in Qingdao on March 13, 2012 between the Plaintiff and Hong Kong Iron and Steel Union, to prove the fact that the Plaintiff sold the goods involved to Hong Kong Iron and Steel Union, the price of the goods involved was 600 yuan/ton and the agreement of liquidated damages. Evidence 15. Customs declaration form, to prove the actual arrival date and customs clearance time of the goods, and the receiving unit was Quantum. Evidence 16. Port operation contract concluded by Quantum and the port operator. The contract agreed that the storage fee was free for 15 days, the rate was 0.1 yuan per ton per day for 30 days, and 0.2 yuan per ton per day for more than 30 days, to prove the calculation standard of the composition of the Plaintiff’s loss. Evidence 17. Statement of the import process found on the Qingdao Port Logistics Information Network, to prove that in the statement, it specifically mentioned the six documents required for customs declaration. One of them was the delivery order. The delivery order was exchanged with the original ocean bill of lading. The Defendant in the case did not issue the original bill of lading, so Quantum could not exchange the delivery order, and finally could not declare to the customs, so there was a delayed declaration fee. Evidence 18. Case of Shanghai Maritime Court, case number (2009) Hu Hai Fa Hai Shang Chu Zi No.226, to prove that: (1) the reason for the delayed declaration fee in practice. It could not be cleared without the bill of lading. (2) In judicial

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practice, the approach to the attribution of the liability for the loss of delayed declaration fee. On August 6, 2013, the Plaintiff submitted notarized evidence 1 copy of the bill of lading, evidence 2 origin certificate, evidence 3 inspection certificate, evidence 4 certificate of North Korean Da’an port, evidence 13 shipment fact records, the five pieces of evidence all went through the procedures of notarization and certification. The Defendant had no objection to the authenticity of evidence 1 submitted by the Plaintiff, but had objection to the content of the evidence, holding that the bill of lading was not issued by the Defendant, nor did it indicate that the Defendant was the carrier, and the normal bill of lading had a carrier column. Although evidence 2, 3, and 4 was notarized and certified, they had no objection to the authenticity of the form of evidence, but the content of the evidence was not recognized. None of the above-mentioned evidence could prove that the Defendant was the carrier, nor could it prove and support the Plaintiff’s claims. On the certificate of North Korean Da’an port, the place where the captain of M/V RICHOCEAN did not have the Defendant’s carrier’s signature and seal. Regarding evidence 5, neither the Plaintiff nor Shanghai Iron and Steel Union ever claimed to deliver the bill of lading from the Defendant until the Plaintiff filed an action against the Defendant. The Defendant did not receive the freight paid by the shipper, nor did it receive the freight paid by the Iron and Steel Union, let alone the freight paid by the so-called designated consignee by the Plaintiff. Therefore, the authenticity, legality and relevancy of evidence 5 were not recognized. The authenticity, legality and relevancy of evidence 6 and 7 were not recognized, because the buyer and the seller of the two contracts had nothing to do with the case. There was no objection to the authenticity of evidence 8, but its relevancy was not recognized. The Plaintiff’s loss was not caused by the Defendant, and the Defendant was not liable for compensation. There was objection to the authenticity of the statement in evidence 9, and the apparent authenticity of the three original invoices was recognized, but the port construction fee was a normal customs charge and had nothing to do with whether the declaration was postponed. The port construction fee and customs declaration fee were not the Plaintiff’s loss. The relevancy of this piece of evidence with the case was not recognized. The authenticity and relevancy of evidence 10 to 3vidence 18 was not recognized, and the Plaintiff’s loss was deemed irrelevant to the Defendant. To prove its pleas, the Defendant submitted the following evidence: Evidence 1. M/V RICHOCEAN ownership registration certificate, to prove that the Defendant was not the owner of M/V RICHOCEAN, the owner of the ship was Zhoushan Gaodi Shipping Co., Ltd., the Defendant was not the carrier, and the ship was under mortgage. Evidence 2. M/V RICHOCEAN bareboat charter registration certificate, to prove that the owner of the ship, Zhoushan Gaodi Shipping Co., Ltd. chartered it to the Defendant, the Defendant was not the owner of the ship, the Defendant was the charterer of the ship, and the Defendant was not the carrier. Evidence 3. Time charter party. The Defendant chartered the ship to Qingdao Guangya through Jiangsu New Unite. The time charter time was from April 28, 2011, and the term was one year, to prove that M/V RICHOCEAN was chartered to

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Qingdao Guangya. During the time charter period, the Defendant’s captain accepted the instructions and management of the charterer Qingdao Guangya, and its act of issuing the bill of lading only represented the charterer. Evidence 4. On November 8, 2010, the Defendant and Jiangsu New Unite concluded M/V RICHOCEAN management contract, and the management period was three years, to prove that Jiangsu New Unite chartered M/V RICHOCEAN to Qingdao Guangya, which was entrusted by the Defendant. Evidence 5. Bill of lading receipt, the bill of lading involved was taken away by the staff of Qingdao Guangya, to prove that the Defendant did not control the bill of lading, let alone the goods, and that the Defendant was not the carrier. Evidence 6. Two lease renewal agreements for M/V RICHOCEAN, to prove that the ship was chartered to Guangya. Evidence 7. Voyage charter party between Guangya and Taiyuan on April 6, 2012, to prove that Guangya sub-leased M/V RICHOCEAN to Taiyuan in the form of voyage charter. Evidence 8. Voyage instructions of M/V RICHOCEAN, to prove that Guangya instructed the captain to sail the ship to North Korea. Evidence 9. Bank remittance notice of rent issued by Qingdao Guangya, the charterer of the time charter party of the ship involved, to the Defendant, to prove that the Defendant was the charterer of the ship involved, not the carrier. The Defendant only charged the ship’s rent, not freight. Evidence 10. Certificate issued by Qingdao Guangya, to prove the time charter party concluded with Jiangsu New Unite and the voyage charter party concluded with Taiyuan Shipping Co., Ltd and there was no contractual relationship of carriage between the Defendant and the Plaintiff. The Plaintiff had no objection to the authenticity of evidence1 and 2 submitted by the Defendant. These two pieces of evidence just proved that the Defendant was the charterer of the bareboat and the operator of the ship, which was consistent with the issuance and seal of the bill of lading. The Plaintiff was not suing the owner or the owner of the ship, but suing the carrier according to the requirements of the Maritime Code, and the Defendant was the carrier. Because evidence 3 and evidence 6 were not originals, their authenticity was not recognized. Even if the Defendant provided the original, the Plaintiff held that it would not rule out the possibility of concluding the time charter party in response to the action in the case. Qingdao Guangya was a shipping company registered in Hong Kong, therefore, the time charter party should be notarized and certified. Because this time charter party was from April 28, 2011 to April 28, 2012, even if the captain was instructed by Guangya according to the Defendant, the goods involved happened in May 2012, which exceeded the period of the time charter party, and Guangya had no right to instruct. Even if Guangya had the right to instruct, since this time charter party was an internal agreement, its agreement could not contradict the record on the bill of lading. Evidence 4 did not go through relevant notarization and certification, so the authenticity, legality and relevancy of the contract was not recognized. The content recorded in evidence 5 was not recognized, and the Defendant’s delivery of the bill of lading to Guangya was a wrong delivery and should be delivered to the delivery

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shipper according to the Maritime Code. The authenticity of evidence 7 was not recognized, because Taiyuan was the Defendant’s agent, so it was impossible for Taiyuan to conclude a voyage charter party with Guangya. Both Taiyuan and Guangya were registered companies in Hong Kong, and the Defendant should handle notarization and certification procedures of evidence. The authenticity of evidence 8 was not recognized. Regarding evidence 9, the Plaintiff held that the evidence had no relevancy to the case because the payee was Jiangsu New Unite and the Defendant in the case was Hong Kong New Unite Shipping Co., Ltd. For evidence 10, Qingdao Guangya, the issuer, was a Hong Kong company and should go through the procedures of notarization and authentication. The legality and validity of the certificate were not recognized. The court confirms the authenticity of evidence 1 to 3 and evidence 8 submitted by the Plaintiff, confirms the authenticity of evidence 1 and 2 submitted by the Defendant, and comprehensively confirms the other evidence submitted by both parties combined with other evidence. After cross-examination in court, combined with the evidence and statements submitted by the Plaintiff and the Defendant, the court finds the following facts: M/V RICHOCEAN owned by Zhoushan Gaodi Shipping Co., Ltd. was chartered to the Defendant by bareboat from September 1, 2010 to August 31, 2013, and the bareboat charter was registered with the Zhoushan Maritime Safety Administration of the People’s Republic of China. M/V RICHOCEAN management contract concluded by the Defendant and Jiangsu New Unite on November 8, 2010 stated that after friendly negotiation between the two parties, for things that Jiangsu New Unite managed the Defendant’s M/V RICHOCEAN, on November 8, 2010, the following agreement was reached in Nanjing. The Defendant entrusted Jiangsu New Unite to operate the ship, conclude a freight contract or time charter party, and charge freight or rent. The two parties agreed that the cooperation period would be three years, and the management fee would be collected from the date of receiving the ship. The contract also agreed other matters. On April 28, 2011, Jiangsu New Unite, as the owner of the ship, concluded a time charter party for M/V RICHOCEAN with the charterer Qingdao Guangya, agreeing that “… the captain and the crew should try their best to assist in the dispatch, although the shipowner appointed the captain, however, as the hirer of the charterer, the captain should follow the instructions of the charterer and the agent … during the charter period, the charterer requires the captain to sign a bill of lading consistent with the charter party. The charterer and the agent can be entrusted to sign the bill of lading same with the mate’s receipt on behalf of the captain and chief mate.” After that, the two parties concluded a lease renewal agreement for the ship on May 14, 2012. The charter period was from May 23, 2012 to November 23, 2012. Except for the rent terms, other terms were enforced as time charter party of M/V RICHOCEAN concluded by both parties on April 28, 2011. The time charter party submitted by the Defendant did not contain the record of the place where the contract was concluded, nor did it go through relevant notarization and certification.

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The 6 remittance notices from China Merchants Bank submitted by the Defendant from January to June 2012 stated that the remitter was Qingdao Guangya, the beneficiary was Jiangsu New Unite, the country/region of the remitter was Hong Kong, and the remittance information was M/V RICHOCEAN rent. On May 20, 2012, M/V RICHOCEAN loaded 3,782 tons of anthracite at Da’an Port in North Korea. The delivery shipper was the Plaintiff. On May 23, 2012, the goods involved arrived at the destination port of Qingdao Port, China. On November 8, 2012, when the court boarded and arrested M/V RICHOCEAN at Baosteel Comprehensive Terminal in Shanghai, the captain of the ship, YANG Binghe, recognized that the goods shipper involved was the Plaintiff, and the D-1 bill of lading involved was taken away by staff of Qingdao Guangya on May 24, 2012. The bill of lading stated that the charter party was incorporated into the bill of lading, the shipper was the Plaintiff, and the consignee was instructed, Hong Kong Iron and Steel Union was notifying party. The signature of the captain YANG Binghe was signed at the place of writing, and it was stamped with seal of M/V RICHOCEAN of the Defendant. Coal Purchase and Sale Contract submitted by the Plaintiff, which was concluded by Hong Kong Iron and Steel Union with it on March 13, 2012 stated that the seller was the Plaintiff and the buyer was Hong Kong Iron and Steel Union; the name was anthracite; the place of origin was North Korea; the price was CFR Nampu/Da’an Port, North Korea; the number was 4,000 tons (±5%), and the number on the ship should prevail; the port of shipment was North Korea, Nanpu Port/Da’an Port; the port of destination was the northern port of China (subject to the buyer’s notice); the delivery date was from March 15, 2012 to May 30, 2012; the payment terms were that the buyer should pay the full payment after receiving the goods; the total contract value was RMB2,400,000 yuan (based on 22 ash points)… The trade price of Coal Purchase and Sale Contract was CFR, namely, the Plaintiff should be responsible for booking space and paying freight. Regarding the payment of the freight involved, the Plaintiff’s claims were inconsistent. In the first exchange of evidence, the Plaintiff claimed that the freight and demurrage had been paid to the Defendant’s shipping agent Taiyuan Shipping Co., Ltd., but in the third exchange of evidence, it claimed that it had not paid any freight to anyone and which paid freight to Taiyuan Shipping Co., Ltd. was Qingdao Quantum Jinyuan, and stated that it had no obligation to pay freight to the Defendant. Regarding the shipment of the goods involved, the Plaintiff claimed that the goods involved were delivered to M/V RICHOCEAN at Da’an Port in North Korea according to the sales contract to ship; the Defendant claimed that M/V RICHOCEAN involved was time chartered to Qingdao Guangya, and Qingdao Guangya again voyage chartered the ship to Taiyuan Shipping Co., Ltd., and the captain drove the ship to North Korea according to Qingdao Guangya’s instructions. The coal purchase and sale contract submitted by the Plaintiff and concluded between Hong Kong Iron and Steel Union and Qingdao Quantum Jinyuan on March 3, 2012 recorded that the seller was the Plaintiff and the buyer was Hong Kong Iron and Steel Union International Trade Co., Ltd.; the name was anthracite; the place of origin was North Korea; the price was CFR Nanpu/Da’an Port, North

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Korea; the number was 4,000 tons (±5%), and the number on the ship should prevail; the port of shipment was North Korea, Nanpu Port/Da’an Port; the port of destination was the northern port of China (subject to the buyer’s notice); the delivery period was from March 15, 2012 to May 30, 2012; the payment terms were that the buyer would pay the full payment after receiving the goods; the total contract value was RMB2,400,000 yuan (based on 22 ash points)… Qingdao Quantum Jinyuan paid a port construction fee RMB21,179 yuan to Qingdao Port (Group) Co., Ltd. Qiangang Branch on May 5, 2012; Qingdao Quantum Jinyuan paid the port operation leasing fee RMB84,717 yuan to Qingdao Port (Group) Co., Ltd. Qiangang Branch on May 28, 2012; Qingdao Quantum Jinyuan paid the imported goods delayed declaration fee of the goods involved RMB501,426 yuan to the Huangdao Customs of the People’s Republic of China on July 10, 2013; During the trial of the case, the Plaintiff withdrew the claim for the Defendant to compensate for the total loss of goods of 2.4 million, but still retained the claim for the Defendant to issue the original bill of lading. The Plaintiff recognized that it had handled the customs clearance and taking procedures of the goods involved in an irregular manner. The statement of claim and deduction notice of Hong Kong Iron and Steel Union submitted by the Plaintiff stated that the liquidated damages was 567,300 yuan for that the Plaintiff was unable to perform the delivery obligation to the buyer due to the arrest of the bill of lading, and compensation for the loss of the decline of the coal market was 680,760 yuan. Both parties in the case chose to apply the laws of the mainland of the People’s Republic of China to handle the disputes involved. The above facts are based on the relevant evidence submitted by the Plaintiff and the Defendant and the transcripts of the trial, which are sufficient to confirm. The court holds that the case is a dispute over a contract for the carriage of goods by sea. According to the Some Provisions of the Supreme People’s Court on the Scope of Cases to be Entertained by Maritime Courts Article 16, the dispute falls within the scope of cases accepted by the maritime court. Since the port of destination of the goods involved was Qingdao, China, the court has jurisdiction over the case. Because the Plaintiff was a corporate legal person registered outside of China and the Defendant is a corporate legal person registered in Hong Kong, China, the case has foreign-related factors, and all parties in the case chose to apply the laws of the mainland of the People’s Republic of China to handle the dispute involved, so the laws of the mainland of the People’s Republic of China should be used as governing law to solve the dispute in the case. The issues of the case are that: whether the Defendant has the obligation to issue the bill of lading involved to the Plaintiff; the amount of economic loss claimed by the Plaintiff due to the failure to obtain the original bill of lading. Firstly, whether the Defendant has the obligation to issue the bill of lading involved to the Plaintiff. According to the Maritime Code of the People’s Republic of China Article 72, “when the goods have been taken over by the carrier or have been loaded on board,

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the carrier shall, on demand of the shipper, issue to the shipper a bill of lading. The bill of lading may be signed by a person authorized by the carrier. A bill of lading signed by the Master of the ship carrying the goods is deemed to have been signed on behalf of the carrier.” The fact that can be confirmed is that the Plaintiff was the shipper of the goods involved and the goods was delivered to M/V RICHOCEAN bareboat chartered by the Defendant. YANG Binghe, the captain of the ship issued the D-1 bill of lading involved. Although the bill of lading involved was not delivered to the Plaintiff, the act of issuing the bill of lading D-1 involved, according to Article 72 of the Maritime Code, should first be deemed to be issued on behalf of the carrier, and the carrier should first be understood as that the bearboat charterer of registration and filing of the ship of M/V RICHOCEAN was the Defendant. As the delivery shipper, the Plaintiff had the right to obtain the bill of lading involved and delivered the goods to M/V RICHOCEAN to ship. The Defendant argued that it was not the carrier, because the time charter party and the voyage charter party existed under the voyage shipment, and the charterer should be regarded as the carrier rather than the Defendant. In this regard, the Defendant should provide evidence to prove the time charter party, voyage charter party and disclose the legal existence of the charterer under the contract. According to the facts confirmed in the case, after the Plaintiff, as the shipper, delivered the goods involved to M/V RICHOCEAN for shipment and transportation, the chief mate of the ship verified that they were correct and should sign on the receipt for confirmation and deliver the receipt to the shipper, or the captain should provide the delivery shipper with a certificate that the goods was loaded on the ship. However, YANG Binghe, the captain of M/V RICHOCEAN, gave the bill of lading involved to the staff of Qingdao Guangya, but did not deliver the bill of lading with the goods receipt that the goods was loaded to the shipper, namely the Plaintiff. No. D-1 bill of lading involved contained a charter party bill of lading, and the signature of the captain YANG Binghe and the ship seal of the Defendant were shown at the place where the bill of lading was signed. This is the same as that the identity of the Defendant was the bareboat charterer of M/V RICHOCEAN that has been identified in the case. The Defendant claimed that although the captain of M/V RICHOCEAN issued the bill of lading involved, it did not mean that the Defendant was the carrier in the case. The Defendant was only the bareboat charterer of the ship. It entrusted the management of the ship to Jiangsu New Unite. Jiangsu New Unite time chartered the ship to Qingdao Guangya, and Qingdao Guangya concluded a voyage charter party with Taiyuan Shipping Co., Ltd. There is no contractual relationship of carriage of goods by sea between the Defendant and the Plaintiff. The Defendant argued that it was not the carrier of the goods involved. At this time, the Defendant should disclose the charter party it claimed or indicate the identity of the carrier. The time charter party of M/V RICHOCEAN that the Defendant submitted, which was concluded by Jiangsu New Unite and Qingdao Guangya was not notarized and certified, and did not provide evidence to prove that the time charter party was formed in China, and it did not disclose whether Qingdao Guangya International Shipping Co., Ltd. legally existed. According to the Several Provisions on Civil

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Litigation Evidence of the Supreme People’s Court Article 11, the evidence provided by the parties to the people’s court was formed outside the territory of the People’s Republic of China, the evidence should be certified by the notary office of the host country and certified by the embassy or consulate of the People’s Republic of China in that country, or perform the certification procedures stipulated in the relevant treaty between the People’s Republic of China and the host country. The evidence provided by the parties to the people’s court was formed in Hong Kong, Macau, and Taiwan regions, and relevant certification procedures should be performed. As the Defendant failed to fully and reasonably disclose the charter party carrier involved in the transportation of the goods involved, nor did it go through the procedures for notarization and certification of the charter party involved, and the manager, time charterer and voyage charterer Jiangsu New Unite, Qingdao Guangya and Taiyuan Shipping Co., Ltd. which claimed whether M/V RICHOCEAN legally existed during the transportation involved did not provide evidence to prove. Therefore, it could not prove that during the voyage of the transportation of goods involved from Da’an Port in North Korea to Qingdao Port in China, the Defendant did not actually operate or participate in the management of M/V RICHOCEAN. The court holds that the Plaintiff delivered the goods involved to M/V RICHOCEAN that the Defendant bareboat chartered. The act that ship’s captain issued the bill of lading and the ship’s seal stated that the carrier was the Defendant. Therefore, the Plaintiff and the Defendant formed a contractual relationship for the carriage of goods by sea. After receiving the goods delivered by the Plaintiff for consignment, it was obligated to deliver the bill of lading involved to the Plaintiff. In the case, the bill of lading stated that the charter party was incorporated into the bill of lading, and the Defendant was the bareboat charterer of M/V RICHOCEAN. The captain of the ship also recognized that it had received the goods involved delivered by the Plaintiff and issued the D-1 bill of lading with the ship seal of the Defendant. The bill of lading has the function of a goods receipt and the nature of a document of property rights. At this time, whichever the bill of lading issued by the Defendant represented, it should issue such bill of lading or receipt to the shipper, Plaintiff, but after the Defendant received the goods delivered by the Plaintiff, it failed to deliver the bill of lading with the shipment receipt to the Plaintiff, which caused the Plaintiff to suffer economic damage, and it should be liable for compensation. Since the bill of lading involved was issued and the goods involved was taken at the port of destination, the Plaintiff’s claim for that the Defendant should deliver the D-1 original bill of lading involved has no practical significance. Secondly, the amount of economic loss claimed by the Plaintiff due to the failure to obtain the original bill of lading. 1. The Plaintiff claimed that the storage cost of the goods involved at Qingdao Port was 312,393.20 yuan due to the arrest of the bill of lading. Although the Plaintiff submitted the charging standard, it did not submit the relevant documents for the actual expense of the above storage cost for verification by the court. Therefore,

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the Plaintiff had no evidence to prove the loss actually happened, so the claim of the Plaintiff is not supported. 2. The Plaintiff claimed that due to the arrest of the bill of lading, the port construction fee RMB21,179 yuan, the port operation leasing fee RMB84,717 yuan, and the customs delayed declaration fee 501,426 yuan, totaling 607,322 yuan of the goods involved, happened at the destination port Qingdao Port. The court holds that, regardless of whether the goods involved were taken in time, the port construction fee and port operation leasing fee are charged according to the weight of the goods, which are reasonable expenses that must happen for imported goods. The fee has nothing to do with the Defendant’s arrest of the bill of lading and were not caused by the Defendant’s act. The Plaintiff claimed that the port construction fee and port operation leasing fee happened at the destination port Qingdao Port caused by the arrest of the bill of lading should be born by the Defendant, which has no legal basis and the court does not support it. Regarding customs delayed declaration fee, according to the invoice and explanation that Qingdao Quantum Jinyuan paid the imported goods delayed declaration fee RMB501,426 yuan of goods involved to Huangdao Customs of the People’s Republic of China on July 10, 2013, it proved that the loss actually happened, and it was caused by the Defendant’s failure to deliver the bill of lading involved to the Plaintiff in time, which prevented the Plaintiff from making timely customs declarations. There is a causal relationship between the two. The Defendant should be liable for compensation and for the claim of the Plaintiff that the Defendant should compensate it for the customs delayed declaration fee RMB501,426 yuan, the court supports it. 3. The Plaintiff claimed that the liquidated damages 567,300 yuan of that the Plaintiff was unable to perform the delivery obligation to the buyer due to the arrest of the bill of lading, and compensation for the loss of the coal market decline 680,760 yuan, and submitted Hong Kong Iron and Steel Union claim statement and deduction notice. The court holds that according to the Coal Purchase and Sale Contract concluded on March 13, 2012 between the Plaintiff and Hong Kong Iron and Steel Union, it stated that the seller was the Plaintiff, the buyer was Hong Kong Iron and Steel Union, and the trade price was CFR Nanpu/Da’an Port. For the delayed delivery of goods at the port of destination Qingdao Port, the carrier should be liable for compensation to the consignee. In the case, the Plaintiff actually fulfilled the obligation to deliver goods to the carrier as the seller of the purchase and sale contract when performing coal purchase and sale contract. The goods arrived at the destination port of Qingdao, China on May 23, 2012 within the contractual delivery period, which did not constitute a fundamental breach of contract. Hong Kong Iron and Steel Union had no right to claim compensation from the buyer, and therefore the court does not support the Plaintiff’s claim. 4. The Plaintiff claimed that the interest loss RMB2,269,200 yuan (3,782 tons 600 RMB/ton) due to the arrest of the bill of lading and caused the Plaintiff’s failure to receive the payment in time and the total interest loss of RMB1,300,000 yuan deposit due to litigation preservation, totaling 213,904.63

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yuan. The court holds that the Plaintiff’s claim has no legal basis and is not supported. The case is studied by the judicial committee of the court, and according to the Maritime Code of the People’s Republic of China Article 71, Article 72, and the Civil Procedure Law of the People’s Republic of China Article 64 Paragraph 1, the judgment is as follows: 1. The Defendant, NEW UNITE (HK) MARINE SHIPPING CO., LTD., shall compensate the Plaintiff, JOHO TRADING CORPORATION, for the delayed customs declaration fee RMB 501,426 yuan; 2. Reject other claims of the Plaintiff JOHO TRADING CORPORATION against the Defendant NEW UNITE (HK) MARINE SHIPPING CO., LTD. The above obligation to pay money shall be fulfilled by the Defendant within 10 days after the judgment comes into effect. If the Defendant fails to perform the obligation to pay money according to the period specified in this judgment, it shall double the payment of interest on the debt during the period of delay according to the Civil Procedure Law of the People’s Republic of China Article 253. Court acceptance fee in amount of 23,886 yuan, the Plaintiff, JOHO TRADING CORPORATION, shall bear 18,631.08 yuan and the Defendant, NEW UNITE (HK) MARINE SHIPPING CO., LTD., shall bear 5,254.92 yuan. Litigation preservation fee in amount of 5,000 yuan, shall be born by the Defendant, NEW UNITE (HK) MARINE SHIPPING CO., LTD. If not satisfy with the judgment, the Plaintiff, JOHO TRADING CORPORATION, and the Defendant, NEW UNITE (HK) MARINE SHIPPING CO., LTD., within 30 days of the date of the judgment is served, can submit appeal to the court and submit 9 copies, and appeal to the Shandong High People’s Court. Presiding Judge: WANG Ailing Judge: SUN Peng Judge: ZHANG Bo March 11, 2014 Clerk: REN Wei

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Shandong High People’s Court Civil Judgment Joho Trading Corporation v. New Unite (HK) Marine Shipping Co., Ltd. (2014) Lu Min Si Zhong Zi No.106 Related Case(s) This is the judgment of second instance, and the judgment of first instance and the judgment of retrial are on page 513 and page 540 respectively. Cause(s) of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote Revoking lower court decision holding the Plaintiff shipper to be entitled to recover some, but not all, losses incurred as a result of refusal by the Defendant to sign and issue bills of lading prepared by the Plaintiff; appellant court held that the Plaintiff, not the Defendant, was the carrier responsible for issuing bills of lading. Summary The Plaintiff, Joho Trading Corp. (Joho), which was shipper of a cargo of coal to be carried from North Korea to China, prepared bills of lading relating to carriage of the cargo, but the Defendant refused to sign and issue them. The Plaintiff sued the Defendant for damages resulting from the Defendant’s refusal to issue the bills. The damages claimed included port fees, and delay damages caused by the decrease in value of coal which the Defendant carried. The Defendant argued that there was no contractual relationship between it and the Plaintiff, whereby the Plaintiff was entitled to demand issue of the bills of lading. At trial, the court of first instance held that: (1) the Plaintiff, as shipper and shipper of the goods, had the right to receive the bill of lading, and (2) the Defendant was liable to the Plaintiff for the customs delay fees incurred. All other claims for damages by the Plaintiff were denied. The Plaintiff appealed, asking for all of its economic losses to be paid; the Defendant cross-appealed, arguing that it should not be liable for any losses incurred by the Plaintiff. The appeal court revoked the first instance judgment holding that the Plaintiff was the actual carrier, and that the evidence was insufficient to establish that the Defendant bore any responsibility as carrier.

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Judgment The Appellant (the Plaintiff of first instance): Joho Trading Corporation Domicile: QianJin Cave, Lelang District, Pyongyang, Korea. Legal representative: DONG Jinyu, chairman of the corporation. Agent ad litem: GAO Liangchen, lawyer of Shandong Wincon Law Firm. Agent ad litem: GUO Enzhong, lawyer of Shandong Wincon Law Firm. The Appellant (the Defendant of first instance): New Unite (HK) Marine Shipping Co., Ltd. Domicile: Room 19c, Rock Centre, 301–307 Lockhart Road, Wan Chai, Hong Kong. Legal representative: LIU Xiangyang, chairman of the company. Agent ad litem: CHEN liang, lawyer of Shanghai Allbright (Nanjing) Law Offices. Agent ad litem: ZHANG Yujie, male, born on January 14, 1981, Hui. The Appellant, Joho Trading Corporation (hereinafter referred to as JOHO), and the Respondent, New Unite (HK) Marine Shipping Co., Ltd., (hereinafter referred to as NEW UNITE), dissatisfied with the Qingdao Maritime Court (2012) Qing Hai Fa Hai Shang Chu Zi No.958 Civil Judgment in respect of the case of dispute over contract of carriage of goods by sea, and filed an appeal before the court. The court, after accepting this case, organized the colligate panel according to law and tried this case. Agents ad litem of JOHO, GAO Liangchen and GUO Enzhong, agents ad litem of the Defendant, CHEN liang and ZHANG Yujie, appeared in court to attend the hearing. Now the case has been concluded. JOHO claimed to the court of first instance that: on March 3, 2012, JOHO and Hong Kong Iron and Steel Union International Trade Co., Ltd. (hereinafter referred to as Hong Kong Iron and Steel Union) concluded a coal sales contract, and Hong Kong Iron and Steel Union and Qingdao Quantum Jinyuan Energy Development Co., Ltd. (hereinafter referred to as Qingdao Jinyuan) concluded a coal purchase and sale contract, and Qingdao Jinyuan was the ultimate consignee of the goods involved. According to the contract, JOHO loaded 3,782 tons of coal on board M/V RICHOCEAN at Da’an Port in North Korea. After the goods was loaded on the ship, NEW UNITE issued a full set of original bills of lading which recorded that the shipper was the Plaintiff and the notifying party was Hong Kong Iron and Steel Union on May 20, 2012. Although the Plaintiff repeatedly asked for the bill of lading, the Defendant rejected it on various untenable reasons. According to the instructions of JOHO, Qingdao Jinyuan also paid the ocean freight and reasonable demurrage, and paid the full payment for the goods involved. On January 4, 2013, JOHO applied to add Qingdao Guangya International Shipping Co., Ltd. (hereinafter referred to as Qingdao Guangya) as the co-Defendant in the case. On July 2, 2013, JOHO applied to withdraw the lawsuit against Qingdao Guangya, and the court approved. During the trial of the case, the Plaintiff changed claims three times. The court explained and the Plaintiff clearly stated that claims were that: 1. NEW UNITE should deliver the full set of original bill of lading No. D-1 to JOHO or a person designated by JOHO; 2. NEW UNITE should compensate JOHO for

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312,393.20 yuan for the storage fee of goods happened at Qingdao port caused by the arrest of the bill of lading; 3. NEW UNITE should compensate JOHO for 501,426 yuan for the customs delayed declaration fee, the port fee 105,896 yuan of goods happened at Qingdao port caused by the arrest of the bill of lading, totaling 607,322 yuan; 4. NEW UNITE should compensate JOHO for liquidated damages 567,300 yuan for the JOHO’s failure to perform the delivery obligation to the buyer due to the arrest of the bill of lading; 6. NEW UNITE should compensate JOHO for interest loss 213,904.63 yuan; and NEW UNITE should bear the litigation fee and preservation fee of the case. The court of first instance found out that: M/V RICHOCEAN owned by Zhoushan Gaodi Shipping Co., Ltd. was chartered to NEW UNITE by bareboat from September 1, 2010 to August 31, 2013, and the bareboat charter was registered with the Zhoushan Maritime Safety Administration of the People’s Republic of China. M/V RICHOCEAN management contract concluded by the Defendant and Jiangsu New Unite Shipping Co., Ltd. (hereinafter referred to as Jiangsu New Unite) on November 8, 2010 stated that NEW UNITE entrusted Jiangsu New Unite to operate the ship, conclude a freight contract or time charter party, and charge freight or rent. The two parties agreed that the cooperation period would be three years, and the management fee would be collected from the date of receiving the ship. The contract also agreed other matters. On April 28, 2011, Jiangsu New Unite, as the owner of the ship, concluded a time charter party for M/V RICHOCEAN with the charterer Qingdao Guangya, agreeing that “… the captain and the crew should try their best to assist in the dispatch, although the shipowner appointed the captain, however, as the hirer of the charterer, the captain should follow the instructions of the charterer and the agent … during the charter period, the charterer requires the captain to sign a bill of lading consistent with the charter party. The charterer and the agent can be entrusted to sign the bill of lading same with the mate’s receipt on behalf of the captain and chief mate.” The two parties concluded a lease renewal agreement for the ship on May 14, 2012. The charter period was from May 23, 2012 to November 23, 2012. Except for the rent terms, other terms were enforced as time charter party of M/V RICHOCEAN concluded by both parties on April 28, 2011. The time charter party submitted by the Defendant did not contain the record of the place where the contract was concluded, nor did it go through relevant notarization and certification. The 6 remittance notices from China Merchants Bank submitted by NEW UNITE from January to June 2012 stated that the remitter was Qingdao Guangya, the beneficiary was Jiangsu New Unite, the country/region of the remitter was Hong Kong, and the remittance information was M/V RICHOCEAN rent. On May 20, 2012, M/V RICHOCEAN loaded 3,782 tons of anthracite at Da’an Port in North Korea. The delivery shipper was the Plaintiff. On May 23, 2012, the goods involved arrived at the destination port of Qingdao Port, China. On November 8, 2012, when the court boarded and arrested M/V RICHOCEAN at Baosteel Comprehensive Terminal in Shanghai, the captain of the ship, YANG Binghe, recognized that the goods shipper involved was the Plaintiff, and the D-1 bill of lading involved was taken away by staff of Qingdao Guangya on May 24,

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2012. The bill of lading stated that the charter party was incorporated into the bill of lading, the shipper was the Plaintiff, and the consignee was instructed, Hong Kong Iron and Steel Union was notifying party. The signature of the captain YANG Binghe was signed at the place of writing, and it was stamped with seal of M/V RICHOCEAN of NEW UNITE (HK). Coal Purchase and Sale Contract submitted by JOHO, which was concluded by Hong Kong Iron and Steel Union with it on March 13, 2012 stated that the seller was JOHO and the buyer was Hong Kong Iron and Steel Union; the name was anthracite; the place of origin was North Korea; the price was CFR Nampu/Da’an Port, North Korea; the number was 4,000 tons (±5%), and the number on the ship should prevail; the port of shipment was North Korea, Nanpu Port/Da’an Port; the port of destination was the northern port of China (subject to the buyer’s notice); the delivery date was from March 15, 2012 to May 30, 2012; the payment terms were that the buyer should pay the full payment after receiving the goods; the total contract value was RMB2,400,000 yuan (based on 22 ash points)… The trade price of Coal Purchase and Sale Contract was CFR, namely, JOHO should be responsible for booking space and paying freight. Regarding the payment of the freight involved, JOHO’s claims were inconsistent. In the first exchange of evidence, JOHO claimed that the freight and demurrage had been paid to NEW UNITE’s shipping agent Taiyuan Shipping Co., Ltd., but in the third exchange of evidence, it claimed that it had not paid any freight to anyone and which paid freight to Taiyuan Shipping Co., Ltd. was Qingdao Quantum Jinyuan, and stated that it had no obligation to pay freight to NEW UNITE. Regarding the shipment of the goods involved, JOHO claimed that the goods involved were delivered to M/V RICHOCEAN at Da’an Port in North Korea according to the sales contract to ship; NEW UNITE claimed that M/V RICHOCEAN involved was time chartered to Qingdao Guangya, and Qingdao Guangya again voyage chartered the ship to Taiyuan Shipping Co., Ltd., and the captain drove the ship to North Korea according to Qingdao Guangya’s instructions. The coal purchase and sale contract submitted by JOHO and concluded between Hong Kong Iron and Steel Union and Qingdao Jinyuan on March 3, 2012 recorded that the seller was JOHO and the buyer was Hong Kong Iron and Steel Union International Trade Co., Ltd.; the name was anthracite; the place of origin was North Korea; the price was CFR Nanpu/Da’an Port, North Korea; the number was 4,000 tons (±5%), and the number on the ship should prevail; the port of shipment was North Korea, Nanpu Port/Da’an Port; the port of destination was the northern port of China (subject to the buyer’s notice); the delivery period was from March 15, 2012 to May 30, 2012; the payment terms were that the buyer would pay the full payment after receiving the goods; the total contract value was RMB2,400,000 yuan (based on 22 ash points)… Qingdao Jinyuan paid a port construction fee RMB21,179 yuan to Qingdao Port (Group) Co., Ltd. Qiangang Branch on May 5, 2012; Qingdao Jinyuan paid the port operation leasing fee RMB84,717 yuan to Qingdao Port (Group) Co., Ltd. Qiangang Branch on May 28, 2012; Qingdao Jinyuan paid the imported goods delayed declaration fee of the goods involved RMB501,426 yuan to the Huangdao Customs of the People’s Republic of China on July 10, 2013;

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During the trial of the case, JOHO withdrew the claim for NEW UNITE to compensate for the total loss of goods of 2.4 million, but still retained the claim for NEW UNITE to issue the original bill of lading. JOHO recognized that it had handled the customs clearance and taking procedures of the goods involved in an irregular manner. The statement of claim and deduction notice of Hong Kong Iron and Steel Union submitted by JOHO stated that the liquidated damages was 567,300 yuan for that JOHO was unable to perform the delivery obligation to the buyer due to the arrest of the bill of lading, and compensation for the loss of the decline of the coal market was 680,760 yuan. Both parties in the case chose to apply the laws of the mainland of the People’s Republic of China to handle the disputes involved. The court of first instance held that the case was a dispute over contract for the carriage of goods by sea. According to the Some Provisions of the Supreme People’s Court on the Scope of Cases to be Entertained by Maritime Courts Article 16, the dispute fell within the scope of cases accepted by the maritime court. Since the port of destination of the goods involved was Qingdao, China, the court had jurisdiction over the case. Because the Plaintiff was a corporate legal person registered outside of China and the Defendant was a corporate legal person registered in Hong Kong, China, the case had foreign-related factors, and all parties in the case chose to apply the laws of the mainland of the People’s Republic of China to handle the dispute involved, so the laws of the mainland of the People’s Republic of China should be used as governing law to solve the dispute in the case. The issues of the case were that: whether NEW UNITE had the obligation to issue the bill of lading involved to JOHO; the amount of economic loss claimed by JOHO due to the failure to obtain the original bill of lading. Firstly, whether NEW UNITE had the obligation to issue the bill of lading involved to JOHO. According to the Maritime Code of the People’s Republic of China Article 72, “when the goods have been taken over by the carrier or have been loaded on board, the carrier shall, on demand of the shipper, issue to the shipper a bill of lading. The bill of lading may be signed by a person authorized by the carrier. A bill of lading signed by the Master of the ship carrying the goods is deemed to have been signed on behalf of the carrier.” The fact that could be confirmed was that JOHO was the shipper of the goods involved and the goods was delivered to M/V RICHOCEAN bareboat chartered by NEW UNITE. YANG Binghe, the captain of the ship issued the D-1 bill of lading involved. Although the bill of lading involved was not delivered to JOHO, the act of issuing the bill of lading D-1 involved, according to Article 72 of the Maritime Code, should first be deemed to be issued on behalf of the carrier, and the carrier should first be understood as that the bearboat charterer of registration and filing of the ship of M/ V RICHOCEAN was NEW UNITE. As the delivery shipper, JOHO had the right to obtain the bill of lading involved and delivered the goods to M/V RICHOCEAN to ship. NEW UNITE argued that it was not the carrier, because the time charter party and the voyage charter party existed under the voyage shipment, and the charterer

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should be regarded as the carrier rather than NEW UNITE. In this regard, NEW UNITE should provide evidence to prove the time charter party, voyage charter party and disclose the legal existence of the charterer under the contract. According to the facts confirmed in the case, after JOHO, as the shipper, delivered the goods involved to M/V RICHOCEAN for shipment and transportation, the chief mate of the ship verified that they were correct and should sign on the receipt for confirmation and deliver the receipt to the shipper, or the captain should provide the delivery shipper with a certificate that the goods was loaded on the ship. However, YANG Binghe, the captain of M/V RICHOCEAN, gave the bill of lading involved to the staff of Qingdao Guangya, but did not deliver the bill of lading with the goods receipt that the goods was loaded to the shipper, namely JOHO. No. D-1 bill of lading involved contained a charter party bill of lading, and the signature of the captain YANG Binghe and the ship seal of NEW UNITE were shown at the place where the bill of lading was signed. This was the same as that the identity of NEW UNITE was the bareboat charterer of M/V RICHOCEAN that has been identified in the case. NEW UNITE claimed that although the captain of M/V RICHOCEAN issued the bill of lading involved, it did not mean that NEW UNITE was the carrier in the case. NEW UNITE was only the bareboat charterer of the ship. It entrusted the management of the ship to Jiangsu New Unite. Jiangsu New Unite time chartered the ship to Qingdao Guangya, and Qingdao Guangya concluded a voyage charter party with Taiyuan Shipping Co., Ltd. There was no contractual relationship of carriage of goods by sea between NEW UNITE and JOHO. NEW UNITE argued that it was not the carrier of the goods involved. At this time, NEW UNITE should disclose the charter party it claimed or indicate the identity of the carrier. The time charter party of M/V RICHOCEAN that NEW UNITE submitted, which was concluded by Jiangsu New Unite and Qingdao Guangya was not notarized and certified, and did not provide evidence to prove that the time charter party was formed in China, and it did not disclose whether Qingdao Guangya International Shipping Co., Ltd. legally existed. According to the Several Provisions of the Supreme People’s Court on Evidence in Civil Procedures Article 11, the evidence provided by the parties to the people’s court was formed outside the territory of the People’s Republic of China, the evidence should be certified by the notary office of the host country and certified by the embassy or consulate of the People’s Republic of China in that country, or perform the certification procedures stipulated in the relevant treaty between the People’s Republic of China and the host country. The evidence provided by the parties to the people’s court was formed in Hong Kong, Macau, and Taiwan regions, and relevant certification procedures should be performed. As NEW UNITE failed to fully and reasonably disclose the charter party carrier involved in the transportation of the goods involved, nor did it go through the procedures for notarization and certification of the charter party involved, and the manager, time charterer and voyage charterer Jiangsu New Unite, Qingdao Guangya and Taiyuan Shipping Co., Ltd. which claimed whether M/V RICHOCEAN legally existed during the transportation involved did not provide evidence to prove. Therefore, it could not prove that during the voyage of the

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transportation of goods involved from Da’an Port in North Korea to Qingdao Port in China, NEW UNITE did not actually operate or participate in the management of M/V RICHOCEAN. JOHO delivered the goods involved to M/V RICHOCEAN that NEW UNITE bareboat chartered. The act that ship’s captain issued the bill of lading and the ship’s seal stated that the carrier was NEW UNITE. Therefore, JOHO and NEW UNITE formed a contractual relationship for the carriage of goods by sea. After receiving the goods delivered by JOHO for consignment, it was obligated to deliver the bill of lading involved to JOHO. In the case, the bill of lading stated that the charter party was incorporated into the bill of lading, and NEW UNITE was the bareboat charterer of M/V RICHOCEAN. The captain of the ship also recognized that it had received the goods involved delivered by JOHO and issued the D-1 bill of lading with the ship seal of NEW UNITE. The bill of lading has the function of a goods receipt and the nature of a document of property rights. At this time, whichever the bill of lading issued by NEW UNITE represented, it should issue such bill of lading or receipt to the shipper, JOHO, but after NEW UNITE received the goods delivered by JOHO, it failed to deliver the bill of lading with the shipment receipt to JOHO, which caused JOHO to suffer economic damage, and it should be liable for compensation. Since the bill of lading involved was issued and the goods involved was taken at the port of destination, JOHO’s claim for that NEW UNITE should deliver the D-1 original bill of lading involved had no practical significance. Secondly, the amount of economic loss claimed by JOHO due to the failure to obtain the original bill of lading. 1. JOHO claimed that the storage cost of the goods involved at Qingdao Port was 312,393.20 yuan due to the arrest of the bill of lading. Although JOHO submitted the charging standard, it did not submit the relevant documents for the actual expense of the above storage cost for verification by the court. Therefore, JOHO had no evidence to prove the loss actually happened, so the claim of JOHO was not supported. 2. JOHO claimed that due to the arrest of the bill of lading, the port construction fee RMB21,179 yuan, the port operation leasing fee RMB84,717 yuan, and the customs delayed declaration fee 501,426 yuan, totaling 607,322 yuan of the goods involved, happened at the destination port Qingdao Port. The court of first instance held that, regardless of whether the goods involved were taken in time, the port construction fee and port operation leasing fee were charged according to the weight of the goods, which were reasonable expenses that must happen for imported goods. The fee had nothing to do with the Defendant’s arrest of the bill of lading and were not caused by the Defendant’s act. The Plaintiff claimed that the port construction fee and port operation leasing fee happened at the destination port Qingdao Port caused by the arrest of the bill of lading should be born by the Defendant, which had no legal basis and the court did not support it. Regarding customs delayed declaration fee, according to the invoice and explanation that Qingdao Quantum Jinyuan paid the imported goods delayed declaration fee RMB501,426 yuan of goods involved to Huangdao Customs of the People’s Republic of China on July 10, 2013, it proved that the loss actually happened, and it was caused by NEW UNITE’s failure to deliver the bill of lading involved to JOHO

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in time, which prevented JOHO from making timely customs declarations. There was a causal relationship between the two. Claims that NEW UNITE should be liable for compensation and for the claim of JOHO that NEW UNITE should compensate it for the customs delayed declaration fee RMB501,426 yuan should be supported. 3. JOHO claimed that the liquidated damages 567,300 yuan of that JOHO was unable to perform the delivery obligation to the buyer due to the arrest of the bill of lading, and compensation for the loss of the coal market decline 680,760 yuan, and submitted Hong Kong Iron and Steel Union claim statement and deduction notice. The Coal Purchase and Sale Contract concluded on March 13, 2012 between JOHO and Hong Kong Iron and Steel Union stated that the seller was JOHO, the buyer was Hong Kong Iron and Steel Union, and the trade price was CFR Nanpu/Da’an Port. For the delayed delivery of goods at the port of destination Qingdao Port, the carrier should be liable for compensation to the consignee. In the case, JOHO actually fulfilled the obligation to deliver goods to the carrier as the seller of the purchase and sale contract when performing coal purchase and sale contract. The goods arrived at the destination port of Qingdao, China on May 23, 2012 within the contractual delivery period, which did not constitute a fundamental breach of contract. Hong Kong Iron and Steel Union had no right to claim compensation from the buyer, and therefore the claim was not supported. 4. JOHO claimed that the interest loss RMB2,269,200 yuan (3,782 tons 600 RMB/ton) due to the arrest of the bill of lading and caused JOHO’s failure to receive the payment in time and the total interest loss of RMB1,300,000 yuan deposit due to litigation preservation, totaling 213,904.63 yuan. The claim had no legal basis and was not supported. Being studied by the judicial committee of the court of first instance, and according to the Maritime Code of the People’s Republic of China Article 71, Article 72, and the Civil Procedure Law of the People’s Republic of China Article 64 Paragraph 1, the judgment was as follows: 1. NEW UNITE should compensate JOHO for the customs delayed declaration fee RMB 501,426 yuan; 2. reject other claims of JOHO against NEW UNITE. Court acceptance fee of first instance in amount of 23,886 yuan, JOHO should bear 18,631.08 yuan and NEW UNITE should bear 5,254.92 yuan. Litigation preservation fee in amount of 5,000 yuan, should be born by NEW UNITE. JOHO refused to accept the judgment of first instance and appealed that: the judgment of first instance that NEW UNITE should bear the liability for the economic loss caused by the failure to deliver the original bill of lading to JOHO was correct. Since the bill of lading was not issued in time, resulting in the long-term storage of the goods at the port of destination, JOHO already paid the storage fee happened, which should be born by NEW UNITE. JOHO was unable to fulfill the delivery obligation to the buyer on time, and NEW UNITE should bear the liquidated damages suffered as a result. NEW UNITE should compensate JOHO for price loss and interest loss caused by the decline in the goods market. In summary, it claims to change the judgment according to the law to support a storage fee 312,393.20 yuan, liquidated damages 567,300 yuan, a loss 680,760 yuan in coal prices decline and a loss of interest 213,904.63 yuan of the goods claimed by JOHO

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happened in Qingdao Port, a total of 1,774,357.63 yuan. The litigation fee and preservation fee should be born by NEW UNITE. NEW UNITE argued that NEW UNITE did not have the obligation to issue and deliver the original bill of lading to JOHO, and there was no reason or need to arrest the goods bill of lading involved. Before the action, JOHO had obtained the bill of lading of the goods involved, and the consignee had already taken the goods during the litigation, and the action for breach of contract filed by it had completely lost the factual and legal basis. The evidence from JOHO could not prove that storage fee, liquidated damages, loss of goods prices, or interest loss existed or happened, let alone that it had born the fee. The evidence provided by JOHO proved that the price of the goods involved was applicable to CFR clauses. Under the CFR clauses, the cost and freight of the goods and the risks after the goods crossed the ship’s rail should be born by the buyer. JOHO was not the holder of the original bill of lading, nor the consignee specified in the bill of lading. Even if the loss existed, it should not be claimed by it. The court should reject JOHO’s claims according to law. NEW UNITE refused to accept the judgment of first instance and appealed that: firstly, the facts confirmed in the judgment of first instance were wrong and NEW UNITE was not the carrier of the goods in dispute. 1. NEW UNITE was only the charterer of the time charter party and was not obligated to issue and deliver the bill of lading. 2. NEW UNITE did not collect the freight paid by JOHO. In the case, the bill of lading was incorporated into the charter party. According to the voyage charter party, it could be determined that NEW UNITE was not the carrier. 3. NEW UNITE was not the actual controller of the disputed goods. Secondly, the judgment of first instance was wrong in applying the law, and the judgment that NEW UNITE should bear the customs delayed declaration fee had no legal basis. 1. JOHO was not the owner of the goods, nor was it the buyer or consignee of the goods, and it had no right to claim for customs delayed declaration fee. 2. The delay in handling customs declaration procedures was not the reason of NEW UNITE. 3. The payer of the customs delayed declaration fee was not JOHO, and the subject qualification of claims of the customs delayed declaration fee was not suitable. 4. The judgment of first instance rejected JOHO’s claim for breach of contract, and its claim for compensation should not be supported. 3. The procedure of the judgment of first instance was illegal. It claimed to revoke the judgment of first instance, the litigation fee should be born by JOHO. JOHO argued that: firstly, NEW UNITE was the carrier of the contract of carriage of goods by sea involved. The bareboat charter party, ship management contract, time charter party, and voyage charter party claimed by NEW UNITE, whether they existed or not, would not affect the contractual relationship of carriage of goods by sea as proved by the bill of lading involved and the fact that the goods was shipped. The record of the incorporation of the party in the bill of lading involved was in a fixed format, and the name, parties, date of the incorporated party were not clearly recorded, and it was not certain that the party was incorporated. NEW UNITE did not issue the bill of lading to the shipper according to the law, but erroneously issued the bill of lading to a third party, which caused the third party to control the goods and was the cause of the dispute in the case. Secondly,

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NEW UNITE should be liable for compensation for the loss of customs delayed declaration fee. (1) The goods involved was seaborne goods, and JOHO should deliver the bill of lading to complete the delivery of the goods. Because NEW UNITE did not issue a bill of lading to JOHO, JOHO did not complete the delivery of the goods. Before the physical delivery, the ownership of the goods belonged to JOHO, and the risks, loss and fee were also born by JOHO. (2) The customs delayed declaration fee should be paid by JOHO on behalf of JOHO. (3) The goods involved was taken, and the court of first instance held that JOHO’s claim for delivery of the bill of lading by NEW UNITE was meaningless, but this did not mean that NEW UNITE was exempted from the legal liability of issuing the bill of lading to a third party in error. Thirdly, NEW UNITE’s claim that the court of first instance violated due procedures had no basis. The court should dismiss NEW UNITE’s appeal. During second instance of the case, NEW UNITE filed an application for investigation and evidence collection. During the trial, the application was withdrawn. During the second instance, NEW UNITE submitted the following evidence: (1) the registration and existence certificate of Taiyuan Shipping Co., Ltd., to prove that although the company was registered in Hong Kong, its main shareholder and place of business were in Dalian. (2) Submit the invoices for freight, fines, and detention fee issued by Taiyuan Shipping Co., Ltd. for Qingdao Jinyuan (this evidence was submitted by JOHO during firsst instance), to prove that the contact address of Taiyuan Shipping was in Dalian. (3) Qingdao Guangya’s Hong Kong registration information and the statement on Qingdao Guangya’s service issued to the court by the agent of JOHO at first instance, to prove that Qingdao Guangya was a officially registered company and its sole shareholder and legal representative’s domicile and contact information were all in the mainland. (4) A copy of the corporate legal person business license of Jiangsu Xinglian Shipping Co., Ltd., to prove that M/V RICHOCEAN was managed and operated by M/V RICHOCEAN (HK). The time charter party was concluded by Jiangsu Xinglian and Qingdao Guangya. The contract was formed in the mainland and did not require notary certification. (5) One printout of the screenshot of the crew business online declaration system of the Jiangsu Maritime Safety Administration, which recorded that the owner of M/V RICHOCEAN was Qingdao Guangya, to prove that Qingdao Guangya chartered the ship from Jiangsu Xinglian. JOHO cross-examined that: (1) it had no objection to the authenticity of Qingdao Guangya and Taiyuan Shipping Co., Ltd.’s existence certificates, but the two pieces of evidence could not prove NEW UNITE’s litigation claims. (2) The authenticity of the invoice issued by Taiyuan Shipping was not recognized, and the content that could be proved by the invoice could only show that there was the fact that Taiyuan Shipping received or notified Qingdao Jinyuan to pay freight. (3) It had no objection to the authenticity of the statement of Qingdao Guangya’s service submitted by the agent of JOHO to the court, but it was not known whether the address in the statement was the business address or office address of Qingdao Guangya. (4) It had no objection to the authenticity of Jiangsu Xinglian’s corporate legal

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person business license, but the evidence had nothing to do with the contract of carriage of goods by sea in this case. (5) The print page of the crew business online declaration system did not show the download address of the web page, and the authenticity could not be verified. Judging from the recorded matters, the owner of the ship was Qingdao Guangya, which contradicted the facts of the case. The evidence could not prove NEW UNITE’s claims. The court holds that both parties had no objection to the registration and the registration of corporate legal persons of Taiyuan Shipping, Qingdao Guangya, Jiangsu Xinglian, and the court confirms this fact. The invoice issued by Taiyuan Shipping provided by NEW UNITE was consistent with the evidence submitted by JOHO during first instance, which is confirmed by the court. The court does not confirm the authenticity of the print page of the crew business online declaration system and the content of its certification. The court holds that: JOHO is an enterprise legal person registered in the People’s Republic of Korea, and NEW UNITE is an enterprise legal person registered in Hong Kong. The case has foreign-related and Hong Kong-related factors and is a foreign-related case. Based on the choice of both parties, the court of first instance was correct to apply the laws of the People’s Republic of China as the applicable law for this case. The issue between the two parties is that: whether the loss claimed by JOHO should be born by NEW UNITE. JOHO filed an action with a copy of the “bill of lading”, claiming NEW UNITE to deliver the bill of lading and compensate for the loss caused by the arrest of the bill of lading. The court of first instance confirmed that the legal relationship of the carriage contract between NEW UNITE and JOHO was established. After receiving the goods delivered by JOHO, NEW UNITE was obliged to deliver the bill of lading and bore customs delayed declaration fee that was caused by the goods involved at the port of destination due to the arrest of the bill of lading. NEW UNITE argued that it was not the carrier of the goods involved and filed an appeal, claiming that it should not bear the liability of the carrier. The case is the dispute over contract of carriage of goods by sea. The first issue affecting the dispute between the two parties is the legal status of the Defendant of first instance, NEW UNITE, namely, whether it was the carrier of the goods involved. The copy of the “bill of lading” submitted by JOHO proved that it was the shipper, and after it delivered the goods to the carrier M/V RICHOCEAN, the captain of the ship YANG Binghe signed the bill of lading and stamped it with the seal of M/V RICHOCEAN. When the court of first instance boarded the ship and arrest M/V RICHOCEAN based on the application of JOHO, the captain YANG Binghe recognized that JOHO was the shipper recorded in the bill of lading, stating that the bill of lading was taken by the staff of Qingdao Guangya and provided a copy of the bill of lading it issued. The owner of the ship indicated on the copy of the bill of lading was Zhoushan Gaodi. NEW UNITE had no objection to the authenticity of the copy of the “bill of lading” submitted by JOHO, but held that the bill of lading in dispute was not issued by it, and the bill of lading itself did not indicate that NEW UNITE was the carrier.

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The Maritime Code of the People’s Republic of China Article 72 stipulates that: “when the goods have been taken over by the carrier or have been loaded on board, the carrier shall, on demand of the shipper, issue to the shipper a bill of lading. The bill of lading may be signed by a person authorized by the carrier. A bill of lading signed by the Master of the ship carrying the goods is deemed to have been signed on behalf of the carrier.” The court of first instance held that YANG Binghe’s issuance of the bill of lading was deemed to be issued on behalf of the carrier, and the carrier should first be understood as the bareboat charterer of the ship’s registration. NEW UNITE should provide evidence to prove that there was a time charter party and voyage charter party under the voyage involved, and prove that the charterer under the contract was legally existing, because the time charter party submitted by NEW UNITE was not notarized and certified, and no evidence was provided to prove that the time charter party was formed in China and it did not disclose whether Qingdao Guangya was legally existing. For this, NEW UNITE failed to fully and reasonably disclose the charter carrier involved in the goods transportation, and could not prove the voyage transportation involved and that NEW UNITE not actually operating or participating in the management of M/V RICHOCEAN. NEW UNITE argued that it was not the carrier of the goods involved. The reason was that it was only the bareboat charterer of the ship involved and entrusted the management of the ship involved to Jiangsu Xinglian. Jiangsu Xinglian also chartered the ship to Qingdao Guangya and Qingdao Guangya also concluded a voyage charter party with Taiyuan Shipping Co., Ltd. Under the voyage transportation, there was a time charter party and a voyage charter party, and it did not have a contractual relationship of carriage of goods by sea with JOHO. For this, NEW UNITE submitted the time charter party with Qingdao Guangya and the bank remittance notice for Qingdao Guangya to pay the rent. During second instance, NEW UNITE submitted the evidence that the legal existence of Qingdao Guangya and Taiyuan Shipping Co., Ltd. and its shareholders and places of business were all in the mainland. The Maritime Code of the People’s Republic of China Article 42 stipulates that “‘carrier’ means the person by whom or in whose name a contract of carriage of goods by sea has been concluded with a shipper”. As the shipper, JOHO claimed that it had a contractual relationship of carriage with NEW UNITE, and NEW UNITE did not raise any objection to the legal status of the shipper under the bill of lading it claimed, and the court confirms it. Regarding whether the controversial signing act of the captain YANG Binghe represented NEW UNITE. The judgment of first instance was based on M/V RICHOCEAN bareboat charter registration and held that it was correct that the carrier should first be deemed as NEW UNITE. However, NEW UNITE disclosed the existence of time charter party and voyage charter party for the ships involved during the judgement of first instance. The time charter party, bank remittance notice, the legal registration and existence certificates of Qingdao Guangya and Taiyuan Shipping Co., Ltd. provided by NEW UNITE in first and second instance, according to evidence such as the freight invoices involved submitted by JOHO and Qingdao Guangya delivery

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instructions, and the fact that the bill of lading involved was taken away by the staff of Qingdao Guangya, and the goods under the bill of lading involved was taken by JOHO and Qingdao Jinyuan, the court confirms that NEW UNITE claimed that it delivered the ship involved to Jiangsu Xinglian to manage, Jiangsu Xinglian time chartered the ship to Qingdao Guangya. In the dispute over contract of carriage involved, NEW UNITE did not manage the ship, did not control the goods, and did not actually carry out goods transportation, and recognized that NEW UNITE had disclosed the fact. The confirmation of the court of first instance that the evidence involved was formed outside the territory and should be notarized and certified was changed for the evidence provided by NEW UNITE during second instance. It thus confirms that the act of signing the bill of lading by the captain of M/V RICHOCEAN YANG Binghe did not represent NEW UNITE. NEW UNITE was not the carrier of the contract of carriage of goods by sea involved. As the shipper of the bill of lading, JOHO claimed NEW UNITE to bear the liability of the carrier, which had insufficient evidence and the court does not support it. Therefore, the court also does not support JOHO’s claim for compensation of NEW UNITE for its loss. In conclusion, the appeal of NEW UNITE is reasonable and the court supports it; the appeal of JOHO is not supported by the court. The facts confirmed in the judgment of first instance are unclear and should be revoked. According to the Civil Procedure Law of the People’s Republic of China Article 170 Paragraph 1 Sub-Paragraph 2, the judgment is as follows: 1. Revoke the Qingdao Maritime Court of the People’s Republic of China (2012) Qing Hai Fa Hai Shang Chu Zi No.958 Civil Judgment; 2. Reject the claims of JOHO TRADING CORPORATION. Court acceptance fee of first instance in amount of 23,886 yuan, litigation preservation fee in amount of 5,000 yuan, and court acceptance fee of second instance in amount of 20,769 yuan, shall be born by JOHO TRADING CORPORATION. The judgment is final. Presiding Judge: LI Wei Judge: ZHAO Tong Acting Judge: WANG Lei December 5, 2014 Clerk: ZHAO Fei

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The Supreme People’s Court of the People’s Republic of China Civil Judgment Joho Trading Corporation v. New Unite (HK) Marine Shipping Co., Ltd. (2016) Zui Gao Fa Min Zai No.17 Related Case(s) This is the judgment of retrial, and the judgment of first instance and the judgment of second instance are on page 513 and page 527 respectively. Cause(s) of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote Revoking appellant court decision and affirming first instance decision holding the Plaintiff shipper to be entitled to recover some, but not all, losses incurred as a result of refusal by the Defendant to sign and issue bills of lading prepared by the Plaintiff. Summary The Plaintiff, Joho Trading Corp. (Joho), which was shipper of a cargo of coal to be carried from North Korea to China, prepared bills of lading relating to carriage of the cargo, but the Defendant refused to sign and issue them. The Plaintiff sued the Defendant for damages resulting from the Defendant’s refusal to issue the bills. The damages claimed included port fees, and delay damages caused by the decrease in value of coal which the Defendant carried. The Defendant argued that there was no contractual relationship between it and the Plaintiff, whereby the Plaintiff was entitled to demand issue of the bills of lading. At trial, the court of first instance held that: (1) the Plaintiff, as shipper and shipper of the goods, had the right to receive the bill of lading, and (2) the Defendant was liable to the Plaintiff for the customs delay fees incurred. All other claims for damages by the Plaintiff were denied. The Plaintiff appealed, asking for all of its economic losses to be paid; the Defendant cross-appealed, arguing that it should not be liable for any losses incurred by the Plaintiff. The appellant court revoked the first instance decision holding that the Plaintiff was the actual carrier, and that the evidence was insufficient to establish that the Defendant bore any responsibility as carrier. The Plaintiff applied to the Supreme People’s Court, asking for a retrial. The Claimant of Retrial claimed that the Respondent of Retrial was “the carrier” because the captain had authority to sign the bills of lading and there was no indication on the bills of lading that charter parties were incorporated. The Supreme People’s Court held in favour of the Claimant of Retrial, revoking the judgment of the intermediate court of appeal and affirming the judgment of first instance.

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Judgment The Claimant of Retrial (the Plaintiff of first instance, the Appellant of second instance): Joho Trading Corporation Domicile: Qianjin Cave, Lelang District, Pyongyang, Korea. Legal representative: DONG Jinyu, chairman of the corporation. Agent ad litem: GAO Liangchen, lawyer of Shandong Wincon Law Firm. Agent ad litem: GUO Enzhong, lawyer of Shandong Wincon Law Firm. The Respondent of Retrial (the Defendant of first instance, the Appellant of second instance): New Unite (HK) Marine Shipping Co., Ltd. Domicile: Room 19C, Rock Centre, 301–307 Lockhart Road, Wan Chai, Hong Kong. Legal representative: LIU Xiangyang, chairman of the company. Agent ad litem: CHEN Liang, lawyer of Shanghai Allbright (Nanjing) Law Offices. With respect to the case arising from dispute over contract of carriage of goods by sea between the Claimant of Retrial, Joho Trading Corporation (hereinafter referred to as JOHO), and the Respondent of Retrial, New Unite (HK) Marine Shipping Co., Ltd. (hereinafter referred to as NEW UNITE), the Claimant disagreed with the Shandong High People’s Court (2014) Lu Min Si Zhong Zi No.106 Civil Judgment and filed an application for retrial before the court. On November 24, 2015, the court made (2015) Min Shen Zi No.1555 Civil Ruling to try the case. The court formed a collegiate panel and held a hearing in pubic on March 29, 2016. Agent ad litem of JOHO, GUO Enzhong, agent ad litem of NEW UNITE, CHEN liang, appeared in court to attend the hearing. Now the case has been concluded. JOHO filed an action before Qingdao Maritime Court (hereinafter referred to as the court of first instance) in September, 2012 and claimed that: to perform the trade contract, JOHO loaded 3,782 tons of coal on board M/V RICHOCEAN to ship at Da’an Port in North Korea. NEW UNITE issued a full set of original bills of lading which recorded that the shipper was the Plaintiff. JOHO repeatedly asked for the bill of lading, NEW UNITE rejected it, which caused that the goods detained in the port of destination and a large amount of fee happened. On January 4, 2013, JOHO applied to add Qingdao Guangya International Shipping Co., Ltd. (hereinafter referred to as Qingdao Guangya) as the co-Defendant in the case. On July 2, 2013, the court of first instance ruled to approve that JOHO withdrew the action against Qingdao Guangya. During the trial of the case, JOHO changed claims three times. After the court of first instance explained, JOHO clearly stated that claims were that: (1) NEW UNITE should deliver the full set of original bill of lading No. D-1 to JOHO or a person designated by JOHO; (2) NEW UNITE should compensate JOHO for 312,393.20 yuan for the storage fee of goods happened at Qingdao port caused by the arrest of the bill of lading; (3) NEW UNITE should compensate JOHO for 501,426 yuan for the customs delayed declaration fee, the port fee 105,896 yuan of goods happened at Qingdao port caused by the arrest of the bill of lading, totaling 607,322 yuan; (4) NEW UNITE should compensate JOHO for liquidated damages 567,300 yuan for the JOHO’s failure to perform the delivery

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obligation to the buyer due to the arrest of the bill of lading; 6. NEW UNITE should compensate JOHO for interest loss 213,904.63 yuan; and NEW UNITE should bear the litigation fee and preservation fee of the case. The court of first instance found out that: M/V RICHOCEAN owned by Zhoushan Gaodi Shipping Co., Ltd. was chartered to NEW UNITE by bareboat from September 1, 2010 to August 31, 2013, and the bareboat charter was registered with the Zhoushan Maritime Safety Administration of the People’s Republic of China. M/V RICHOCEAN management contract concluded by the Defendant and Jiangsu New Unite Shipping Co., Ltd. (hereinafter referred to as Jiangsu New Unite) on November 8, 2010 stated that NEW UNITE entrusted Jiangsu New Unite to operate the ship, conclude a freight contract or time charter party, and charge freight or rent. The two parties agreed that the cooperation period would be three years, and the management fee would be collected from the date of receiving the ship. The contract also agreed other matters. NEW UNITE submitted a time charter party on M/V RICHOCEAN which was concluded between Jiangsu New Unite, as the owner of the ship and Qingdao Guangya on April 28, 2011, agreeing that “… the captain and the crew should try their best to assist in the dispatch, although the shipowner appointed the captain, however, as the hirer of the charterer, the captain should follow the instructions of the charterer and the agent … during the charter period, the charterer requires the captain to sign a bill of lading consistent with the charter party. The charterer and the agent can be entrusted to sign the bill of lading same with the mate’s receipt on behalf of the captain and chief mate.” The two parties concluded a lease renewal agreement for the ship on May 14, 2012. The charter period was from May 23, 2012 to November 23, 2012. Except for the rent terms, other terms were enforced as time charter party of M/V RICHOCEAN concluded by both parties on April 28, 2011. The time charter party submitted by the Defendant did not contain the record of the place where the contract was concluded, nor did it go through relevant notarization and certification. The 6 remittance notices from China Merchants Bank submitted by NEW UNITE from January to June 2012 stated that the remitter was Qingdao Guangya, the beneficiary was Jiangsu New Unite, the country/region of the remitter was Hong Kong, and the remittance information was M/V RICHOCEAN rent. On May 20, 2012, M/V RICHOCEAN loaded 3,782 tons of anthracite at Da’an Port in North Korea. The delivery shipper was JOHO. On May 23, 2012, the goods involved arrived at the destination port of Qingdao Port, China. On November 8, 2012, when the court of first instance boarded and arrested M/V RICHOCEAN at Baosteel Comprehensive Terminal in Shanghai, the captain of the ship, YANG Binghe, recognized that the goods shipper involved was JOHO, and the D-1 bill of lading involved was taken away by staff of Qingdao Guangya on May 24, 2012. The bill of lading stated that the charter party was incorporated into the bill of lading, the shipper was JOHO, and the consignee was instructed, Hong Kong Iron and Steel Union International Trade Co., Ltd. (hereinafter referred to as Hong Kong Iron and Steel Union) was notifying party. The signature of the captain YANG

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Binghe was signed at the place of writing, and it was stamped with seal of M/V RICHOCEAN of NEW UNITE (HK). Coal Purchase and Sale Contract submitted by JOHO, which was concluded by Hong Kong Iron and Steel Union with it on March 13, 2012 stated that the seller was JOHO and the buyer was Hong Kong Iron and Steel Union; the name was anthracite; the place of origin was North Korea; the price was CFR Nampu/Da’an Port, North Korea; the number was 4,000 tons (±5%), and the number on the ship should prevail; the port of shipment was North Korea, Nanpu Port/Da’an Port; the port of destination was the northern port of China (subject to the buyer’s notice); the delivery date was from March 15, 2012 to May 30, 2012; the payment terms were that the buyer should pay the full payment after receiving the goods; the total contract value was RMB2,400,000 yuan (based on 22 ash points)… Regarding the payment of the freight involved, JOHO’s claims were inconsistent. In the first exchange of evidence, JOHO claimed that the freight and demurrage had been paid to NEW UNITE’s shipping agent Taiyuan Shipping Co., Ltd., but in the third exchange of evidence, it claimed that it had not paid any freight to anyone and which paid freight to Taiyuan Shipping Co., Ltd. was Qingdao Quantum Jinyuan, and stated that it had no obligation to pay freight to NEW UNITE. Regarding the shipment of the goods involved, JOHO claimed that the goods involved were delivered to M/V RICHOCEAN at Da’an Port in North Korea according to the sales contract to ship; NEW UNITE claimed that M/V RICHOCEAN involved was time chartered to Qingdao Guangya, and Qingdao Guangya again voyage chartered the ship to Taiyuan Shipping Co., Ltd., and the captain drove the ship to North Korea according to Qingdao Guangya’s instructions. Qingdao Jinyuan respectively paid a port construction fee RMB21,179 yuan and port operation leasing fee RMB84,717 yuan to Qingdao Port (Group) Co., Ltd. Qiangang Branch on May 5, 2012 and May 28, 2012; Qingdao Jinyuan paid the imported goods delayed declaration fee of the goods involved RMB501,426 yuan to the Huangdao Customs of the People’s Republic of China on July 10, 2013. JOHO recognized that it had handled the customs clearance and taking procedures of the goods involved in an irregular manner. The court of first instance held that the case was a dispute over contract for the carriage of goods by sea. The dispute fell within the scope of cases accepted by the maritime court. Since the port of destination of the goods involved was Qingdao, China, the court had jurisdiction over the case. The case had foreign-related and Hong Kong-related factors, and all parties in the case chose to apply the laws of the mainland of the People’s Republic of China as governing law to handle the dispute involved. Firstly, whether NEW UNITE had the obligation to issue the bill of lading involved to JOHO. The fact that could be confirmed was that JOHO was the shipper of the goods involved and the goods was delivered to M/V RICHOCEAN bareboat chartered by NEW UNITE. YANG Binghe, the captain of the ship issued the D-1 bill of lading involved. Although the bill of lading involved was not delivered to JOHO, the act of issuing the bill of lading D-1 involved, according to Article 72 of the Maritime Code, should first be deemed to be issued on behalf of the carrier, and

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the carrier should first be understood as that the bearboat charterer of registration and filing of the ship of M/V RICHOCEAN was NEW UNITE. The bill of lading involved contained a charter party bill of lading, and the signature of the captain YANG Binghe and the ship seal of NEW UNITE were shown at the place where the bill of lading was signed. This was the same as that the identity of NEW UNITE was the bareboat charterer of M/V RICHOCEAN that has been identified in the case. NEW UNITE argued that it was not the carrier of the goods involved, because the time charter party and the voyage charter party existed under the voyage shipment, and the charterer should be regarded as the carrier. In this regard, NEW UNITE should provide evidence to disclose the charter party it claimed or indicate the identity of the carrier. The time charter party of M/V RICHOCEAN that NEW UNITE submitted, which was concluded by Jiangsu New Unite and Qingdao Guangya was not notarized and certified, and did not provide evidence to prove that the time charter party was formed in China, and it did not disclose whether Qingdao Guangya International Shipping Co., Ltd. legally existed. According to the Several Provisions of the Supreme People’s Court on Evidence in Civil Procedures Article 11, the evidence provided by the parties to the people’s court was formed outside the territory of the People’s Republic of China, the evidence should be certified by the notary office of the host country and certified by the embassy or consulate of the People’s Republic of China in that country, or perform the certification procedures stipulated in the relevant treaty between the People’s Republic of China and the host country. The evidence provided by the parties to the people’s court was formed in Hong Kong, Macau, and Taiwan regions, and relevant certification procedures should be performed. As NEW UNITE failed to fully and reasonably disclose the charter party carrier involved in the transportation of the goods involved, nor did it go through the procedures for notarization and certification of the charter party involved, and the manager, time charterer and voyage charterer Jiangsu New Unite, Qingdao Guangya and Taiyuan Shipping Co., Ltd. which claimed whether M/V RICHOCEAN legally existed during the transportation involved did not provide evidence to prove. Therefore, it could not prove that during the voyage of the transportation of goods involved from Da’an Port in North Korea to Qingdao Port in China, NEW UNITE did not actually operate or participate in the management of M/V RICHOCEAN. JOHO delivered the goods involved to M/V RICHOCEAN that NEW UNITE bareboat chartered. The act that ship’s captain issued the bill of lading and the ship’s seal stated that the carrier was NEW UNITE. Therefore, JOHO and NEW UNITE formed a contractual relationship for the carriage of goods by sea. After receiving the goods delivered by JOHO for consignment, it was obligated to deliver the bill of lading involved to JOHO. The bill of lading has the function of a goods receipt and the nature of a document of property rights. Whichever the bill of lading issued by NEW UNITE represented, it should issue such bill of lading or receipt to the shipper, JOHO, but after NEW UNITE received the goods delivered by JOHO, it failed to deliver the bill of lading with the shipment receipt to JOHO, which caused JOHO to suffer economic damage, and it should be liable for

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compensation. Since the bill of lading involved was issued and the goods involved was taken at the port of destination, JOHO’s claim for that NEW UNITE should deliver the D-1 original bill of lading involved had no practical significance. Secondly, the amount of economic loss claimed by JOHO due to the failure to obtain the original bill of lading. 1. JOHO claimed that the storage cost of the goods involved at Qingdao Port was 312,393.20 yuan due to the arrest of the bill of lading. Although JOHO submitted the charging standard, it did not submit the relevant documents for the actual expense of the above storage cost for verification by the court. Therefore, JOHO had no evidence to prove the loss actually happened, so the claim of JOHO was not supported. 2. JOHO claimed that due to the arrest of the bill of lading, the port construction fee, the port operation leasing fee, and the customs delayed declaration fee, totaling 607,322 yuan of the goods involved, happened at the destination port Qingdao Port. Regardless of whether the goods involved were taken in time, the port construction fee and port operation leasing fee were charged according to the weight of the goods, which were reasonable expenses that must happen for imported goods. The fee had nothing to do with NEW UNITE’s arrest of the bill of lading and were not caused by NEW UNITE’s act. JOHO claimed that it should be born by NEW UNITE, which had no legal basis and the court did not support it. According to the invoice and explanation that Qingdao Quantum Jinyuan paid the imported goods delayed declaration fee RMB501,426 yuan of goods involved to Huangdao Customs of the People’s Republic of China on July 10, 2013, it proved that the loss actually happened, and it was caused by NEW UNITE’s failure to deliver the bill of lading involved to JOHO in time, which prevented JOHO from making timely customs declarations. There was a causal relationship between the two. NEW UNITE should be liable for compensation and for the claim of JOHO that NEW UNITE should compensate it for the customs delayed declaration fee RMB501,426 yuan should be supported. 3. JOHO claimed that the liquidated damages 567,300 yuan of that JOHO was unable to perform the delivery obligation to the buyer due to the arrest of the bill of lading, and compensation for the loss of the coal market decline 680,760 yuan, and submitted Hong Kong Iron and Steel Union claim statement and deduction notice. According to the Coal Purchase and Sale Contract concluded, for the delayed delivery of goods at the port of destination Qingdao Port, the carrier should be liable for compensation to the consignee. In the case, JOHO actually fulfilled the obligation to deliver goods to the carrier as the seller of the purchase and sale contract when performing coal purchase and sale contract. The goods arrived at the destination port of Qingdao, China on May 23, 2012 within the contractual delivery period, which did not constitute a fundamental breach of contract. Hong Kong Iron and Steel Union had no right to claim compensation from the buyer, and therefore the claim was not supported. 4. JOHO claimed that the interest loss RMB2,269,200 yuan (3,782 tons  600 RMB/ton) due to the arrest of the bill of lading and caused JOHO’s failure to receive the payment in time and the total interest loss of RMB1,300,000 yuan deposit due to litigation preservation, totaling 213,904.63 yuan. The claim had no legal basis and was not supported.

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In summary, the court of first instance made Judgment (2012) Qing Hai Fa Hai Shang Chu Zi No.958 on March 11, 2014: (1) NEW UNITE should compensate JOHO for the customs delayed declaration fee RMB501,426 yuan; (2) reject other claims of JOHO against NEW UNITE. Court acceptance fee of first instance in amount of 23,886 yuan, JOHO should bear 18,631.08 yuan and NEW UNITE should bear 5,254.92 yuan. Litigation preservation fee in amount of 5,000 yuan, should be born by NEW UNITE. Both NEW UNITE and JOHO refused to accept the judgment of first instance and appealed to Shandong High People’s Court (hereinafter referred to as the court of second instance). NEW UNITE appealed that the facts and the application of law were wroHBustoms declaration fee had no legal basis, and claimed that the judgment of first instance should be revoked and JOHO’ claims should be rejected. JOHO appealed that NEW UNITE’s failure to issue bills of lading in a timely manner resulted in goods storage fee, liquidated damages, and price declines, which should be born by NEW UNITE, and claimed that the judgment be changed to support all of its claims for compensation for loss. The court of second instance found out that NEW UNITE submitted the registration and existence certificates of Qingdao Guangya and Taiyuan Shipping. Both parties had no objection to the registration and the status of corporate legal person registration of Taiyuan Shipping, Qingdao Guangya, and Jiangsu Xinglian, and recognized the fact. The invoice issued by Taiyuan Shipping provided by NEW UNITE was consistent with the evidence submitted by JOHO during the first instance, which was recognized. The court of second instance held that the case was the dispute over contract of carriage of goods by sea. The issue of both parties was whether various loss claimed by JOHO should be born by NEW UNITE. The first issue affecting the dispute between the two parties was whether it was the carrier of the goods involved. The Maritime Code of the People’s Republic of China Article 42 stipulates that “‘carrier’ means the person by whom or in whose name a contract of carriage of goods by sea has been concluded with a shipper”. As the shipper, JOHO claimed that it had a contractual relationship of carriage with NEW UNITE, and NEW UNITE did not raise any objection to the legal status of the shipper under the bill of lading it claimed, and it was confirmed. Regarding whether the controversial signing act of the captain YANG Binghe represented NEW UNITE. The judgment of first instance was based on M/V RICHOCEAN bareboat charter registration and held that it was correct that the carrier should first be deemed as NEW UNITE. However, NEW UNITE disclosed the existence of time charter party and voyage charter party for the ships involved during the judgement of first instance. The time charter party, bank remittance notice, the legal registration and existence certificates of Qingdao Guangya and Taiyuan Shipping Co., Ltd. provided by NEW UNITE in first and second instance, according to evidence such as the freight invoices involved submitted by JOHO and Qingdao Guangya delivery instructions, and the fact that the bill of lading involved was taken away by the staff of Qingdao Guangya, and the goods under the bill of lading involved was taken by JOHO and Qingdao Jinyuan, the court confirms that NEW UNITE claimed that it delivered the ship involved to

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Jiangsu Xinglian to manage, Jiangsu Xinglian time chartered the ship to Qingdao Guangya. In the dispute over contract of carriage involved, NEW UNITE did not manage the ship, did not control the goods, and did not actually carry out goods transportation, and recognized that NEW UNITE had disclosed the fact. The confirmation of the court of first instance that the evidence involved was formed outside the territory and should be notarized and certified was changed for the evidence provided by NEW UNITE during second instance. It thus confirms that the act of signing the bill of lading by the captain of M/V RICHOCEAN YANG Binghe did not represent NEW UNITE. NEW UNITE was not the carrier of the contract of carriage of goods by sea involved. As the shipper of the bill of lading, JOHO claimed NEW UNITE to bear the liability of the carrier, which had insufficient evidence and the court does not support it. Therefore, the court also does not support JOHO’s claim for compensation of NEW UNITE for its loss. The court of second instance made (2014) Lu Min Si Zhong Zi No.106 on December 5, 2014: (1) revoke the Qingdao Maritime Court of the People’s Republic of China (2012) Qing Hai Fa Hai Shang Chu Zi No.958 Civil Judgment; (2) reject the claims of JOHO TRADING CORPORATION. Court acceptance fee of first instance in amount of 23,886 yuan, litigation preservation fee in amount of 5,000 yuan, and court acceptance fee of second instance in amount of 20,769 yuan, should be born by JOHO TRADING CORPORATION. JOHO refused to accept the judgment of second instance and applied to the court for a retrial, claiming that: (1) the bill of lading involved was issued by the captain of M/V RICHOCEAN and was stamped with the seal of NEW UNITE. NEW UNITE was the carrier of the contract of carriage of goods by sea as proved by the bill of lading involved. The judgment of second instance confirmed that NEW UNITE was not the carrier and lacked evidence. (2) As the shipper, JOHO claimed the carrier to issue a bill of lading based on the contract of carriage of goods by sea as proved by the bill of lading. The judgment of second instance incorporated the ship management contract and the ship charter party into the contract of carriage as proved by the bill of lading in the case, and the application of law was wrong. (3) As NEW UNITE failed to fulfill its obligation to issue bills of lading to JOHO, the goods could not be cleared and taken after the goods arrived at the port of destination, causing JOHO to suffer heavy economic loss, and NEW UNITE should bear the liability for compensation. It claimed to revoke the judgment of second instance, and NEW UNITE should compensate JOHO for economic loss 2,275,783.83 yuan, and NEW UNITE should bear the litigation fee in this case. NEW UNITE argued that: (1) the facts confirmed in the judgment of second instance were clear and NEW UNITE was not the carrier of the goods in dispute. (2) The judgment of second instance applied the law correctly and did not confuse the bare charter party, time charter party and voyage charter party. NEW UNITE was not obliged to issue and deliver the bill of lading. (3) JOHO was neither the owner of the disputed goods, nor the buyer or consignee of the disputed goods, and it had no right to claim customs delayed declaration fee and other loss from NEW UNITE. It claimed to dismiss the retrial application of JOHO.

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The court finds that JOHO did not submit the purchase and sale contract concluded by Hong Kong Iron and Steel Union and Qingdao Jinyuan as evidence to the court of first instance, and the judgments of first and second instance described that the content of the purchase and sale contract concluded between JOHO and Hong Kong Iron and Steel Union as the content of the purchase and sale contract concluded between Hong Kong Iron and Steel Union and Qingdao Jinyuan was incorrect, which should be corrected. JOHO submitted Coal Purchase and Sale Contract concluded on March 13, 2012 between Hong Kong Iron and Steel Union and Qingdao Jinyuan as new evidence to the court to prove that the final consignee of the goods involved was Qingdao Jinyuan. NEW UNITE did not recognize the authenticity, legality and relevancy of the evidence. The court holds that the purchase and sale contract was a copy, and neither party concluding the contract was a party to this case, and the authenticity of the content of the contract cannot be confirmed. However, combined with other evidence such as the Statement issued by Hong Kong Iron and Steel Union and Qingdao Jinyuan, the record of the bill of lading involved, and the import goods declaration form, it can be confirmed that there was a purchase and sale contract relationship between Hong Kong Iron and Steel Union and Qingdao Jinyuan, and Qingdao Jinyuan was the consignee of the goods involved. When JOHO applied to the court for a retrial, it gave up the claims that NEW UNITE should deliver the bill of lading involved and pay the port construction fee and port operation leasing fee happened in the destination port of Qingdao. The parties had no objection to other facts found out by the courts of first and second instance, and the court confirms them. The court holds that the case is a dispute over contract for the carriage of goods by sea related to foreign and Hong Kong factors, and both parties chose to apply the laws of the mainland of the People’s Republic of China to handle the dispute involved, and the court confirms it. JOHO’s abandonment of part of the claims in the retrial is a self-discipline of its civil rights and does not violate relevant laws and regulations and should be permitted. The issues of the retrial of the case are that: 1. how to confirm the legal status of NEW UNITE, whether NEW UNITE has the obligation to issue and deliver the bill of lading to JOHO; 2. whether the various loss claimed by JOHO should be born by NEW UNITE. (1) Regarding how to confirm the legal status of NEW UNITE, whether NEW UNITE has the obligation to issue and deliver the bill of lading to JOHO Firstly, according to the facts found out in the case, the goods involved were sold by JOHO to the Hong Kong Iron and Steel Union, and the trade price terms were CFR. On May 20, 2012, JOHO actually delivered the goods involved to M/V RICHOCEAN bareboat chartered by NEW UNITE at Da’an Port, North Korea. The captain of the ship issued a short bill of lading numbered D-1 and stamped it with the ship seal M/V RICHOCEAN with the English name of NEW UNITE, and the shipper recorded in the bill of lading was JOHO. NEW UNITE had no objection to that the shipper involved in the carriage of goods was JOHO. The Maritime Code of the People’s Republic of China Article 72 Paragraph 1 stipulates that after the

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goods was received by the carrier or shipped, the carrier should issue a bill of lading at the claim of the shipper. As the shipper of the goods involved, JOHO had the right to claim the issuance and obtain the bill of lading from the carrier receiving the goods. However, after the captain of M/V RICHOCEAN issued the original bill of lading involved, it was not delivered to JOHO. Instead, it was delivered to the staff of Qingdao Guangya after the ship arrived at the destination port of Qingdao on May 24, 2012. As the shipper, JOHO had the right to claim compensation for the loss caused by the carrier’s failure to deliver the bill of lading to it. Secondly, the Maritime Code of the People’s Republic of China Article 72 Paragraph 2 stipulates that if the bill of lading was issued by the captain of the ship shipped the goods, it should be deemed to be issued on behalf of the carrier. Both parties in the case had no objection to the contents of the bill of lading involved. The bill of lading is a short-form bill of lading used combined with a charter party, but the bill of lading did not record any incorporation of a charter party, which can not prove that there was a charter party under the bill of lading. In the absence of a charter party, the bill of lading is evidence of the contract of carriage. If the bill of lading is issued by the captain, it is deemed to have been issued on behalf of the carrier. The shipper who delivers the goods has the right to identify the carrier based on the bill of lading and claim rights against it. The bill of lading was issued by the captain of M/V RICHOCEAN and was stamped with the ship seal M/V RICHOCEAN with the English name of NEW UNITE. The courts of first and second instance, based on the M/V RICHOCEAN bareboat charter registration and filing, held that the carrier should first be presumed to be the bareboat charterer of M/V RICHOCEAN NEW UNITE, and it is not inappropriate. Thirdly, NEW UNITE argued that because the carriage involved had a lease, it was not the carrier of the carriage involved, and NEW UNITE should bear the burden of proof. Although NEW UNITE submitted Ship Management Contract concluded with Jiangsu Xinglian, Time Charter Party concluded by Jiangsu Xinglian and Qingdao Guangya, and Voyage Charter Party concluded between Qingdao Guangya and Taiyuan Shipping, But because Voyage Charter Party is a copy, its authenticity cannot be confirmed. Therefore, NEW UNITE’s evidence can only prove the fact that the ship involved was time chartered to Qingdao Guangya. The agreement concerning the issuance of the bill of lading in the time charter party concluded by Jiangsu Xinglian and Qingdao Guangya was only effective between the parties to the time charter party and can not be effective against the third party outside the contract, nor can be the basis for NEW UNITE to be exempted from the external responsibility. The payment of fee by Qingdao Jinyuan to Taiyuan Shipping can not prove that Taiyuan Shipping had a carriage contractual relationship with JOHO. NEW UNITE had no evidence to prove that Qingdao Guangya or Taiyuan Shipping had a carriage contractual relationship with the shipper JOHO as recorded in the bill of lading involved. NEW UNITE only proved that it was not the carrier of the goods involved on the basis of the fact that it concluded a time charter party with Qingdao Guangya, which had insufficient evidence. In the absence of evidence to prove that JOHO had a contract of carriage with others, according to the fact that the bill of lading was issued by the captain

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and stamped with the ship seal M/V RICHOCEAN with the English name of NEW UNITE, it should be confirmed that JOHO and NEW UNITE constituted a contractual relationship of carriage of goods by sea. As the carrier, NEW UNITE was obligated to issue a bill of lading to the shipper JOHO. After the bill of lading was issued, the bill of lading was not delivered to the shipper JOHO. Instead, it was delivered to Qingdao Guangya by the captain at the port of destination. NEW UNITE could not prove that Qingdao Guangya was the carrier involved in the carriage, so the captain delivered the issued bill of lading to Qingdao Guangya, which lacked sufficient basis. As the shipper, JOHO had the right to claim a bill of lading from NEW UNITE. The judgment of second instance only confirmed that NEW UNITE was not the carrier of the goods involved on the grounds that the ship involved had been time chartered, and lacked sufficient factual and legal basis and should be corrected. (2) Whether the various loss claimed by JOHO should be born by NEW UNITE As the carrier of the goods involved, NEW UNITE was obliged to issue a bill of lading to the shipper JOHO in a timely manner. After the captain of M/V RICHOCEAN issued the bill of lading, it did not deliver it to the shipper JOHO, but delivered it to Qingdao Guangya, which constituted a breach of contract and should bear the corresponding liability for damages. As the Plaintiff of the case, JOHO claimed NEW UNITE to bear the storage fee, customs delayed declaration fee, liquidated damages, market price decline loss and interest loss caused by failure to deliver the bill of lading. Regarding storage fee. JOHO claimed that as NEW UNITE failed to deliver the bill of lading, the goods involved could not be taken in time at the port of destination, resulting in a storage fee 312,393.20 yuan. JOHO submitted Port Operation Contract for Imported Goods concluded by Qingdao Jinyuan and the port operator, to prove the calculation standard for the storage fee of the goods involved. However, JOHO did not submit a receipt for the actual payment of the expenses, which could not prove the actual occurrence of the loss, so the claim of JOHO is not supported. Regarding customs delayed declaration fee. The goods involved arrived at Qingdao Port on May 23, 2012, and the bill of lading involved was taken away by staff of Qingdao Guangya on May 24. It was not until the procedures in the case that the goods involved was allowed to go through customs clearance and withdrawal procedures through unconventional methods. Because JOHO failed to obtain a bill of lading from the carrier to deliver to the buyer of the trade contract, the goods could not be declared in time after the goods arrived at the port of destination, resulting in customs delayed declaration fee. The invoice submitted by JOHO that Qingdao Jinyuan paid the customs delayed declaration fee of imported goods 501,426 yuan, and the statement issued by Qingdao Jinyuan that it paid the fee on behalf of JOHO, can prove that the fee actually happened. Moreover, Qingdao Jinyuan and JOHO reached an agreement, and JOHO would bear the fee. There is a causal relationship between the occurrence of the fee and the carrier’s

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failure to deliver the bill of lading in time, and it should be born by the carrier NEW UNITE. Regarding liquidated damages. Coal Purchase and Sale Contract concluded by JOHO and Hong Kong Iron and Steel Union agreed that the trade price was CFR Nanpu/Da’an Port, and the delivery period was from March 15 to May 30, 2012. CFR referred to cost plus freight (…designated port of destination). The seller’s delivery obligation was to deliver the goods to the ship at the port of shipment within the agreed date or time limit. The seller of the purchase and sale contract involved, JOHO, delivered the goods to the shipping ship at Da’an Port in North Korea on May 20, 2012. The date did not exceed the delivery date agreed in the purchase and sales contract and did not constitute a breach of contract. JOHO only relied on the statement of claim of Hong Kong Iron and Steel Union and claimed that the carrier NEW UNITE should bear the liability for breach of contract for the failure to deliver the goods within the specified time as agreed in the purchase and sale contract, which lacked basis. Therefore, the claim of JOHO is not supported. Regarding the market price decline loss. The carrier NEW UNITE was obliged to deliver the bill of lading to the shipper JOHO, and should be liable for compensation for the loss caused to JOHO if it violated the obligation of presenting documents. According to Coal Purchase and Sale Contract concluded by JOHO and Hong Kong Iron and Steel Union, the information that the seller should provide to the buyer included the original bill of lading. Although the contract did not specify the time limit for delivery of the bill of lading, since the carrier did not deliver the bill of lading to JOHO, JOHO was unable to deliver the bill of lading to the consignee to take the goods for up to one year after the goods arrived at the port of destination, which obviously exceeded the reasonable time limit for delivery of the bill of lading, and violated the obligation to deliver the bill of lading as agreed in the purchase and sale contract. JOHO claimed that it suffered the market price decline loss proposed by Hong Kong Iron and Steel Union as a result, but the Declaration of Claim and Deduction Notice of Hong Kong Iron and Steel Union and the Statement issued by Qingdao Jinyuan submitted by JOHO can not fully prove the actual occurrence of the loss. The authenticity of the website materials submitted by it cannot be confirmed. The relevant purchase and sales contracts and commercial invoices can only prove the sale of goods at reduced prices, but cannot fully prove the causal relationship between the sale of goods at reduced prices and the inability to retrieve the goods in time. Therefore, the claim of JOHO is not supported. Regarding interest loss. JOHO claimed that the carrier NEW UNITE’s arrest of the bill of lading resulted in the loss of interest on the payment of the goods involved and the interest loss on the deposit paid by the action preservation. During the trial, JOHO recognized that the goods was delivered, but it did not receive the payment for the goods involved so far. JOHO’s claim that the interest loss on the payment for goods is not based on sufficient basis. The guarantee fee paid by JOHO to the court for the application for arrest of the ship is a litigation fee that should be paid according to the law, and its claim that the interest loss of the fee has no legal basis. Therefore, the claim of JOHO is not supported.

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In summary, the judgment of second instance confirmed that NEW UNITE was not the carrier of the contract of carriage involved, which lacks factual and legal basis and should be corrected. The judgment of first instance confirmed that NEW UNITE, as the carrier of the goods involved, failed to pay the bill of lading to the shipper, JOHO, which constituted a breach of contract, and the judgement that NEW UNITE should be liable for compensation for the loss of customs delayed declaration fee suffered by JOHO is proper. According to the Civil Procedure Law of the People’s Republic of China Article 207 Paragraph 1 and the Interpretation of the Supreme People’s Court Concerning the Application of the Civil Procedure Law of the People’s Republic of China Article 407 Paragraph 2, the judgment is as follows: 1. Revoke the Shandong High People’s Court (2014) Lu Min Si Zhong Zi No.106 Civil Judgment; 2. Affirm the Qingdao Maritime Court (2012) Qing Hai Fa Hai Shang Chu Zi No.958 Civil Judgment. Court acceptance fee of first instance in amount of 23,886 yuan, JOHO TRADING CORPORATION shall bear 18,631.08 yuan and NEW UNITE (HK) MARINE SHIPPING CO., LTD. shall bear 5,254.92 yuan. Litigation preservation fee in amount of 5,000 yuan, shall be born by NEW UNITE (HK) MARINE SHIPPING CO., LTD. Court acceptance fee of second instance in amount of 20,769 yuan, JOHO TRADING CORPORATION shall bear 11,955 yuan and NEW UNITE (HK) MARINE SHIPPING CO., LTD. shall bear 8,814 yuan. The judgment is final. Presiding Judge: HU Fang Judge: GUO Zhonghong Judge: YU Xiaohan June 30, 2016 Clerk LI Na

Haikou Maritime Court Civil Judgment LI Jiezhao v. Hainan Province Fishery Mutual Insurance Association et al. (2016) Qiong 72 Min Chu No.289 Related Case(s) None. Cause(s) of Action 230. Dispute over marine insurance contract on the sea or sea-connected waters. Headnote The Defendant insurer held to be unable to rely on exclusion clause in insurance policy, as it had failed to inform the assured about the clause, thereby rendering it void. Summary The Plaintiff vessel owner purchased insurance for ZHANG Junquan and other seamen. ZHANG Junquan fell into the water and was later declared dead. ZHANG Junquan’s heir, ZHANG Yanjun, reached a settlement with the Plaintiff, and the Plaintiff became subrogated to ZHANG Yanjun’s right to seek insurance compensation. The Plaintiff then sued the Defendant insurer seeking compensation. The Defendants argued that ZHANG Junquan’s death was a result of illegal fishing and should be excluded under the exclusion clause of the insurance policy. The court found the Defendants failed to prove that they had fulfilled the insurer’s duty to inform regarding the exclusion clause, rendering the clause void. Therefore, the court awarded the Plaintiff compensation.

Judgment The Plaintiff: LI Jiezhao Agent ad litem: CHE Liyong, lawyer of Shandong Chengshan Haitian Law Firm. The Defendant: China Fishery Mutual Insurance Association Legal representative: LI Jianhua, director. The Defendant: Hainan Province Fishery Mutual Insurance Association Legal representative: WANG Shiwen, president. © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_20

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Agent ad litem: LI Jiaxin, lawyer of Beijing Dentons (Haikou) Law Firm. Agent ad litem: ZHANG Liuqing, lawyer of Beijing Dentons (Haikou) Law Firm. With respect to the case arising from dispute over marine insurance contractfiled by the Plaintiff LI Jiezhao against the Defendants China Fishery Mutual Insurance Association (hereinafter referred to as “China Fishery Association”) and Hainan Province Fishery Mutual Insurance Association (hereinafter referred to as “Hainan Fishery Association”) before the court on August 8, 2016. After entertaining this case on the same day, the court heard the case in public under general procedure according to law. CHE Liyong, agent ad litem of the Plaintiff, WANG Shiwen, president of Hainan Fishery Association, LI Jiaxin and ZHANG Liuqing, agents ad litem of the Defendant, appeared in court and participated in the action. The Defendant, China Fishery Association failed to appear before the court without justified reasons after being summoned by the court. The case has been concluded. The Plaintiff raised the following claims and requested the court to order: 1. the Defendants should pay the Plaintiff accidental injury insurance compensation in amount of RMB380,000; 2. the Defendants should undertake the litigation costs. Facts and reasons: the Plaintiff LI Jiezhao was the shipowner of M.V. “QIONG CHANG JIANG 10440” (hereinafter referred to as M.V. “10440”). LI Jiezhao, as applicant, purchased fishermen marine personal accident insurance B of Hainan agricultural insurance fishery corporate bodies for ZHANG Junquan and other 8 seamen on November 4, 2014. The insured amount was RMB400,000, including RMB380,000 for accident insurance, RMB20,000 for additional accidental injury medical insurance, and the insurance premium was RMB1,000 per seaman. Duration of insurance was from 0000 h on November 5, 2014 to 2400 h on November 4, 2015. On November 12, 2014, ZHANG Junquan fell into water carelessly from M.V. “10440” in 981-6 Sea Area, after searching, it was unable to locate the whereabouts of him after searching and rescuing in many ways. At about 1900 h on November 14, the vessel anchored at Xinfa fishing port in Rongcheng, Shandong, and reported to the local frontier police substation and fishing port supervisory authority. Later, Qingdao Maritime Court declared death of ZHANG Junquan by (2015) Qing Hai Fa Xuan Zi No.32 Civil Judgment. At the witness of Shandong Jianqin Law Firm, ZHANG Yanjun, the only legal heir of ZHANG Junquan, reached a compensation agreement with the Plaintiff on December 31, 2014. In that agreement, the Plaintiff agreed to compensate ZHANG Yanjun RMB650,000, and transfer the right to claim for compensation of this accident to the Plaintiff and notified the Defendants. The Plaintiff claimed the Defendant to make compensation for many times after reporting the case, but the Defendant did not reply. Until July 8, 2016, Hainan Fishery Association replied in written on the ground that the time of seaman’s falling overboard and the time of purchasing insurance was too close. The Plaintiff requested the court to support his claims. The Defendant defended as follows: (1) the fishing vessel registration certificate of M.V. “10440”, stated that the owner of the vessel was XU Lumin, the Plaintiff had no insurable interest in this case and the policies were invalid; (2) it was irrational that the Plaintiff purchased insurance for the crew 5 days after the vessel

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went to sea, and the Plaintiff’s evidence was not enough to prove the insured event happened after purchasing insurance; (3) the operation field of the fishing vessel was C3 fishing zone, it was illegal that the vessel operated in 981-6 area without approval, which met the exceptions Article 5 Paragraph 5 of the insurance clauses. The Defendant requested the court to reject the Plaintiff’s claims. The Plaintiff submitted 7 sets of evidence within the time limits of adducing evidence in order to support the claims: Fishermen Marine Personal Accident Insurance Policy, the Disappearance Certificate of ZHANG Junquan issued by Shandong Province Rongcheng City Public Security Bureau Taoyuan Border Police Station, the Maritime Traffic Accident Investigation Report issued by of Rongcheng fishing port superintendency agency, Civil Judgment in which ZHANG Junquan was declared of death rendered by Qingdao Maritime Court, Compensation Agreement between the Plaintiff and ZHANG Yanjun, the reply to the claim of ZHANG Junquan’s disappearance due to the accident falling from M. V. “10440” issued by Hainan Fishery Association, records of marriage registration and residential registration of ZHANG Junquan issued by Rongcheng government department. The Plaintiff submitted 2 sets of evidence in the hearing, including Fishing Vessel Ownership Certificate and transfer voucher of the compensation in amount of RMB650,000 paid by the Plaintiff to ZHANG Yanjun. The Defendant had no objection to authenticity of evidence above, but lodged an objection to ownership of M.V. “10440” and the time of insured event. The Defendant submitted 3 sets of evidence to the court within the time limit for adducing evidence: (1) Fishing Vessel Registration Certificate; (2) Instrument of Ratification of Fishing Vessels Nets Index, Regulations on Administration of Fishing Licensing, Fishing Vessel Safety Certificate, Statutory Rules of Fishing Vessels; (3) blank Fishermen Marine Personal Accident Insurance Policy, then submitted the Fishermen Marine Personal Accident Insurance Policy with the signature of both parties after the hearing. The Plaintiff had no objection to the authenticity of the evidence, but objected to the validity of Fishing Vessel Registration Certificate, effectiveness of departmental regulations and exceptions of death due to illegal fishing. The court confirms and adopts the evidence to which the parties have no objection. In terms of the facts and evidence in dispute, the court finds as follows: 1. As for the ownership of M.V. “10440”, Fishing Vessel Ownership Certificate provided by the Plaintiff was registered by Changjiang fishing port superintendency agency on July 30, 2013, which recorded Changjiang Weisheng fishery Co., Ltd. held 20% shares and LI Jiezhao held 80% shares. But Fishing Vessel Ownership Certificate provided by the Defendant was registered by Changjiang fishing port superintendency agency on April 30, 2011, which recorded the shipowner was XU Lumin and term of validity thereof was to April 30, 2013. Fishing Vessel Registration Certificate provided by the Defendant was overdue, while the Fishing Vessel Ownership Certificate provided by the Plaintiff was registered on July 30, 2013 and LI Jiezhao became the ultimate owner with 80% shares.

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2. As for the time of occurrence of insured event, M.V. “10440” set sail on October 30, 2014, LI Jiezhao purchased insurance on November 4 through phone, and the Insured ZHANG Junquan fell into water and disappeared on November 12. It was proved by (2015) Qing Hai Fa No.32 Civil Judgment of Qingdao Maritime Court which declared the death of ZHANG Junquan. The Defendants challenged the time of occurrence of insured event but could not prove that, so they should take legal consequences for failure on burden of proof. The court finds that Hainan Fishery Association was established in January 2013, a social entity organization could bear civil liabilities independently and set up 13 insurance agencies in 13 coastal counties such as Changjiang City, Hainan Province. China Fishery Mutual Insurance (former China Fishing Vessel Owners Mutual Insurance Association) was founded in July 1994, which was also a social entity organization. The court holds that this case is concerning marine insurance contract dispute arising from fishermen marine personal accident insurance between the Plaintiff and the Defendants. The issues in this case are as follows: (1) whether the Plaintiff has an insurable interest of the insured; (2) whether the exception clause about death due to illegal fishing in the insurance policy in question is effective. In this case, the Plaintiff purchased insurance for ZHANG Junquan and 8 other seamen by phone on November 4, 2014 and paid premiums as arranged. The insurance contract was established when the Defendant signed the insurance policy as the insurer, and duration of insurance was from 0000 h on November 5, 2014 to 2400 h on November 4, 2015. M.V. “10440” was registered by Changjiang fishing port superintendency agency. The Plaintiff, as the ultimate owner of the vessel, purchased insurance for ZHANG Junquan and 8 other seamen he hired, which accorded with Article 1 of insurance policy. The Plaintiff had an insurable interest of the insured ZHANG Junquan and 8 other persons, so the insurance contract shall be effective. The Plaintiff had paid ZHANG Yanjun (ZHANG Junquan`s mother) the only legal heir of ZHANG Junquan RMB650,000 after ZHANG Junquan was declared dead. ZHANG Yanjun the beneficiary transferred the right to claim of the insurance compensation in relation to the insured event to the Defendant. According to Article 13 of the Interpretation of the Supreme People’s Court on Several Issues concerning Application of the Insurance Law of the People’s Republic of China (III), the Plaintiff LI Jiezhao shall be a proper party in lawsuit. As for whether the exception clause about death due to illegal fishing in the insurance policy in question is effective, Article 17 of the Insurance Law provides that “if there are any exclusion clauses imposed by the insurer in the insurance contract, then the insurer shall give specific and clear explanations thereof to the applicant when concluding the insurance contract, otherwise such clauses shall not be enforceable”. Combined with this case, the Defendants did not give enough literal, typeface, signal or other tips for clear signs to attract insurance applicant’s attention on policy clause that exempt the insurer’s obligations, the Defendants

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failed to prove they had fulfilled insurer’s explanation obligation. Therefore, Article 5 Paragraph 5 of the insurance policy in question, the terms that death due to illegal fishing could exempt the insurer’s obligations had no effectiveness in this case. Besides, Hainan Fishery Association is social entity organization which could bear civil liabilities independently and has direct interest in the cases. While China Fishery Association is social entity organization and only one of the underwriters of corporate bodies of fishing vessels and fishmen in Hainan Fishery Association, which has no direct interest in this cases, thus China Fishery Association shall not take legal liability in this case. To sum up, the Plaintiff is a proper party in suit and his claims are well grounded. The court supports the Plaintiff’s claims. According to Article 48 of the General Principles of the Civil Law of the People’s Republic of China and Article 14 of the Insurance Law of the People’s Republic of China, the judgment is as follows: The Defendant Hainan Province Fishery Mutual Insurance Association shall pay accidental injury insurance compensation in amount of RMB380,000 to the Plaintiff LI Jiezhao within 10 days after the day that this judgment comes into force. Where party fails to perform the obligation of paying above-mentioned amounts within the period prescribed herein, such party shall, in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China, double pay the interest for the period of delayed performance. Court acceptance fee in amount of RMB7,000, shall be born by the Defendant Hainan Province Fishery Mutual Insurance Association. In event of dissatisfaction with this judgment, the parties may, within 15 days upon service of this judgment, submit a statement of appeal with the court, with duplicates being submitted in terms of the number of the other parties, to lodge an appeal to the Guangdong High People’s Court. Presiding Judge: WU Ping Acting Judge: WANG Yuan People’s Juror: WANG Xu October 20, 2016 Judge Assistant: ZHANG Xiaoguang Clerk: SU Shengxi

Tianjin Maritime Court Civil Judgment LUAN Shuhai et al. v. Conoco Phillips China Inc. et al. (2012) Jin Hai Fa Shi Chu Zi No.1 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 575. Cause(s) of Action 197. Dispute over liability for marine pollution damage on the sea or sea-connected waters. Headnote The Defendant oil company held liable to the Plaintiff fishermen for damage to fish stocks caused by oil spill. Summary The Plaintiffs (local fishermen) sued the Defendants for damages for the loss of aquatic resources resulting from an oil spill accident at the drilling platforms operated by the Defendants. The Plaintiffs alleged that the Defendants should bear joint liability for breaching the obligation to take precautions before and mitigate losses after the oil spill took place. The Defendants argued that (1) the Plaintiffs were not entitled to damages for failing to provide the aquaculture permits; (2) the oil spill accident did not influence the aquatic resources at the Plaintiffs’ range; (3) the scientific report presented by the Plaintiffs could not prove the causation between the oil spill accident and the Plaintiffs’ losses; (4) the Defendants had already taken measures to mitigate the losses and had been compensated. The court found in favor of the Plaintiffs. The court ordered Conoco Phillips to pay for the damages and dismissed any remaining claims against China National Offshore Oil Corporation.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_21

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Judgment The Plaintiff: LUAN Shuhai, male, Han, born on November 6, 1964. The Plaintiff: LIU Mingwei, male, Han, born on July 8, 1964. The Plaintiff: ZHOU Zhaodong, male, Han, born on August 9, 1958. The Plaintiff: DU Shouyuan, male, Han, born on August 4, 1985. The Plaintiff: WANG Yinzhe, male, Han, born on November 1, 1993. The Plaintiff: YAN Xiaoxia, female, Han, born on October 19, 1996. The Plaintiff: ZHU Changhai, male, Han, born on April 9, 1960. The Plaintiff: WANG Dan, female, Han, born on August 27, 1980. The Plaintiff: GU Yan, female, Han, born on April 3, 1958. The Plaintiff: WANG Guixin, male, Han, born on February 6, 1959. The Plaintiff: LIU Jun, male, Han, born on September 27, 1970. The Plaintiff: YU Jichuan, male, Han, born on November 1, 1993. The Plaintiff: FU Chuanjia, male, Han, born on August 26, 1964. The Plaintiff: ZHANG Tianlong, male, Han, born on July 19, 1950. The Plaintiff: ZHANG Tianfeng, male, Han, born on October 19, 1952. The Plaintiff: HE Yunchao, male, Han, born on May 21, 1968. The Plaintiff: SUN Jinkun, male, Han, born on November 7, 1966. The Plaintiff: WANG Fuyong, male, Han, born on March 28, 1976. The Plaintiff: YANG Yingzhi, male, Han, born on October 31, 1974. The Plaintiff: TANG Delong, male, Han, born on June 19, 1976. The Plaintiff: MEI Yuhe, male, Han, born on November 15, 1970. Agent ad litem for above 21 Plaintiffs: ZHANG Fuqiu, male, Han, Born on October 6, 1957, president of Aquaculture Association in Laoting County, Hebei, living in Laoting County, Tangshan, Hebei, the People’s Republic of China. Agent ad litem for above 21 Plaintiffs: SHI Xiaogang, male, Han, born on May 19, 1958, director of Foodstuffs Department of CITIC Trading Ltd. in CITIC Group. The Defendant: Conoco Phillips China Inc. Registration: No.80, Broad Street, Monrovia, Liberia. Domicile: Floors 11&12, Hyundai Motor Building, No.38, Xiaoyun Road, Chaoyang District, Beijing, the People’s Republic of China. Legal representative: James W. Taylor, CEO of the company. Agent ad litem: XU Ping, lawyer of Beijing Dentons Law Firm. Agent ad litem: LI Jian, lawyer of Beijing East & Concord Partners Law Firm. The Defendant: China National Offshore Oil Corporation. Domicile: No.25, North Street, Chaoyang Men, Dongcheng District, Beijing, the People’s Republic of China. Legal representative: YANG Hua, chairman of the company. Agent ad litem: CHEN Xiangyong, lawyer of Guangdong WANG JING & Co. Law Firm. Agent ad litem: YAN Xinfeng, lawyer of Guangdong WANG JING & Co. (Tianjin) Law Firm.

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With respect to the case arising from dispute over liability for marine pollution damages filed by the Plaintiffs, LUAN Shuhai, LIU Mingwei, ZHOU Zhaodong, DU Shouyuan, WANG Yinzhe, YAN Xiaoxia, ZHU Changhai, WANG Dan, GU Yan, WANG Guixin, LIU Jun, YU Jichuan, FU Chuanjia, ZHANG Tianlong, ZHANG Tianfeng, HE Yunchao, SUN Jinkun, WANG Fuyong, YANG Yingzhi, TANG Delong, MEI Yuhe (“LUAN Shuhai, 21 Plaintiffs etc.”), against the Defendants Conoco Phillips China Inc. (hereinafter referred to as “Conoco Phillips”) and China National Offshore Oil Corporation (hereinafter referred to as “CNOOC”), in the court on December 7, 2011. On December 30, 2011, the court accepted the case and applied general procedure for trial according to the law. LUAN Shuhai, 21 Plaintiffs etc. elected LUAN Shuhai and LIU Mingwei as representatives to engage in the lawsuit. On January 4, 2013, the Defendant Conoco Phillips submitted to the court the notarized subject-proving materials and power of attorney. On April 10 and July 17 2013, the court organized two evidenceexchanges among the parties respectively in accordance with the law, and on October 14, 2014 evidence had been obtained. On December 9 and 10, 2014, the court held hearings in public respectively for the trial of the case. The Plaintiffs LUAN Shuhai, LIU Mingwei, ZHANG Tianlong, FU Chuanjia, YU Jichuan, YAN Xiaoxia and agents ad litem of LUAN Shuhai, 21 Plaintiffs etc., ZHANG Fuqiu and SHI Xiaogang, agents ad litem of the Defendant Conoco Phillips, XU Ping and LI Jian, and agents ad litem of the Defendant CNOOC CHEN Xiangyong and YAN Xinfeng, attended the hearings. The witnesses, Wang, Liu 1, Lu, Di, Zhao, Liu 2, appeared in court to testify and accepted the parties’ interpellation. Now the case has been concluded. LUAN Shuhai, 21 Plaintiffs etc. alleged as follows. They engaged in sea cucumber aquaculture in the sea areas of Laoting County, Tangshan City, Hebei Province. They had a total of 2,905.99mu of sea cucumber aquaculture pool and 5,727m3 of industrial aquaculture. The above-mentioned sea areas were contracted with compensation by LUAN Shuhai, 21 Plaintiffs etc. from local fishermen in Laoting County, the original obligee held the State-owned Land Use Certificate. In June 2011, the Penglai 19-3 oilfields Platform B and C, which belonged to the Defendants Conoco Phillips and CNOOC, spilled oil and then caused large area environmental pollution in the Bohai Bay. On July 17 of the same year, the Plaintiff WANG Guixin found oil pollution and the death of many sea cucumbers in his aquaculture pond; then, he notified ZHANG Fuqiu, the president of the Aquaculture Association in Laoting County, Hebei Province. In order to find out the sources of the oil pollution, ZHANG Fuqiu and the Plaintiffs LUAN Shuhai, LIU Mingwei, FU Chuanjia, and Zhao, YIN Xianghui, who are the technical staffs of the Laoting County Bureau of Aquatic Products, and the staffs in Tangshan Leyang Aquatic Products Co., Ltd., Wang, ZHANG Lijiang as well as the Fishermen WANG Helu, Liu 1 etc., sampled and sealed the oil spill particles and seawater in the aquaculture pond on June 18. On September 22 and 23, ZHANG Fuqiu sent two seawater samples to the Fishery Environment and Aquatic Products Quality Supervision, Inspection and Testing Center (Tianjin) of Ministry of Agriculture for a test. The test result showed

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that the petroleum content of the seawater samples exceeded the fishery water quality standard. On September 27, ZHANG Lijiang sent two oil spill particle samples to the North China Sea Environmental Monitoring Center, State Oceanic Administration (hereinafter referred to as “North China Sea Monitoring Center”) for appraisal. The result showed that the fingerprints of the oil spill samples were consistent with the oil sample that spilled from platform B and C from Penglai 19-3 oilfields. LUAN Shuhai, 21 Plaintiffs etc. commissioned Hebei Boya Technology Business Co., Ltd. (hereinafter referred to as “Boya Company”) for appraisal, and Boya Company issued a Technical Advisory Report. The appraisal result was that the loss of sea cucumbers bred in the pond was RMB140,359,317 (RMB48,300/ mu, the following currency is the same), and the appraisal fee agreed by both parties was RMB7,037,200. Cangzhou Technology Affair Judicial Appraisal Center (hereinafter referred to as “Cangzhou Appraisal Center”) issued a appraisal submission. The authentication conclusion was that the loss of industrial aquaculture was RMB1,145,400 (RMB200/m3). The above two losses totaled RMB141,504,717, and the Plaintiffs requested the compensation from Conoco Phillips. CNOOC and Conoco Phillips signed a contract of cooperation in the oilfields’ development and set up a development company. Accounting for 51% of the shares, CNOOC was not only the controlling shareholder but also bore the responsibility of management. After the oil spill incident, CNOOC did not take effective measures to prevent the expansion of the loss, and it should be jointly and severally liable for compensation with Conoco Phillips. Therefore, LUAN Shuhai, 21 Plaintiffs etc. requested Conoco Phillips and CNOOC to compensate for their aquaculture loss RMB141,504,717 and appraisal fee of RMB7,037,200 jointly and severally and bear the litigation costs of this case. The Defendant, Conoco Phillips, defended as follows. The lawsuit filed by LUAN Shuhai, 21 Plaintiffs etc. should be rejected by the court. The main reasons were as follows. Firstly, according to Article 11 of the Fishery Law of the People’s Republic of China and Article 9 of the Measures of Waters and Tidal Flats Aquaculture Permit Registration promulgated by the Ministry of Agriculture, the aquaculture producers must obtain aquaculture permits issued by the local people’s governments at or above the county level; then, they can obtain the legitimate right to use state-owned waters and tidal flats working on aquaculture production. If the aquaculture right of all the state waters and tidal flats was transferred according to law, the aquaculture producers should hold the original aquaculture permits to re-apply for registration of certification. As LUAN Shuhai, 21 Plaintiffs etc. did not provide the aquaculture permits, they had no legal aquaculture right and claim right. Secondly, according to Incident Investigation and Handling Report of Penglai 19-3 oilfields Oil Spill Incident Joint Investigation Group (hereinafter referred to as Joint Investigation Report), the polluted range of Penglai 19-3 oilfields oil spill incident did not include LUAN Shuhai, 21 Plaintiffs etc. aquaculture sea areas. Assessment Report of Potential Impact of Penglai 19-3 Oilfields Incident on

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Regional Environmental Resources in Daqing River Saltern, Hebei Province (hereinafter referred to as Newfields Assessment Report), issued by Newfields Environmental Technology Services (Dalian) Co. Ltd. (“Newfields Company”) who accepted Conoco Phillips's commission, showed that this oil spill incident did not impact aquatic resources of LUAN Shuhai, 21 Plaintiffs etc. aquaculture sea areas. Thirdly, Boya Company did not obtain Fishery Pollution Incident Investigation and Appraisal Qualification Certificate, so it did not have the appraisal qualification. And appraisal procedures as well as methods did not meet the Provisions on Fishery Waters Pollution Incident Investigation and Handling Procedures and Measures on Fishery Pollution Incident Economic Loss Calculation, therefore, Technical Advisory Report issued by Boya Company, which submitted by LUAN Shuhai, 21 Plaintiffs etc. did not have effect of evidence, and the losses claimed by them did not have objective authenticity and there was no legal causation with Penglai 19-3 oilfields oil spill incident. Fourthly, Conoco Phillips, as the operator of Penglai 19-3 oilfields, accepted the administrative mediation of the Ministry of Agriculture, compensated for the losses of the fishery, and took effective governance measures. The Defendant CNOOC defended as follows. The aquaculture loss claimed by LUAN Shuhai, 21 Plaintiffs etc. did not have factual and legal basis, and the Defendant requested the court to reject the claims for the following main reasons: Firstly, LUAN Shuhai, 21 Plaintiffs etc. claimed that the Penglai 19-3 oilfields oil spill incident caused damage to their aquaculture productions; however, they did not submit their aquaculture permits. Thus, LUAN Shuhai, 21 Plaintiffs etc. had no legal aquaculture right, and they did not have the right to file the claim. Secondly, CNOOC was neither the operator of Penglai 19-3 oilfields nor contractor, nor even the polluter or responsible person; so, CNOOC was not liable for the Penglai 19-3 oilfields oil spill incident, and LUAN Shuhai, 21 Plaintiffs etc. had no right to file a claim against CNOOC. Thirdly, LUAN Shuhai, 21 Plaintiffs etc. failed to prove that the alleged aquaculture sea areas were actually contaminated and the pollution was related to the Penglai 19-3 oilfields oil spill incident. In 2011, there were eleven times oil ashore and marine floating oil events found in Tangshan sea areas, but only three times were the Penglai 19-3 oilfields oil spill. Thus, the aquaculture loss claimed by LUAN Shuhai, 21 Plaintiffs etc. was not necessarily linked to the Penglai 19-3 oilfields oil spill incident, and they had no right to file the claim. Fourthly, although LUAN Shuhai, 21 Plaintiffs etc. claimed that their aquaculture suffered losses, they did not provide the assessment method and calculation process on which the loss assessment was based and lacked factual and legal basis as to the calculation of the loss amount. So, the aquaculture loss they claimed should not be supported. As for the appraisal fee that LUAN Shuhai, 21 Plaintiffs etc. claimed, they did not submit evidence to prove that the appraisal fee was related to the case and the expenses had actually been paid; thus, there was no factual or legal basis for the claim.

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According to the arguments of the litigants, the court concluded the following issue in this case. 1. whether LUAN Shuhai, 21 Plaintiffs etc. had a legal aquaculture right and claim right or not. 2. Whether the Penglai 19-3 oilfields oil spill incident caused pollution to aquaculture sea areas of LUAN Shuhai, 21 Plaintiffs etc. or not. 3. Whether the loss claimed by LUAN Shuhai, 21 Plaintiffs etc. had legal causation with Penglai 19-3 oilfields oil spill incident or not. 4. The extent and amount of loss LUAN Shuhai, 21 Plaintiffs etc. suffered. 5. Whether CNOOC shall be jointly and severally liable for compensation in this case or not. LUAN Shuhai, 21 Plaintiffs etc. submitted 288 pieces of evidence, mainly including the following four sets of evidence: Evidence 1 1. The State-owned Land Use Certificate of the Aquaculture Sea Areas. 2. Transfer and Contracting Agreement. 3. Document and Statistical Tables verified, indemnified for Compensation by Laoting County Committee and County People's Government on the local aquaculture industry, and so on. To prove that the Plaintiffs had legal aquaculture right and claim right. Evidence 2 1. Witness Testimony, Photographs and Records by whom Sampled, inspected for oil spill particles, contaminated seawater and sea cucumbers. 2. Inspection, Appraisal Report and so on. To prove that Penglai 19-3 oilfields oil spill incident caused pollution in LUAN Shuhai, 21 Plaintiffs etc.’s aquaculture sea areas. Evidence 3 1. Technical Advisory Report issued by Boya Company. 2. Appraisal Submission issued by Cangzhou Appraisal Center. 3. Witness Testimony on local aquaculturists Lu and sea cucumbers purchaser Zhai for loss, and so on. To prove the extent and amount of LUAN Shuhai, 21 plaintiffs etc.’s loss. Evidence No.4 1. Joint Investigation Report. 2. On the Settlement of Penglai 19-3 Oilfields Oil Spill Incident Fisheries Indemnity and Compensation for the Loss of Agreement (hereinafter referred to as “Indemnity and Compensation Agreement”) signed by Conoco Phillips, CNOOC and the Ministry of Agriculture, and so on. To prove that Conoco Phillips and CNOOC shall be jointly and severally liable for compensation. Conoco Phillips submitted 18 evidence, mainly including the following three sets of evidence:

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Evidence 1 1. Bohai Oilfields Shoreline Cleaning Work Group Daily (“Cleaning Work Daily”). 2. Newfields Assessment Report, and so on. To prove that Penglai 19-3 oilfields oil spill incident did not cause pollution to the aquaculture sea areas of LUAN Shuhai, 21 Plaintiffs etc. Evidence 2 1. Report submitted by Conoco Phillips to North China Sea Branch of State Oceanic Administration (“North China Sea Branch”) at the time of oil spill incident. 2. Ship Statement of clean-up work, Payment Receipt and so on. To prove that Conoco Phillips had timely reported the incident to the competent authorities and had taken pollution control measures. Evidence 3 1. Joint Investigation Report. 2. Indemnity and Compensation Agreement. 3. Environmental Impact Report of Penglai 19-3 Oilfields Development, Production, Rectification and Adjustment Project (“Environmental Impact Report”). 4. Work Progress Report of the Indemnity and Compensation for Penglai 19-3 Oilfields Oil Spill Pollution of Laoting County People's Government (“Work Progress Report”) and so on. To prove that Conoco Phillips had fulfilled its liability to compensate. CNOOC submitted 9 evidence, mainly including the following two sets of evidence: Evidence 1 1. Cooperation Contract between Conoco Phillips and CNOOC. 2. Joint Investigation Report, and so on. To prove that the responsible person for the oil spill incident was Conoco Phillips, and CNOOC should not bear the liability. Evidence 2 Hebei Marine Environment State Bulletin, 2011, and so on. To prove that eleven oil spill incidents occurred in Tangshan areas in 2011, and only three times were in Penglai 19-3 Oilfields. In order to identify the fact of the case, the court surveyed the LUAN Shuhai, 21 Plaintiffs etc.’s aquaculture sea areas, and obtained 39 pieces of evidence in the trial process, mainly including the following four sets of evidence:

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Evidence 1. Statistical Table on the Use, Compensation Agreements and Compensation of the aquaculture seawaters involved, which was obtained from Laoting County People’s Government. Evidence 2. Inquiry Record, which inquired of third party, YU Juanjuan and other aquaculturists, about the contracted status in aquaculture sea areas of LUAN Shuhai, 21 Plaintiffs etc. by the court. Evidence 3. North China Sea Marine Environment Bulletin, 2011. North China Sea Marine Environment Bulletin, 2012. Evidence 4. Investigation Report of Penglai 19-3 Oilfields Oil Spill Beach and Inshore Sea Areas (hereinafter referred to as “Inshore Investigation Report”) issued by North China Sea Monitoring Center. The parties had issued cross-examined opinions on the relevant evidence of this case. After comprehensively analyzing the proof and cross-examined opinions of the parties, the court considers as follows. Regarding evidence obtained by the court: Whereas the parties have no objection to authenticity of the evidence obtained by the court, the court can confirm to authenticity of it. Among them, North China Sea Marine Environment Bulletin, 2011 and North China Sea Marine Environment Bulletin, 2012 are both issued by North China Sea Branch, who organizes Marine Competent authorities at all levels to monitor according to its power. Inshore Investigation Report is North China Sea Monitoring Center scientific monitoring and investigating marine environment made on the basis of the conclusion. The above-mentioned evidence can truly and comprehensively reflect the marine environment in the monitoring areas. According to Article 10 of the Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Disputes over Liability for Environmental Torts, provides that The environmental pollution incident investigation report, inspection report, test report, assessment report or monitoring data and other issued by the Environmental protection, supervision, management of responsibility of the department or its entrusted organization, which is cross-examined by parties, can be regarded as the basis for confirming the fact of the case. The court can confirm to probative force of it. Regarding evidence submitted by LUAN Shuhai, 21 Plaintiffs etc.: LUAN Shuhai, 21 Plaintiffs etc. submitted evidence 1, Document, part of Statistical Table and Agreement on verifying and indemnifying local aquaculture industry by Laoting County Committee and County People’s Government, which could be confirmed with the Compensation and Statistical Tables and Inquiry Record obtained by the court. The court can confirm to probative force of it. LUAN Shuhai, 21 Plaintiffs etc. submitted evidence 2, because the relevant witnesses in the court testimony cannot prove that the tested seawater and oil spill particles sample sampling, storage, inspection procedures are continuous, cannot prove that the sample is obtained from the aquaculture sea areas. The concentrations of petroleum of seawater samples stated in the two inspection reports respectively are 190 lg/l and 540 lg/l, which is inconsistent with the average of 45.5 lg/l of the Inshore Sea Areas of Tangshan Shallow Bay of Inshore Investigation Report. So, the court cannot confirm the probative force of it.

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LUAN Shuhai, 21 Plaintiffs etc. submitted evidence 3, because Boya Company could not get the Fisheries Pollution Incident Investigation and Appraisal Qualification Certificate issued by Fishery Administration and Fishing Harbor Supervision and Administration Bureau of Ministry of Agriculture. So, it does not have the qualification, and the court cannot confirm the probative force of it issued in the Technical Advisory Report. Appraisal Submission was issued by Cangzhou Appraisal Center, who assessed and evaluated the annual production capacity of other non-litigation aquaculture workshop at the end of 2009, and it is not a special appraisal for the involved incident in this case. So, it has no relevancy with the case. Testimony of losses were issued by Lu and Zhai, which could be confirmed with other evidence, so the court can confirm the probative force of it. LUAN Shuhai, 21 Plaintiffs etc. submitted evidence 4, Joint Investigation Report was made by the authority of Government Office, and the court can confirm the authenticity of it. Indemnity and Compensation Agreement was recognized by parties, and the court can confirm the authenticity of it. Regarding the evidence submitted by Conoco Phillips: Conoco Phillips submitted evidence 1: On July 21, 2011, Oil records in Jingtang Port nearby of Cleaning Work Daily were not found, which was inconsistent with the Content of Oil Pollution Landfall in Tangshan Shallow Bay of Inshore Investigation Report. So, the court cannot confirm to probative force of it. One of the main authors of Newfields Assessment Report is called Liu, although he appeared to give testimony to the trial, he and Newfields Company have not participated in the whole process of sampling and testing. The content of record is based on the data of others’samples and tests, and it cannot prove that sample and test are authentic and that its specifications are true. So, the court cannot confirm the probative force of it. Conoco Phillips submitted evidence 2. It has no relevancy with the case, and the court cannot confirm to probative force of it. Conoco Phillips submitted evidence 3, Environmental Impact Report, its relevant content is inconsistent with the records of Joint Investigation Report. The court cannot confirm the probative force of it. Work Progress Report verified by the court and the local government is true, and the court can confirm the authenticity of it. It proves that Conoco Phillips paid compensation in accordance with Indemnity and Compensation Agreement. Regarding the evidence submitted by CNOOC: The court holds that Cooperation Contract between Conoco Phillips and CNOOC have been verified with the original, and the other is public released document. The court can confirm the authenticity of it. Through the trial, the court ascertains the following facts. LUAN Shuhai, 21 Plaintiffs etc. did sea cucumber aquaculture in inshore sea areas of Guhe Town, Matouying Town, Tangjiahe Town and Jianggezhuang Town, Laoting County, Tangshan City, Hebei Province. The actual aquaculture areas include 2,905.99mu of pond aquaculture and 5,727m2 of industrial aquaculture. After verification, the court holds that the industrial aquaculture areas of 5,727m2 LUAN Shuhai, 21 Plaintiffs etc. alleged should be 5,727m3. All above aquaculture sea areas are contracted with

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compensation by LUAN Shuhai, 21 Plaintiffs etc. from Laoting County, are original holders of aquaculture right, and also approved by the government. Around 2000, the original holders of the aquaculture right obtained the State-owned Land Use Certificate issued by Laoting County Bureau of Land and other administration. As reported by the certificate, it should be used for aquaculture and its use time is 30 years. In the meantime, Laoting County Bureau of Aquatic Products did not issue any aquaculture permit. Since 2008, LUAN Shuhai, 21 Plaintiffs etc. had set out to do sea cucumber aquaculture in contracting sea areas. On June 4, 2011, located in China’s south central Bohai Bay, the Penglai 19-3 oilfields Platform B spilled oil. On June 17 of the same year, the well kick incident occurred at the Penglai 19-3 oilfields Platform C-20. Those incidents caused the pollution in some parts of Bohai Sea areas. The Penglai 19-3 oilfields were cooperatively developed through a joint effort between CNOOC and Conoco Phillips. The oilfields’ operator was Conoco Phillips when the oil spill incidents occurred. On August 18, 2011, the Penglai 19-3 Oilfields Oil Spill Incident Joint Investigation Group, which was composed of State Oceanic Administration, Ministry of Land and Resources, Ministry of Environmental Protection, Ministry of Transport, Ministry of Agriculture, State Administration of Work Safety and National Energy Administration, had investigated the cause, nature, responsibility and pollution damage etc. of the incident. On June 21, 2012, Joint Investigation Group issued Joint Investigation Report, identified: 1. The Penglai 19-3 oilfields oil spill incident was a liability incident that had caused serious marine oil spill pollution, leading to the seawater pollution in the Penglai 19-3 oilfields periphery and its northwest area about 6,200km2 sea areas. 2. Conoco Phillips violated the Oilfields Overall Development Plan during its operating process. It had a flaw in system and management. It had not taken the essential guard measure to the risk that should be foreseen, and ultimately it caused the oil spill incident. 3. As the oilfields’ operator, Conoco Phillips should undertake full responsibility for the oil spill incident. After the incident occurred, State Oceanic Administration organized the relevant organizations to do surveillance and monitoring of the oil spill in the Bohai Beach and inshore sea areas. In September 2011, the North China Sea Monitoring Center issued Inshore Investigation Report. According to the record of this report, on July 14, 16 and 21 2011, North China Sea Monitoring Center found the oil pollution from the Penglai 19-3 oilfields Platform B and C in the shallow bay beach and tidal flats areas of Tangshan City, Hebei Province. The oil pollution was zonal distribution. It was about 500 m in length and 1–1.5 m in width near the high tide line and it was about 300 m in length and 1.5-2 m in width near the low tide line. In the meantime, North China Sea Branch organized the relevant organizations to do six monitorings of the concentration of petroleum in the seawater of the shallow bay beach and tidal flats areas of Tangshan City, Hebei Province from July 14 to 21, 2011. The concentration of petroleum respectively was 48.0 lg/l, 49.1 lg/l, 46.5 lg/l, 41.4 lg/l, 55.3 lg/l, 32.5 lg/l. Among them, the result of July 18 was 55.3 lg/l, which exceeded the first category water quality standard. The other

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results reached the first category water quality standard, but they were approaching the upper bound of this standard. Before the incident occurred, in May 2011, the concentration background value of petroleum was 32.4 lg/l in the seawater of the shallow bay beach and tidal flats areas of Tangshan City. After the incident occurred, the average concentration of petroleum was 45.5 lg/l in this sea area, which was more than 0.4 of the concentration background value. Both the aquaculture areas of LUAN Shuhai, 21 Plaintiffs etc. and the shallow bay beach and tidal flats areas of Tangshan City are located in the coast of Laoting County; the nearest distance was about 14 km, and the actual distances between two places and the Penglai 19-3 oilfields are equal, which were about 140 km. After consultation between Ministry of Agriculture, CNOOC and Conoco Phillips, Conoco Phillips would pay RMB10 billion to settle the compensation problems related to the economic loss of aquaculture creatures in the “four counties and three districts” continuous shores from Laoting County of Hebei Province to Suizhong County of Liaoning Province (including Laoting County, Changli County, Funing County, Suizhong County, Haigang District, Shanhaiguan District and Beidaihe District) and the loss of natural fishery resources in Bohai. The Ministry of Agriculture was responsible for coordinating the relevant departments of Hebei Province and Liaoning Province to compensate the aquaculture fishery claimants with RMB7.315 billion in the above payments through administrative mediation. In January 2012, Laoting County carried out a concentrated action for optimizing coastal environment and renovating development and construction order (“Concentrated Action”). On January 7, 2012, Laoting County Committee and Laoting County People’s Government issued the Laoting County Concentrated Action Application Program of Optimizing Coastal Environment and Renovating Development and Construction Order. They established a headquarters by the main leaders of County Committee and County People’s Government, the persons in charge of Bureau of Oceanic, Bureau of Aquatic Products and other units. The headquarters guided the Guhe Town, Matouying Town and other coastal towns people’s governments to implement specific work. In Concentrated Action, the coastal township people’s governments did verification and standardized management to the aquaculture sea areas, including the sea cucumber aquaculture. On September 22 of the same year, Laoting County People’s Government issued Compensation Payments Assign Application Programs of the Loss of Seawater Aquaculture in the 2011 Penglai 19-3 Oilfields Oil Spill Pollution Incident of Laoting County. On the basis of the assessment and demonstration by aquaculture experts, they determined the criterion of the compensation standard. It was RMB540/mu of sea cucumber pond aquaculture and RMB30/m3 of industrial aquaculture. Hereafter, the relevant towns people’s governments presided over the administrative mediation with holders of aquaculture right according to verified results and compensation standard, and the governments assigned the compensation payments in Penglai 19-3 oilfields oil spill incident to holders of aquaculture right who accepted the mediation. The most local holders of aquaculture right accepted the administrative mediation with the above standard and received compensation. The aquaculture sea areas of LUAN Shuhai, 21 Plaintiffs etc. were also in the

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compensation range, but Plaintiffs did not accept the administrative mediation. Among them, YAN Xiaoxia only accepted the administrative mediation for about 106.63mu of her aquaculture sea areas (has appointed two people other than involved in the case who named PANG Yeyun and LI Chuanxi to receive compensation) but did not accept the administrative mediation about other 54.39mu aquaculture loss. It is otherwise found that Sea Water Quality Standard (GB3097-1997), implemented on July 1, 1998 as specified, seawater quality could be divided into four categories according to the different use functions and protect purposes of sea areas. Among them, the first category was applicable for ocean fishery water areas, marine natural reserves and endangered and rare species of marine organisms reserves. The concentration of petroleum in this category should not more than 50 lg/l. The second category was applicable to aquaculture areas, bathing beaches, marine sport or entertainment zones for direct touching with human body and industrial water zones directly related to human consumption, the concentration of petroleum in this category should not more than 50 lg/l. Water Quality Standard of Fishery (GB11607-89) implemented on March 1, 1990 so specified, and the concentration standard values of petroleum in water quality of fishery should not more than 50 lg/l. The court holds that the case involves a dispute over liability for marine pollution damages. Conoco Phillips Registered outside the People’s Republic of China. According to Article 1 Paragraph 1 of the Interpretation of the Supreme People’s Court on Several Issues concerning Application of the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China (I), this case is a dispute over the liabilities for foreign-related tort damages. According to Article 44 of the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China, the liabilities for tort shall apply the laws of the place of the tort. In this case, both the place where the infringement acts took on and the place where the infringement results took place are in the territory of the People’s Republic of China. Therefore, the law of the People’s Republic of China shall be confirmed as the applicable law to deal with the dispute of the case. 1. Regarding whether LUAN Shuhai, 21 Plaintiffs etc. had the legal aquaculture right and claim right or not. According to Article 11 of the Fishery Law of the People’s Republic of China, Laoting County People’s Government has the right to permit aqua culturists to do aquaculture by using the waters and tidal flats under ownership by the whole people, which should be used in aquaculture determined by the national plan. Around 2000, Laoting County’s original holders of aquaculture right in the sea areas obtained the State-owned Land Use Certificate. As reported by the certificate, it was used for aquaculture. LUAN Shuhai, 21 Plaintiffs etc. contracted those aquaculture sea areas from the original holders of aquaculture right and paid the fees accordingly. Thus, the contract procedure is legal. Before the incident occurred, LUAN Shuhai, 21 Plaintiffs etc. had already done sea cucumber aquaculture, and the local people’s government’s relevant departments did not raise any objection against them. After the incident occurred, the local people’s government

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had done verification, cleaning and specification to the aquaculture sea areas by carrying out the Concentrated Action. On this basis, the government assigned the compensation payments in the oil spill incident involved caused through presiding the administrative mediation. The aquaculture sea areas of LUAN Shuhai, 21 Plaintiffs etc. are in the compensation range. As the administrative authority for fishery, Laoting County Bureau of Aquatic Products also takes part in Concentrated Action. All the above facts show that both the local people’s government and the administrative authority for fishery have given LUAN Shuhai, 21 Plaintiffs etc. permission to do aquaculture actually. Therefore, LUAN Shuhai, 21 Plaintiffs etc. shall be regarded as the legal holders of the aquaculture right and enjoy legal right to the claim of their loss caused by pollution incident. The court does not support the claims of Conoco Phillips, CNOOC that LUAN Shuhai, 21 Plaintiffs etc. have no legal aquaculture right, and have no right to claim. 2. Regarding whether the Penglai 19-3 oilfields oil spill incident caused pollution to aquaculture sea areas of LUAN Shuhai, 21 Plaintiffs etc. and whether the loss claimed by LUAN Shuhai, 21 Plaintiffs etc. caused Penglai 19-3 oilfields oil spill incident or not. Based on the available evidence, the court can assume that the aquaculture sea areas of LUAN Shuhai, 21 Plaintiffs etc. affected in the oil spill incident and suffered loss for the following main reasons: (1) According to the record of Inshore Investigation Report, in May 2011, the concentration background values of petroleum was 32.4 lg/l in the seawater of the shallow bay beach and tidal flats areas of Tangshan City. This shows that before the incident occurred, the water quality of the aquaculture sea areas of LUAN Shuhai, 21 Plaintiffs etc. meets the requirement of aquaculture water. (2) Joint Investigation Report shows that the oil spill incident caused the seawater pollution in the Penglai 19-3 oilfields periphery and its northwest area about 6,200km2 sea areas. This shows that the spilled oil from the incident diffused to the northwest due to the impact of wind and current while the aquaculture sea areas of LUAN Shuhai, 21 Plaintiffs etc. are located in the northwest of oilfields. (3) Inshore Investigation Report shows that the oil pollution from the Penglai 19-3 oilfields is found in the shallow bay beach and tidal flats areas of Tangshan City, Hebei Province. (4) Inshore Investigation Report also shows that, after the incident occurred, the concentration background values of petroleum in the seawater of the shallow bay beach and tidal flats areas of Tangshan City is increasing. During the monitoring period, the result of concentration of petroleum was approaching the upper bound of the first category water quality standard, which is more than 0.4 of the concentration background values. The result of July 18, 2011 exceeded the standard of 50 lg/l. (5) The aquaculture areas of LUAN Shuhai, 21 Plaintiffs etc. are located in the coast of Laoting County, which is located in the northwest of the Penglai 19-3

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oilfields, and the nearest distance between the aquaculture areas and the shallow bay beach and tidal flats areas is about 14 km. The actual distances between two places and the Penglai 19-3 oilfields are equal (about 140 km). Combined with the actual situation that the oil spilled from the oil spill incident diffuses to the northwest, the water quality in the aquaculture areas of LUAN Shuhai, 21 Plaintiffs etc. can be represented as the water quality monitoring result in the shallow bay beach and tidal flats areas. The oil spill incident involved caused damage to marine biological resources, seawater use quality and other harmful effects, which constitutes pollution damage pollution in the aquaculture sea areas of LUAN Shuhai, 21 Plaintiffs etc. The evidence provided by Conoco Phillips, CNOOC cannot deny the fact that the oil spill incident involved caused some loss to LUAN Shuhai, 21 Plaintiffs etc. Therefore, the court does not support the claim of Conoco Phillips, CNOOC that there is not a causation between the claim of loss of LUAN Shuhai, 21 Plaintiffs etc. and oil spill incident because of the absence of factual and legal basis. 3. Regarding the extent and amount of loss LUAN Shuhai, 21 Plaintiffs etc. suffered. According to Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China and Article 90 of the Interpretation of the Supreme People’s Court concerning Application of Civil Procedure Law of the People’s Republic of China, it is the duty of a party to an action to provide evidence in support of his allegations. Before giving the judgment, if a party cannot provide evidence or the evidence is insufficient to support their factual claims, who shall bear the burden of proof will be required to bear the adverse legal consequences. LUAN Shuhai, 21 Plaintiffs etc. shall bear the burden of proof about the extent of damage and amount of losses. After cross-examination and identification, the evidence about the extent of damage and amount of loss offered by LUAN Shuhai, 21 Plaintiffs etc. is not obtained to a fully certain degree. Therefore, the legal fact should not be identified on the basis of the evidence provided by them. During the court hearing, the conditions of the assessment and appraisal of the loss of LUAN Shuhai, 21 Plaintiffs etc. are no longer available. Therefore, the extent of damage and amount of loss should carry on the comprehensive identification combined with the case of the relevant evidence and the facts of the case. Firstly, according to the related record of Inshore Investigation Report, it is indicated that the polluted degree of aquaculture sea areas of LUAN Shuhai, 21 Plaintiffs etc. caused by the oil spill incident involved is not serious. Secondly, most Laoting County holders of aquaculture right accept the compensation standard determined by the local government through administrative mediation. It is indicated that the above-mentioned compensation standard can make up the loss of Laoting County holders of aquaculture right suffered by the oil spill incident involved. Thirdly, LUAN Shuhai, 21 Plaintiffs etc. do aquaculture in inshore sea areas of Laoting County. As far as the geographical position is concerned, LUAN Shuhai,

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21 Plaintiffs etc. cannot prove the polluted degree of their aquaculture sea areas is more serious than other holders of aquaculture right. On these grounds, the court identifies the total loss of LUAN Shuhai, 21 Plaintiffs etc. is RMB1,683,464.4 after deducting the part the Plaintiff, YAN Xiaoxia, has received administrative mediation (Specific aquaculture area/volume and the amount of losses see Schedule) by reference to the above compensation standard. Regarding the appraisal fee of Boya Company, LUAN Shuhai, 21 Plaintiffs etc. Claimed that: because the company does not obtain Fishery Pollution Incident Investigation and Appraisal Qualification Certificate, it has no appraisal qualification, and Technical Advisory Report issued cannot be used as the basis for determining the loss of LUAN Shuhai, 21 Plaintiffs etc. The court does not support the claim for the fee. 4. Regarding whether CNOOC shall be jointly and severally liable for compensation in this case or not. According to the rules on foreign cooperation in the exploitation of offshore oil resources of the People’s Republic of China and the cooperation contract signed between CNOOC and Conoco Phillips, when the incident occurred, Conoco Phillips was the operator of the Penglai 19-3 oilfields, who engaged in oil extraction operation, controlled the pollution source, and the Joint Investigation Report concluded that Conoco Phillips violated the Oilfields Overall Development Plan during its operation, it had deficiencies in the system and management, and did not take the necessary precautions against the risks should be foreseen. Thus eventually led to oil spill. According to Article 65 of the Tort Liability Law of the People’s Republic of China, “where any harm is caused by environmental pollution, the polluter shall assume the tort liability.” The liability of the polluter should be born by Conoco Phillips. When the incident occurred, CNOOC was not the operator of the Penglai 19-3 oilfields and did not control the pollution source. It should not be liable for compensation. LUAN Shuhai, 21 Plaintiffs etc.’s claim that the CNOOC was jointly and severally liable for compensation, and the Court shall not support it. In view of above, LUAN Shuhai, 21 Plaintiffs etc. have legal aquaculture rights and claim rights, the oil spill incident involved in the case caused pollution in its aquaculture marine area, and CNOOC shall bear the corresponding liability for compensation. From the decision of the trial committee of the Court, according to Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, Article 90 of the Interpretation of the Supreme People’s Court concerning the Application of the Civil Procedure Law of the People’s Republic of China, Article 44 of the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China, Article 1 Paragraph 1 of the Interpretation of the Supreme People’s Court on Several Issues concerning Application of the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China (I), Article 65 of the Tort Liability Law of the People’s Republic of China, the judgment is as follows:

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1. The Defendant, Conoco Phillips China Inc., shall, within ten days as of the effective day of this judgment, indemnify the Plaintiffs, LUAN Shuhai, LIU Mingwei, ZHOU Zhaodong, DU Shouyuan, WANG Yinzhe, YAN Xiaoxia, ZHU Changhai, WANG Dan, GU Yan, WANG Guixin, LIU Jun, YU Jichuan, FU Chuanjia, ZHANG Tianlong, ZHANG Tianfeng, HE Yunchao, SUN Jinkun, WANG Fuyong, YANG Yingzhi, TANG Delong, MEI Yuhe in sum of RMB1,683,464.4 (for the specific amount of compensation, see the schedule); 2. The other claims of the Plaintiffs, LUAN Shuhai, LIU Mingwei, ZHOU Zhaodong, DU Shouyuan, WANG Yinzhe, YAN Xiaoxia, ZHU Changhai, WANG Dan, GU Yan, WANG Guixin, LIU Jun, YU Jichuan, FU Chuanjia, ZHANG Tianlong, ZHANG Tianfeng, HE Yunchao, SUN Jinkun, WANG Fuyong, YANG Yingzhi, TANG Delong, MEI Yuhe, shall be rejected. If the Defendant, Conoco Phillips China Inc., fails to fulfill its obligation to make the said payments within the time limit provided by this judgment, the interest for the period of deferred payment thereon shall be double paid in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in the amount of RMB8,891, shall be born by Conoco Phillips China Inc., and the balance shall be assumed by LUAN Shuhai, 21 Plaintiffs etc. The court decided to waive the court acceptance fee for LUAN Shuhai, 21 Plaintiffs etc. This was examined and approved by the court in accordance with the relevant provisions of the Measures for the Payment of Litigation Fees during the trial of this case. In the event of dissatisfaction with this judgment, the Plaintiffs, LUAN Shuhai, LIU Mingwei, ZHOU Zhaodong, DU Shouyuan, WANG Yinzhe, YAN Xiaoxia, ZHU Changhai, WANG Dan, GU Yan, WANG Guixin, LIU Jun, YU Jichuan, FU Chuanjia, ZHANG Tianlong, ZHANG Tianfeng, HE Yunchao, SUN Jinkun, WANG Fuyong, YANG Yingzhi, TANG Delong, MEI Yuhe, and the Defendant, China National Offshore Oil Corporation, shall within fifteen days as of the service of this judgment, and the Defendant, Conoco Phillips China Inc., shall within thirty days as of the service of this judgment, submit a statement of appeal to the court, with duplicates in the number of the opposing parties, so as to make an appeal before Tianjin High People’s Court. If dissatisfied with the amount of the judgment of first instance, appeal entertainment fee shall be paid within seven days when submitting the statement of appeal (deposit bank: Tiancheng, Agricultural Bank; number of account: 02xxx69; name of account: Tianjin High People’s Court’s Finance Department), after the period of appeal expires, the appeal will be automatically recalled. Presiding Judge: WU Liqun Judge: CHEN Shunping Acting Judge: CHEN Jianpeng October 29, 2015 Clerk: ZHANG Guojun

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Tianjin High People’s Court Civil Judgment LUAN Shuhai et al. v. Conoco Phillips China Inc. et al. (2016) Jin Min Zhong No.69 Related Case(s) This is the judgment of second instance and the judgment of first instance is on page 559. Cause(s) of Action 197. Dispute over liability for marine pollution damage on the sea or sea-connected waters. Headnote Dismissing the successful Plaintiffs fishermen’s appeal against the amount of damages awarded by the lower court against the Defendant oil company for damage to fish stocks caused by oil spill. Summary The Plaintiffs (local fishermen) sued the Defendants for damages for the loss of aquatic resources resulting from an oil spill accident at the drilling platforms operated by the Defendants. The Plaintiffs alleged that the Defendants should bear joint liability for breaching the obligation to take precautions before and mitigate losses after the oil spill took place. The Defendants argued that (1) the Plaintiffs were not entitled to damages for failing to provide the aquaculture permits; (2) the oil spill accident did not influence the aquatic resources at the Plaintiffs’ range; (3) the scientific report presented by the Plaintiffs could not prove the causation between the oil spill accident and the Plaintiffs’ losses; (4) the Defendants had already taken measures to mitigate the losses and had been compensated. The court of first instance found in favor of the Plaintiffs. The court of first instance ordered Conoco Phillips to pay for the damages and rejected any remaining claims against China National Offshore Oil Corporation. Dissatisfied with the amount of damages awarded, the Plaintiffs of first instance appealed. The appeal court found the issues were the degree of pollution and the amount of losses that the Plaintiff-Appellants suffered from an oil spill. The appeal court found that the law the Plaintiff-Appellants relied on only applies to ship pollution cases and the report offered by the Plaintiff-Appellants was invalid. Therefore, the appeal court dismissed the appeal and affirmed the judgment of first instance.

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Judgment The Appellant (the Plaintiff of first instance): LUAN Shuhai. The Appellant (the Plaintiff of first instance): LIU Mingwei. The Appellant (the Plaintiff of first instance): ZHOU Zhaodong. The Appellant (the Plaintiff of first instance): DU Shouyuan. The Appellant (the Plaintiff of first instance): WANG Yinzhe. The Appellant (the Plaintiff of first instance): YAN Xiaoxia. The Appellant (the Plaintiff of first instance): ZHU Changhai. The Appellant (the Plaintiff of first instance): WANG Dan. The Appellant (the Plaintiff of first instance): GU Yan. The Appellant (the Plaintiff of first instance): WANG Guixin. The Appellant (the Plaintiff of first instance): LIU Jun. The Appellant (the Plaintiff of first instance): YU Jichuan. The Appellant (the Plaintiff of first instance): FU Chuanjia. The Appellant (the Plaintiff of first instance): ZHANG Tianlong. The Appellant (the Plaintiff of first instance): ZHANG Tianfeng. The Appellant (the Plaintiff of first instance): HE Yunchao. The Appellant (the Plaintiff of first instance): SUN Jinkun. The Appellant (the Plaintiff of first instance): WANG Fuyong. The Appellant (the Plaintiff of first instance): YANG Yingzhi. The Appellant (the Plaintiff of first instance): TANG Delong. The Appellant (the Plaintiff of first instance): MEI Yuhe. Agent ad litem of the above 21 Appellants: ZHANG Fuqiu, male, Han, born on October 6, 1951, president of Aquaculture Association in Laoting County, Heibei, living in Laoting County, Tangshan, Hebei, the People’s Republic of China. Agent ad litem of the above 21 Appellants: SHI Xiaogang, male, Han, born on May 19, 1958, director of Foodstuffs Department of CITIC Trading Ltd. in CITIC Group. The Respondent (the Defendant of First Instance): Conoco Phillips China Inc. Registered Office: 80 Broad Street, Monrovia, Liberia. Domicile: Floors 11th & 12th, Hyundai Motor Tower, No.38 Xiaoyun Road, Chaoyang District, Beijing, the People’s Republic of China. Legal representative: Mark Thomas Wheeler, president of the company. Agent ad litem: FENG Yinghui, lawyer of Beijing Tianda Gonghe Law Firm. Agent ad litem: LIN Yanhua, lawyer of Shanghai Fangda (Beijing) Law Firm. The Defendant of First Instance: China National Offshore Oil Corporation. Domicile: No. 25 North Main Street, Chaoyang Men, Dongcheng District, Beijing, the People’s Republic of China. Legal representative: YANG Hua, chairman of the company.

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Agent ad litem: CHEN Xiangyong, lawyer of Guangdong WANG JING & CO Law Firm. Agent ad litem: YAN Xinfeng, lawyer of Guangdong WANG JING & CO (Tianjin) Law Firm. With respect to a case arising from dispute between the Appellants, LUAN Shuhai, LIU Mingwei, ZHOU Zhaodong, DU Shouyuan, WANG Yinzhe, YAN Xiaoxia, ZHU Changhai, WANG Dan, GU Yan, WANG Guixin, LIU Jun, YU Jichuan, FU Chuanjia, ZHANG Tianlong, ZHANG Tianfeng, HE Yunchao, SUN Jinkun, WANG Fuyong, YANG Yingzhi, TANG Delong, and MEI Yuhe (hereinafter referred to as “the above 21 persons including LUAN Shuhai”), the Respondent Conoco Phillips China Inc. (hereinafter referred to as “Conoco Phillips”), and the Defendant of first instance China National Offshore Oil Corporation (hereinafter referred to as “CNOOC”) over liability for marine pollution damage, the Appellants appealed to the court against Civil Judgment of (2012) Jin Hai Fa Shi Chu Zi No.1 (hereinafter referred to as “judgment of first instance”) made by Tianjin Maritime Court (hereinafter referred to as “court of first instance”) on October 29, 2015. After entertaining the case on January 27, 2016, the court formed a collegiate panel according to law and, on July 14, 2016, heard the case publicly. The Appellants, LUAN Shuhai, LIU Mingwei, ZHANG Tianlong, HE Yunchao, WANG Fuyong, and TANG Delong and agents ad litem of the above 21 persons including LUAN Shuhai and ZHANG Fuqiu, and agents ad litem of the Respondent Conoco Phillips, FENG Yinghui and LIN Yanhua, and agents ad litem of the Defendant of first instance CNOOC, CHEN Xiangyong and YAN Xinfeng, participated in the proceedings. The case has been concluded. The claims of the appeal of the above 21 persons, including LUAN Shuhai are as follows: 1. change the judgment of first instance according to law and order Conoco Phillips to compensate the above 21 persons including LUAN Shuhai for damages of overall 123.477 million yuan caused by environmental pollution; 2. Conoco Phillips should pay the out-of-pocket expert evaluation expenses of 7.0372 million yuan to the above 21 persons including LUAN Shuhai; 3. Conoco Phillips should bear the costs of this appeal case. The facts and reasons were as follows: 1. The judgment of first instance held that the extent and amount of losses that the above 21 persons including LUAN Shuhai suffered from did not reach the extent of sufficiency and adequacy, and this was not right. In first instance, the above 21 persons including LUAN Shuhai provided evidence such as a receipt for the purchase of seed, the certificate of the purchasing units, Technical Advisory Report issued by Hebei XX Science & Tech Co., Ltd. (hereinafter referred to as “XX Company”), the expert evaluation of sea cucumber yield carried out by XX Company commissioned by the government, proving that the evidence of the extent and the amount of damage to the aquaculture was adequate and sufficient. Even if the expert evaluation of XX Company was not adopted, the judgment should also be made in accordance with the Regulations of Supreme

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People’s Court of the People’s Republic of China on Certain Issues concerning the Disputes over Compensation for Oil Pollution Damage of Vessel. 2. The court of first instance decided that the fact that the extent of the damage to maricultural areas of the above 21 persons including LUAN Shuhai was not serious and was the same as the breeding right holders was wrong. According to Survey Report issued by Ministry of Agriculture Fishery Environment and Aquatic Products Quality Supervision and Testing Center (Tianjin), the oil concentration of the aquacultural areas owned by the above 21 persons including LUAN Shuhai was 8.3 times higher than the monitoring data recorded by Shores and Offshore Areas of Spill Oil in Penglai 19-3 Oil Field Survey Report (hereinafter referred to as Offshore Survey Report) issued by the State Oceanic Administration Beihai Environment Monitoring Center (hereinafter referred to as “North Sea Monitoring Center”) and the average petroleum hydrocarbon content in the body of breeding objects was 2.5 times higher than the standard content. This could prove that the extent of the pollution to the breeding areas of the above 21 persons including LUAN Shuhai was heavier than that of the other breeding right holders, and the breading areas of the above 21 persons was the hardest hit area. Through monitoring two samples of the oil spill, the North Sea Oil Spill Monitoring Center held that two samples of oil spill are consistent with oil fingerprints of Penglai 19-3 oil field. The standards of reparation and compensation of County Leting could only make up for the losses suffered by the other breeding right holders and could not make up for the losses suffered by the above 21 persons including LUAN Shuhai. The judgment of first instance, referring to the standard of reparation and compensation of County Leting, decided the amount of loss. This was wrong. The court of first instance entertained the present case. This could prove that the extent of the pollution that the above 21 persons including LUAN Shuhai suffered from was heavier than that of the other breeding right holders. 3. The court of first instance held that XX Company did not have an expert evaluation certificate. This was wrong. XX Company in 2005 was listed in the roster of court’s expert witness issued by the Supreme People’s Court of the People’s Republic of China. Tangshan Intermediate People’s Court in Hebei Province (hereinafter referred to as “Tangshan Intermediate Court”) and Leting County People’s Government repeatedly appointed XX Company to do evaluation. Therefore, the evaluation of XX Company was valid. Investigation and Evaluation Qualification Certificate of Fishing Industry Pollution Accident was required by the “Dispute Resolution Policy on Investigation and Evaluation Qualification of Fishing Industry Pollution Accident.” This policy belongs to industry regulations, and its effectiveness is lower than the “Decision of the Standing Committee of the National People’s Congress on the Issues Concerning the Management of Judicial Evaluation”, “Regulations of Supreme People’s Court of the People’s Republic of China on the Management of Forensic

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Evaluation Appointed by the People’s Court” and other laws and Judicial Interpretations. Conoco Phillips argued to dismiss the claims of the appeal made by the above 21 persons including LUAN Shuhai and uphold the judgment of first instance based on the following facts and for the following reasons: 1. Penglai 19-3 Oil Spill Accident did not cause damage to the above 21 persons including LUAN Shuhai. From the perspective of distance and other factors, Offshore Survey Report did not prove that the oil spill accident effected the breading areas of the above 21 persons including LUAN Shuhai. Even if the effect occurred, the degree of it was not likely to cause serious damage to the breeding activities conducted by the above 21 persons including LUAN Shuhai. Related environmental bulletin showed that in the year and the following year that the oil spill of Penglai 19-3 oil field occurred, the water quality in the aquacultural areas was in line with the requirements of breeding. 2. The above persons including LUAN Shuhai failed to fulfill the corresponding burden of proof on their claimed losses. The sampling, storage and inspection procedure of the samples made by the above 21 persons including LUAN Shuhai did not meet the regulatory requirements. Survey Report and September 2011 Report on the Evaluation of Fingerprints of the Sample Oil in Oil Spill Sent by Tangshan XX Aquatic Products Co., Ltd. (hereinafter referred to as Oil Fingerprints Evaluation Report) submitted by them lack probative force and could not prove the extent of damage suffered by the above 21 persons including LUAN Shuhai. Moreover, it could not also prove that the damage suffered by the above 21 persons including LUAN Shuhai was worse than other breeding right holders. The scope of XX Company’s business was limited to the technology consulting. It did not include the evaluation and investigation of fishing pollution accident. Technical Advisory Report issued by XX Company broke the requirements of the Regulations on the Methods of Calculation of Losses of Fishing Industry in the Water Pollution Accident. The judgment of first instance did not accept the probative force of Technical Advisory Report. This was correct. The above 21 persons including LUAN Shuhai unilaterally collected statistics of input costs and sea cucumber yield. This was not objective. Other evidence to prove breeding losses submitted by the above 21 persons including LUAN Shuhai had no association with the case. This case was not about the dispute of compensation for oil pollution damage of vessel; therefore, the Regulations of Supreme People’s Court of the People’s Republic of China on Certain Issues concerning the Disputes over Compensation for Oil Pollution Damage of Vessel did not apply to the present case, and the above 21 persons including LUAN Shuhai could not prove their average net income of the previous three years.

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3. The court of first instance decided to apply the standards of reparation and compensation formulated by Leting County People’s Government. It was appropriate. Leting County People’s Government made a comprehensive and detailed evaluation on the impact of the damage to Leting County aquaculture caused by the oil spill of Penglai 19-3’s oil field. On the balance of numerous factors, such as the total amount of reparation and compensation, aquacultural areas of different species and extent of the losses, the appropriate standards of the reparation and compensation was determined. It was enough to reflect all the possible losses suffered by the above 21 persons including LUAN Shuhai. CNOOC claimed to dismiss all the appeal claims made by the above 21 persons including LUAN Shuhai based on the following facts and for the following reasons: 1. CNOOC was not the polluter and the party taking responsibility of Penglai 19-3 oil spill accident. The court of first instance held that CNOOC should not be liable for the compensation. This complied with the law and it should be upheld. 2. There was no necessary connection between the breeding losses claimed by the above 21 persons including LUAN Shuhai and Penglai 19-3 field oil spill accident. The conclusion of the expert evaluation in Survey Report submitted by the above 21 persons including LUAN Shuhai could not prove that the pollution to the aquacultural areas had connection with oil spill of 19-3 oil field accident because the sampling personnel were not professional, the sampling sites were not clear, the collection process was not standardized, the sample storage was easily contaminated, the submittal for inspection was not timely, etc. 3. The above 21 persons including LUAN Shuhai had no factual and legal basis for the claimed breeding losses. XX Company did not qualify for the investigation and evaluation on the fishing pollution accident. The evaluation experts did not have relevant qualifications. Technical Advisory Report issued by the evaluation experts was based on the materials from Leting Aquaculture Association and the introduction from the persons concerned. There were no evaluation methods and calculation procedures. Therefore, Technical Advisory Report did not have probative force. In addition, owing to the fact that the above 21 persons did not accept administrative mediation, all the files during the administrative mediation process should not apply to them. Even if applicable, it should also be in accordance with the standards of reparation and compensation decided by the administrative mediation to calculate the amount of losses. As for the evaluation fee, the above 21 persons including LUAN Shuhai did not provide evidence that is relevant to the present case and did not prove that the evaluation fee was actually incurred. Therefore, this claim had no factual or legal basis.

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The above 21 persons including LUAN Shuhai filed the lawsuit to the court of first instance requesting the following. Conoco Phillips and CNOOC should jointly and severally compensate for the damage to their aquaculture of 141.504717 million yuan and expert evaluation expenses of 7.037200 million yuan and bear the costs of the present civil proceedings. The court of first instance ascertained the following facts. The above 21 persons including LUAN Shuhai cultivated sea cucumbers in offshore marine areas in XX village, XX town, XX town and XX hamlet, Yueting County, Tangshan, Hebei Province. The actual aquacultural area was 2,905.99 mu of pond culture and 5,727 cubic meters of factory farming. The above 21 persons including LUAN Shuhai got the maricultural areas from the original breeding right holders at a price, and this was admitted by the local government. The original breeding rights holder in 2000 got the “state-owned land use permit” from the Bureau of Land Management in Yueting County. The use of “state-owned land use permit” was for aquaculture and the period of 30 years. During this period, the Bureau of Aquatic Products did not issue a breeding permit. Since 2008, the above 21 persons including LUAN Shuhai started breeding sea cucumbers in the coastal waters that they contracted. On June 4, 2011, an oil spill occurred in the platform B of Penglai 19-3 oil field located in the middle south of Bohai Sea. On June 17, of the same year, a blowout occurred in the Well C20 of platform C20 of Penglai 19-3 oil field, which caused part of the Bohai Sea to suffer pollution. CNOOC cooperated with Conoco Phillips to exploit the Penglai 19-3 oil field. When an oil spill occurred, the operator of the oil field was Conoco Phillips. On August 18, 2011, Penglai 19-3 Oil Spill Accident Joint Investigation Team composed of the State Oceanic Administration, the Ministry of Land and Resources, Ministry of Environmental Protection, Ministry of Transport, the Ministry of Agriculture, Administration of Production Safety Supervision, Bureau of Energy investigated the causes, nature, responsibility and damage to the pollution and so on. On June 21, 2012, the Joint Investigation Team released the Report of Penglai 19-3 Oil Spill Accident Joint Investigation Team on Accident Investigation Disposal (hereinafter referred to as Joint Investigation Report) and found the following: 1. A serious dereliction of duty was behind the Penglai 19-3 Oil Spill Accident, resulting in the sea water pollution in the surrounding areas and north-west areas of 6,200 square kilometers of Penglai 19-3 oil field. 2. Conoco Phillips broke the overall development plan of the oil field during the operation. It was deficient in institution and management. It did not take any requisite precautions against the risk that it should have foreseen. Finally, it resulted in an oil spill. 3. Conoco Phillips, as an operator of the oil field, should assume full responsibility for the oil spill accident. After the oil spill occurred, the State Oceanic Administration organized relevant units to monitor and detect the oil spill in shores around Bohai Sea and the offshore areas. In September 2011, the North Sea Monitoring Center issued an “Offshore

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Survey Report.” According to the records of the report, on July 14, 16 and 21, 2011, the North Sea Monitoring Center in Tangshan (Hebei Province) repulse bay beach shore found the greasy dirt from platform B and platform C of 19-3 oil field. The greasy dirt zonally distributed. The length of greasy dirt adjacent to the high water line was about 500 m and the bandwidth of it was about 1 to 1.5 m. The length of greasy dirt adjacent to the low water line was about 300 m and the bandwidth of it was about 1.5-2 m. During this period, the North Sea Branch of the State Oceanic Administration organized relevant units from July 14, 2011 to June 21, 2011 to carry out six monitors on the oil concentration in seawater of Tangshan (Hebei Province) offshore areas. The data was 48.0 µg/l, 49.1 µg/l, 46.5 µg/l, 41.4 µg/l, 55.3 µg/l and 32.5 µg/l respectively. Among them, the monitoring result on 18th July was 55.3 µg/l and surpassed the first class seawater quality standards. The monitoring results at other times, although in line with the first class seawater quality standards, were close to the upper limit of the standard. Before the oil spill accident occurred, in May 2011, the background value of seawater oil concentration in Tangshan Repulse Bay offshore areas was 32.4 µg/l. After the oil spill occurred, the average oil concentration of the area was 45.5 µg/l. It was 0.4 times higher than the background value. The aquacultural area of the above 21 persons including LUAN Shuhai and Tangshan Repulse Bay offshore areas were all located in the coastal area of Leting County, and the nearest distance was about 14 km. The two places were equidistant from Penglai 19-3 oil field, which was about 140 km. After the Ministry of Agriculture and CNOOC, Conoco Phillips determined in consultation, Conoco Phillips invested one billion yuan to resolve the issues of economic loss of aquacultural animals and reparation and compensation of Bohai Sea natural fishery resources in the continuous shore sections “the four counties and three districts” from Leting County (Hebei Province) to Suizhong County (Liaoning Province), (including Leting County, Changli County, Funing County, Suizhong County, Haigang District, Shanhaiguan District, Beidaihe District). The Ministry of Agriculture took charge of coordinating the relevant governmental departments of Hebei Province and Liaoning Province to make reparations of 731.5 million yuan from the above amount to fishery claimants through administrative mediation. In January 2012, Leting County carried out a centralized action to optimize the coastal environment, rectify the development and construction order. Leting County Party Commitee and Leting County People’s Government on January 7, 2012 issued the Plan of Leting County on the Centralized Action to Optimize the Coastal Environmental and Rectify Development and Construction Order, and established a command post attended by the main leaders of the County Party Committee and County People’s Government and unit leaders in State Oceanic administration and the Bureau of Aquatic Products. It guided the People’s Government of XX village, XXX town to implement the specific work. In the centralized action, the people’s government of coastal villages and towns verified and standardized aquacultural areas, including the area of sea cucumbers. On September 22 of the same year, People’s Government of Leting County issued the Work Plan on the Distribution of Reparation and Compensation for

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Maricultural Loss in the 2011 Oil Spill of Penglai 19-3 Oil Field in Leting County. It determined the standards of reparation and compensation based on fishery experts’ evaluation. The standards and compensation were 540 yuan/mu for pond breeding of sea cumbers and 30 yuan/ cubic meter for factory breeding. Hereafter, the people’s government of the related villages and towns conducted administrative mediation with the breeding right holders according to the results of the verification and standards of reparation and compensation and distributed the money of reparation and compensation of the oil spill of Penglai 19-3 oil field accident to the rights holders accepting the mediation. The majority of the local breeding rights holders accepted administrative mediation and received the money of reparation and compensation according to above criteria. The aquaculture areas of the above 21 persons including LUAN Shuhai were within the range of the reparation and compensation, but they did not accept the administrative mediation. Among them, YAN Xiaoxia only accepted the administrative mediation on the aquacultural losses in her aquacultural area of 106.63 acres (have already appointed PANG Yeyun and LI Chuanxi who were not involved in the case to receive the amount of reparation and compensation), but she did not accept the administrative mediation on the aquacultural losses of the remaining 54.39 ac. The court of first instance also found that the Sea Water Quality Standards (GB3097-1997) implemented on July 1, 1998 stated that, according to different functions of usage and objectives of protection of waters, sea water quality was divided into four categories. Among them, the first type was suitable for marine fishery waters, marine nature reserves and reserves of rare and endangered marine organisms. The concentration of petroleum in this kind of water quality did not exceed 50 µg/l. The second type was suitable for aquacultural areas, bathing beaches, marine sports or recreation areas in which human beings contact with seawater, and industrial water areas associated with human’s direct consumption. The concentration of petroleum in this kind of water quality did not exceed 50 µg/l. The Fishery water Quality Standard (GB11607-89) implemented on March 1, 1990 stated that the concentration of petroleum in fishery water quality did not exceed 50 µg/l. The court of first instance held that the present case was about the dispute over the liability of marine pollution damage. Owing to the fact that Conoco Phillips registered outside the People’s Republic of China, in accordance with the Article 1 Paragraph 1 of the Interpretation of the Supreme People’s Court on Several Issues concerning the Application of the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China (I), this case belongs to the dispute on the foreign-related tortious liability. In accordance with Article 44 of the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China, the laws at the place of tort shall apply to liabilities for tort. In this case, the place of infringement and the result are both in the territory of the People’s Republic of China; therefore, the law of the People’s Republic of China should be determined as the applicable law dealing with the disputes in this case.

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The issues in this case are as follows. 1. Whether the above 21 persons including LUAN Shuhai had legitimate breeding rights and claim rights. In accordance with Article 11 of the Fishery Law of the People’s Republic of China, the People’s Government of Leting County had the right to authorize aquaculturists to use state-owned waters and intertidal zones, which are planned by the State to engage in aquacultural production. Around 2000, the original breeding right holders in this area of Leting County received the state land-use permits, and this area was used for aquaculture. The above 21 persons including LUAN Shuhai contracted aquacultural areas from the original breeding right holders with the corresponding payment, and the procedures for contrcating were legal. Before the pollution accident occurred, the above 21 persons including LUAN Shuhai had already started breeding sea cucumbers. The relevant departments of the local people’s government raised no discrepancy about this. After the pollution accident occurred, the local people’s government carried out a centralized action to verify, clean up and standardize the aquacultural areas. Based on this, the money of reparation and compensation for oil spill accident was paid through administrative mediation. The whole aquacultural area of the above 21 persons including LUAN Shuhai was within the scope of reparation and compensation. Leting County Bureau of Fisheries, as the fishery administration authority, also participated in this centralized action. The facts mentioned above showed that the local people’s government and the fishery administration authorities both actually authorized the above 21 persons to carry out aquacultural production. Therefore, the above 21 persons including LUAN Shuhai should be regarded as having legitimate breeding rights, and they had legitimate claim rights to losses suffered from pollution accident. Conoco Phillips, CNOOC claimed that the above 21 persons including LUAN Shuhai had no legitimate breeding rights and had no right to claim damages. The court of first instance held that these claims could not be established. 2. Whether the oil spill of the Penglai 19-3 oil field accident caused pollution to the aquacultual area owned by the above 21 persons including LUAN Shuhai and whether there was a causation between the losses claimed by them and the oil spill accident. Based on the existing evidence, the aquacultural area owned by the above 21 persons including LUAN Shuhai could be regarded polluted by the oil spill and suffered losses. The main reasons were as follows: (1) According to the report of Off-shore Survey Report, in May 2011, the background value of seawater oil concentration in Tangshan Repulse Bay offshore areas was 32.4 µg/l. This showed that the quality of water in the aquacultural area of the above 21 persons including LUAN Shuhai met the requirements of aquacultural water before the oil spill accident involved occurred. (2) Joint Investigation Report showed that the oil spill accident polluted the surrounding areas and northwest sea areas of 6,200 square kilometers of Penglai

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19-3 oil field. It indicated that the oil in the oil spill accident diffused to the northwest because of the influence of wind and flow, and the aquacultural areas owned by the above 21 persons including LUAN Shuhai are located in the northwest of the oil field. (3) Off-shore Survey Report showed that the oil pollution from the Penglai 19-3 oil field was found on Tangshan (Hebei Province) Repulse Bay offshore areas, resulting in the pollution to Repulse Bay offshore areas. (4) Off-shore Survey Report also showed that after the oil spill occurred, the concentration of petroleum in Tangshan (Hebei Province) Repulse Bay offshore areas had increased a little in comparison with the background value. During the period of monitoring, the monitoring results were closer to the upper limit of the standard of first class seawater quality, exceeding the background value by 0.4 times. The monitoring results exceeded the standard of 50 µg/l on July 18, 2011. (5) The aquacultural areas owned by the above 21 persons including LUAN Shuhai were located in the northwest of the Penglai 19-3 oil field of the coastal area of Leting County. The nearest distance between the aquacultural area and repulse bay waters are about 14 km, and the two places were equidistant from Penglai 19-3 oil field, which was about 140 km. Combined with the actual situation of the diffusion of oil to the northwest, water quality monitoring in the repulse bay waters could represent the water quality in the aquacultural area owned by the above 21 persons including LUAN Shuhai. The oil spill accident involved in the case caused harmful effects on marine biological resources, water use quality, and constituted pollution damage to the aquacultural areas of the above 21 persons including LUAN Shuhai. The evidence provided by Conoco Phillips and CNOOC could not deny the losses of the above 21 persons including LUAN Shuhai caused in the oil spill accident involved in the case. Conoco Phillips and CNOOC claimed that there is no causation between the losses alleged by the above 21 persons including LUAN Shuhai and oil spill accident, which lacked factual and legal basis. Therefore, the court of first instance did not support that argument. 3. Regarding the extent and the amount of loss that the above 21 persons including LUAN Shuhai suffered. In accordance with Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China and the Article 90 of the Interpretation of the Supreme People’s Court concerning the Application of the Civil Procedure Law of the People’s Republic of China, one party should have the responsibility to provide evidence in support of their own propositions. If the parties failed to provide evidence or if the evidence that could not prove their factual claims enough before the judgment was made, the party who bore the burden of proof should bear adverse consequences. The above 21 persons including LUAN Shuhai should bear the burden of proof on the extent and amount of losses they suffered.

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After cross-examination and certification, the evidence submitted by the above 21 persons including LUAN Shuhai for the extent and amount of breeding losses did not reach the sufficient and accurate degree; therefore, it should not be identified on the basis of the evidence submitted. Given the lack of the conditions for evaluation and identification of the losses suffered by the above 21 persons including LUAN Shuhai in the civil proceedings. Therefore, the degree of pollution and the amount of losses should be identified by the combination of the relevant evidence and facts of the case. Firstly, according to the relevant data recorded in Off-shore Survey Report, it could be indicated that the degree of pollution caused by the oil spill accident to the above 21 persons including LUAN Shuhai was not serious. Secondly, in Leting County, through administrative mediation, the majority of the breeding right holders have accepted the standards of reparation and compensation determined by the local people’s government, which suggested that these standards of reparation and compensation could basically make up for the losses suffered by the breeding rights holders of Leting County in the oil spill. Thirdly, the above 21 persons including LUAN Shuhai carried out aquaculture in offshore area of Leting County. In terms of their location, they could not prove that the degree of pollution of their aquacultural area was more serious than other breeding right holders. Accordingly, with reference to the above-mentioned standards of reparation and compensation, the court of first instance decided the amount of the losses suffered by the above 21 persons including LUAN Shuhai. After deducting the amount of money that YAN Xiaoxia received in the administrative mediation, the total losses of the above 21 persons including LUAN Shuhai were 1,683,464.4 yuan. As to the evaluation fee of XX Company alleged by the above 21 persons including LUAN Shuhai, the court of first instance did not support this because this company did not obtain Investigation and Evaluation Qualification Certificate of Fishing Industry Pollution Accident and had no qualification of evaluation. Technical Advisory Report issued by the company could not be used as the basis for determining the losses of the above 21 persons including LUAN Shuhai. 4. Whether CNOOC should undertake joint and several liability for compensation in this case. According to the Regulations of the People’s Republic of China on the Exploitation of Offshore Petroleum Resources in Cooperation with Foreign Countries and the cooperation contract signed by CNOOC and Conoco Phillips, when the accident occurred, Conoco Phillips was the operator of the Penglai 19-3 oil field in the oil production operations and controlled the pollution sources. Joint Investigation Report identified that Conoco Phillips violated the overall development plan of the oil field in the operating process. It had deficiencies in the system and management. Conoco Phillips failed to take necessary precautions against the risks that it should have foreseen, which ultimately resulted in oil spill. In accordance with Article 65 of the Tort Liability Law of the People’s Republic of China, with respect to any damage caused by environment pollution, the polluter should bear tort liability. The polluter’s liability should be born by Conoco Phillips. When

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the accident occurred, CNOOC was not the operator of the oil field and also did not control the pollution sources. Therefore, it should not bear the liability for compensation. The court of first instance did not support the allegation that CNOOC should undertake the joint and several liabilities for compensation. In summary, the above 21 persons including LUAN Shuhai had legitimate rights of claim and aquaculture. The oil spill involved in the case caused pollution to their aquacultural areas, and Conoco Phillips should bear the corresponding liability for compensation. Decided upon by the judicial committee of court of first instance for discussion, in accordance with Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, Article 90 of the Interpretation of the Supreme People’s Court concerning the Application of the Civil Procedure Law of the People’s Republic of China, Article 44 of the Law of the Application of Law for Foreign-Related Civil Relations of the People’s Republic of China, Article 1 Paragraph 1 of the Interpretation One of the Supreme People’s Court on Several Issues concerning the Application of the Law of the Application of Law for Foreign-Related Civil Relations of the People’s Republic of China (I), Article 65 of the Tort Liability Law of the People’s Republic of China, the court held as follows. 1. Conoco Phillips compensated 1,683,464.40 yuan within 10 days from the date that the judgment became effective. 2. Other claims of the above 21 persons including LUAN Shuhai should be rejected. If Conoco Phillips did not fulfill the obligation to pay money within the period specified in the judgment, it should make double payment of interest on the debt during delayed performance in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Conoco Phillips should bear the litigation costs of 8,891 yuan, and the rest should be born by the above 21 persons including LUAN Shuhai. The Plaintiffs applied to the court of first instance for reduction or exemption of case litigation cost during civil proceedings of first instance. After the examination, the application met the relevant provisions of the Measures on the Payment of Litigation Costs. The court of first instance decided to exempt the litigation costs, which should be born by the above 21 persons including LUAN Shuhai. During the civil proceedings of second instance, the parties provided additional evidence relating to the claims of appeal according to law. The court organized the parties to carry out the exchange of evidence and cross-examination. The above 21 persons including LUAN Shuhai additionally submitted the following evidence: Evidence 1. License of the business corporation of XX Company, which was registered in the Tangshan City Administration for Industry and Commerce, to prove that XX Company was engaged in environmental protection, breeding, technical advisory evaluation legally. Evidence 2 to 6. Three power of attorney of judicial evaluation of Tangshan Intermediate People’s Court in 2009 and 2010 and two civil judgments of People’s Court of Leting, People’s Court of Luannan County in Hebei Province, to prove that the judicial evaluation reports issued by XX Company in other cases were all adopted by the court. This indicated that XX Company had qualification of evaluation.

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Evidence 7. Decision of the Standing Committee of the National People’s Congress on the Issues Concerning the Management of Judicial Evaluation, to prove that XX Company had qualification of evaluation, and its evaluation results were valid and effective. Evidence 8. Dispute Resolution Policy on Investigation and Evaluation Qualification of Fishing Industry Pollution Accident, to prove that the Investigation and Evaluation Qualification Certificate of Fishing Industry Pollution Accident was based on industry regulations and it was not the compulsory regulations that should be applied. The industry regulations are less effective than the regulations of law. Evidence 9 and 10. News reports, to prove that the court did not entertain the cases filed by the other breeding right holders. Therefore, the degree of pollution which the above 21 persons including LUAN Shuhai suffered was more serious than other breeding right holders. Evidence 11. Photos, to prove that the procedures of sampling, storage and submittal for inspection conformed to the relevant provisions of the State. The cross-examination of Conoco Phillips on the evidence additionally submitted by the above 21 persons including LUAN Shuhai are as follows: Evidence 1 to 6 and evidence 11 did not provide the original copies, and evidence 9 and evidence 10 derived from unconfirmed news reports. Therefore, the authenticity and the legality of the above evidence could not be confirmed, and its relevancy to the case and the purpose of its certification was not accepted. Evidence 1, scope of business specified in the license of the legal person of XX Company, did not include loss evaluation of fishery pollution accident. Although the report issued by XX Company called “Technical Advisory Report,” its substance was to identify the fishery pollution accident. However, XX company did not obtain Investigation and Evaluation Qualification Certificate of Fishing Industry Pollution Accident. Evidence 2 to 6, whether effective judgments of other courts adopted the evaluation opinions of XX Company was irrelevant to this case. It could not prove that XX Company had the qualification of evaluation and investigation on fishery pollution accident required in this case. Evidence 7 was the legal regulations, and evidence 8 was departmental regulations. Both of them were not the evidence in the sense of law. Evidence 9 and 10, whether the court entertained the other cases were irrelevant to the extent of contamination that the above 21 persons including LUAN Shuhai were suffered from. Evidence 11, photos submitted by the above 21 persons including LUAN Shuhai could not prove its purpose. CNOOC agreed with Conoco Phillips’ opinions of cross-examination and believed that the evaluation agency should legally obtain Forensic Evaluation Permit, and evaluation experts should legally obtain Forensic Evaluation License. The evaluation experts should also be included in the “Register of State Forensic Evaluation Expert and Forensic Expertise Agency” and should be engaged in forensic business according to registered practice categories. The evidence submitted by the above 21 persons including LUAN Shuhai could not confirm that

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forensic evaluation agency and evaluation experts listed in Technical Advisory Report had evaluation qualification. Conoco Phillips submitted the following supplementary evidence: Evidence 1 Environmental Conditions Bulletin of Hebei Province in 2011 and evidence 2 Criteria of Seawater Quality, to jointly prove that oil spill of Penglai 19-3 Oil field did not have a negative effect on the breeding waters of the above 21 persons including LUAN Shuhai. Therefore, there was no causation between the losses alleged by them and the oil spill accident. Evidence 3. Specification for Ecological Environment Monitoring of Fisheries Part 1: General Rules and Specification for Ecological Environment Monitoring of Fisheries Part 2: Marine, and evidence 4, Specification for Marine Monitoring Part 6: Organism Analysis, to jointly prove that the process of sampling, storage and submittal for inspection of sea water and aquaculture biological samples carried out by the above 21 persons including LUAN Shuhai did not meet the national standard. Therefore, they could not prove losses they claimed. The above 21 persons including LUAN Shuhai did not accept all the supplementary evidence submitted by Conoco Phillips. They thought the process of sampling, storage, and submittal for inspection were all reasonable and in line with the national standard. CNOOC had no objection to all supplementary evidence submitted by Conoco Phillips. The supplementary evidence submitted by CNOOC are as follows: Evidence 1 XX Company’s materials of business registration and annual reports from 2013 to 2015 and evidence 2, Thang Shan XXXX Evaluation Center’s materials of judicial registration, to jointly prove that XX Company was confused with Tangshan XXXX Evaluation Center. Evidence 3, the “Register of Forensic Evaluation Expert and Forensic Expertise Agency” of Tangshan City from 2013 to 2015, to prove that XX Company did not have the conditions for forensic evaluation. Therefore, Technical Advisory Report issued by the company could not be regarded as the basis to identify the losses suffered by the above 21persons including LUAN Shuhai. The above 21 persons including LUAN Shuhai did not accept all the supplementary evidence submitted by CNOOC. They thought that XX Company was appointed to issue Technical Advisory Report in 2011 which the company and its evaluation experts all had qualification. Conoco Phillips did not object to all the supplementary evidence submitted by CNOOC. The court examined the supplementary evidence submitted by the parties, and ascertained as follows. As for the supplementary evidence that was submitted by the above 21 persons including LUAN Shuhai, the court confirms the authenticity of the evidence from 1 to 6. With regard to the probative force of this part of evidence, the court will refer to the relevant evidence to analyze and discuss in the judgment reasoning in the case. The court confirms the authenticity of evidence 9 and 10. However, whether the court entertained the cases is irrelevant to the judgment of degree of pollution; therefore, the court will not confirm its probative force. The

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court confirms the authenticity of evidence 11, but this evidence cannot reach the purpose of the proof that the process of sampling, storage and submittal for inspection complies with the relevant provisions. Therefore, the court will not confirm its probative force. As to the supplementary evidence submitted by Conoco Phillips, the court confirms the authenticity of evidence 1 and 2. However, the judgment of first instance has identified that there is causation between the oil spill accident involved in the case and the pollution damage to the aquacultural areas of the above 21 persons including LUAN Shuhai. Conoco Phillips did not appeal to this and the two pieces of evidence could not rebut the conclusions of the judgment of first instance. Therefore, the court will not confirm the probative force of the two pieces of evidence. Evidence 7 and 8 additionally submitted by the above 21 persons including LUAN Shuhai and evidence 3 and 4 additionally submitted by Conoco Phillips belongs to legal regulations and industrial regulations, and they cannot serve as evidence for identifying the facts of the case but as the basis of judicial decisions or reference. As to the supplementary evidence submitted by CNOOC, the court confirms the authenticity of evidence from 1 to 3. The above evidence reflects the relevant information about XX Company from 2013 to 2015 and forensic evaluation center of Tangshan construction cost, all of which are irrelevant to the case. Therefore, the court does not confirm their probative force. The facts ascertained by the court of first instance are supported by the relevant evidence; therefore, the court confirms those facts. The court holds that the case is about the disputes over liability of marine pollution damage. Because Conoco Phillips is registered outside the People’s Republic of China, the case is the foreign-related civil case in accordance with Article 522 Paragraph 1 of the Interpretation of the Supreme People’s Court Concerning the Application of the Civil Procedure Law of the People’s Republic of China. It is not inappropriate for the judgment of first instance to apply the tort law at the place of tort, namely the law of the People’s Republic of China as the applicable law in handling the disputes in accordance with Article 44 of the Law of the Application of Law for Foreign-Related Civil Relations of the People’s Republic of China. There was no objection by the parties; therefore, the court confirms it. Conoco Phillips shall bear the corresponding liability because the aquacultural area of the above 21 persons including LUAN Shuhai was polluted by the oil spill of Penglai 19-3 oil field accident. According to pleadings and claims of the parties, the court determines the issues of disputes at second instance: the degree of pollution and the amount of losses that the above 21 persons including LUAN Shuhai suffered from oil spill. 1. Regarding the identification of the probative force of Technical Advisory Report issued by XX company. The above 21 persons including LUAN Shuhai advocated Technical Advisory Report issued by XX Company as the basis of the extent of contamination and the amount of loss. In this regard, the analyses of the court are as follows.

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Firstly, although XX Company was listed in the register of evaluation experts of the people's court in accordance with the Provisions of the Supreme People’s Court on the Administration of People’s Court Commissioning to the Outside Judicial Expertise, the registration of the professional category is “science and technology consultation.” The business scope recorded in the business license includes technical development, technical consultation, technical services and other items, and in particular, “except for the above involving the projects of qualification management” is highlighted. The case is about the disputes resulting from pollution damage of aquacultural area of the above 21 persons including LUAN Shuhai caused by the oil spill of Penglai 19-3 oil field accident. The identification of the cause of death of aquatic organisms bred by the above 21 persons including LUAN Shuhai and the assessment of degree of fishery loss all belong to investigation and evaluation of fishery pollution accident. The above 21 persons including LUAN Shuhai alleged that XX Company had the qualification of expertise in accordance with the relevant provisions of the Decision of the Standing Committee of the National People’s Congress on the Issues Concerning the Management of Judicial Evaluation. In this regard, the court holds that the Decision of the Standing Committee of the National People’s Congress on the Administration of Judicial Authentication is the decision to strengthen the administration of evaluation experts and the evaluation institutions to adapt to lodging a complaint by judiciary authorities, and citizens and organizations, which is not clearly related to the investigation and evaluation of fishery pollution accident. However, in accordance with the Laws of the Marine Environmental Protection Law of the People’s Republic of China, Water Pollution Prevention and Control Law of the People’s Republic of China, and other laws and regulations, the Ministry of Agriculture has formulated special stipulations of measures for administration of qualification of investigation and evaluation of fishery pollution accident on the issues of investigation and evaluation of fishery pollution accident. It clearly required the unit that bear the investigation and evaluation of the fishery pollution accident and must obtain Investigation and Evaluation Qualification Certificate of Fishing Industry Pollution Accident. In this case, XX Company that issued Technical Advisory Report has not received Investigation and Evaluation Qualification Certificate of Fishing Industry Pollution Accident. Therefore, judgment of first instance that the company did not have the qualification of investigation and evaluation of fishery pollution accident was not inappropriate. The above 21 persons including LUAN Shuhai alleged that XX Company had been entrusted by other courts to issue the judicial expertise report and had been adopted. Therefore, XX Company has the qualification of judicial expertise in the case. The court holds that the reasons for damage in cases in other courts are not pollution caused by oil spills, and the adoption of the judicial expertise report issued by XX Company in cases in other courts cannot prove that the company has the qualification of investigation and evaluation of fishery pollution accident in this case. Therefore, the above claims of the above 21 people including LUAN Shuhai cannot stand. From Technical Advisory Report, the matter entrusted by XX

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Company was “the technical analysis on the expected yield and production value caused by the water pollution”, and XX Company also made it clear in Technical Advisory Report that our institution only has the technical analysis on the expected yield and production value of breeds this time and provides theoretical advice”. Therefore, the court holds that Technical Advisory Report issued byXX Company is only theoretical advice, but it does not have theoretical advice of an expert opinion. Secondly, Technical Advisory Report is based mainly on Survey Report and Oil Fingerprint Identification Report. “Date of sample’s arrival” recorded in the Survey Report relating to two seawater samples is September 22 and September 23, 2011. “Date of sample’s submission” recorded in Oil Fingerprint Identification Report relating to oil spill samples is 27th September 2011. However, according to what the above 21 persons including LUAN Shuhai said in the case, all the samples above were collected on July 18, 2011. There are strict normative requirements for the process of collection, storage and transportation of seawater samples and oil spill samples in the Specification for Ecological Environment Monitoring of Fisheries and the Specification for Identification System of Oil Spill on the Sea, but seawater and oil spill samples involved in the case are not promptly given to inspection departments for inspection after collection. In this case, the sampling and submission behavior are not continuous and cannot prove that the submitted samples are the collected samples. In this case, the results of petroleum concentration test of seawater samples recorded in the Survey Report cannot deny the offshore petroleum concentration data of Tangshan repulse bay over the same period recorded in Off-shore Survey Report given by the north sea monitoring center. The court does not confirm the probative force of Technical Advisory Report. In summary, the above 21 persons including LUAN Shuhai alleged Technical Advisory Report issued by XX Company as the basis of the extent of contamination and the amount of loss, and the court will not support it. 2. Regarding the identification of the extent of contamination and the amount of loss of the above 21 persons including LUAN Shuhai suffered from oil spill. Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China stipulates that the parties have the responsibility to provide evidence for their own claims. The above 21 persons including LUAN Shuhai alleged that the extent of the pollution of their aquacultural waters is more serious, and the amount of losses are higher. Therefore, they should bear the corresponding burden of proof. As to the degree of pollution, after the oil spill involved in the case occurred, State Oceanic Administration organized relevant units to investigate and monitor the oil spill around Bohai shore and coastal area and to assess the scope and extent that the oil spill of Penglai 19-3 oil field accident affected the lake shore. The North Sea Monitoring Center issued Off-shore Survey Report. The report could reflect the marine environment in the monitoring area and has been cross-examined by the parties. The above 21 persons including LUAN Shuhai alleged that the sea petroleum concentration of their aquacultural area was higher than the monitoring data recorded in Off-shore Survey Report. Therefore, they suffered more serious

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pollution. However, they did not provide sufficient evidence to negate the relevant conclusions in the “Off-shore Survey Report”. In accordance with Article 10 of the Supreme People’s Court on Some Issues concerning the Application of Law for the Trial of Cases of Disputes over Environmental Tort Liability, it is not inappropriate for judgment of first instance to make Off-shore Survey Report as the basis for determining the degree of pollution. Regarding the amount of the loss, in considering the evidence given by the above 21 persons including LUAN Shuhai cannot prove the specific amount of losses, according to Off-shore Survey Report, referring to compensation standard determined by Leting County People’s Government, it is not inappropriate for the judgment of first instance to identify synthetically the degree of pollution and determine the amount of the loss of the above 21 persons including LUAN Shuhai as appropriate. The above 21 persons including LUAN Shuhai claimed that the cognizance of the amount of the loss should be in accordance with the Regulations of the Supreme People’s Court on Certain Issues concerning the Disputes over Compensation for Oil Pollution Damage of Vessel. Because the judicial interpretation only applies to oil pollution damage compensation disputes, the court will not support it. The above 21 persons including LUAN Shuhai claimed that APF of XX Company should be paid by Conoco Phillips because Technical Advisory Report issued by XX company has no probative force in this case. It conforms to the legal judgment of the judgment of first instance not to support the appeal; therefore, the court shall affirm the decision. In summary, the claims of the above 21 persons including LUAN Shuhai cannot be established and should be rejected. If the facts are clearly ascertained and the law and regulations are correctly applied in the original judgment, the appeal shall be dismissed and the original judgment shall be affirmed. According to Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance shall be undertaken by the above 21 persons including LUAN Shuhai owing to the fact that the above 21 persons including LUAN Shuhai applied to the people’s court for the reduction or exemption of the payment during the civil proceedings of second instance. After the review, the application is in compliance with the relevant provisions of the Measures on the Payment of Litigation Costs. The court decided to exempt litigation costs of second instance bore by the above 21 persons including LUAN Shuhai. The judgment is final. Presiding Judge: GENG Xiaoning Judge: LI Tong Acting Judge: ZHANG Xin September 26, 2016 Clerk: SUN Chao Clerk: ZHAO Wei

Shanghai Maritime Court Civil Judgment MAO Xuebo v. CHEN Wei et al. (2014) Hu Hai Fa Hai Chu Zi No.85 Related Case(s) This is the judgment of first instance, and the judgment of second instance and the ruling of retrial are on page 626 and page 639 respectively. Cause(s) of Action 193. Dispute over liability for ship collision damage. Headnote Apportioning liability 70% to the Defendant and 30% to the Plaintiff after collision in which both ships failed to follow required navigational rules, but after which the Defendant’s ship fled, contributing to the probable death of all crew members of the Plaintiff’s ship; the Defendant’s counterclaim denied. Summary The Plaintiff, MAO Xuebo, filed suit against the Defendants, CHEN Wei and Jiangshan Co., after a collision between “Zhesheng 97506”, owned by Wei and operated by Jiangshan Co., and “Tailianhai 18,” owned by Xuebo. After the collision, “Zhensheng 97506” fled the scene which, the court found, likely exacerbated the extent of the damage as all of the crew members of the “Tailianhai 18” are presumed dead. For this reason, as well as the fact that both vessels were improperly manned and failed to conform to the relevant rules regarding the navigation procedures applicable to the foggy conditions present at the time, the Court found that Wei (as owner of “Zhensheng 97506”) and Jiangshan Co. (as operator of the vessel) should bear 70%, jointly and severally, of the tort liability and Xuebo, as owner of “Tailanhai 18”, should bear 30% of the tort liability. Further, based on the extent of illegality of both parties’ actions, the gravity of negligence, and the magnitude of the cause of damage, the court determined that any counterclaim by the Defendant was untenable.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_22

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Judgment The Plaintiff (the Counterclaim Defendant): MAO Xuebo, Male, Born on June 26, 1977, Han, Living in No. XXX, Meixin Road, Yangshan Town, Shengsi County, Zhejiang. Agents ad litem: JIN Yulai and RAO Yi, lawyers of Shanghai Kairong Law Firm. The Defendant (the Counterclaim Plaintiff): CHEN Wei, Male, Born on March 12, 1968, Han, Living in No.XXX, Yangxi Road, Yangshan Town, Shengsi County, Zhejiang. Agents ad litem: LI Chenbiao and YU Yang, lawyers of Beijing Zhonglun (Shanghai) Law Firm. The Defendant: Shengsi Jiangshan Marine Shipping Co., Ltd. Domicile: No.XXX, Gongjian Road, Yangshan Town, Shengsi County, Zhejiang. Legal representative: ZHANG Yue, chairman of the company. Agents ad litem: ZHANG Wei, lawyer of Shanghai Lvkai Law Firm. With respect to the case of dispute over collision damage liability dispute, the Plaintiff MAO Xuebo filed a litigation against the Defendant CHEN Wei and Shengsi Jiangshan Marine Shipping Co., Ltd. (hereinafter referred to as Jiangshan Company), to the court on September 5, 2014. The court accepted this case on the same day, and constituted the collegiate panel according to the law. On November 14, 2014, CHEN Wei counterclaimed MAO Xuebo, and the court accepted the case and consolidated the principal action and counterclaim. On January 5, 2015, CHEN Wei applied to established limitation fund of liability for maritime claims to pay compensation for the ship involved collision accident. After the court’s ruling permitted, CHEN Wei paid RMB799,624.81 to the court on March 24, 2015, and set up the limitation fund for maritime claims. On August 14, 2015, the court held a hearing of the case in public. MAO Xuebo’s agents ad litem JIN Yulai and RAO Yi, CHEN Wei’s agent ad litem LI Chenbiao and YU Yang, and Jiangshan Company’s agent ad litem, ZHANG Wei, appeared in court and participated in the hearing. The case has been concluded now. MAO Xuebo claimed that on March 19, 2013 2 or 3 o’clock, M.V. “Zhesheng 97506” owned by CHEN Wei and operated by Jiangshan Company, had a sudden collision with M.V. “Tailianhai 18”owned by MAO Xuebo, in waters north of the Changjiang River estuary and outside the Datang power plant. After the incident, the crew of M.V. “Zhesheng 97506” on duty at the bridge reported the accident to CHEN Wei, and under CHEN Wei’s intention, neither reported to the competent authorities, nor stay in the incident to rescued M.V. “Tailianhai 18”, but flew away from the scene, and finally caused the sank of M.V. “Tailianhai 18”, in which the crew were all killed (6 people died, 2 people so far unknown, no hope of life), the accident could not be identified. After maritime administrative departments compulsory salvaged M.V. “Tailianhai 18”, the parties coordinated. Although CHEN Wei signed a salvage agreement with MAO Xuebo, salvage operator Jiangsu

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Wenqiang Marine engineering Co., Ltd. (hereinafter referred to as Wenqiang Marine), but did not pay salvage costs according to the agreement, and the plaintiff was also unable to pay, which leaded M.V. “Tailianhai 18” long lay aside in the salvage company, could not be repaired, and constituted a total loss. CHEN Wei indicated all navigating mates of its M.V. “Zhesheng 97506” hit-and-run, which gave rise to the real cause of the accident that cannot be fully verified. Thus, CHEN Wei should bear all the collision liability, and Jiangshan Company as a ship operator, who did not fulfill the statutory ship operating and management responsibilities, should bear joint liability with CHEN Wei. Therefore, the Plaintiff requested the court to order CHEN Wei and Jiangshan Company to jointly compensate the loss of the Plaintiff 9.84 million yuan (including ship loss 5.9 million yuan, 2 months loss for detention 800,000 yuan, 160,000 yuan loss of the ship diesel, 20,000 yuan loss of the ship lubricating oil, 400,000 yuan loss of ship material and spare parts, 80,000 yuan on board gravel loss, wreck salvage charges 2.4 million yuan, accident handling costs and inspection costs 80,000 yuan) and the interest of the above amount (according to the People’s Bank of China the same period one-year lending rate from March 19, 2013 to the date of commencement of the judgment). CHEN Wei argued that M.V. “Tailianhai 18” without any certificate was a “three- no-ship”. M.V. “Zhesheng 97506” had a complete ship’s certificate and certificate of competency. According to the facts of collision accident, M.V. “Tailianhai 18” should bear the equal or main responsibility for the accident. M.V. “Tailianhai 18” after the incident disposed improperly. It did not take self-help measures which like to the nearby shore beach, berth of call and so on, and to missed the rescue time. And, combining with the round was “three noes” ship, there was no watertight performance of cabin and other defects. Thus, it had resulted in the sinking. The AIS (Automatic Identification System, the same below) showed that M.V. “Zhesheng 97506” had searched for 20 min after the incident, neither left the scene, nor escaped. But it was the Plaintiff left the scene, which had resulted in the Defendant could not sue and labor. M.V. “Tailianhai 18” was assessed as repairable after the incident, but MAO Xuebo did not pay the salvage costs, so that the ship did not been repaired in time and caused the enlargement of losses. M.V. “Tailianhai 18” was the “three noes”ship, whose operating income was illegally acquired, and the ownership of the cargo on board was unclear, and the amount of materials and fittings was insufficient. Therefore, it should not be supported. CHEN Wei had the right of limitation of liability for maritime claims, and had set the fund of limitation of liability for maritime claims. Any loss of MAO Xuebo shall be compensated proportionally in the fund. To sum up, CHEN Wei requested to dismiss MAO Xuebo’s claims. Jiangshan Company argued that M.V. “Tailianhai 18” was “three noes” ship, whose crew were operating without a license, and it did not use safe speed. Thus, MAO Xuebo should bear the primary responsibility for the accident. The entrustment operation contract between Jiangshan Company and CHEN Wei and the investigation report provided by Maritime administrative departments were both proved that though Jiangshan Company was registered as the ship operator, but was not the actual

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ship operator. Crews were equipped by CHEN Wei, and operating income was enjoyed by CHEN Wei. Jiangshan Company only charged annual management fee, without independent management rights or decision-making power. It was the actual ship manager, rather than the operator, and should not bear the collision responsibility of the case. Therefore, Jiangshan Company requested to dismiss MAO Xuebo’s claim. CHEN Wei counterclaimed that: on March 19, 2013, M.V. “Zhesheng 97506” owed by CHEN Wei collided with M.V. “Tailianhai 18” which was owed and operated by MAO Xuebo in the waters near north of the Changjiang River estuary. And, it resulted in M.V. “Zhesheng 97506” being damaged and caused significant economic losses. According to the investigation by the maritime administrative department, M.V. “Tailianhai 18” did not hold any ship and crew certificate, did not fulfill the safe navigation duties, and the ship itself was not seaworthy. CHEN Wei believed that these factors were direct cause caused the collision accident, and MAO Xuebo should bear liability to pay compensation for CHEN Wei’s loss. To this end, it requested MAO Xuebo compensate economic losses 5,771,981 yuan (including 27,535 yuan for crew insurance, 2013, crew salaries 845,210 yuan, the ship diesel fuel 459,518 yuan, 58,000 yuan food costs, boat rental costs 288,000 yuan, during the accident rental boat cost 50,000 yuan, the cost of repairing damaged parts was 76,630 yuan, the cost of hull repair was 550,000 yuan and the operating profit of 16 months 3,417,088 yuan). And the interest of the amount according to the People’s Bank of China the same period one-year lending rate from March 19, 2013 to the actual payment. MAO Xuebo argued that the accident involved was caused by unilateral negligence of M.V. “Zhesheng 97506”, and CHEN Wei should bear all responsibility. M.V. “Zhesheng 97506” seized by maritime administrative department for hit and run, and the loss caused from this had no connection with MAO Xuebo. Moreover, there was no evidence to prove CHEN Wei’s actual loss and its reasonableness. Therefore, request to reject CHEN Wei’s counterclaim requests. The parties provided evidence, cross-examination and the court certification are as follows: MAO Xuebo submitted: 1. Shipbuilding agreement and ship launching agreement of M.V. “Tailianhai 18”, to prove that the ship was owed by MAO Xuebo, and the cost was 6.98 million yuan. CHEN Wei, Jiangshan Company had no objection to its authenticity, and confirmed that the ship was owed by MAO Xuebo. But that the value of the ship should be based on the assessment price, and the Plaintiff did not submit the certificate to pay the price. 2. M.V. “Tailianhai 18” income and loss certificate, to prove that MAO Xuebo suffered a sailing date loss 800,000 yuan, due to the sinking of the ship. CHEN Wei, Jiangshan Company had no objection to its authenticity, but did not recognized its association. It thought that it could not not confirm the real relationship between issuer Shanghai Chenlei Industrial Co., Ltd. (hereinafter referred to as Chenlei Company) and MAO Xuebo, and it could not prove the real loss of income.

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3. Oil proof, to prove that M.V. “Tailianhai 18” oil loss 180,000 yuan. CHEN Wei, Jiangshan Company had no objection to its authenticity, but did not recognize the content which proved. There was no specific fuel certificate that could not reach the Plaintiff’s prove purpose. 4. Proof of material supply, to prove that MAO Xuebo suffered another loss of material spare parts 400,000 yuan in addition to the value of the ship. CHEN Wei, Jiangshan Company had no objection to its authenticity, but did not recognize the relevancy and the content of proof. Issuer metal casting plant did not have fresh water, food supply qualification, propeller and other spare parts specifications which could not have descript. Thus, it could not prove the will-be-proved facts. 5. M.V. “Tailianhai 18” salvage agreement, salvage company dunning letter, proof letter, on behalf of the payment instructions, construction contract, to prove that M.V. “Zhesheng 97506” owner CHEN Wei confirmed that the fact of ship collision accident occurred and rationality for related salvage costs. And, CHEN Wei further confirmed to pay 1.5 million yuan to the salvage company, but he did not pay any amount of default, resulting M.V. “Tailianhai 18” long shelved and total loss. CHEN Wei, Jiangshan Company confirmed the authenticity of the salvage agreement and the payment order and confirmed the signing of CHEN Wei, but the authenticity of salvage details could not be confirmed for no seal. Salvage agreement agreed 1.5 million was loan, but, the lender did not lend in the fact. Thus, it did not take effect, or no actual causal relationship with the case. 6. Photos of sunken M.V. “Tailianhai 18”, to prove the condition of the ship after being salvaged out of water. The left anchor lost, the collision was very likely to be the state of the mooring, and the round was now stable in the place arranged by Wenqiang Marine and under its control. CHEN Wei, Jiangshan Company recognized the authenticity of the photo, but they thought that the photo was not collected by surveyor company or a third party, could not prove the situation of M.V. “Tailianhai 18”, could not prove whether the left anchor was lost and when it lost, could not construct whether it was in anchored state. 7. AIS record of M.V. “Zhesheng 97506”, transferred by MAO Xuebo from the People’s Republic of China Zhejiang Maritime Safety Administration Shengsi Marine Department (hereinafter referred to Shengsi Marine Department), to prove that this round incident to escape. CHEN Wei and Jiangshan Company did not recognize the authenticity, legality, relevancy of this evidence. They argued that its origin was unknown, and it could not indicate this track was the ship’s AIS track. 8. MAO Xuebo and CHEN Wei’s consignee HUANG Ming’s call recording, to prove that captain of M.V. “Zhesheng 97506” hit and escape under CHEN Wei’s intention. CHEN Wei, Jiangshan Company did not recognize the authenticity, legality, relevancy of this evidence, and argued the outsider HUANG Ming was not witnesses, the call content had nothing to do with the collision.

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9. MAO Xuebo loss list, to prove that MAO Xuebo suffered loss 9.84 million yuan for involved ship collision accident. CHEN Wei and Jiangshan Company considered that it was unilateral statement, did not belong to evidence. Salvage costs were not paid. The costs of accident handling and inspection without evidence to support. And there was no description of the owner or the number of the goods. It could not prove the loss of MAO Xuebo side. 10. Explanation of condition signed by the family members of the death crew of M. V. “Tailianhai 18”, to prove that M.V. “Zhesheng 97506” hit and run which resulted M.V. “Tailianhai 18” crews all died. CHEN Wei and KONG Manchang had obvious interest relationship with the case. Relevant personnel investigation or testimony, maritime administrative departments confirmed responsibility based on, which cannot be accepted. CHEN Wei and Jiangshan Company did not recognize the authenticity, legality of this evidence. They believed that the identity and signature of the family could not be confirmed, and these families were not in the scene. Its testimony did not meet the formal requirements of witness testimony, and had no proof force to the collision fact. 11. Identification issued by Chenlei Company, to prove that M.V. “Tailianhai 18” operated 16 voyage during a month, freight 22 yuan every ton. CHEN Wei, Jiangshan Company recognized its authenticity, but had objection to legality, relevancy. And they insisted that Chenlei Company was disqualified to provide identification, which this evidence could not prove the operating income of M. V. “Tailianhai 18”. The court confirms that, CHEN Wei, Jiangshan Company recognized the authenticity of MAO Xuebo evidence 1–6, 11, and the court identifies its authenticity as well. Evidence 1 reflected the agreed cost of the two self-discharging sand dredger made by MAO Xuebo, but could not prove the value of M.V. “Tailianhai 18” involved in the case when the accident happened and the residual value after salvage. Evidence 2, 3, 4, 11, although had authenticity, but unilateral provided by subjects had economic transactions with MAO Xuebo. It was difficult to independent prove the amount of the loss MAO Xuebo claimed, and the amount of the relevant loss will be comprehensive identificated separately. Evidence 5 was a salvage agreement signed by MAO Xuebo and Wenqiang Marine. And CHEN Wei signed on it and made it clear that “the cost of 2.12 million yuan, the agreement involved in, I think was reasonable. And after the agreement signed into effect, our side agree to borrow RMB 1.5 million to ‘Tai Lian Sea 18’ round within 10 days, dedicated to pay salvage costs”. Its validity of the evidence could be identified. The proof was subject to the evidence. Evidence 6 could reflect the apparent condition of M.V. “Tailianhai 18” at the time, and its proof force would be determined in conjunction with other evidence. Evidence 7 was the electronic data, the first half of the content could confirm with the AIS track video the court obtained from the maritime administrative department, and the latter half of the content could confirm with the accident investigation report the court obtained from above-mentioned department, which identified its evidence effect and the corresponding proof power. Evidence 8, it could not be verified that the identity of the other person and the

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situation in the time of conversation. The contents of the call was submitted as evidence had not been recognized by each other, and the contents of the call did not indicate that CHEN Wei instructed or instructed captain of M.V. “Zhesheng 97506” to escape. This evidence could not prove that MAO Xuebo’s corresponding fact claim. Thus, its proof force was not recognized. Evidence 9 belonged to MAO Xuebo’s unilateral statement, namely the claim for the amount of the loss. The court will comprehensively cognizance. Evidence 10 were series of written testimony, the main contents was to declare the mutual relationship among M.V. “Zhesheng 97506” shipowner, the captain, and the crew, and the situation when M.V. “Tailianhai 18”salvaged from sea and when the body of the death crew found, and the proof force would be combined other evidence to comprehensive cognizance. CHEN Wei submitted: 1. Ship certificate of M.V. “Zhesheng 97506”; 2. This ship crew training relevant documents and certificate of competency, to prove that the ship was seaworthiness, the crew qualified the contract, and the total tonnage were 498 tons. MAO Xuebo did not recognize the authenticity, legality and relevancy of this evidence. Jiangshan Company recognized the authenticity, legality, relevancy of the evidence; 3. Maritime traffic accident investigate conclusion report (hereinafter referred to as the investigate conclusion report), to prove that two ships involved in was part of damaged, M.V. “Tailianhai 18” was “three nose” ship, no seaworthiness, the crew to comply with navigation rules. MAO Xuebo recognized its authenticity, but did not recognize its contents. Jiangshan Company recognized the authenticity, legality, relevancy of the evidence; 4. M.V. “Zhesheng 97506” loss list, to prove the repair price of ship. MAO Xuebo did not recognized the validity of this evidence, and that CHEN Wei should bear the loss of their own. The ship was seizure by maritime administrative department. Indirect loss should not claim to MAO Xuebo, and CHEN Wei had not fulfilled the obligation to derogate, either. Jiangshan Company declared that although the ship was linked to the company, but managed by CHEN Wei, so the contents of the evidence should not be confirmed; 5. Identification conclusion report of M.V. “Zhesheng 97506” damaged repair price, to prove that the repair price of this ship. MAO Xuebo recognized its authenticity, but claimed that it was issued by inspection agency employed by CHEN Wei unilaterally that it could not confirm whether the conclusion of the test was reasonable. Jiangshan Company confirmed its authenticity, legality and relevancy; 6. Insurance policy and insurance invoices, to prove that the insurance cost of M. V. “Zhesheng 97506”. MAO Xuebo recognized its authenticity, but objected to its relevancy. Because MAO Xuebo thought that it did not record the vessel name, the list could not one-to-one correspondence to the policy. Insurance cost itself was the operating cost CHEN Wei side should bear, and no right to claim to MAO Xuebo. Jiangshan Company recognized its evidence;

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7. Wage schedule, to prove that the payroll costs of M.V. “Zhesheng 97506”. MAO Xuebo deemed that the evidence was made by CHEN Wei unilaterally, and did not recognized the effectiveness of this evidence. Jiangshan Company considered that wages was paid by CHEN Wei, that Jiangshan Company did not know this situation. But the amount was rational for what was in line with industry standard; 8. Charter agreement; 9. Cost schedule after the accident, to prove the maintenance costs of M.V. “Zhesheng 97506” after the accident. MAO Xuebo did not recognized its authenticity, relevancy, and deemed that the cost calculation of CHEN Wei was incorrect. Because there was no evidence to prove the expense standard. Jiangshan Company confirmed its effect of evidence. 10. Expenditure details of 2012 annual fee, to prove that M.V. “Zhesheng 97506” operating costs in 2012. MAO Xuebo did not confirm the effect of evidence of this evidence. Jiangshan Company recognized its effect of evidence; 11. Stone transportation detail list of 2012 annual; 12. Supply contract and final statement, details, etc., to prove that operating income of M.V. “Zhesheng 97506” in 2012. MAO Xuebo did not recognize its effect of evidence of evidence 11, and detail list was a form made unilaterally by CHEN Wei. MAO Xuebo recognized the surface authenticity of original supply contract in evidence 12. But its relevancy and content were not recognized for that it could not one to one correspondent to evidence 11, the detail list. Jiangshan Company recognized the effect of evidence of evidence 11, 12. 13, The Conclusion of Repair Costs of Damaged M.V. “Zhesheng 97506”, to prove that the vessel was part damaged and its repair price. MAO Xuebo did not recognize its effect of evidence, identification procedure, qualification and conclusion. Jiangshan Company recognized its effect of evidence. 14, Salvage agreement to prove that M.V. “TAI Haihai 18” did not constitute a total loss and the amount of vessel repair cost. MAO Xuebo and Jiangshan Company both recognized its evidence effect. 15, Conclusion of judicial appraisal made by Shanghai Maritime Judicial Expertise Center entrusted by Jiangsu Zhouyong Law Firm on December 25, 2014 to prove that the two ships involved should each bear 50% of their collision responsibility. MAO Xuebo did not recognize the authenticity, legality, relevancy of this evidence, because it was made under no commission of the people’s court. And appraiser failed to appear in court for questioning, and consequently this conclusion was wrong for it was made merely according to testimony of crew of M.V. “Zhesheng 97506” and AIS trajectory. Jiangshan Company had no objection to the validity of its evidence. The court confirms that: MAO Xuebo, Jiangshan Company recognized the authenticity of evidence 1, 5, 6, 14. The court identifies its effect of evidence, and will comprehensively identify this evidence’s probative force according to its content and other evidence. The court identifies the probative force of the part confirm together among evidence 1, 2 and evidence 3. Evidence 4, 7, 9, 10, 11, was made unilaterally by CHEN Wei, belonging to the party’s statements of facts and

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claims. For related losses and the amount CHEN Wei claimed, the court will comprehensively identify combining with other evidence. Evidence 8 had the original to check, whose authenticity can be identified, and its probative force will be separately identified. Evidence 12, the authenticity of one part, which had the original to check was identified, and its probative force would be comprehensively identified combining with other evidence. The authenticity of evidence 13 could be identified, but this evidence was issued on September 12, 2013, has been unable to reflect and prove the damage condition of M.V. “Tailianhai 18” and the possibility, rationality of restoration of the vessel when the case was in hearing. Thus, this course did not identify the corresponding probative force of this evidence. The authenticity of evidence 15 could be identified, but the statement was not legally applied by the parties, formed during the trial process of the case, the issuer failed to appear in court to accept the parties’ examination. Therefore, its probative force will be comprehensively identified combining with other evidence. Jiangshan Company submitted: 1. Contract of Requirement of Management and Operation of M.V. “Zhesheng 97506”; 2. Employer liability insurance policy of this vessel; 3. Letter of responsibility for ship safety management, to prove that though Jiangshan Company registered as the operator of the vessel, the company did not actually possess, control and operate the vessel, of the round. In fact, Jiangshan Company was the manager of the round, and all the crew of the ship was employed by CHEN Wei. Therefore, Jiangshan Company should not bear responsibility for no fault in the collision of the vessel. MAO Xuebo thought that the group of evidence formed between CHEN Wei and Jiangshan Company. Thus, MAO Xuebo did not identify the effectiveness of this evidence. In addition to recognize the authenticity of evidence 3, CHEN Wei recognized the effectiveness and proof purpose of any other evidence. The court confirms that Jiangshan Company’s evidence could reflect the fact that M.V. “Zhesheng 97506” was managed by Jiangshan Company under the consignation of CHEN Wei in the agreement between CHEN Wei and Jiangshan Company, and CHEN Wei had no objection to the authenticity of the evidence 1, 2. Thus, the court identifies the effectiveness and corresponding probative force of this evidence. Evidence 3 was the internal agreement about safety management liability between Jiangshan Company and M.V. “Zhesheng 97506”, and its probative force will be comprehensive identified separately. Under the separate application of MAO Xuebo and CHEN Wei, the court transferred collision accident investigation report about Nantong “3.19”, “Zhesheng 97506” and three noes sandstorm ship “Tailianhai 18” (hereinafter referred to as the investigation report) and AIS track record of M.V. “Zhesheng 97506” form Nantong Maritime Safety Administration of the People’s Republic of China (hereinafter referred to as Nantong MSA). MAO Xuebo, CHEN Wei applied for the court to withdraw the above evidence which was in order to prove their own claims

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about the collision facts. After reading and demonstrating in the court, it was no objection to the surface authenticity and relevancy of the investigation report, but MAO Xuebo held the opinion that the investigation report had no objective basis to reflect the objective facts. Therefore, the content of the report was not recognized. The AIS track record had no objection. CHEN Wei had no objection to the authenticity and legality of the investigation report, but considered that the conclusion of the responsibility was wrong. The effect of evidence of AIS track record was recognized. Jiangshan Company recognized the investigation report and the effect of evidence of AIS track record. The court confirms that investigation report was made by maritime administrative department according to law and authority after investigating the involved accident, AIS track record was original electronic data formed while maritime administrative department supervising safety of navigation. The effect of evidence and probative force of this two evidence was identified. Due to the large dispute between MAO Xuebo and CHEN Wei, and involving the special issue, both two sides agreed the court to designate expertise institution. The court through the Shanghai High People’s Court judicial commission intermediary management system to determine Shanghai Jilian Asset Evaluation Co., Ltd. (hereinafter referred to Jilian Company) to evaluate ship value of M.V. “Tailianhai 18” on collision day March 18, 2013 and on site investigate date March 11, 2015, and loss for detention of M.V. “Tailianhai 18” and M.V. “Zhesheng 97506” during March 2013 while collision. Jilian Company made valuation report of M.V. “Tailianhai 18” and M.V. “Zhesheng 97506”, subject matter of the case (2014) Hu Hai Fa Hai Chu Zi No.85 (Hereinafter referred to as valuation report) on June 2, 2015. MAO Xuebo confirmed the authenticity, legality and relevancy of valuation report, but considered that there was a certain gap between the assessed value and its actual loss. M.V. “Tailianhai 18” was far exceeded M.V. “Zhesheng 97506”, but it was unreasonable that the assessment of loss for detention was less than the latter. CHEN Wei did not object to the authenticity of the assessment report. But CHEN Wei believed that the conclusions of the assessment lack of reasonable basis, because evaluating value and loss for detention of M.V. “Tailianhai 18” did not consider its “three nose” ship condition and repairable situation, did not make an inventory of cabin, cab equipment. And appraiser assistant went to the scene to investigate, signing that appraiser did not go to the scene. Thus, the assessment conclusion could not be accepted. Jiangshan Company agreed to CHEN Wei’s cross-examination views. The court confirms that investigation report was expert (evaluate) opinions made by qualified independent surveyor (evaluator). Signing appraiser did not survey on scene did not affect appraiser assess the independent views according to the situation the assistant investigated and understand. The report had a supporting role to identify the specialized questions about average net profit per voyage of M.V. “Tailianhai 18” and M.V. “Zhesheng 97506” etc., the effect of evidence and probative force of this evidence was identified.

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After the examination and verification of the above evidence, combining with the court investigation, the court identifies the facts as follows: Firstly, the fact of collision. At about two past three March 19, 2013, M.V. “Zhesheng 97506” had a collision with “three nose” gravel boat M.V. “Tailianhai 18” in the waters about 200 m near Jiangsu Qidong coastal large bend waterway Lvsi Datang power plant wharf upstream, on the way from Jiangsu province Qidong Lvsi fishery port economic zone seaport hub project operating point no load to Shengsi. The accident caused M.V. “Tailianhai 18” sank, 8 people of the ship all fell into the water, of which 6 people were killed and 2 missing. On March 22, 2013, Jiangsug Maritime Safety Administration of the People’s Republic of China set up collision accident investigation team about Nantong “3.19” M.V. “Tailianhai 18” and M.V. “Zhesheng 97506”. After a comprehensive investigation of this accident, the team made an investigation report on May 9, 2013. On March 12, 2014, Nantong MSA made the survey of the conclusion. 1. Incident site navigation environment condition. According to the investigation report, the incident water was located in Jiangsu Qidong coastal large bend waterway, Datang power plant wharf upstream edge about 200 m. Large bend waterway was southeast to northwest, about 60 miles, lower wide, upper narrow, which Datang power plant wharf and upstream is about 7 miles, width of 600 to 700 m. After 2009 Datang Power plant wharf and Lvsi port area first installment approach channel (Lvsi # 1—Lv si# 15 floating, 54.30 miles long) was completed, the same year on May 26, Nantong Maritime Bureau issued Nantong Lvsi port navigation notice, asked the ship enter and exit Lvsi port should access through the entry channel, and the ship enter and exit Lvsi port should comply with Convention on the International Regulations for Preventing Collisions at Sea, 1972 (hereinafter referred to collision avoidance rules), to strengthen the look, careful navigate, ensure safety. When the accident occurred, M.V. “Yongxing 11” was in the 2nd anchor, M.V. “Datang 8” and one foreign vessel was in mooring on Datang power plant wharf, in addition to M.V. “Zhesheng 97506” and M.V. “Tailianhai 18”, no other nearby ships. 2. The incident site weather condition. According to M.V. “Zhesheng 97506” KONG Guoping’s statement, at about twelve past twenty-five in March 19, the anchor endurance, visibility distance was 100 to 200 m then. At time of impact, there was fog, it was vague to see the bow from the cab, and visibility distance was estimated about 30 m. There was a steady breeze and flood current in the collision. According to M.V. “Zhesheng 97506” LE Yuangen’s statement, visibility distance was 400–500 m at about eleven o’clock March 19 when the anchor up, and in the large fog, visibility distance was 30–40 m at time of impact. According to terminal records and staff statements of Lvsi Datang power plant, at eleven and a half March 19, the terminal shut down due to fog, crane workers could not see the bilge of operating ship (about 35 m) from the crane control room. Heavy fog weather continued to eight o’clock when the shift happened; terminal CCTV (Closed Circuit

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Television, closed-circuit television) video showed, at about three past two March 19, it only could see mooring in the dock upstream berth M.V. “Datang 8” ship bow, live measured, the probe from the location of “Datang 8” ship was only 30 m bow. 3. M.V. “Zhesheng 97506” Sailing dynamics. According to the investigation report, at about twenty o’clock March 17, 2010, M.V. “Zhesheng 97506” loaded about 690 tons rock from Zhejiang Daishan Shulang lake to Jiangsu Qidong, with bow and stern draught 2.6 m/3.7 m. At eleven and a half on the 18th, the vessel arrived Jiangsu Lvsi fishery port economic zone seaport hub project operating point (32°6′19.45″N, 121°35′44.34″E). At fifteen o’clock about, the vessel started discharging cargo. At the time about nineteen to twenty, the vessel completed of discharge and set sail. At about fourteen to twenty, sailing about 200 m (32°6′ 24.04″N, 121°35′55.47″E), the stern stranded and the bow toward the northwest, throwing right anchor 15 m from deck. Twenty-two o’clock, the sea was fog, and Twenty-three o’clock, the tide began. At the time of midnight past twenty-five on the 19th, hull refloating, anchor endurance, and visibility distance was 100 to 200 m. KONG Guoping steered, LE Yuangen assisting the lookout, and electronic map, AIS, GPS (Global Positioning System, GPS, the same below), VHF (Very High Frequency, VHF, the same below) 16, VHF08, radar (range 1.5 nm) were normal on, which Show front and rear mast lights, port and starboard lights, stern lights, did not cast fog. At thirty-five past midnight or so, sailing: 32°6′23.42″N, 121°35′52.69″E, speed 7.2 knot, heading 020°; and the time of seven to one, position: 32°8′10.78″N, 121°36′44.63″E, speed 7.4 knot, Heading 043°. At about Five to one, the vessel sailed to the place near the north side of the Lvsi meteorological station (32°8′10.71″N, 121°36′39.92″E), with speed 7.3 knot, heading 111°. KONG Guoping and LE Yuangen shift changed, KONG Guoping continued to assistant to look out on the right side of the cab. At about forty-two past one, position 32°6′55.92″N, 121°42′36.61″E, speed 7.4 knots, heading 112°, visibility distance reduced to 30 m or so. And the distance to anchored boat M.V. “Yongxing 11” (GPS anchor 32°6.14′N, 121°43.98′E) in Lvsi port 2 anchorage was about 1.5 nautical mile away. Then, KONG Guoping left cab, and enjoined LE Yuangen that both sides of M.V. “Yongxing 11” could sail. At ten to two, with speed 7 knots and heading 127°, the vessel passed from the place about 100 m away from port of M. V. “Yongxing 11”, then the vessel adjusted the heading to 146° to the right. At about three to two, position 32°5′56.98″N, 121°44′21.51″E, speed 7.4 knots, heading 146°, KONG Guoping returned to cab, continued to stand on the right side of VHF, LE Yuangen and KONG Guoping had successively discovered one radar echo on the left front about 30°, about 1.5 miles away, run along Lvsi first installment entry channel to the upstream, no AIS signal. KONG Guoping thought that the other side without AIS signal was the fishing vessel. At about one to two, position 32°5′42.5″N, 121°44′33.72″E, speed 7.5 knots, the distance to upstream of Datang Power Plant wharf was about 900 m, with an angle of about 20° with the front line of the wharf. LE Yuangen thought that the angle between the ship heading and the front line of the wharf (frontier azimuth of Lvsi Datang Power Plant wharf was 126° to 306°) was larger, and adjusted the heading to 127°. At about one past two, Position 32°5′31.02″N, 121°44′48.7″E, speed 7.5 knots. The

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distance to upstream of Datang Power Plant wharf was about 500 m, and the departure to the front line of the wharf was about 350 m. LE Yuangen thought that the position was open, and adjusted the heading to 143°. Then, it was found that the other side vessel was located on the left front of the boat about 30°, about 0.5 nautical mile away. LE Yuangen adjusted the radar range to 0.75 nautical mile, still kept the speed to sail. At about two past two, position 32°5′25.91″N, 121°44′54.38″ E, heading 140°, speed 7.4 knots; three past two, KONG Guoping visual discoveryed the other side vessel contour and immediately decelerated, stop, full speed reversed. Then, M.V. “Zhesheng 97506” bow collided with the other side ship in front starboard. The collision site was located at about 200 m (32°5′21.97″N,121° 44′55.92″E) at the upstream of the Datang Power Plant wharf, with M.V. “Zhesheng 97506” heading about 140°. Site survey showed that above of bulbous bow of M.V. “Zhesheng 97506” was broken through, and the collision angle was about 150° (from left to right rear). After the collision, M.V. “Zhesheng 97506” parking drift, and saw the other side ship sailed from larboard of this vessel. KONG Guoping arranged LE Yuangen to inspect stem, and then, it was found a hole in stem of this ship. Meantime, KONG Guoping called the other ship through VHF08 channel and did not have response. At eleven past two or so, KONG Guoping reported the accident situation to the ship owner CHEN Wei. At seventeen past two or so, KONG Guoping contacted M.V. “Zhesheng 97506” nearby through phone, and asked it open VHF, calling the accident ship though VHF08 channel and testing the ship VHF condition was good. It was still unsuccessfully contact. Twenty three past two or so, the ship left the accident water and continued to sail. Fourteen past three, the vessel turned around until sailed to Datang power plant wharf about 10 km southeast away (32°1′39.24″N, 121°49′26.23″E). At ten past four, anchored in the southwest of Datang power plant about 800 m, in position (32°5′20.6″N, 121°44′20.7″E). After the break, in addition to KONG Guoping, the rest of the staffs were back to room to rest. And during the period, it was many times to contact M.V. “Zhesheng 97506”, which would be soon back to Zhoushan from Qidong, for sailing matters. Thirty-seven past five or so, weigh anchor and sailed with M.V. “Zhesheng 97506”. Six past eight or so, when sailing to Datang power plant wharf southeast about 48 m away (31°49′45.95″N, 122°6′1.48″E), CHEN Wei mobile phone informed KONG Guoping, that there was a ship sunk nearby Lvsi Datang power plant., and requested get back and reported to the competent authority. Then, KONG Guoping verified the relevant circumstances with unloading operations point contact. Forty-one past eight, the vessel turned back when Sailing to Datang power plant wharf about 54 km southeast (31°46′41.36″N, 122°10′26.47″E). At eleven o’clock, the vessel arrived at the incident waters, and saw that M.V. “Lvdian 2” was towing a buckle sunken ship. Thirty-two past eleven or so, call 0513–12,395 to report. At about thirteen o’clock, the ship lay at anchor near No.2 anchorage (32°6′7.06″N, 121°43′39.32″E). 4. AIS trajectory information of M.V. “Zhesheng 97506”. The above-mentioned M.V. “Zhesheng 97506” the corresponding voyage dynamic and AIS track record this course transferred from Nantong MSA coincided with AIS track record MAO Xuebo provided on March 19, 2013 midnight to two to eight. The case AIS track

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records showed that there was the sudden deflection when M.V. “Zhesheng 97506” sailed to north of Datang Lvsi port power plant dedicated coal wharf, nearby the northeast of Lvsi waterway No.2 anchorage at four past two, on the 19th, and the speed dropped. Then, at the time twenty-two past two, the round in the No. 2 anchorage and its north area, drove to the southeast direction (ground heading 137°), the speed returned to 7.5 knots. To eighteen past three, the vessel suddenly turned back when sailing to 32.0298° N, 121.8208° E (Datang Power Plant wharf about 10 km southeast), and it arrived at 32.086365° N, 121.75736° E (Datang power plant wharf about 800 m southwest), at about eight past four. 5. Navigation dynamics of M.V. “Tailianhai 18”. According to the investigation report, because there was no survivors of M.V. “Tailianhai 18”, according to the statement of MAO Xuebo, who was loading dock head, the actual owner and operator of M.V. “Tailianhai 18”, combined with M.V. “Zhesheng 97506” position displayed in Jiangsu maritime bureau GIS (Geographic Information System, GIS, the same below) the system video, as well as M.V. “Zhesheng 97506” personnel statement, to identify that the accident was as follows: at half past eleven March 18, 2013, M.V. “Tailianhai 18” loading 2000 tons of stone sailed to Lvsi fishery port economic zone seaport hub project operating point from Xiao Huanglong, Shengsi County, with 8 people on boat at the beginning of the voyage. At about three to two, the vessel sailed to Lvsi# No.14 float upstream about 200 m; at one past two or so, the vessel sailed to Lvsi # No.15 float downstream about 600 m, nearby Lvsi# No.14–15 float line, and the speed was about 7.5 knots. According to the relevant AIS trajectory record and maritime administrative department identified, at three past two on March 19, in front of M.V. “Tailianhai 18” starboard collided with bow of M.V. “Zhesheng 97506”. Middle right side of M.V. “Tailianhai 18” No.1 cargo hold was broken through, the size of the break: 1.70 m wide and 2.05 m wide, the collision angle was about 150°, M.V. “Tailianhai 18” heading about 290°. At about twenty-two past ten, M.V. “Tailianhai 18” upside down in the sea drifted to the water near the downstream side of Lvsi Datang power plant wharf bridge (32° 04.927′N, 121°44.650′E). Jiangsu Province Water Search and Rescue Center started emergency response plan after receiving the report. Nantong water search and rescue center dispatched salvage boat “Wenqiang No.2” and “Wenqiang No.6” of Wenqiang Marine rushed to the scene to carry out underwater touch and wreck salvage work. After organizing the rescue, it had found six dead bodies successively in the incident waters. At eight o’clock on March 26, the wreck was pulled up near the waters 32°07.831′N, 121°41.944′E, and at eight o’clock on March 28, it was salvaged. According to the site survey, the wheel cab port and starboard lights, stern lights, mast lights control switch was turned on. There were each one radar, one electronic chart, one AIS, and two VHF in cab, of which 2 VHF were in the opening state, and electronic chart was closed, AIS and radar power switch was touch-tone and could not determine whether open (before the incident, the wheel did not show AIS information, when M.V. “Zhesheng 97506” radar found the echo, the ship did not show AIS signal, Jiangsu MSA GIS system did not have the ship AIS signal at the time as well). The rudder angle indicator was located in the right full rudder and the steering handle was in the forward state.

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6. Accident responsibility identified of maritime administrative department. Nantong Maritime Bureau concluded, in the survey, that M.V. “Zhesheng 97506” duty staff shipped without license, only could switch radar, electronic chart and other simple operations. During the voyage, the radar range had been set in the 1.5 nautical mile, and could not perform the safety sailing duties. Neglected to look out, they did not comply with provisions that sailed on safe speed, and let off a fog under poor visibility and so on, and did not take effective measures to avoid. M.V. “Tailianhai 18” duty officers driving without a license, 1, did not displayed AIS signal during the voyage; 2, failed to use VHF to contact; 3, could not perform safe navigation duties; and 4, failed to comply with provisions that sailed on safe speed, and let off a fog under poor visibility. The above was the direct cause of the accident. M.V. “Zhesheng 97506” did not take timely effective search and rescue operations after the accident, nor reported to the competent authorities, and unauthorized leaving the scene was an important cause of heavy casualties. There were many manholes and unclosing doors between M.V. “Tailianhai 18” wing tank and air tank, air tank and accumulation tank, and the significant cause that M.V. “Tailianhai 18” sank quickly after hull broken into water was cabin could not maintain an effective watertight. Comprehensive analyzed all causes of the collision accident, Nantong Maritime bureau identified that M.V. “Zhesheng 97506” shall bear the primary responsibility, and M.V. “Tailianhai 18” shall bear the secondary responsibility. Secondly, relevant facts of vessel and crew members. 1. The status of M.V. “Zhesheng 97506” and its crew members: according to the certificate of ship’s nationality and certificate of ship’s ownership of M.V. “Zhesheng 97506”, such vessel was a steeled bulk vessel with the gross tonnage 498MT, the net tonnage 278MT, one internal-combustion engine of 202KW and one propeller. The place of ship building and port of ship both were Zhoushan. The shipowner was CHEN Wei and the operator of ship was Jiangshan Company. The seaworthy certificated of such vessel provided that this vessel was granted to sail in the near sea area (sailing line), namely limited to the near sea of Shanghai and Zhejiang and A, B sailing area in Yangtze River. Upon the review of maritime administrative authority, such vessel failed to take vessel passport with the vessel in the subject accident and the port pratique also failed to be fulfilled. The vessel failed to take the vessel safety inspection record with and the relevant information failed to be found in the vessel management system. According to the investigation report, M.V. “Zhesheng 97506” commuted from Shanghai, Jiangsu and Zhoushan Zhejiang for the transport of stones recently, and this voyage started from the operating place of Haikou key engineer in the economic district of Lvsi fishing port of Jiangsu Province to Zhoushan, which was within the extent of port area in Lvsi fishing port. According to Article 6 of Provisions on Entering and Leaving of Fishing Port of the People’s Republic of China, the vessel shall apply to the fishing supervision authority for the visa informality for entering and leaving port and accept the safety inspection within 24 h upon the enter of vessel into the fishing port or if the time of staying in the port was less than 24 h. After the supervision and confirmation of Qidong fishing port, M.V. “Zhesheng 97506” failed to handle

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the informality of pratique. Such vessel had never handle the visa informality before Shengsi Maritime Department. On 9 January 2010, CHEN Wei concluded Contract of Requirement of Management and Operation of Carrying Vessel with Jiangshan Company, providing that Jiangshan Company as the trustee was responsible for acquiring the legal qualification of operation and for the operation and safety management of the vessel and bearing the responsibility of safety management, for the construction, guidance, inspection and implement of safety system and managing measures, for the equipment of crew members According to the national relevant provisions, the training of job, safety of crew members and smooth of communication to the land. CHEN Wei as the truster (owner of M.V. “Zhesheng 9706”) shall cooperate and assist Jiangshan Company in the operation and safety management of the vessel and making payment of the operation and management fees and other costs to Jiangshan Company in accordance with the amount and payment ways agreed in the above contract. The operation fees were calculated as RMB19,320 per year on the basis of RMB2.30 per dead weight per month. The period of requirement of operation of vessel expired at the date of 30 June 2013. Jiangshan Company was the operator of vessel expressly provided in the certificate of ship’s nationality of M.V. “Zhesheng 97506” which issued by Zhoushan Maritime Safety Administration (hereinafter referred to as “MSA Zhoushan”) on March 15, 2010. According to the investigation report, Jiangshan Company was established on May 23, 2002 and accrued the License of Transport by Water issued by Ministry of Transport in October 2002, of which the valid period expired on June 30, 2013, engaged in the cargo transport by normal cargo vessel in the domestic near sea and the middle and lower reach of Yangtze River. This company managed fifty two vessels, of which three vessel were owned by itself and forty nine vessels were required for operation. Among the vessels to be operated, there were forty six stones vessel, five lighting vessel and one bulk vessel, which was M.V. “Pusheng 6” owned by itself in the tonnage of 17052MT. This company had never established the safety management system. This company organized one safety conference monthly which was attended by the agent of shipowner or master. On January 8, 2007, this company submitted the Report of Main Problems in Safety Management of Vessel in the Company to the Yangshan Town government and MSA Shengsi for reflecting the condition that the vessel had insufficient crew members sailed outside the limited water area. On August 6, 2011, the company issued Notice of Making Legal Adjustment As Soon As Possible to all operated vessels in respect of the insufficient manning and sailing outside the limited water area of part of vessel. On October 6, 2012, the company issued the Notice of Prohibiting the Operation of Carrying Vessel Outside Limited Area to all operated vessels. The company admitted the presence of insufficient manning and sailing outside the limited area in most vessels. According to evidence No.6 (insurance policy and invoice of insurance fees) provided by CHEN Wei, and Jiangshan Company once provided team accidental insurance against eleven crew members including KONG Guoping and LE Yuangen on March 28, 2013.

MAO Xuebo v. CHEN Wei et al.

611

According to evidence 2 (liability of employer insurance policy) submitted by Jiangshan Company, the insurance addressed to the eleven crew members including KONG Guoping. The applicant and insurer under such insurance both were CHEN Wei (Jiangshan Company). According to the investigation report, the minimum safety manning crew members was five which was provided by Ship Minimum Safety Manning Certificate of M.V. “Zhesheng 97506”, namely one Master, third officer and engineer and two on-duty crew members as well as one pluralistic GMDSS operator. Upon the review, the actual presence of crew members in the material voyage was eleven, which failed to satisfy the requirements of Ship Minimum Safety Manning Certificate of M.V. “Zhesheng 97506”, namely lack of Master, third officer and pluralistic GMDSS operator. The on-duty crew members KONG Guoping, male, born on 15 November 1966, started to fulfill the obligation of Master on M.V. “Zhesheng 97506” from the Spring Festival in 2008 and had the certificate of qualification of navigator in small sea vessel less than 100 gross tonnage issued by MSA Zhoushan on 16 March 2004, of which the number was XHBXXXXXXXXXXX and the valid period was five years. When the valid period was expired, he failed to be renewed. According to the field investigation, KONG Guoping was not capable of utilizing the navigating facilities and made the vessel sail along the line indicated by the previous navigator. KONG Guoping was assisting in the lookout in the bridge. The other on-duty LE Yuangen, male, born on October 10, 1953, worked on the fishing boat before 2006 and started to act as the chief mate on the stone vessel in 2006. On March 6, 2013, he started the obligation of chief mate on M.V. “Zhesheng 97506” and participated in the training of crew members in Yangshan area organized by Shanghai Waterway Bureau, whose registered number was XXXXXXXXXXXXXXXX and the issuance authority was MSA Zhoushan and the date of issuance was at the date of January 12, 2010. LE Yuangen failing to take the certificate of qualification was navigating the vessel at the material time. ZHOU Mizhang, male, born on August 10, 1953, started to act as the chief engineer on M.V. “Zhesheng 97506” in 2006 and held the certificate of qualification of chief engineer on the vessel from 75 to 220 KW issued by MSA Zhoushan on December 21, 2012, whose number was XHBXXXXXXXXXXX and valid period was expired at the date of December 31, 2016. ZHOU Mizhang was on duty at the engine room at the material time. Apart from the above three people, the engineer SUN Zhijun held the certificate of qualification as the second engineer on the vessel whose power of propeller was less than 750 KW issued by MSA Shenzheng on March 25 2010 and the other seven people failed to held relevant certificate/documents of crew members. According to the pleadings of Tong Chong Jian Su Xing Su [2014] No.378 filed by Nantong Chongchuan People’s Procuratorate (hereinafter referred to as Chongchuan Procuratorate), after the occurrence of this accident, KONG Guoping and LE Yuangen surrendered itself before the Police. Upon the termination of investigation of Nantong Bureau of Yangtze Maritime Police Station (hereinafter referred to as “Maritime Police”), it transferred the prosecution before Chongchuan People’s Procuratorate on 22 May 2014 on the basis that the Defendant KONG

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Guoping and LE Yuangen were suspected of triggering traffic causality. Chongchuan Procuratorate filed the public prosecution before Nantong Chongchuan People’s Court on June 25, 2014. In order to find the fact of collision in dispute and relevant situation of criminal prosecution caused by the accident in dispute, the court investigated against the Chongchuan Court on November 12, 2014 and referred to the consulting record against CHEN Wei on April 17, 2014 and against KONG Guoping and LE Yuangen on April 28 and 29, May 3 and 13 respectively, where the statements of facts including the ownership, operation, loading and discharging, sailing, process of collision and actions after the collision as well as whether crew member on board had relevant certificate of qualification of M.V. “Zhesheng 97506” were all consistent with relevant provisions of investigation report. When receiving consulting, CHEN Wei confirmed that he and Jiangshan Company failed to organize relevant training including safe navigation of crew members and maritime salvage while he and KONG Weiguo both participated in the safety conference organized by Jiangshan Company. (2) The situation of M.V. “Tailianhai 18” and its crew members. According to the investigation report and the ship-building contract as well as ship launching agreement, MAO Xuebo concluded the ship-building contract with Yan person other than involved in the case on December 23, 2010, agreeing Yan to build two stone vessels for MAO Xuebo in Wuhu Yinghao Ship-building Ltd. (hereinafter referred to as “Yinghao Company”). In January 2011, Yan hired a place of Yinghao Company for building vessels and launched one stone vessel on October 13, 2011. Given that the coastal stone carrying vessel had severe safety vices, in the later half year 2010, Vessel Management of MSA Wuhan, Vessel Inspection Bureau of Anhui Province and Anhui Wanjiang (hereinafter referred to as “Wanjiang Inspection Bureau”) issued notice in order to stop accepting the construction and inspection of such type of vessel. Therefore, when building ships, the vessel inspection department failed to accept the application of inspection while such vessel was completed according to the original plan. Before the launching, Yinghao Company and Yan and MAO Xuebo concluded the statement that such vessel might not leave the area of the company if it failed to acquire the formal inspection by Wanjiang Inspection Bureau. It might leave the company once it was adjusted in accordance with the requirement of inspection department, during which it might not engage in the operation and other business activities, otherwise all consequences arising therefrom should be born by the shipowner. In the beginning of 2012, under the circumstance that such vessel failed to try sailing and handled relevant formalities including the inspection and registry, MAO Xuebo arranged someone to drive the vessel to Zhoushan, and operated the vessel in May 2012. In August 2012, such vessel returned to the shipyard for application of inspection again while the inspection authority failed to issue such certificate at the material time. According to the reconstruction picture of such type of vessel approved by Wanjiang Inspection Bureau on August 7, 2012, this vessel had 1353MT gross tonnage and 757MT net tonnage. The chief engine of such vessel was internal-combustion engine after the field inspection, whose type was R6170ZC and power was 202KW*2.

MAO Xuebo v. CHEN Wei et al.

613

During the period of construction of vessel in the early half year of 2011, MAO Xuebo verbally made the agreement of the attention of attachment with Changyuan Shipping Ltd. in Anhui Wuhu and the name of vessel M.V. “Changyuan 268”. Since the vessel inspection formality failed to be performed, this vessel failed to accrue the identification number of vessel and handled the review of ship’s name. Since the debt of the original attached company, MAO Xuebo transferred the vessel to Wuhu Tailian Shipping Ltd. and made an agreement with such company to change the name of vessel to M.V. “Tailianhai 18”. For the same reason, such company failed to handle the informality of license before maritime authority. MAO Xuebo failed to execute the requirement of operation contract with the above two attachment company with the result that it failed to take control of the safety and operation of such vessel. It was said by MAO Xuebo that since the operation of the vessel, this vessel engaged in the transport of stones within the scope of Shanghai, Jiangsu and Zhejiang Zhoushan. Upon the review of maritime administrative authority, this vessel failed to be equipped with Ship Visa Book and Ship Safety Inspection Record and information of ship safety inspection in the ship management system. In this voyage, this vessel failed to handle the ship pratique in the loading port. It was confirmed by MSA Zhoushan Shengsi that this vessel failed to handle the ship pratique and had never handled this informality. M.V. “Tialianhai 18” failed to be registered and equipped with Ship Minimum Safety Manning Certificate and the actual manning was eight men, of whom only one crew member had the service book and the other seven men (including the person performing the obligation of Master, chief mate and chief engineer) failed to had relevant certificate/license of qualification in this case in accordance with the investigation against MAO Xuebo and Li Wenyuan who acted as Master and left the vessel on March 14, 2013. On November 12, 2014, the court referred to the consulting record to MAO Xuebo conducted by Shipping Police, where the statement of MAO Xuebo as to the ownership, attachment, loading and discharging of goods and sailing situation was consistent with relevant provisions of the investigation report when investigating against Chongchuan Court for the criminal litigation and other circumstances in relation to this accident. Thirdly, the facts of loss of property. According to the investigation report, the above part of bulb bow of M.V. “Zhesheng 97506” was pierced as a hole and the scope of the hole was Length 1.5 m * Width 1.4 m and the bulb bow was totally distorted. M.V. “Tailianhai 18” sank and then was get out of water. Upon the field inspection, the hole at the middle of vessel at right side of cargo hold No.1 and the hole was about Height 1.70 m * Width 2.05 m resulting in the direct economic loss in the amount of RMB3,050,000. After M.V. “Tailianhai 18” was collided and sank on March 19, 2013, this vessel was rectified on March 26 and get out of water on March 28 upon the underwater detection and salvage conducted by Wenqiang Marine. The total fees of the salvage agreement concluded by MAO Xuebo and Wenqiang Marine on June 21, 2013 was in the amount of RMB2,120,000 and CHEN Wei as the witness confirmed the rationality of the above fees of this agreement and agreed to lend RMB1,500,000 to M.V. “Tailianhai 18” especially for the salvage fees, which

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would be offset in the compensation amount finally. As the above salvage fees failed to be paid, Wenqiang Marine had a lien over such vessel upon this vessel was get out of water and filed another sue against MAO Xuebo and CHEN Wei before the court on May 8, 2015 in respect of the salvage fees. According to evidence 5 submitted by CHEN Wei, Nantong Price Identification Center made the Conclusion of Repair Costs of Damaged M.V. “Zhesheng 97506” on September 15, 2013, which was in the amount of RMB76,630 and defined six days necessary for the repair in the price inspection sheet. Jilian Company was required to assess the value and loss of earning of M.V. “Tailianhai 18”, loss of earning of M.V. “Zhesheng 97506” in this legal proceeding. In this respect, it detached assessor together with judges of the court to field inspect the above two vessels and issued the assessment report on June 2, 2015 where the market value of M.V. “Tailianhai 18” at the material time was RMB5,614,500 and that of M.V. “Tailianhai 18” at the date of field inspection on March 11, 2015 was in the amount of 815,546 and the average net incoming of one voyage of M.V. “Tailianhai 18” in March 2013 at the material time was RMB4,100 and that of M.V. “Zhesheng 97506” was RMB6,300. The court held the view that since MAO Xuebo and CHEN Wei claimed the compensation of loss in the collision of vessels respectively in this claim and counter-claim, this case was the dispute over the liability of loss arising from the collision. From the claims and argument as well as the contentions in the cross-examination of both parties, the key issues in dispute in this case may be concluded to the collision liability proportion, liability of limitation and the identification of losses. From this perspective, the comments of the court were specified as below. Firstly, with regard to the collision liability, both parties had no license to navigate vessel. Since this case related to the collision occurred between two vessels within the coastal sea, both parties shall be under compliance with the Maritime Code of People’s Republic of China (hereinafter referred to as “Maritime Code”), Maritime Traffic Safety Law of the People’s Republic of China (hereinafter referred to as “Maritime Traffic Safety Law”) and relevant provisions of Convention on the International Regulations for Preventing Collision at Sea, 1972. Article 32 of Maritime Code provides that the Master, deck officers, chief engineer, engineers, electrical engineer and radio operator must be those in possession of appropriate certificates of competency. Article 4 of Maritime Traffic Safety Law provides that vessels and their major equipment relating to navigation safety must have valid technical certificates issued by vessel inspection departments and Article 5 provides that a vessel must have a certificate showing its nationality, a vessel registry certificate or a vessel license and Article 6 provides that vessels shall be manned with qualified crew members according to a standard quota to ensure the vessels’ safety. Article 7 provides that the captain, chief engineer, pilot, engineers, radio and telephone operators and similar personnel on board seaplanes or submersibles must hold valid job certificates. All other crew members must undergo specialized technical training required for their work. Article 9 provides that all personnel on vessels and installations must observe relevant rules and regulations concerning maritime traffic safety, follow the operating rules and ensure the safety

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of the vessels and installations in navigation, berthing and operations. Article 10 provides that while navigating, berthing or carrying out operations, vessels and installations must abide by the relevant laws, administrative statutes and rules and regulations of the People’s Republic of China. The above provisions were the most basic safety guarantee to the navigation and also the most basic legal requirement which should be aware of and observed by any person or organization engaged in the maritime navigation. The violation of the above legal provisions committed by relevant shipping subject was a severe illegal action, endangering the navigation safety of itself and others. Among eleven personnel on board M.V. “Zhesheng 97506”, only the chief engineer and one engineer had the certificate of competency and the other all failed to hold valid certificate of competency appropriate for the served vessel. Especially the on-duty deck officer KONG Guoping and LE Yuangen performing the obligation of Master and Chief Mate not only navigated the vessel without license but was also merely capable of open and close the radar and electronic map and other simple operation. During the voyage, the length of radar had always been set at the level of 1.5 nm and they failed to know when to adjust and be equipped with the competence for the safety navigation and even good seamanship. M.V. “Tailianhai 18” even failed to be inspected and registered without any certificate of vessel, namely and illegally engaging in the shipping and operation, which objectively made the structure and equipment of such vessel fail to undergo any safety oversight and its communication and safety facility were ensured to be the valid status. This might be one of primary reasons why this vessel sank quickly after the occurrence of collision. Apart from one member had crew member service book, the other seven crew members on M.V. “Tailianhai 18” failed to hold certificate of competency and indicated the AIS signals and utilize VHF to approach during the voyage so as to the failure of other vessels and maritime safety supervision department to find, identify and approach this vessel, severely endangering maritime navigation safety. Its on-duty officer failed to be equipped with basic skills of navigating vessel, which fundamentally ensured the safe navigation. Secondly, both parties derogated from relevant provisions in the Convention on the International Regulations for Preventing Collision at Sea, 1972 concerning the lookout, safe speed, fog signals and valid avoidance of collision. Article 5, 6 and 8 of the Convention on the International Regulations for Preventing Collision at Sea, 1972 provided the normal regulations of the watching, safe speed, action to avoid collision and other actions and avoidance of collision under any visibility and Article 19 of that provided the rules of action under restricted visibility and Article 35 of that provided that fog signals should be made under restricted visibility. These provisions related to the safety of navigation and were the rules which shall be known and grasped and complied with strictly by related crew members. At the material time, heavy fog was present at sea and in a high water, and the visibility was merely about 30 m, deck officers of both vessels should be aware of such condition. However, deck officers sightlessly used and maintained the speed of above 7 knots and failed to release fog signals under such restrict visibility at the adjacent presence of dock of power station, mooring place, fishing port and traffic

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circumstance where cargo vessel and fishing boat were relatively dense, which severely violated the Convention on the International Regulations for Preventing Collision at Sea, 1972 and was the action failing to be responsible for the safety of itself, others, this vessel and other vessels. While two deck officers on M.V. “Zhesheng 97506” found the location of M.V. “Tailianhai 18” at 30 degrees ahead on the left and 1.5 nm away in order, they considered that the opponent had no AIS signals and was the underway fishing boat and subsequently kept the speed and direction for navigation. They failed to take effective measures to avoid collision until the collision was unavoidable under such circumstance and then any actions were of no avail even if the decreasing of speed, stoppage of engine and astern running were taken. Thirdly, the contention that M.V. “Tailianhai 18” was a mooring vessel was untenable. First of all, according to the picture of loss of left moor of this vessel, it might not be inferred that this vessel was in the condition of berthing as this vessel sank and was get out of water after the collision during which the reasons and procedures were too much resulting in the loss of moor and line. Then, the field inspection of vessel which had been get out of water and had found that the rudder angle indicator was located at full right rudder and the navigating handle was located at the condition of propelling. Before the collision, the distance of both vessels was diminished 1 nm within four minutes while the speed of M.V. “Zhesheng 97506” indicated by AIS record was 7.5 kn, which might be inferred that the speed of M.V. “Tailianhai 18” was about 7.5 kn. Lastly, since M.V. “Tailianhai 18” failed to undergo the inspection and registry and also open the AIS signal, the status before and after the collision and at the material time were lack of direct evidence to prove the consequence arising from such illegal navigation and operation should be born by M.V. “Tailianhai 18” unilaterally. This factual contention of MAO Xuebo was lack of support of evidence and the court refused to accept. Fourthly, the illegal action that M.V. “Zhesheng 97506” consciously left the field after the occurrence of collision was the material reason causing serious damages of this accident. Article 166 of Maritime Code provides that after a collision, the Master of each of the ships in collision was bound, so far as he can do so without serious danger to his ship and persons on board to render assistance to the other ship and persons on board. The Master of each of the ships in collision is likewise bound so far as possible to make known to the other ship about the name of his ship, its port of registry, port of departure and port of destination. Article 34 of the Maritime Traffic Safety Law provides that when vessels, installations or aircraft are in distress, they shall, in addition to issuing distress signals calling for help, use the quickest method possible to report to the competent authority about the time and place of the accident, the extent of damage, the assistance required and the cause of the accident. Article 37 provides that vessels or installations involved in a collision shall exchange their names, nationalities and ports of registry and do their best to rescue personnel in distress. The vessels involved may not leave the scene of the accident without authorization, so far as their own safety was not seriously endangered. The above provisions were the rules of action which shall be

MAO Xuebo v. CHEN Wei et al.

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complied with by any competent and legal navigator and the duties of humanity which shall be performed by any virtuous and rational navigator. In this case, deck officers on M.V. “Zhesheng 97506” with knowledge that the collision had occurred and the head of this vessel had been pierced as to a hole and the bulb bow had been distorted, failed to expect the damage and possible consequence of the opposite vessel in accordance with the place of collision and damage situation of this vessel, and held the view sightlessly that the opposite vessel had been away and continued to sail and failed to make field rescue and report to competent authority and then left the locale without authorization without a danger to its safety when the opposite vessel might not be seen or unclear in the heavy fog. Fifthly, with regard to the collision liability proportion, In conclusion analysis, on-duty persons on M.V. “Zhesheng 97506” had no license for navigation and failed to take effective rescue measures and reported to the competent authority and then left the locale without authorization after the occurrence of collision, which derogated from Article 166 of Maritime Code and Article 6, 34 and 37 of Maritime Traffic Safety Law. The negligence in watching and failure to use safe speed appropriate for that circumstance and fog to sail and comply with relevant provisions under the restrict visibility and take valid measures to avoid collision in good time, which violated Article 5, 6, Article 19 Paragraph 2 and 5 and Article 35 Paragraph 1 of the Convention on the International Regulations for Preventing Collision at Sea, 1972. M.V. “Tailianhai 18” failed to have any certificate and on-duty persons had no license for navigation, which contravened Article 4, 5 and 6 of the Maritime Traffic Safety Law and open AIS signals and use safe speed appropriate for the surroundings and fogs at that time to sail and abide by relevant provisions under the restricted visibility and take valid measures to avoid collisions, which transgressed Article 6, Article 19 Paragraph 2 and 4 and Article 35 Paragraph 1 of the Convention on the International Regulations for Preventing Collision at Sea, 1972. Based on the extent of illegality of both parties’ actions, the gravity of negligence and the magnitude of the cause of damage, M.V. “Zhesheng 97506” shall assume the tort liability at the level of 70% in this collision and M.V. “Tailianhai 18” shall bear the tort liability at the level of 30%. Sixthly, with regard to the liability of the operator Jiangshan Company, Jiangshan Company had concluded a contract of requirement of vessel operation for M.V. “Zhesheng 97506”, whereby Jiangshan Company assumed the obligation of safety management and training for the vessel and its crew members, and possessed the right to acquire the operation fees. More importantly, Jiangshan Company was the registered vessel operator of M.V. “Zhesheng 97506” which had the demonstration effect legally. On the basis of such demonstration effect, in the external aspect, it was sufficient for unspecific third persons to believe that this vessel was operated by Jiangshan Company and to claim liability of compensation in connection with the vessel operation against Jiangshan Company. In the internal aspect, Jiangshan Company shall earnestly fulfill the responsibility of safety management to ensure the conformity of M.V. “Zhesheng 97506” and its crew members to the provisions and requirements of safety management to avoid the external liability arising from such unconformity. If this vessel failed to assist the safety management

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for a long period of time and carried out actions violating safety management without authorization, Jiangshan Company might choose to rescind the contract of requirement of vessel operation and handle the withdrawal registration of vessel operator with the result of averting the risk of suffering claims lodged by a third party or conclude the liability clause with the shipowner, expressly agreeing that the shipowner shall indemnify Jiangshan Company against the losses arising therefrom when it refused cooperation in the safety management and conducted the action violating the safety management without authorization. Effective evidence in this case indicated that Jiangshan Company provided team accidental harm insurance against eleven persons including KONG Guoping and LE Yuangen from the insurance company while these persons had serious faults without licenses. This was sufficient to expound that Jiangshan Company was aware of the situation of personnel on board M.V. “Zhesheng 97506” but failed to perform the safety supervision and assumed responsibility of safety management. Besides, it was in 2007 that Jiangshan Company had found the presence of navigation exceeding the limited sea area and insufficient manning in their affiliated vessel and reflected to relevant competent authorities and then issued notices to require the adjustment. However, not until the investigation against the accident in dispute, the company admitted the presence of insufficient manning and navigation beyond the limited sea area in most of vessels, which evinced the safety management of this company for vessels objectively had little efficacy. Under such circumstance, such company still operated and managed fifty two vessels, of which self-owned vessel was merely three vessels but vessels required to be operated were forty nine. As the legally registered and externally demonstrated ship operator of M.V. “Zhesheng 97506”, Jiangshan Company failed to fulfill the responsibility of safety management so as to the navigation beyond the limited sea area and the sailing without visa and the dissatisfaction of standard of minimum safety manning as well as the navigation of crew members without a license, which caused the accident in dispute with the result of great casualty and loss of property that Jiangshan Company and the shipowner CHEN Wei should bear joint and several liability. Secondly, as regards the limitation of liability, CHEN Wei expressly presented the defense of limitation for maritime claims against MAO Xuebo’s claims and stated that even if it shall bear the liability, it also shall be limited to the amount of fund of limitation of maritime claims set up before the court. MAO Xuebo contended the presence of intentions and gross faults on CHEN Wei, who shall loss the right of limitation for maritime claims. In this matter, the court was of the view that the claims of loss of property arising from the collision argued by MAO Xuebo to CHEN Wei belongs to the limited obligatory right provided by Article 207 Paragraph 1 Sub-paragraph 1 of the Maritime Code and hence CHEN Wei legally possessed the right of limitation for such maritime claims unless According to Article 209 of the Maritime Code, MAO Xuebo may prove the loss sustained in the collision in dispute was caused by CHEN Wei’s intention or reckless act or omission with knowledge that the loss may occur. According to effective evidence in this case, the limited sea area of M.V. “Zhesheng 97506” owned by CHEN Wei was the coastal sea of Shanghai and Zhejiang while

MAO Xuebo v. CHEN Wei et al.

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M.V. “Zhesheng 97506” commuted from Shanghai, Jiangsu to Zhejiang Zhoushan to engage in the conveyance of stones. The previous voyage before the collision was carrying 690MT stones from Shuliang Lake Daishan to Qidong Jiangsu and the subject voyage was the navigation without goods to Zhoushan after the discharging of goods, which both were in exceed of the limited sea area. The coastal sea in Shanghai and Zhejiang had distinctive difference with that at Jiangsu coastal sea in respect of the aspect of hydrogeological condition. The later one had shallower depth of water and more shoals and had absolutely different effect on the manipulation, avoidance and the possibility of stranding. The characteristics of manipulation nature and vessel structure of vessels limited to Shanghai and Zhejiang coastal sea might not be suitable to sail at Jiangsu coastal sea. If sailing illegally at Jiangsu coastal sea, it was bound to affect the sailing safety. Among eleven persons on board, only two men had valid certificate of competency but nine men especially the on-duty officer KONG Guoping and LE Yuangen fulfilling the responsibility of Master and chief mate failed to hold license for navigation, severely endangering the safety navigation. It was proved by the fact that the combination of several illegal actions including navigation beyond limited area, insufficient manning, navigation without license and failure to perform the responsibility of safe navigation by deck officers was the primary, irreplaceable cause resulting in the occurrence of collision. If this vessel legally navigated within the limited area and failed to go to Lvsi Port in Qidong of Jiangsu coastal sea, and the manning satisfied with the minimum safety manning requirement and crew members were competent, otherwise the subject collision would not take place. In addition, the preceding voyage before this collision and the subject voyage both failed to handle the pratique, which was the intentional omission committed by relevant subjects for avoiding safety supervision conducted by maritime competent authorities, creating the possibility of navigation beyond limited area, insufficient manning and navigation without licenses. The subject voyage was not at the first time to conduct the above seriously illegal action and this vessel was engaged in the conveyance beyond limited area within the scope of Jiangsu, Shanghai and Zhejiang and failed to handle navigation visa. CHEN Wei as the shipowner and persons directly arranging the operation of vessel had no possibility not to be aware of such seriously illegal actions and foresee the danger which might occur and the harm arising therefrom while it still committed the above actions for a long period of time several times, which belonged to the extent of the reckless act or omission with knowledge that losses might occur. After the occurrence of the subject collision, KONG Guoping performing the responsibility of Master of M.V. “Zhesheng 97506” once called at and reported to CHEN Wei the status of collision while CHEN Wei did not require KONG Guoping to stay at the locale and implement the rescue expressly but indulged KONG Guoping to handle by himself. The action that KONG Guoping navigated the vessel to leave the locale without authorization was material cause resulting in the sinking of M.V. “Zhesheng 97506” and great casualty and loss of property. CHEN Wei as the shipowner of M.V. “Zhesheng 97506” shall be aware of the legal and correct handling way upon the occurrence of collision but he failed to direct relevant persons to start the rescue and confirm the condition of the opposite vessel and whether the vessel body was broken and had risk

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of sinking with knowledge that the collision took place and the head of this vessel was pierced as to a hole and the bulb bow was distorted and also failed to report to competent authority and then indulged KONG Guoping to handle the accident by himself, which finally caused severe loss. Such circumstance also belonged to the reckless act or omission with knowledge that the loss might take place. In conclusion, the argument in connection with limitation for maritime claims raised by CHEN Wei in this case was not tenable. MAO Xuebo and Jiangshan Company failed to argue the defense of limitation for maritime claims in the first instance in this case, so the provisions of limitation for maritime claims were not applicable to its liability of compensation. Even if these two parties concerned filed this defense, such defenses were still untenable. On the basis of reasons analogous to the reason why CHEN Wei was not entitled to limit its liability, M.V. “Tailianhai 18” failed to undergo ship inspection and registry without any ship certificates with the result that crew members navigated the vessel without licenses which operated illegally. MAO Xuebo as the shipowner shall be aware of such illegal actions seriously endangering the safety of navigation but still indulges the performance of such action, which also complies with the situation of the reckless act or omission with knowledge that losses might take place provided by the law. Jiangshan Company as the ship operator which was legally registered and demonstrated externally failed to fulfill the responsibility of safety supervision. With knowledge that M.V. “Zhesheng 97506” had insufficient manning and the officers on board were incompetent and this vessel sailed beyond limited area etc. seriously illegal actions, which was liable to incur accidents and result in losses, and Jiangshan Company had no effective action apart from convening safe conference, which also fell into the scope of the reckless act or omission with knowledge that losses might occur. Therefore, Jiangshan Company also had no rights to limit the liability of compensation of MAO Xuebo. Thirdly, the identification of losses. 1. The loss of property of M.V. “Zhesheng 97506” were based on the evidence submitted by CHEN Wei. The repair price was in the amount of RMB76,630 and the repair time was six days after the inspection of Nantong Price Identification Center, which shall be reasonable and accepted by the court. While CHEN Wei argueed other repair costs and maintenance costs and loss of earning in exceed of six days, he failed to adduce evidence to prove the stoppage arises from the subject accident or directly caused by MAO Xuebo and also failed to effectively prove the actual presence of a variety of fees and incomes together with its rationality. Therefore, its arguments were lack of factual grounds and not supported by the court. While this vessel undergoes the inspection and registry legally and acquires qualified annual review, its approved scope of operation and trade limit were limited to Shanghai and Zhejiang coastal sea and ports. Since this vessel sailed at Jiangsu coastal sea throughout the year, voyages all belong to the operation beyond the trade limit before the collision and in the subject voyage, which fell into seriously illegal actions, the operation incomes and profits acquire here from should not be protected by the law. Therefore, the court fails to support the loss of earning incurred in six days during the period of repair. The maintenance fees incurred in six days of repairing vessel was legal and supported by the court. According to the

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standard of five crew members approved by the Ship Minimum Safety Manning Certificate, and the court identifies the average wage of each crew member as RMB6,000 per month and food fees as RMB50 per day per person and the consumed fuel and material as RMB600 per day accordingly. The total maintenance fees during the period of repairing vessel was RMB11,100. The loss of property of M.V. “Zhesheng 97506” amounts to RMB87,730. The contention argued by CHEN Wei that the interest should be calculated at one year loan rate at the same time issued by People’s Bank of the People’s Republic of China from the date of collision March 19, 2013 to the date of actual payment was not improper and the court supported such contention. 2. Regarding the loss of M.V. “Tailianhai 18”, since it was get out of water on March 28, 2013, such vessel was exercised a lien by the salvage company for the unpaid salvage fees. On June 2, 2015, Jilian Company made the assessment report considering that the market value of such vessel at the date of collision was in the amount of RMBXXXXX and the value at the date of March 11, 2015 was RMB815,546. Therefore, the loss of value of this vessel might be identified as RMBXXXX. While CHEN Wei argued that this vessel might be repaired and provided the repair price inspection conclusion issued by Nantong Price Identification Center on September 12, 2013 but failed to give regard to the actual condition and the possibility of carrying out repair after salvage of this vessel. Actually, since this vessel was get out of water, it was always exercised a lien by the salvage company and CHEN Wei should prove this vessel was still be repairable under the lien of salvage company. Especially, CHEN Wei once signed and confirmed the rationality of salvage fees on the salvage and rescue agreement and agreed to lend RMB1,500,000 specifically for the payment of such fees. However, CHEN Wei failed to achieve the promise and pay this amount, which objectively resulted in the continuous lien of M.V. “Tailianhai 18” and the failure of repair. Meanwhile, as the aggrieving party, CHEN Wei shall bear the loss of price arising from the collision and sinking and then salvage and lastly lien of M.V. “Tailianhai 18” in proportion of tort liability. While MAO Xuebo claimed the loss of fuel, materials, goods and fees for accident handling and inspection, MAO Xuebo failed to adduce effective evidence to prove the presence and its rationality of the loss and fees given that M.V. “Tailianhai 18” was a vessel without certificate and lack of the system of management and fuel and material registration and also failed to prove the owner of the consignment. Hence, the court does not support this type of claim. As the salvage fees failed to be paid actually and the claim raised by the salvage company against MAO Xuebo and CHEN Wei still had no effective judgment, the court temporarily does not support this claim. Relevant parties might, after the salvage fees was established by valid judgment, negotiated with themselves or argued their rights in accordance with the liability proportion of collision established by valid judgment. Given that M.V. “Tailianhai 18” failed to be inspected and registered without any ship certificate, which should not operate According to the law, and hence its incomes shall not be protected by the law and the loss of earning was not supported by the court. The loss of M.V. “Tailianhai 18” was in the total amount of RMBXXXXXX and the interests argued by MAO

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Xuebo calculated from March 19, 2013 to the date when the judgment takes effect at one year loan rate at the same time issued by People’s Bank of China was not improper and supported by the court. 3. The detailed assumption of compensation of liability. According to the liability proportion of collision, the loss of M.V. “Zhesheng 97506” was RMB87,730, of which RMB26,319 shall be assumed by MAO Xuebo and RMB61,411 shall be born by CHEN Wei. The loss of M.V. “Tailianhai 18” was RMB4,798,954, of which RMB1,439,686.20 shall be born by MAO Xuebo and RMB3,359,267.80 shall be assumed by CHEN Wei, namely CHEN Wei shall indemnify the amount of RMB3,359,267.80 to MAO Xuebo and MAO Xuebo shall indemnify the amount of RMB26,319 to CHEN Wei. After the set-off, CHEN Wei shall still compensate MAO Xuebo RMB3,332,948.80. Jiangshan Company and CHEN Wei shall bear the joint and several liabilities. In conclusion, according to Article 6 Paragraph 1 of the Tort Liability Law of the People’s Republic of China and Article 32, 166 and Article 169 Paragraph 1 and 2 and Article 209 of the Maritime Code of People’s Republic of China and Article 4, 5, 6, 7, 9, 10 of the Maritime Traffic Safety Law of People’s Republic of China and Article 14 and 19 of the Several Provisions of the Supreme People’s Court on the Trial of Cases of Disputes over the Limitation of Liability for Maritime Claims and Article 7 and 8 of Provisions of the Supreme People’s Court on the Trial of Compensation for Property Damage in Cases of Collision and Contact of Ships as well as Article 64 Paragraph 1 of the Civil Procedure Law of People’s Republic of China, the judgment is specified as follows: 1. The Defendant CHEN Wei shall compensate the Plaintiff MAO Xuebo RMB3,332,948.80 within ten days from the date when this judgment takes effect as well as the interests calculated from March 19, 2013 to the date when this judgment takes effect at the loan rate from six month to one year (including one year) issued by People’s Bank of China and this obligation of payment of the above amount is not limited by the fund of limitation for maritime claims set up by the Defendant CHEN Wei before the court. 2. The Defendant Jiangshan Company shall bear joint and several liability for the obligation established by the first item of this judgment. 3. Other claims against the Plaintiff MAO Xuebo are not supported by the court. 4. The counter-claims against the Defendant CHEN Wei are not supported. If the Defendants CHEN Wei and Jiangshan Company fail to fulfill the obligation of payment within the period nominated by this judgment, the debt interests incurred within the belated period shall be double paid in accordance with Article 253 of the Civil Procedure Law of People’s Republic of China. Court acceptance fee in amount of RMB80,680, RMB53,353 shall be born by MAO Xuebo and RMB27,327 shall be born by the Defendants CHEN Wei and Jiangshan Company. Court acceptance fee of counterclaim in amount of RMB26,102, shall be assumed by the counterclaim Plaintiff CHEN Wei. The

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judicial inspection fees in the amount of RMB60,000, the Plaintiff MAO Xuebo shall bear RMB34,737 and the Defendant CHEN Wei shall bear RMB25,263. In the event of dissatisfaction with this judgment, the parties may submit the petition of appeal to the court within fifth days of this judgment, and provides copies in accordance with the number of the opposite parties and files the appeal before the Shanghai High People’s Court. Presiding Judge: JI Gang Acting Judge: LIN Yan People’s Juror: LI Youwen November 24, 2015 Clerk: PAN Cen

Appendix: Relevant Laws 1. Tort Liability Law of the People’s Republic of China Article 6 If an actor, through his/her/its own fault, infringes upon the civil rights or interests of another, he/she/it shall bear tort liability. …… 2. Maritime Code of the People’s Republic of China Article 32 The Master, deck officers, chief engineer, engineers, electrical engineer and radio operator must be those in possession of appropriate certificates of competency. Article 66 After a collision, the Master of each of the ships in collision was bound, so far as he can do so without serious danger to his ship and persons on board to render assistance to the other ship and persons on board. Neither of the parties shall be liable to the other if the collision was caused by force majeure or other causes not attributable to the fault of either party or if the cause thereof was left in doubt. Article 169 If the colliding ships were all in fault, each ship shall be liable in proportion to the extent of its fault; if the respective faults were equal in proportion or it was impossible to determine the extent of the proportion of the respective faults, the liability of the colliding ships shall be apportioned equally. The ships in fault shall be liable for the damage to the ship, the goods and other property on board according to the proportions prescribed in the preceding paragraph. Where damage was caused to the property of a third party, the liability for compensation of any of the colliding ships shall not exceed the proportion it shall bear. …

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Article 209 A person liable shall not be entitled to limit his liability in accordance with the provisions of this Chapter, if it was proved that the loss resulted from his act or omission done with the intent to cause such loss or recklessly and with knowledge that such loss would probably result. 3. Maritime Traffic Safety Law of the People’s Republic of China Article 4 Vessels and their major equipment relating to navigation safety must have valid technical certificates issued by vessel inspection departments. Article 5 A vessel must have a certificate showing its nationality, a vessel registry certificate or a vessel licence. Article 6 Vessels shall be manned with qualified crew members according to a standard quota to ensure the vessels’ safety. Article 7 The captain, chief engineer, pilot, engineers, radio and telephone operators and similar personnel on board seaplanes or submersibles must hold valid job certificates. All other crew members must undergo specialized technical training required for their work. Article 9 All personnel on vessels and installations must observe relevant rules and regulations concerning maritime traffic safety, follow the operating rules and ensure the safety of the vessels and installations in navigation, berthing and operations. Article 10 While navigating, berthing or carrying out operations, vessels and installations must abide by the relevant laws, administrative statutes and rules and regulations of the People’s Republic of China. 4. Several Provisions of the Supreme People’s Court on Limitations of Liability for Maritime Claims Cases Article 14 Where the responsible person fails to file a maritime liability limitation, the maritime court shall not take the initiative to apply the provisions of the maritime law on the limitation of maritime liability. Article 19 The maritime claimant has no right to limit liability for the liability of the ship in the event of maritime accident, but it cannot prove such loss is resulted from an act or omission of responsible person, uch request shall not be supported by the people’s court. 5. Several Provisions of the Supreme People’s Court on Compensation for Losses in Cases of Judging ship’s Collision and Auison Cases Article 7 In addition to the principal, the interest loss should also be compensated. Article 8 The calculation of the value of the ship shall be determined at the prevailing market price of the collision site and time; if there is no market value similar to the ship’s market on the site, where the collision occurs, it shall be determine as a similar ship market price of the ship’s port, or determine the market price on the average price of the similar ship in other regions; if there is no market price, the ship price will be calculated by original ship’s cost or purchase price, deduct depreciation (depreciation rate of 4–10% per year); depreciation after the

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value of the residual value. After depreciation, there is no value calculated by salvage value. After the salvage of the ship is still salvage, the value of the ship shall be deducted from the residual value. (6) Civil Procedure Law of the People’s Republic of China Article 64 A party shall have the responsibility to provide evidence in support of its own propositions. ……

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Shanghai High People’s Court Civil Judgment MAO Xuebo v. CHEN Wei et al. (2016) Hu Min Zhong Zi No.24 Related Case(s) This is the judgment of second instance, and the judgment of first instance and the ruling of retrial are on page 595 and page 639 respectively. Cause(s) of Action 193. Dispute over liability for ship collision damage. Headnote Affirming lower court decision apportioning liability 70% to the Defendant and 30% to the Plaintiff after collision in which both ships failed to follow required navigational rules, but after which the Defendant’s ship fled, contributing to the probable death of all crew members of the Plaintiff’s ship, and denying the Defendant’s counterclaim. Summary The Plaintiff, Xuebo, filed an action against the Defendants, Wei and Jianshan Co., after a collision between “Zhesheng 97506,” owned by Wei and operated by Jiangshan Co., and “Tailianhai 18,” owned by Xuebo. After the collision, “Zhensheng 97506” fled the scene which, the court found, likely exacerbated the extent of the damage as all of the crew members of the “Tailianhai 18” are presumed dead. For this reason, as well as the fact that both vessels were improperly manned and failed to conform to the relevant rules regarding the navigation procedures applicable to the foggy conditions present at the time, the court of first instance found that Wei (as owner of “Zhensheng 97506”) and Jiangshan Co. (as operator of the vessel) should bear 70%, jointly and severally, of the tort liability and Xuebo, as owner of “Tailanhai 18”, should bear 30% of the tort liability. Further, based on the extent of illegality of both parties’ actions, the gravity of negligence, and the magnitude of the cause of damage, the court of first instance determined that any counterclaim by the Defendant was untenable. The Defendant Wei, dissatisfied with the previous judgment, appealed; however, the appeal court determined that his claim lacked a rational and legal basis, and affirmed the judgment of the court of first instance.

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Judgment The Appellant (the Defendant of First Instance, the Counterclaim Plaintiff): CHEN Wei, Male, Born on March 12, 1968, Han, Living in No. XXX, Yangxi Road, Yangshan Town, Shengs County, Zhejiang. Agent ad litem: LI Chenbiao, lawyer of Beijing Zhonglun (Shanghai) Law Firm. Agent ad litem: YU Yang, lawyer of Beijing Zhonglun (Shanghai) Law Firm. The Respondent (the Plaintiff of First Instance, the Counterclaim Defendant): MAO Xuebo, Male, Born on June 26, 1977, Han, Living in No. XXX, Mexin Road, Yangshan Town, Shengsi County, Zhejiang. Agent ad litem: SHEN Jianbin, lawyer of Shanghai Kairong Law Firm. Agent ad litem: RAO Yi, lawyer of Shanghai Kairong Law Firm. The Defendant of First Instance: Shengsi Jiangshan Marine Shipping Co., Ltd. Domicile: No. XXX, Gongjian Road, Yangshan Town, Shengsi County, Zhejiang. Legal representative: ZHANG Yue, chairman of the company. With respect to the case arising from dispute over collision damage liability, the Plaintiff MAO Xuebo filed a litigation against the Defendant CHEN Wei, and Shengsi Jiangshan Marine Shipping Co., Ltd. (hereinafter referred to as Jiangshan Company), to Shanghai Maritime Court. After responding to suits, CHEN Wei counterclaimed MAO Xuebo. MAO Xuebo claimed that on March 19, 2013 2 or 3 o’clock, M.V. “Zhesheng 97506”, owned by CHEN Wei and operated by Jiangshan Company, had a sudden collision with M.V. “Tailianhai 18” owned by MAO Xuebo, in waters north of the Changjiang River estuary and outside the Datang power plant. After the incident, in M.V. “Zhesheng 97506”, the crew on duty at the bridge reported the accident to CHEN Wei, and under CHEN Wei’s intention, neither reported to the competent authorities, nor stayed in the incident to rescue M.V. “Tailianhai 18” round, but flew away from the scene, and finally caused M.V. “Tailianhai 18” sank, the crews were all killed ( 6 people died, 2 people so far unknown, no hope of life), the accident could not be identified … After maritime administrative departments compulsory salvaged M.V. “Tailianhai 18”, the parties coordinated. Although CHEN Wei and MAO Xuebo, salvage operator Jiangsu Wenqiang Marine engineering Co., Ltd. (hereinafter referred to as Wenqiang Marine) signed a salvage agreement, but did not pay salvage costs according to the agreement, and the Plaintiff was also unable to pay, which leaded M.V. “Tailianhai 18” long lay aside in the salvage company, could not be repaired, and constituted a total loss. CHEN Wei indicated all navigating mates of its M.V. “Zhesheng 97506” hit-and-run, which gave rise to the real cause of the accident could not be fully verified. Thus, CHEN Wei should bear all the collision liability, and Jiangshan Company as a ship operator, who did not fulfill the statutory ship operating and management responsibilities, shall bear joint liability with CHEN Wei. Therefore, the Plaintiff requested the court to rule CHEN Wei and Jiangshang Company to jointly compensate the loss of the Plaintiff 9.84 million yuan

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(including ship loss 5.9 million yuan, 2 months loss for detention 800,000 yuan, 160,000 yuan loss of the shipborn diesel, 20,000 yuan loss of the ship born lubricating oil, ship born material and spare parts loss 400,000 yuan, 80,000 yuan on board gravel loss, wreck salvage charges 2.4 million yuan, accident handling costs and inspection costs 80,000 yuan) and the interest of the above amount (according to the People’s Bank of China the same period one-year lending rate from March 19, 2013 to the date of commencement of the judgment). CHEN Wei argued that M.V. “Tailianhai 18” without any certificate was a “three noes” ship. M.V. “Zhesheng 97506” had a complete ship’s certificate and certificate of competency. According to the facts of collision accident, M.V. “Tailianhai 18” should bear the equal or main responsibility for the accident. M.V. “Tailianhai 18” after the incident improperly disposed. It did not take self-help measures like to the nearby shore beach, berth of call and so on, to missed the rescue time. And, combined with the round was “three noes” ship. There was no watertight performance of cabin and other defects, thus, resulted in the sinking. The AIS (Automatic Identification System, the same below) showed M.V. “Zhesheng 97506” had searched for 20 min after the incident, neither left the scene, nor escaped, but it was the Plaintiff left the scene, that resulted Defendant could not sue and labor. M.V. “Tailianhai 18” was assessed as repairable after the incident, but MAO Xuebo did not pay the salvage costs, so that the ship did not been repaired in time and caused the enlargement of losses. M.V. “Tailianhai 18” was the “three noes” ship, whose operating income was illegally acquired, and the ownership of the cargo on board was unclear, the amount of materials and fittings was insufficient. Therefore, it should not be supported. CHEN Wei had the right of limitation of liability for maritime claims, and had set the fund of limitation of liability for maritime claims. Any loss of MAO Xuebo should be compensated proportionally in the fund. To sum up, CHEN Wei requested to reject MAO Xuebo’s claims. Jiangshan Company argued that M.V. “Tailianhai 18” was “three noes” ship, whose crews were operating without a license, and it did not use safe speed. Thus, MAO Xuebo should bear the primary responsibility for the accident. The entrustment operation contract between Jiangshan Company and CHEN Wei and the investigation report provided by Maritime administrative departments were both proved that though Jiangshan Company was registered as the ship operator, but was not the actual ship operator. crews were equipped by CHEN Wei, and operating income was enjoyed by CHEN Wei. Jiangshan Company only charged annual management fee, without independent management rights or decision-making power. It was the actual ship manager, rather than the operator, should not bear the collision responsibility of the case. Therefore, it requested to reject MAO Xuebo’s claims against Jiangshan Company. CHEN Wei counterclaimed that: on March 19, 2013, M.V. “Zhesheng 97506” owed by CHEN Wei collided with M.V. “Tailianhai 18” owned and operated by MAO Xuebo in the waters near north of the Changjiang River estuary. And, it resulted M.V. “Zhesheng 97506” damaged and caused significant economic losses. According to the investigation by the maritime administrative department, M.V. “Tailianhai 18” did not hold any ship and crew certificate, did not fulfill the safe

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navigation duties, the ship itself was not seaworthy. CHEN Wei believed that these factors were direct causes caused the collision accident, and MAO Xuebo should bear liability to pay compensation for CHEN Wei’s loss. To this end, it requested MAO Xuebo compensate economic losses 5,771,981 yuan (including 27,535 yuan for crew insurance, 2013, crew salaries 845,210 yuan, the ship diesel fuel 459,518 yuan, 58,000 yuan food costs, boat rental costs 288,000 yuan, during the accident rental boat cost 50,000 yuan, the cost of repairing damaged parts was 76,630 yuan, the cost of hull repair was 550,000 yuan and the operating profit of 16 months 3,417,088 yuan). And the interest of the amount according to the People’s Bank of China the same period one-year lending rate from March 19, 2013 to the actual payment. MAO Xuebo argued that the accident involved was caused by unilateral negligence of M.V. “Zhesheng 97506”, CHEN Wei shall bear all responsibility. M.V. “Zhesheng 97506” seized by maritime administrative department for hit and run, and the loss caused by it which had no connection with MAO Xuebo. Moreover, there was no evidence to prove CHEN Wei’s actual loss and its reasonableness. Therefore, request to reject CHEN Wei’s counterclaims. The court of first instance found out that: At about two past three March 19, 2013, M.V. “Zhesheng 97506” had a collision with “three nose” gravel boat M.V. “Tailianhai 18” which was actually invested, owned and operated by MAO Xuebo, and without the registration of the maritime competent authority, no inspection certificate, the crews without certificates of competence, in the waters about 200 m near Jiangsu Qidong coastal large bend waterway Lvsi Datang power plant wharf upstream, on the way from Jiangsu province Qidong Lvsi fishery port economic zone seaport hub project operating point no load to Shengsi. After the collision, M.V. “Zhesheng 97506” did not report to the competent authority, and after reporting to CHEN Wei in the telephone, the duty officer Kongmou who performed the duties of the captain sailed away from the scene. The accident caused M.V. “Tailianhai 18” sank, 8 people of the ship all fell into the water, of which 6 people were killed and 2 missing. Above of bulbous bow of M.V. “Zhesheng 97506” was broken through with distortion. After the accident, Jiangsug Maritime Safety Administration of the People’s Republic of China set up collision accident investigation team to spread a comprehensive investigation of this accident. According to the accident investigation report and survey conclusion, combined with AIS track record and other materials. At about a quarter to nineteen, M.V. “Zhesheng 97506” unloaded stones and set sail in Lvsi fishery port economic zone seaport hub project operating point, before the incident. At about one to two on 19th, the ship arrived the place distance upstream of Datang Power Plant wharf was about 900 m (32°5′42.5″N, 121°44′33.72″E), heading 146°, speed 7.5 knots. At this point, the sea fog, breeze, visible distance was about 30 m. Lemou and Kongmou who respectively performed as the mate and captain of M.V. “Zhesheng 97506” had successively discovered one ship echo on the left front about 30° on radar, about 1.5 miles away, was running along Lvsi first installment entry channel to the upstream, no AIS signal. KONG Guoping thought that the other side without AIS signal was the fishing vessel. Thus, kept the speed

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and heading to sail. Three past two, Kongmou visual discovered the other side vessel contour and immediately decelerated, stop, full speed reversed. Then, M.V. “Zhesheng 97506” bow collided with the other side ship in front starboard. The collision site was located at about 200 m (32°5′21.97″N, 121°44′55.92″E) at the upstream of the Datang Power Plant wharf, with M.V. “Zhesheng 97506” heading about 140°. There were no survivors in M.V. “Tailianhai 18”. Synthesizing the statement of loading dock head, MAO Xuebo, M.V. “Zhesheng 97506” crews, at half past eleven on March 18, 2013, M.V. “Tailianhai 18” loading 2,000 tons of stone sailed to Lvsi fishery port economic zone seaport hub project operating point from Xiao Huanglong, Shengsi County, with 8 people on boat at the beginning of the voyage. At one past two or so, the vessel sailed to Lvsi # No.15 float downstream about 600 m, nearby Lvsi# No.14–15 float line. At eight o’clock on March 26, the wreck was pulled up near the waters 32° 07.831′N, 121° 41.944′E, and at eight o’clock on March 28, it was salvaged from water. According to the site survey, the wheel cab port and starboard lights, stern lights, mast lights control switch was turned on. There were each one radar, one electronic chart, one AIS, and two VHF in cab, of which 2 VHF were in the opening state, electronic chart was closed, AIS and radar power switch was touch-tone and could not determine whether open (before the incident, the wheel did not show AIS information, when M.V. “Zhesheng 97506” radar found the echo, the ship did not show AIS signal, and Jiangsu Maritime Bureau GIS system did not have the ship AIS signal at the time as well). The rudder angle indicator was located in the right full rudder and the steering handle was in the forward state. 4 min before the collision, the distance between two ships shortened 1 nautical mile, and AIS showed M.V. “Zhesheng 97506” speed were 7.5 knots, which could be calculated that M.V. “Tailianhai 18” speed was about 7.5 knots. M.V. “Zhesheng 97506”, such vessel with the gross tonnage 498MT and the net tonnage 278MT, and the port of the ship was Zhoushan. The shipowner registered was CHEN Wei and the operator of ship was Jiangshan Company. This vessel was granted to sail in the near sea area (sailing line), namely limited to the near sea of Shanghai and Zhejiang and A, B sailing area in Yangtze River. But M.V. “Zhesheng 97506” commuted from Shanghai, Jiangsu and Zhoushan Zhejiang for the transport of stones recently years. Upon the review of maritime administrative authority and fishing supervision, such vessel failed to take vessel passport with the vessel in the subject accident and the port pratique also failed to be fulfilled. The vessel failed to take the vessel safety inspection record with the vessel and the relevant information failed to be found in the vessel management system. Such vessel had never handle the visa informality before Shengsi Maritime Department. The actual presence of crew members in the material voyage was eleven, which failed to satisfy the requirements of Ship Minimum Safety Manning Certificate of M.V. “Zhesheng 97506”. The on-duty crew members Kongmou fulfilled the obligation of Master. According to the field investigation, KONG Guoping was not capable of utilizing the navigating facilities and made the vessel sail along the line indicated by the previous navigator. The other on-duty Lemou, acting as the chief mate, worked on the fishing boat before, failing to take the certificate of

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qualification. Apart from the chief engineer Zhou and the engineer Sun had certificates of qualification, the other seven people failed to held relevant certificates/ documents of crew members. On January 9, 2010, CHEN Wei concluded Contract of Requirement of Management and Operation of Carrying Vessel with Jiangshan Company, providing that Jiangshan Company was responsible for acquiring the legal qualification of operation and for the operation and safety management of the vessel and bearing the responsibility of safety management, for the construction, guidance, inspection and implement of safety system and managing measures, for the equipment of crew members according to the national relevant provisions, the training of job safety of crew members and smooth of communication to the land. And CHEN Wei made payment of the operation and management fees and other costs to Jiangshan Company. Jiangshan Company was established on May 23, 2002. This company managed fifty two vessels, of which three vessels were owned by itself and forty nine vessels were required for operation. This company had never established the safety management system. On 8 January 2007, this company submitted Report of Main Problems in Safety Management of Vessel in the Company to the Yangshan Town government and MSA Shengsi for reflecting the condition that the vessel had insufficient crew members sailed outside the limited water area. On August 6, 2011, the company issued Notice of Making Legal Adjustment As Soon As Possible to all operated vessels in respect of the insufficient manning and sailing outside the limited water area of part of vessel. On October 13, 2011, after the completion of M.V. “Tailianhai 18”, the ship was putted into operation with no registration and Failing to obtain inspection certificate of the inspection department. And since the operation of the vessel, this vessel engaged in the transport of stones within the scope of Shanghai, Jiangsu and Zhejiang Zhoushan. Upon the review of maritime administrative authority, this vessel failed to be equipped with Ship Visa Book and Ship Safety Inspection Record and information of ship safety inspection in the ship management system. In this voyage, this vessel failed to handle the ship pratique in the loading port. It was confirmed by MSA Zhoushan Shengsi that this vessel failed to handle the ship pratique and had never handled this informality. M.V. “Tialianhai 18” failed to be registered and equipped with Ship Minimum Safety Manning Certificate and the actual manning was eight men, of whom only one crew member had the service book and the other seven men (including the person performing the obligation of Master, chief mate and chief engineer) failed to had relevant certificates/licenses of qualification in this case in accordance with the investigation against MAO Xuebo and Limou who acted as Master and left the vessel on March 14, 2013. After M.V. “Tailianhai 18” was collided and sank on March 19, 2013, this vessel was rectified on March 26 and get out of water on March 28 upon the underwater detection and salvage conducted by Wenqiang Company. The total fees of the salvage agreement concluded by MAO Xuebo and Wenqiang Company on June 21, 2013 which was in the amount of RMB2,120,000 and CHEN Wei as the witness confirmed the rationality of the above fees of this agreement and agreed to lend RMB1,500,000 to M.V. “Tailianhai 18” especially for the salvage fees, which

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would be offset in the compensation amount finally. As the above salvage fees failed to be paid, Wenqiang Company had a lien over such vessel upon this vessel was get out of water and filed another sue against MAO Xuebo and CHEN Wei before the court on May 8, 2015 in respect of the salvage fees. Nantong Price Identification Center made Conclusion of Repair Costs of Damaged M.V. “Zhesheng 97506” on September 15, 2013, which was in the amount of RMB76,630 and defined six days necessary for the repair in the price inspection sheet. Due to the large dispute between MAO Xuebo and CHEN Wei, and involving the special issue, both two sides agreed the court to designate expertise institution. The court through the Shanghai High People’s Court judicial commission intermediary management system to determine Shanghai Jilian Asset Evaluation Co., Ltd. (hereinafter referred to Jilian Company) to evaluate ship value of M.V. “Tailianhai 18” on collision day March 18, 2013 and on site investigate date March 11, 2015, and loss for detention of M.V. “Tailianhai 18” and M.V. “Zhesheng 97506” during March 2013 while had collision. Jilian Company made a valuation report of M.V. “Tailianhai 18” and Zhesheng 97506 on June 2, 2015, where the market value of M.V. “Tailianhai 18” at the material time on March 18, 2013 was RMB5,614,500, and that of M.V. “Tailianhai 18” at the date of field inspection on March 11, 2015 was in the amount of 815,546 and the average net incoming of one voyage of M.V. “Tailianhai 18” in March 2013 at the material time was RMB4,100 and that of M.V. “Zhesheng 97506” was RMB6,300. The court of first instance held that: On-duty persons on M.V. “Zhesheng 97506” had no license for navigation and failed to take effective rescue measures and report to the competent authority and then left the locale without authorization after the occurrence of collision, which derogated from Article 166 of the Maritime Code and Article 6, 34 and 37 of the Maritime Traffic Safety Law. The negligence in watching and failure to use safe speed appropriate for circumstance and fog to sail and comply with relevant provisions under the restrict visibility and take valid measures to avoid collision in good time, which violated Article 5, 6, Article 19 Paragraph 2 and 5 and Article 35 Paragraph 1 of the Convention on the International Regulations for Preventing Collision at Sea, 1972. M.V. “Tailianhai 18” failed to have any certificate and on-duty persons had no license for navigation, which contravened Article 4, 5 and 6 of the Maritime Traffic Safety Law and open AIS signals and use safe speed appropriate for the surroundings and fogs at that time to sail and abide by relevant provisions under the restricted visibility and take valid measures to avoid collisions, which transgressed Article 6, Article 19 Paragraph 2 and 4 and Article 35 Paragraph 1 of the Convention on the International Regulations for Preventing Collision at Sea, 1972. Based on the extent of illegality of both parties’ actions, the gravity of negligence and the magnitude of the cause of damage, M.V. “Zhesheng 97506” shall assume the tort liability at the level of 70% in this collision and M.V. “Tailianhai 18” shall bear the tort liability at the level of 30%. As the legally registered and externally demonstrated ship operator of M.V. “Zhesheng 97506”, Jiangshan Company failed to fulfill the responsibility of safety management so as to the navigation beyond the limited sea area and the sailing

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without visa and the dissatisfaction of standard of minimum safety manning as well as the navigation of crew members without a license, which caused the accident in dispute with the result of great casualty and loss of property that Jiangshan Company and the shipowner CHEN Wei should bear joint and several liability. M.V. “Zhesheng 97506” was the coastal sea of Shanghai and Zhejiang while M.V. “Zhesheng 97506” commuted from Shanghai, Jiangsu to Zhejiang Zhoushan to engage in the conveyance of stones, which was in exceed of the limited sea area. The coastal sea in Shanghai and Zhejiang had distinctive difference with that at Jiangsu coastal sea in respect of the aspect of hydrogeological condition. The later one had shallower depth of water and more shoals and had absolutely different effect on the manipulation, avoidance and the possibility of stranding. The characteristics of manipulation nature and vessel structure of vessels limited to Shanghai and Zhejiang coastal sea might not be suitable to sail at Jiangsu coastal sea. If sailing illegally at Jiangsu coastal sea, it was bound to affect the sailing safety. Among eleven persons on board, only two men had valid certificates of competency but nine men especially the on-duty officer KONG Guoping and LE Yuangen fulfilling the responsibility of Master and chief mate failed to hold license for navigation, severely endangering the safety navigation. It was proved by the fact that the combination of several illegal actions including navigation beyond limited area, insufficient manning, navigation without license and failure to perform the responsibility of safe navigation by deck officers was the primary, irreplaceable causes resulting in the occurrence of collision. If this vessel legally navigated within the limited area and failed to go to Lvsi Port in Qidong of Jiangsu coastal sea, and the manning satisfied with the minimum safety manning requirement and crew members were competent, otherwise the subject collision would not take place. In addition, the preceding voyage before this collision and the subject voyage both failed to handle the pratique, which was the intentional omission committed by relevant subjects for avoiding safety supervision conducted by maritime competent authorities, creating the possibility of navigation beyond limited area, insufficient manning and navigation without licenses. The subject voyage was not the first time to conduct the above seriously illegal action and this vessel was engaged in the conveyance beyond limited area within the scope of Jiangsu, Shanghai and Zhejiang and failed to handle navigation visa. CHEN Wei as the shipowner and persons directly arranging the operation of vessel had no possibility of not to be aware of such seriously illegal actions and foresee the danger which might occur and the harm arising therefrom while it still committed the above actions for a long period of time several times, which belonged to the extent of the reckless act or omission with knowledge that losses might occur. After the occurrence of the subject collision, KONG Guoping performing the responsibility of Master of M.V. “Zhesheng 97506” once called at and reported to CHEN Wei the status of collision while CHEN Wei did not require KONG Guoping to stay at the locale and implement the rescue expressly but indulged KONG Guoping to handle by himself. The action that KONG Guoping navigated the vessel to leave the locale without authorization was material cause resulting in the sinking of M.V. “Zhesheng 97506” and great casualty and loss of property.

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CHEN Wei as the shipowner of M.V. “Zhesheng 97506” shall be aware of the legal and correct handling way upon the occurrence of collision but he failed to direct relevant persons to start the rescue and confirm the condition of the opposite vessel and whether the vessel body was broken and had risk of sinking with knowledge that the collision took place and the head of this vessel was pierced as to a hole and the bulb bow was distorted and also failed to report to competent authority and then indulged KONG Guoping to handle the accident by himself, which finally caused severe loss. Such circumstance also belonged to the reckless act or omission with knowledge that the loss might take place. In conclusion, the argument in connection with limitation for maritime claims raised by CHEN Wei in this case was not tenable. The repair price was in the amount of RMB76,630 and the repair time was six days after the inspection of Nantong Price Identification Center, which shall be reasonable and accepted by the court. While this vessel undergoes the inspection and registry legally and acquires qualified annual review, its approved scope of operation and trade limit were limited to Shanghai and Zhejiang coastal sea and ports. Since this vessel sails at Jiangsu coastal sea throughout the year, voyages all belonged to the operation beyond the trade limit before the collision and in the subject voyage, which falls into seriously illegal actions, the operation incomes and profits acquire here from shall not be protected by the law. Therefore, the court failed to support the loss of earning incurred in six days during the period of repair. The maintenance fees incurred in six days of repairing vessel was legal and supported by the court. According to the standard of five crew members approved by the Ship Minimum Safety Manning Certificates, the court identified the average wage of each crew member as RMB6,000 per month and food fees as RMB50 per day per person and the consumed fuel and material as RMB600 per day accordingly. The total maintenance fees during the period of repairing vessel was RMB11,100. The loss of property of M.V. “Zhesheng 97506” amounts to RMB87,730. The contention argued by CHEN Wei that the interest shall be calculated at one year loan rate at the same time issued by People’s Bank of the People’s Republic of China from the date of collision March 19, 2013 to the date of actual payment was not improper and the court supports such contention. Regarding the loss of M.V. “Tailianhai 18”, since it was got out of water on March 28, 2013, such vessel was exercised a lien by the salvage company for the unpaid salvage fees. On June 2, 2015, Jilian Company made the assessment report considering that the market value of such vessel at the date of collision was in the amount of RMB5,614,500 and the value at the date of March 11, 2015 was RMB815,546. Therefore, the loss of value of this vessel may be identified as RMB4,798,954. While CHEN Wei argued that this vessel may be repaired, but failed to give regard to the actual condition and the possibility of carrying out repair after salvage of this vessel. Actually, since this vessel was got out of water, it was always exercised a lien by the salvage company and CHEN Wei should prove this vessel was still be repairable under the lien of salvage company. Especially, CHEN Wei once signed and confirmed the rationality of salvage fees on the salvage and rescue agreement and agreed to lend RMB1,500,000 specifically for the payment of

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such fees. However, CHEN Wei failed to achieve the promise and pay this amount, which objectively resulted in the continuous lien of M.V. “Tailianhai 18” and the failure of repair. Meanwhile, as the aggrieving party, CHEN Wei should bear the loss of price arising from the collision and sinking and then salvage and lastly lien of M.V. “Tailianhai 18” in proportion of tort liability. While MAO Xuebo claimed the loss of fuel, materials, goods and fees for accident handling and inspection, MAO Xuebo failed to adduce effective evidence to prove the presence and its rationality of the loss and fees given that M.V. “Tailianhai 18” was a vessel without certificates and lack of the system of management and fuel and material registration and also failed to prove the owner of the consignment. Hence, the court does not support this type of claim. As the salvage fees failed to be paid actually and the claim raised by the salvage company against MAO Xuebo and CHEN Wei still had no effective judgment, the court temporarily does not support this claim. Relevant parties may, after the salvage fees was established by valid judgment, negotiate with themselves or argue their rights in accordance with the liability proportion of collision established by valid judgment. Given that M.V. “Tailianhai 18” failed to be inspected and registered without any ship certificates, which should not operate According to the law, and hence its incomes should not be protected by the law and the loss of earning was not supported by the court. The loss of M.V. “Tailianhai 18” was in the total amount of RMB4,798,954 and the interests argued by MAO Xuebo calculated from 19 March 2013 to the date when the judgment takes effect at one year loan rate at the same time issued by People’s Bank of China was not improper and supported by the court. According to the detailed assumption of compensation of liability. According to the liability proportion of collision, the loss of M.V. “Zhesheng 97506” was RMB87,730, of which RMB26,319 should be assumed by MAO Xuebo and RMB61,411 should be born by CHEN Wei. The loss of M.V. “Tailianhai 18” was RMB4,798,954, of which RMB1,439,686.20 should be born by MAO Xuebo and RMB3,359,267.80 should be assumed by CHEN Wei, namely CHEN Wei should indemnify the amount of RMB3,359,267.80 to MAO Xuebo and MAO Xuebo should indemnify the amount of RMB26,319 to CHEN Wei. After the set-off, CHEN Wei should still compensate MAO Xuebo RMB3,332,948.80. Jiangshan Company and CHEN Wei should bear the joint and several liabilities. In conclusion, Shanghai Maritime Court according to Article 6 Paragraph 1 of the Tort Liability Law of the People’s Republic of China and Article 32, 166 and Article 169 Paragraph 1 and 2 and Article 209 of the Maritime Code of People’s Republic of China and Article 4, 5, 6, 7, 9, 10 of the Maritime Traffic Safety Law of People’s Republic of China and Article 14 and 19 of the Several Provisions of the Supreme People’s Court on the Trial of Cases of Disputes over the Limitation of Liability for Maritime Claims and Article 7 and 8 of the Provisions of the Supreme People’s Court on the Trial of Compensation for Property Damage in Cases of Collision and Contact of Ships as well as Article 64 Paragraph 1 of the Civil Procedure Law of People’s Republic of China, the judgment was made on November 24, 2015:

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1. CHEN Wei should compensate MAO Xuebo RMB3,332,948.80 within ten days from the date when this judgment took effect as well as the interests calculated from March 19, 2013 to the date when this judgment took effect at the loan rate from six month to one year (including one year) issued by People’s Bank of China and this obligation of payment of the above amount was not limited by the fund of limitation for maritime claims set up by CHEN Wei before the court. 2. Jiangshan Company should bear joint and several liabilities for the obligation established by the first item of this judgment. 3. Other claims against MAO Xuebo were not supported by the court. 4. The counter-claims against CHEN Wei were not supported. CHEN Wei dissatisfied with the judgment, and appealed to the Shanghai High People’s Court that: (1) related case of M.V. “Tailianhai 18” salvage costs were still in the process of other trial, which would affect the results of the case. Thus, the case should be suspended. CHEN Wei had applied to the court of first instance to suspend the case, but the court of first instance did not allowed, which was a serious violation of proceeding. (2) The court of first instance had a wrong identification of collision liability of the accident involved. The court of first instance did not consider the impact of defects and security risks of M.V. “Tailianhai 18” to the accident, and mistakenly identified that M.V. “Zhesheng 97506” left from the scene after the accident. (3) CHEN Wei had the right to file maritime liability restrictions. (4) The court of first instance loss identification of M.V. “Tailianhai 18” did not match the actual loss. M.V. “Tailianhai 18” could still be repaired, rather than total loss. And CHEN Wei did not lend RMB1.5 million for the payment of salvaging fees, which could not remove responsibility that MAO Xuebo to pay salvage costs to the salvage company, and indwelling loss should be heard by MAO Xuebo. (5) The economic losses of the ship CHEN Wei claimed were directly caused by the accident involved, and has actually generated or pay by CHEN Wei, which should be beard by MAO Xuebo. To this end, CHEN Wei requested the court of second instance to revoke the judgment of first instance, dismiss MAO Xuebo’s claims according to law, and requested to support CHEN Wei’s counterclaims. The Respondent MAO Xuebo argued that: (1) the first instance trial procedure was not improper, the final commitment of salvage charges the case involved, MAO Xuebo would settle by negotiating with CHEN Wei or in separate claims in accordance with proportion decided by the judgment of the case. (2) M.V. “Zhesheng 97506” escaped after the event and shall bear the primary responsibility or full responsibility of the accident. Responsibility proportion confirmed in the court of first instance was legitimate and reasonable. (3) On the time of the incident, operators on duty of M.V. “Zhesheng 97506” sailed without licenses, and the ship was long-term operation of the long-range oversea operating. CHEN Wei and Jiangshan Company neither took rectification measures. CHEN Wei and Jiangshan Company were not entitled to enjoy Limitation of liability for maritime claims. (4) The assessment report issued by the Jilian Company had evaluated the ship’s losses. CHEN Wei backtracked, and did not pay RMB1.5 million salvage costs, shall bear the losses thus arising. (5) CHEN Wei made most of the counterclaim

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requests without factual and legal basis, shall be rejected. MAO Xuebo accordingly asked the second instance court to dismiss the appeal to maintain the original judgment. By the second instance of Shanghai High People’s Court, the facts first instance identified are confirmed. The court of second instance holds that: Issues of second instance are that: 1. whether the procedure of the case of the first instance was illegal; 2. the proportion of collision liability in the case; 3. where the Appellant CHEN Wei could claim to apply the maritime liability limit; 4. the amount of the loss caused by the collision. According to the provisions of the Civil Procedure Law of the People’s Republic of China, that legal proceedings that the adjudication of the case pending is dependent on the results of the trial of another case that had not yet been concluded shall be suspended. The trial of this case did not need to base on the outcome of the other case of salvage charges. There was no violation of law that the court of first instance did not suspend the proceedings in this case. Maritime administrative department confirmed in the conclusion: the operators on duty of M.V. “Zhesheng 97506” sailed without licenses, neglected, did not sail on the safe speed, and failed to comply with provisions under poor visibility. And M.V. “Zhesheng 97506” did not take timely effective search and rescue operations after the accident, neither reported to the competent authorities, nor unauthorized lift the scene, shall bear the main responsibility of the accident. Neither M.V. “Tailianhai 18” had any certificate, nor operators on duty sailed with license. The vessel did not open AIS signal, did not sail on safe speed, did not perform relevant provisions under poor visibility, and did not take effective measures to avoid. Thus, M.V. “Tailianhai 18” shall bear the primary responsibility of the accident. The court of first instance concluded that M.V. “Zhesheng 97506” should bear 70% of tort liability of this collision accident; M.V. “Tailianhai 18” should bear 30% tort liability of this collision accident, which had factual basis and was in line with the law. No.3. The existing evidence showed that M.V. “Zhesheng 97506” had been found illegal activities, which liked the presence of navigation exceeding the limited sea area, insufficient manning, and sailing without licenses, etc. The above-mentioned violations were the direct cause of the accident. CHEN Wei as the owner of the ship did not prevent the above illegal activities, rather than hold a laissez-faire attitude. Operators on duty of M.V. “Zhesheng 97506” did not report to the competent authorities and unauthorized leave the scene, which cased heavy casualties of M.V. “Tailianhai 18”. CHEN Wei as the owner of the ship shall be responsible for the actions of his employees. The above behaviors of CHEN Wei belonged to the loss resulted from his act or omission done with the intent to cause such loss or recklessly and with knowledge that such loss would probably result, according to provisions of Maritime Code, appellant CHEN Wei should not apply the limitation of liability for maritime claims. No.4. Costs of repair defined by assessment of M.V. “Tailianhai 18” after salvaging was direct losses the accident caused. According to the proportion of accident liability, CHEN Wei should bear 70% of liability for damage of the direct loss. And for non-payment of the salvage

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costs, resulted the ship was in lien of salvage company for a long time, and the loss resulted by lien higher than the cost of repair loss belonged to enlargement of loss. CHEN Wei agreed to lend RMB1.5 million to pay salvage cost in salvage contract, but it did not actually paid. Although, CHEN Wei in the salvage contract RMB1.5 million expressed as a loan, but CHEN Wei was one of the ultimate suppliers of salvage cost, and the loan contract was signed by the specific collision accident liability subject for a specific accident (salvage) treatment. Thus, its nature was different from ordinary private lending. The loan contract was the true meaning of both sides that once signed, it was legally effective, and the relative party could produce a reasonable expectation to the agreed content. CHEN Wei broke the contract and did not lend RMB1.5 million to pay salvage cost, which was the main reason that the ship was in lien of the salvage company. CHEN Wei shall be liable for enlargement of loss caused by lien in accordance with the proportion of the salvage cost. The total amount of salvage charges was RMB2.12 million, CHEN Wei and Respondent MAO Xuebo neither paid. For enlargement of loss, both sides have the responsibility, and the responsibility shall be shared according to the proportion of contributions made by both parties. The amount of salvage fee RMB1.5 million CHEN Wei agreed to lend, 70% responsibility of enlargement of loss of which shall be beard by CHEN Wei. MAO Xuebo shall pay the salvage cost of RMB620,000, and should bear 30% responsibility of enlargement of loss of which. The court of first instance found that CHEN Wei shall bear 70% of the responsibility of compensation of the amount of total loss of M.V. “Tailianhai 18”, which had no improper. On the amount of loss of M.V. “Zhesheng 97506”, CHEN Wei provided the identification report issued by Nantong price certification center to prove the ship repair prices and repair days and so on. The court of first instance confirmed that the ship repair costs caused by the collision and the ship-related losses during the repair period had no improper. In summary, the Appellant CHEN Wei’s appeal lacks factual and legal basis. The court of first instance found the facts, which are clear and the results are correct and should be affirmed. Accordingly, in accordance with Article 170 Paragraph 1 Sub-paragraph 1 and Article 175 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. The judgment is final. Presiding Judge: CHEN Zilong Judge: LIN Lan Acting Judge: ZHANG Wen April 22, 2016 Clerk: LUO Gang

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The Supreme People’s Court of the People’s Republic of China Civil Ruling MAO Xuebo v. CHEN Wei et al. (2016) Zui Gao Fa Min Shen No.1487 Related Case(s) This is the ruling of retrial, and the judgment of first instance and the judgment of second instance are on page 595 and page 626 respectively. Cause(s) of Action 193. Dispute over liability for ship collision damage. Headnote affirming decisions of first instance and intermediate appellate courts apportioning liability 70% to the Defendant and 30% to the Plaintiff after collision in which both ships failed to follow required navigational rules, but after which the Defendant’s ship fled, contributing to the probable death of all crew members of the Plaintiff’s ship, and denying the Defendant’s counterclaim. Summary The Plaintiff, Xuebo, filed an action against the Defendants, Wei and Jianshan Co., after a collision between “Zhesheng 97506,” owned by Wei and operated by Jiangshan Co., and “Tailianhai 18,” owned by Xuebo. After the collision, “Zhensheng 97506” fled the scene which, the court found, likely exacerbated the extent of the damage as all of the crew members of the “Tailianhai 18” are presumed dead. For this reason, as well as the fact that both vessels were improperly manned and failed to conform to the relevant rules regarding the navigation procedures applicable to the foggy conditions present at the time, the court of first instance found that Wei (as owner of “Zhensheng 97506”) and Jiangshan Co. (as operator of the vessel) should bear 70%, jointly and severally, of the tort liability and Xuebo, as owner of “Tailanhai 18”, should bear 30% of the tort liability. Further, based on the extent of illegality of both parties’ actions, the gravity of negligence, and the magnitude of the cause of damage, the court of first instance determined that any counterclaim by the Defendant was untenable. The Defendant Wei, dissatisfied with the previous judgment, appealed; however, the appeal court determined that his claim lacked a rational and legal basis, and affirmed the judgment of the court of first instance. The Defendant Wei once again appealed the judgments, submitting an application for a retrial. The Supreme People’s Court held that Wei’s retrial application did not meet the situation stipulated in Article 200 (6) of the Civil Procedure Law of the People’s Republic of China that there was an error in the application of the law in the original judgment or ruling and, therefore, denied Wei’s application.

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Ruling The Claimant of Retrial (the Defendant of First Instance, the Appellant of Second Instance): CHEN Wei, Male, Born on March 12, 1968, Han, Living in No. XXX, Yangxi Road, Yangshan Town, Shengsi County, Ƶhejiang. Agent ad litem: LI Chenbiao, lawyer of Beijing Zhonglun (Shanghai) Law Firm. Agent ad litem: YU Yang, lawyer of Beijing Zhonglun (Shanghai) Law Firm. The Respondent of Retrial (the Plaintiff of First Instance, the Respondent of Second Instance): MAO Xuebo, Male, Born on 26 June, 1977, Han, Living in No. XXX, Meixin Road, Yangshan Town, Shengsi County, Zhejiang. Agent ad litem: SHEN Jianbin, lawyer of Shanghai Kairong Law Firm. Agent ad litem: RAO Yi, lawyer of Shanghai Kairong Law Firm. The Defendant of First Instance: Shengsi Jiangshan Marine Shipping Co., Ltd. Domicile: No.XXX, Gongjian Road, Yangshan Town, Shengsi County, Zhejiang. Legal representative: ZHANG Yue, chairman of the company. With respect to the case arising from dispute over collision damage liability among the Claimant of Retrial CHEN Wei, the Respondent of Retrial MAO Xuebo and the Defendant of first instance Shengsi Jiangshan Marine Shipping Co., Ltd. (hereinafter referred to as Jiangshan Company), the Claimant of Retrial CHEN Wei disagreed with (2016) Hu Min Zhong No.24 Civil Judgment and applied for retrial to the court. The court formed a collegiate panel to examine the case in accordance with the law, and now the case has been concluded. CHEN Wei applied for retrial that: Firstly, there was illegal procedure in the judgment of first instance and second instance. MAO Xuebo applied CHEN Wei for salvage cost, while until the end of trial, which did not actually pay the salvage cost to Jiangsu Wenqiang Marine (hereinafter referred to as Wenqiang Marine). Wenqiang Marine had filed an other case to Shanghai Maritime Court (hereinafter referred to as court of first instance) for payment of the salvage cost by MAO Xuebo and CHEN Wei. CHEN Wei applied the court of first instance to terminate the proceedings of this case, the court of first instance did not permit, and judged did not support the claim to request the salvage fee and asked MAO Xuebo to claim the right in other cases, which was in violation of provisions of the Civil Procedure Law of the People’s Republic of China. The error of the first instance did not changed as a result of the claim of MAO Xuebo in the second instance. MAO Xuebo did not formally apply to the court of first instance or second instance to withdraw the claim for salvage cost. It had no basis that the second instance court identified the first instance procedure was not illegal for MAO Xuebo in the trial of second instance said he would claim CHEN Wei for the salvage charge in the other case.

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Secondly, it was wrong that the identification of collision responsibility of ship involved made in the judgment of first instance and second instance. M.V. “Tailianhai 18” failed to pass the official inspection of the ship inspection department, and did not carry out seaworthiness and ship registration and other related procedures. Thus, it did not have safe navigation qualification. At the time of the accident of M.V. “Tailianhai 18” round, many manholes and unclosed doors between M.V. “Tailianhai 18” wing tank and air tank, and between air tank and accumulation tank which caused cabin could not maintain an effective watertight, and which was the significant cause that M.V. “Tailianhai 18” sank quickly after hull broken into water was cabin could not maintain an effective watertight. M.V. “Tailianhai 18” after the accident, in fear of its “three noes” identity of the ship was found out and punished, it took the initiative to escape from the accident scene, which resulted “Zhesheng 97506” round could not search and rescue on the objective. M.V. “Tailianhai 18” had more fault for the occurrence and the consequences of the accident that it shall bear the primary responsibility. The visibility was only 30 m when the incident occurring. M.V. “Zhesheng 97506” failed search and cannot determine the other boat’s position. If continued to blindly search would endanger their own and the security of surrounding ships, facilities. M.V. “Zhesheng 97506” could only suspend the search and sail to the safety basin to drop anchor. M.V. “Zhesheng 97506” after the accident, searched in the first time and did not deliberately straight leave away from the scene. There was no escape or abandonment of humanitarian assistance. The courts of first and second instances wrongly identified that M.V. “Zhesheng 97506” after the accident without permission to leave the scene, and ignored effect of shortcomings and security risks of M.V. “Tailianhai 18” on the accident, and then ordered M.V. “Zhesheng 97506” to bear 70% of the tort liability. It was unfair. Thirdly, judgments of the first and second instances identified that CHEN Wei had no right to invoke limitation of liability for maritime claims. Although, there was a situation of overdrive of M.V. “Zhesheng 97506”, and the cause of the accident was not stranding or no time to avoid resulted by the particular hydrogeological condition of the scene of the accident, but the urgent situation was not found in time for poor visibility on the day of the accident. There was no positive causal relationship between sailing over area and occurring of the accident in this case, nor should it lead to CHEN Wei out of the power of imitation of liability for maritime claims. At the time of the incident, person on board of M.V. “Zhesheng 97506” was not all unlicensed crew, of which captain, mate, chief engineer all held competence certificate and equipped with requisite skill like navigation and maintenance of the ship, dealing with the general emergency, which would not endanger the safety of navigation. After the accident, CHEN Wei communicated with M.V. “Zhesheng 97506” captain in a timely to inform him to search and rescue. There was no circumstance to let the captain to deal with himself. The courts of first instance and second instance identified that CHEN Wei took the captain to deal with the accident was the extent of the reckless act or omission with knowledge that losses might occur, and did not recognize CHEN Wei’s claims about limitation of maritime liability according to this, which was not in compliance with the fact and common sense.

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Fourthly, losses of two collision ships identified by the judgments of first and second instances were not in compliance with the fact. After the collision accident occurred, M.V. “Tailianhai 18” was not total loss. On September 12, 2013, 6 months after the collision accident occurred, Nantong Price Certification Center issued identification document on repair price of M.V. “Tailianhai 18”. Regarded the date of the accident occurred as the identification base date, it identified that the repair price of M.V. “Tailianhai 18” was RMB714,700. Nantong Price Certification Center had the price identification qualification, its identification conclusions could objectively reflect the situation of the vessel and should be accepted. M.V. “Tailianhai 18” and M.V. “Zhesheng 97506” assessment report (hereinafter referred to as assessment report) issued by Shanghai Jilian Asset Evaluation Co., Ltd. (hereinafter referred to Jilian Company) determined by the court of first instance identified that loss of the value of M.V. “Tailianhai 18” was 4,798,954 yuan. M.V. “Tailianhai 18” should not be reassessed as a total loss ship. There were still many flaws for assessment during the assessment process, assessment criteria, assessment methods and so on. Therefore, conclusions of the assessment report could not be accepted. It was wrong that the course of first and second instance identified value loss of M.V. “Tailianhai 18” according to the assessment report. CHEN Wei in the first instance against MAO Xuebo filed a counterclaim, and requested MAO Xuebo compensate CHEN Wei economic loss RMB577,1981, including the crew insurance fees in 2013, crew salaries, costs of shipboard diesel fuel, board wages, boat rental costs, rental boat rescue expenses during the accident, damaged parts repair costs, hull repair costs, 16 months operating profits. The courts of first and second instances only supported the damaged parts repair costs 76,630 yuan and 6 days repair period maintenance costs 11,100 yuan, and did not support other actual costs or suffered losses. To sum up, CHEN Wei in accordance with Article 200 Sub-paragraph 2 and Sub-paragraph 6 of the Civil Procedure Law of the People’s Republic of China to apply for retrial. MAO Xuebo submitted an opinion that: The ship of CHEN Wei hit-and-run caused heavy loss of personnel and property of MAO Xuebo, and the relevant evidence was conclusive. Trial processes of the courts of first instance and second instance were correct, and the judgment determined that the liability of the collision for both two sides and CHEN Wei forfeit the right of limitation of liability for maritime claims was legal and reasonable. It requested to reject CHEN Wei’s retrial application. The court holds that the case is the dispute of ship collision damage liability. According to CHEN Wei’s retrial application, the issues of the review in this case are that: (a) whether the trial processes of first or second instance were illegal; (b) responsibilities proportion of both sides of ship collision; (c) whether CHEN Wei had the right to use limitation of liability for maritime claims to demur; (d) the loss of the parties involved in the collision. MAO Xuebo in the first instance requested for damages of 9.84 million, including wreck salvage cost RMB2.4 million. During the first instance, the salvage company Wenqiang Marine and MAO Xuebo, CHEN Wei in the court of first instance was in a separate case litigation. On November 23, 2015, the court of first

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instance made the judgment on this case that: the salvage costs of this round actually had not been paid. And there was no effective referee about Wenqiang Marine v. MAO Xuebo, CHEN Wei case. Thus, in this case temporarily unable to support this cost request. The relevant parties may, after this salvage cost was determined by the effective referee, in accordance with the proportion of the collision liability that has been determined in the effective referee to resolve or otherwise claim at the time of the determination of the salvage costs determined by the effective referee, resolve by self-negotiation or otherwise claim the right. MAO Xuebo had no objection to it, and in the second trial clearly indicated that did not advocate salvage cost in this case, would advocate CHEN Wei in another case. Thus, the trial of this case ultimately did not need to base on the outcome of the other case. There was no affect to the outcome of this case that the court of first instance did not suspend the proceeding. And there was no improper that the court of second instance did not suspend the litigation of this case and made a judgment directly. According to the identification of Nantong Maritime Bureau investigation conclusion of collision accident involved, the collision ships M.V. “Zhesheng 97506” and M.V. “Tailianhai 18” both had problems that unlicensed driving of crews on duty and failure to perform the safe navigation duties; there was no compliance with safe speed under poor visibility, ringing fog and other relevant provisions of the problem. But M.V. “Zhesheng 97506” after the accident did not take timely effective search and rescue operations, nor report to the competent authorities, left the scene without authorization, which was important causes of heavy casualties. M.V. “Zhesheng 97506” still had problems that neglected lookout and failed to take effective measures to avoid. And, there was also a problem for M. V. “Tailianhai 18” that it was impossible to maintain effective watertight between the cabins. Comprehensive analyzed the cause of the accident, Nantong MSA found that M.V. “Zhesheng 97506” should bear the primary responsibility, and M.V. “Tailianhai 18” should bear the secondary responsibility. It was no improper for the court of first instance and second instance to hereby affirm M.V. “Zhesheng 97506” and M.V. “Tailianhai 18” respectively should bear 70% and 30% of tort liability. The first-instance judgment had identified defects and security risks of M.V. “Tailianhai 18” and identified that it should bear the consequences of illegal navigation. It was not tally with the face that CHEN Wei deemed in the retrial application that the court of first instance did not consider the impact of defects and potential safety hazard of M.V. “Tailianhai 18” on the accident. Nantong MSA investigated and found that M.V. “Zhesheng 97506” after the incident left the scene without permission, that CHEN Wei did not put the contrary evidence to overturn. And it was lack of factual basis that CHEN Wei in the retrial application advocated that the round suspending the search and sailing to the safety basin to drop anchor based on extremely low visibility of incident waters. Article 209 of the Maritime Code of the People’s Republic of China provides that: a person liable shall not be entitled to limit his liability in accordance with the provisions of this Chapter, if it is proved that the loss resulted from his act or omission done with the intent to cause such loss or recklessly and with knowledge that such loss would probably result.

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According to the fact of the judgment of the first and second trial, CHEN Wei as the shipowner itself has faults mainly: first, it knew that M.V. “Zhesheng 97506” existed navigating over navigating zone, lack of crew, sailing without licenses (11 people only 2 people hold the valid certificates of competency, the captain and mate and other staff on duty without the licenses); second, after the accident involved occurred, KONG Guoping performed the duties of captain of M.V. “Zhesheng 97506” had reported the accident situation to CHEN Wei by telephone. But CHEN Wei did not explicitly require KONG Guoping to stay at the scene according to law and carry out search and rescue M.V. “Tailianhai 18”, rather let KONG Guoping self-handling that was leaving the scene without authorization. The accident caused M.V. “Tailianhai 18” sank, 8 people of the ship all fell into the water, of which 6 people were killed and 2 missing. It was in lack of factual basis for CHEN Wei claimed that he requested M.V. “Zhesheng 97506” to search and rescue timely at the time of the incident. It was no improper that the court of first and second instance identified that CHEN Wei letting M.V. “Zhesheng 97506” captain don’t timely rescue in laissez-faire belonged to the loss resulted from his act or omission done with the intent to cause such loss or recklessly and with knowledge that such loss would probably result and did not support CHEN Wei invoke limitation of liability for maritime claims to defense. In the first instance, under the agreement of MAO Xuebo and CHEN Wei, the court of first instance determined Jilian Company to assess the value of M.V. “Tailianhai 18” and loss for detention of two collision ships and so on through the second instance court judicial commission intermediary management system. With Judicial appraisal (evaluation) qualification, on March 11, 2015, Jilian Company dispatched evaluator to the scene to investigate the collision two ships in the accompany of the judicial personnel of court of first instance. On June 2, 2015, the evaluation report was issued independently, and stated clearly the market value of M.V. “Tailianhai 18” on the collision day was RMB5,614,500, the value on March 11, 2015 was RMB815,54. CHEN Wei, as tort liability person, should be liable to restore the original status of M.V. “Tailianhai 18” that was hit, but breached the warranty that he agreed to lend RMB1.5 million to pay for salvage cost in the salvage agreement but did not pay the money actually, which resulted M.V. “Tailianhai 18” salvaged out of water and long stayed by salvage operator. CHEN Wei should bear the corresponding responsibility on the possible loss of the value of ship. Accordingly, it was proper that the court of first instance identified that the loss of M.V. “Tailianhai 18” was RMB4,798,954 (RMB 5,614,500–RMB815,546) reasonable. CHEN Wei in the first instance provided a identification conclusion of M.V. “Tailianhai 18” damaged repair price, to prove that this ship was partial damage and the repair price of this ship. MAO Xuebo did not recognize the probative force of this evidence. It was no improper that the court of first instance did not identify the probative force of this evidence for the evidence material was issued on September 12, 2013, which had been unable to reflected and proved the damage situation of this ship and the possibility and rationality of rehab When this case was hearing. CHEN Wei’s objection to value loss of M.V. “Tailianhai 18” identified in the first and second trial judgment was in lack of factual basis. CHEN Wei in the first instance provided Expert conclusion of M.V.

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“Tailianhai 18” damaged repair price issued by Nantong Price Certification Center to indicate that the repair price was RMB76,630 and 6 repair days. The court of first instance identified its effect of evidence, and due to MAO Xuebo, Jiangshan Company both recognized its authenticity. Although this ship was inspected and registered according to law and annual inspection was qualified. Before the incident and the accident voyage, this ship operated over navigating zone. Thus, it was improper that the court of first instance did not support six days loss for detention during the repair period that CHEN Wei claimed based on illegal operation income. And it was proper that the court of first instance decided that 6 days maintenance cost was a total cost of 11,100 yuan during the repair period, according to minimum safety standard 5 person of M.V. “Zhesheng 97506”. It was no improper that the court of first instance did not identified diesel fuel costs on board and boat rental fees and other losses claimed by CHEN Wei, but with no valid evidence to prove the true existence and rationality of the loss. In summary, CHEN Wei’s retrial application does not meet the situation stipulated in Article 200 Sub-paragraph 6 of the Civil Procedure Law of the People’s Republic of China. In accordance with Article 204 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the ruling is as follows: Reject the application for retrial of CHEN Wei Presiding Judge: YU Xiaohan Acting Judge: HUANG Xiwu Acting Judge: GUO Zaiyu July 25, 2016 Clerk: ZHAO Di

Ningbo Maritime Court Civil Judgment Millennium Logistics (Shenzhen) Ltd. v. Ningbo Hetai Import & Export Co., Ltd. (2016) Zhe 72 Min Chu No.670 Related Case(s) None. Cause(s) of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote The Defendant shipper held liable to compensate the Plaintiff carrier for unpaid freight and storage fees after refusing to arrange for proper delivery of goods that had initially been misdelivered by the Plaintiff carrier without presentation of original bills of lading, but had subsequently by retrieved by carrier and put into storage; the Plaintiff carrier held liable for additional costs caused by initial misdelivery. Summary The Plaintiff carrier released the Defendant shipper’s cargo without presentation of the original bill of lading after a receiver presented a fake bill of lading. The Plaintiff retrieved most of the goods and asked the Defendant to arrange for their delivery to the genuine consignee. The Defendant did not respond but rather sued the Plaintiff for releasing the cargo without the original bill of lading. The parties reached a settlement agreement but the Defendant failed to perform its promise to arrange for the goods to be delivered, so the Plaintiff sued the Defendant for unpaid freight and storage fees. The court held that the Defendant should pay the freight according to the proportion of the goods delivered, the Plaintiff should bear the inland costs incurred by releasing cargo without the original bill of lading, and the parties should share the storage fees based on the periods of storage time for which each was responsible.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_23

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Judgment The Plaintiff (the Counterclaim Defendant): Millennium Logistics (Shenzhen) Ltd. Domicile: Room 3701, 3702, A Block, Shenfang square, South Renmin Road, Luohu District, Shenzhen City, Guangdong. Legal representative: YUYong, chairman. Agent ad litem: ZHENG Faguo, lawyer of Harnest & Garner Law Firm. Agent ad litem: GUI Sicong, lawyer of Harnest & Garner Law Firm. The Defendant (the counterclaim Plaintiff): Ningbo Hetai Import & Export Co., Ltd. Domicile: Room 536, Building 2, 22 HengheRoad, Beilun District, Ningbo City, Zhejiang. Legal representative: YU Biao, general manager. Agent ad litem: GU Jian, lawyer of Shanghai Rolmax Law Office. Agent ad litem: FAN Haitao, lawyer of Shanghai Rolmax Law Office. With respect to the dispute over contract of carriage of goods by sea, lawsuit filed by the Plaintiff Millennium Logistics (Shenzhen) Ltd. (hereinafter referred to as Millennium Company) against the Defendant Ningbo Hetai Import & Export Co., Ltd. (hereinafter referred to as Hetai Company) to the court on February 14, 2016. The court, after accepting this case on March 15, 2016 with supplementation, formed a collegiate panel in accordance with the law to try this case. The Defendant raised a counterclaim on April 25 2016. The court decided to entertain the case and try the counterclaim together with the original claim. The court heard this case in public on May 4 and June 28, 2016. Agent ad litem of the Plaintiff Millennium Company, ZHENG Faguo, agent ad litem of the Defendant Hetai Company, FAN Haitao, attended the court hearing. Now the case has been concluded. The Plaintiff Millennium Company alleged that the Defendant Hetai Company entrust Millennium Company to deal with the issue about carriage of goods by sea. The Plaintiff signed four bills of loading to the Defendant Hetai Company. After the cargo arrived at the port of destination, consignee of bill of lading sent a bogus bill of lading to the agent of goods delivery at the port of destination and took delivery of the object. After the Plaintiff learned the bills of lading are bogus, they got most of the cargo back by calling help of the local police. After getting the cargo back, The Plaintiff Millennium Company asked the Defendant Hetai Company for arrangement about taking delivery of goods or transshipment with the written notification on April 16, 2015, but the Defendant delayed a settlement and sued that the Plaintiff Millennium Company should be responsible for the compensation of misdelivery of cargo without presentation of the original bill of lading. On October 21, 2015, the court entered a judgment about the dispute over the goods under these four mentioned bills of lading. After this, the Plaintiff and the Defendant reached a settlement agreement in second instance. The Defendant entrusted a third party to

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take delivery of these four consignments under the Plaintiff’s control, and the Defendant should send bank guarantee to the Plaintiff to ensure the storage fee and the ocean freight the Plaintiff claimed would be paid. The Plaintiff held that the cargo was still detained in the storehouse rented by the Plaintiff due to the Defendant refused to deal with the cargo, so the Defendant should pay the storage fee extended for their fault. Moreover, four consignments were freight collected. As the Defendant had taken delivery of goods, the Defendant should pay the freight to the Plaintiff. So the plaintiff sued to requested for these: 1. the Defendant should pay the freight of USD10,012.23 (about RMB 61,355) and its interest (from April 21, 2015 to the date which the judgment decided to fulfill the freight and interest); 2. the Defendant should pay storage fee EUR98,840.38 (RMB converted in 696,043) and its interest (from April 21, 2015 to the date which the judgment decides to fulfill the freight and interest); 3. the Defendant should bear the litigation fee of this case. The Defendant Hetai Company had not submit a pleading, but the Defendant defended in court that: 1. about the freight, the bills of lading in this case were freight collected. Charging freight on us should not be supported for the container had been released. Even if the Plaintiff had not collected the freight, its unreasonable to charge freight on the Defendant more than the freight in market quotation. The freight of the cargo had not been got back should not charge on the Defendant. The Plaintiff should settle an agreement about the freight with the original buyer, and the Plaintiff has the duty to disclose these documents. The part of the freight that the Plaintiff had prepaid should be deducted. 2. About the storage fee, it was caused by misdelivery of cargo without presentation of the original bill of lading, so the Plaintiff should bear the storage fee. To say the least, even the Defendant should bear a part of the storage fee, the part of the storage fee higher than the price in the market caused by the Plaintiff’s carelessness should be paid by the Plaintiff. Misdelivery of cargo without presentation of the original bill of lading caused the goods broken into parts and missed the season of sales. These raised the difficulty of reselling these goods, so a period of reasonable time should be allowed for the Defendant to deal with the cargo and the Plaintiff should bear the storage fee of this period of time. The Defendant counterclaimed that the Defendant entrusted the Plaintiff to handle with marine transportation, and the Plaintiff signed four bills of lading for the goods. After the cargo arrived at the port of destination, the Plaintiff ignored the notice of the Defendant and released the cargo of these four bills of lading. Even the Plaintiff got a part of the cargo back, but some cargo still could not be got back and the Defendant suffered a loss from this. The Defendant had been recovered the loss by lawsuit. At the same time, the Plaintiff misdelivered cargo without presentation of the original bills of lading caused a price difference of the goods got back during the resale. The loss totaled USD36,481.48, and the Plaintiff should compensate for this. So the Defendant counterclaimed for these: 1. the Plaintiff should indemnify the Defendant for the loss of price difference for USD36,481.48 (RMB237,129.62) and its interest. 2. The Plaintiff should bear all the litigation fee of the counterclaim.

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The Plaintiff had not submit a pleading against the counterclaim, but the Plaintiff defended in court that: 1. misdelivery of cargo without production of original bills of lading was not the reason which led to the loss of price difference, so there was no causation between them. After released the goods with a forged B/L, no matter in the period of getting the cargo back or in the period of delivery the goods to the Defendant, the Plaintiff had fulfilled their obligation to be careful and quick. So, there was no delayed delivery. After that, the cargo had been stored because the Defendant failed to deal with the cargo in time. Even if there was a loss caused by price difference, the Defendant should bear it. 2. There was no corresponding for the Defendant’s loss caused by price difference. (1) The price difference between the sale price and price at the shipment which the Defendant claimed could not reflect the loss caused by the Plaintiff’s breach of contract. The time the Defendant sold the goods was far behind the time the Plaintiff could deliver the goods. (2) The goods was sold in December 2015. This was caused by the Defendant failed to picked up the goods in time. The Defendant should be responsible for it. The Defendant did not prove the price in April and in May (when the Plaintiff could deliver the goods). In the same way, even if the Plaintiff had not misdelivered cargo without presentation of the original bills of lading, another goods of the same consignee was sold with 20% off after the Defendant picked up because of the consignee failed to take delivery of the goods. This means depreciation is inevitable if consignee fails to take delivery of the goods. The issues of the dispute of the original action can be summarized as follows: 1. whether or not the Plaintiff should pay the freight. If the Defendant should pay the freight, then how much it would be? 2. Whether or not the Defendant should bear the storage expenses. If the Defendant should pay for it, how to confirm the standard of the rate? The issues of counterclaim can be summarized as follows: 1. did the loss of price difference caused of delivery cargo without production of original bills of lading? Who should be responsible for selling goods in December 2015. 2. If the Plaintiff should bear the loss of price difference, then how to calculate the loss. The Plaintiff and the Defendant submitted evidence about the claims and the issues to the court. The Plaintiff submitted the following evidence to the court: Evidence 1: photocopy of four bills of lading and translation. Evidence 2: four civil judgments. Evidence 3: mediation agreement. Evidence 4: certificate of guarantee and application form of taking delivery of goods. Evidence 5: notification of releasing the cargo. Evidence 6: notification letters. Evidence 7: inspection reports. Evidence 8: packing lists. Evidence 9: statement of TirspedSp.zo.o. (hereinafter referred to as Tirsped Company). Evidence 10: remittance slip and the bank prints.

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Evidence 11: storage signed by the storing party (Tirsped company), TMG. AUTAT omasz Grzybowski (hereinafter referred to as TMG.AUTA Company) and Danuta Chmielewska. Evidence 12: cargo storage quotations Sheet of LOXXSp.zo.o.(hereinafter referred to as LOXX Company) and SPEDYCJAPAWBUDSp.zo.o. (hereinafter referred to as SPEDYCJAPAWBUD Company). Evidence 13: freight receipt, Payment list and payment receipt. Evidence 14: e-mails sent and received. Evidence 15: statement and attachment of Tirsped Company. At the same time, evidence 6 (notification letter) and evidence 14 (e-mails sent and received) were taken as defensive evidence of the counterclaim. The Defendant submitted the following evidence to the court: 1. About the part of freight. Evidence 1 & Evidence 2: receipt and the bank receipt of payment. Evidence 3 & Evidence 4: receipt, the bank receipt of payment & bills of lading. 2. About the storage fee. Evidence Evidence Evidence Evidence Evidence inquiry. Evidence

5: lawyer’s letters. 6: lawyer’s letters and its attachments. 7 & Evidence 8: e-mails. 9: Black Company’s mail which replied the inquiry. 10: REXXER Company’s replied mail of the inquiry which replied the 11: BEAST Company’s replied mail of the inquiry.

3. About the counterclaim: Evidence 12: four judgments (the same with the Plaintiff’s evidence 2). Evidence 13: four mediation agreements. Evidence 14: commercial invoices. Evidence 15 & Evidence 16: confirmation of sales information. Evidence 17: inspection report (the same with the Plaintiff’s evidence 7). Evidence 18: testimonies from of the manufacturers which produced the goods. Evidence 19: lawyer’s letter and its attachment (the same with evidence 6). Evidence 20: e-mails. Evidence 21: statement, altered letter of guarantee and bills of lading. Evidence 22: e-mails. Evidence 23: commercial invoices, packing slip and bills of entry. Evidence 24: bills of entry. After cross-examination in court, the evidence which the parties had no objection was confirmed by the court and kept in file as evidence. The questions about the use and the probative force of the evidence presented by two parties should be judged comprehensively according to the specific circumstance of this case.

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The evidence which the parties had objection was held by the court as follows: The Defendant had objection to the Plaintiff’s evidence 10 (Remittance slip and the bank prints). They argued that Tirsped Company was a long-term and stable agent of the Plaintiff. They could not know whether this credential referred to the storage fee of the goods in this case. The Hong Kong Bank’s prints had no seal, so the authenticity cannot be confirmed. The Defendant had objection to the Plaintiff’s evidence 12 (Quotation Sheet of LOXX Company and SPEDYCJAPAWBUD Company). The Defendant argued it did not meet the market discipline for these two companies to sign a piece-wise storage rate. After hearing, the Court identified that evidence 10 and evidence 9(Statement of Tirsped Company) can prove each other. Evidence 12 was notarized. When the supply of the warehouse could match the demand, the not against the market discipline to sign an increasing storage rate. The court confirmed evidence 10 and evidence 12. The Plaintiff had objection to the Defendant’s evidence 10 (REXXER Company’s mail which replied the inquiry) and evidence 11 (BEAST Company’s mail which replied the inquiry). The authenticity cannot be confirmed. The Plaintiff had objection to the Defendant’s evidence 14 (commercial invoices), evidence 15 (confirmation of sales information) and evidence 21 (statement). Both evidence 14 and evidence 15 was made unilaterally, and there evidence 18 (testimonies from the manufacturers which produced the goods) and no e-mails sent or received to prove. There was a discrepancy between these two evidence and the bills of entry. Evidence 18 could not satisfy the formal requirements. It should be signed by the legal representative and operators, then it should be sealed. As learned from the content, the 2th and 3th paragraph of the testify made by these three manufacturers were all delete the same. Obviously, the testimonies were made by the Defendant. After that the testimonies were sent to these three manufacturers to stamp. The evidence could not reflect the true intentions of these three manufacturers. The probative force of evidence is not enough to proof the seasonal products in this way. The statement in evidence 21 was not notarized, so the form of the statement is illegal. After hearing the Court identified: evidence 10 (REXXER Company’s mail which replied the inquiry) and evidence 11 (BEAST Company’s mail which replied the inquiry) were both notarized. These two evidence can reflect the operation condition of the Warsaw warehouse market, so the court confirmed evidence 10 and evidence 11. Evidence 14 (commercial invoices) and evidence 15 (confirmation of sales information) could prove each other, so the court made a determination that evidence 14 and evidence 15 was true. The reasonable for the Plaintiff’s cross-examination opinion of evidence 18 (the testimonies from of the manufacturers which produced the goods), so the court refused to confirm. The form of the statement in evidence 21 could not meet the requirement of law for it was not notarized, so the court refuses to confirm. In the aim to find out the truth, the court withdrew the civil judgment from the record of (2015) Yong Hai Fa Shang Chu No.381. The court copied bills of lading numbered MNGBHAM1500209. The court copied commercial invoices and bills of entry under mentioned bills of lading and the Tirsped Company’s record of the report to the police.

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With the identified evidence and statements of the two parties, the facts are confirmed by the court as follows: The Defendant Hetai Company sold a batch of electric welders, scarifiers, garden pump, gasoline engine generator and some other goods to the Grasshopper Tools Poland Sp.zo.o. (hereinafter referred to as Grasshopper Company). The Defendant consigned the Plaintiff to deliver the goods mentioned above. The Plaintiff signed five bills of lading on February 6, 2015 and February 16, 2015. The number of the bills of lading were MNGBHAM1500166, MNGBHAM1500206, MNGBHAM1500207, MNGBHAM1500208, MNGBHAM1500209. The shipper in bills of lading were all written as Hetai Company. The consignee and notifier were written as Grasshopper Company. Forwarding of port of destination was written as Tirsped Company. The vessel’s name and voyage number were both M.V. “ESSENEXPRESSIV.009W06”. The port of loading was Ningbo and the port of discharge was Hamburg. The container numbers and seal numbers were TTNU9175013/E544822, FCIU5153790/ E561591, TEMU2244589/E525901, TCLU4184985/HD3280554, DFSU2041173/ E567601. The mode of transport was container yard to container yard (CY to CY). All freights were in consignee’s charge. The value of the goods in the containers were USD27,230, USD 17,871, USD24,708, USD65,597.12, USD30,580. The prices in Customs clearance were USD27,230.50, USD15,774.37, USD24,708, USD57,951.61, USD29,310. After the goods was shipped, the Defendant inquired the transfer records of containers in the web page of the actual carrier. The records showed that the containers numbered TTNU9175013, FCIU5153790, TEMU2244589, TCLU4184985, DFSU2041173 were all picked up and the emptied containers were all back. On April 16, 2015, the Plaintiff Millennium Company Ningbo Branch sent a notification letter to the Defendant. It stated that the company booked cargo space and consigned some containers of goods to Hamburg through our company. The number of these bills of lading and the type of the container were MNGBHAM1500166 (1  40’GP), MNGBHAM1500206 (1  20’GP), MNGBHAM1500207 (1  20’GP), MNGBHAM1500208 (1  40’GP) MNGBHAM1500209 (1  20’GP). The time of the container’s arrival were March 20, 2015, March 24, 2015, March 24, 2015, March 24, 2015, March 24, 2015. The company informed your company the consignee had picked up the goods with forged bills of lading, so we suggested you to report to the police. In the aim to keep the goods and capital safe, our company suggested you to report to the local police as soon as possible and to file a suit against the consignee according to the contract signed by your company and the consignee to reduce and prevent loss of expanding. At the same time, there have been some expenses arising from the goods of your company after the goods arrived at the port of destination. Until April 16, 2015 the expense was up to USD8,600 and the expense were still expending everyday. Please give us a specific instruction of how to deal with these goods. If your company need to apply for order returning, the returning fee you should pay

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estimated for USD16,700 except the expense arose at the port of destination. In the aim to prevent loss of expanding, please give a written reply before April 20, 2015 and etc. But there was no evidence to prove the Plaintiff had taken back the goods which were picked up. On April 17, 2015, Tirsped Company reported to the police in Warsaw Poland: In the aim to seek private gain, Grasshopper Company obtained the goods which Tirsped Company purchased from Hetai Company priced for no less than PLN770,000 (monetary unit in Poland, PLN mentioned are all the same) in an illegal way. Grasshopper Company misled Tirsped Company they had paid the payment of goods by using forged bills of lading. Tirsped Company suffered a loss of no less than PLN60,000 and the Plaintiff suffered a loss for no less than PLN770,000. But there was no evidence showed that the police in Poland had registered their loss or the consignee picked up goods with forged bills of lading for investigation. On April 24, 2015, the Defendant filed a suit for misdelivery of five consignments without presentation of the original bills of lading. The numbers of the cases were (2015) Yong Hai Fa Shang Chu No.382, No.383, No.384, No.380 and No.381. While the suit was in progress, the lawyer of the Plaintiff sent a letter to the Defendant on May 26, 2015. In the letter, he stated that Millennium Company had recovered arrears from the consignee for you under the assistance of the Tirsped Company with your company’s agreement. At the same time, Tirsped Company had got back all the goods the consignee had not paid. The goods were stored in the warehouse of Tirsped Company. You can contact with Tirsped Company and check the goods at any time. Now we had applied local SGS for checking goods carefully, inventory of goods and making a SURVEYREPORT. As Millennium Company told there has been a great deal of expense arose from the goods at the port of destination. The expense which including ocean freight, handing charge in the port of destination, demurrage and storage fee from Ningbo to Poland was USD25,000 at present, and the expense would expand by USD555 weekly. Millennium Company could deliver the goods to your company or any lawful holder of the bills of lading. The lawyer of the Plaintiff specially notified that please inform us how to deal with these goods. No matter your company determined to resell these goods or ship them back, Millennium Company would try our best to cooperate with you. The charges could be negotiated. If your company fails to deal with the goods in time, the expense arose from the goods at the port of destination would expend every day without doubt. Your company shall bear the expanded expense and the part of the expense expanding in the future. On June 19, 2015, the lawyer of the Plaintiff sent a letter to the lawyer of the Defendant stated SGS had checked the goods according to related bills of lading on June 29, 2015, and they made a SURVEYREPORT (details were in attachment). Tirsped Company also made a report about this accident and the condition of the goods (details were in attachment). These two documents mentioned above can be notarized by related parties if necessary. So far your company had not given any scheme about how to deal with the goods. Your company should bear the

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demurrage for you had not given a scheme on time. And the lawyer of the Plaintiff noticed again “Please give us a scheme of how to deal with these goods immediately”. On June 1, 2015, the survey report made by SGS located in Poland numbered 352 showed they took the survey on May 29, 2015 in     Poland. The numbers of the referred bills of lading were MNGBHAM1500166, MNGBHAM1500206, MNGBHAM1500207, MNGBHAM1500208. On October 21, 2015, the court made civil judgments of first instance of five cases numbered (2015) Yong Hai Fa Shang Chu No.382, No.383, No.384, No.380 and No.381. The judgments numbered (2015) Yong Hai Fa Shang Chu No.382 held the price of the goods under the bill of lading numbered MNGBHAM1500166 totaled USD 27,230.50 (the price was taken as customs declaration value, follows were in the same), the goods had not been got back valued USD1,678.8 ( the percentage of the value got back was 93.83%), so the court sentenced Millennium Company to compensate for the loss (payment of the goods) of Hetai Company for USD 1,678.8 (equal to RMB10,309.51). The judgment numbered (2015) Yong Hai Fa Shang Chu No.383 held the price of the goods under the bill of lading numbered MNGBHAM1500206 totaled USD 15,774.37, the goods had not been got back valued USD1,371.68 (the percentage of the value got back was 91.30%), so the court judged Millennium Company to compensate for the loss (payment of the goods) of Hetai Company for USD1,371.68 (equal to RMB8,422.38). The judgment numbered (2015) Yong Hai Fa Shang Chu No.384 held the price of the goods under the bill of lading numbered MNGBHAM1500207 totaled USD24,708, the goods had not been got back valued USD3,886 (the percentage of the value got back was 84.27%), so the court sentenced Millennium Company to compensate for the loss (payment of the goods) of Hetai Company for USD3,886 (equal to RMB23,860.81). The judgment numbered (2015) Yong Hai Fa Shang Chu No.380 held the price of the goods under the bill of lading numbered MNGBHAM1500208 totaled USD57,951.61, the goods had not got back valued USD6,011.56 (the percentage of the value got back was 89.63%), so the court sentenced Millennium Company to compensate for the loss (payment of the goods) of Hetai Company for USD6,011.56 (equal to RMB36,912.18). The judgment numbered (2015) Yong Hai Fa Shang Chu No.381 holds the price of the goods under the bill of lading numbered MNGBHAM1500209 totaled USD29,310. All goods were lost, but Hetai Company got the payment of the goods for USD23,800, so the court judged Millennium Company to compensate for the loss (payments of the goods) of Hetai Company for USD5,510 (equal to RMB33,832.50). Hetai Company dissatisfied with judgments of first instance numbered (2015) Yong Hai Fa Shang Chu Zi No.382, No.383, No.384, No.380 and No.381. Hetai Company submitted statements of appeal to the court within the legal period limited. The numbers of the judgments of second instance were (2015) Zhe Hai Zhong Zi No.296, No.297, No.298, No.294 and No.295. The e-mails between the Plaintiff and the Defendant showed that the Defendant sent letter to the Plaintiff: if our company want to take delivery of the goods got back under the bills of lading, which files should be submitted. The numbers of the

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bills of lading were MNGBHAM1500166, MNGBHAM1500206, MNGBHAM1500207, MNGBHAM1500208. And the Defendant inquired whether the new consignee can pick up the goods with currently existing bills of lading. On October 29, 2015, the Plaintiff replied the agency of us meant they should account for the expense. If the Defendant agreed with the expense, the agency of the Plaintiff would go on to the next step. On November 19, 2015, the Plaintiff replied some concrete suggestions about procedures of taking delivery of goods. And the Plaintiff clarified in the reply the new consignee need to pay reasonable freight and other fees had arisen when they going to pick up the goods. Please give us the time your company expect to pick up the goods, we will give the list of related expenses to you as soon as possible. On October 20, 2015, the time we expect to pick up the goods is around December 5, because our company is negotiating with some new consignees, the information of new consignees has to be provided after confirmation. On November 25, 2015, the Plaintiff replied that: the freight was USD10,012.23. The detailed statement of the freight was as follows: the freight of four containers of related goods sent from Ningbo to Poland should be paid when the goods arrived at the port of destination according the contract, but the consignee had not paid the freight. The freight was calculated briefly by the percentage of the number of the goods got back to the number of the goods shipped. The storage fee totaled EUR92,344.04 by December 5, 2015. The detailed statement was as follows: we are wiling to calculate the expense from April 21, 2015. The storage fee charged EUR2.6/m3 per day. The goods we got back were totaled about 155m3. This charge was a common local price standard. If you have objection to the price, you can inquire other local warehouse. On the same day, the Defendant replied that: the goods were picked up by consignee, so our company should not bear the freight. The storage of the goods was your company’s unilateral act, and it was the result of your company’s misdelivery of cargo without presentation of the original bills of lading, so your company should bear the storage fee. We suggested both of us should lay the dispute over who should bear the expenses aside to avoid missing this chance of reselling. We could negotiate after the goods are resold. On December 7, 2015, Hetai Company and Millennium Company came to mediation agreements refer to the cases numbered (2015) Yong Hai Fa Shang Chu No.382, No.383, No.384, No.380 and No.381 with the guidance of the court of second instance. Hetai Company promise to provide letter of guarantee made by the bank in China or cash no more than USD78,087 to Millennium Company for the expense of take delivery of the goods in control of Millennium Company. The expense including the storage fee, freight and some other expenses related. The premise was that Millennium Company agreed with the decision in five judgments to compensate the Hetai Company’s loss caused by misdelivery of cargo without presentation of the original bills of lading totaled USD18,454.04 and it’s interest. Millennium Company turned the goods in their control to Hetai Company before December 14, 2015. Hetai Company should arrange the time of the customer to take the delivery of the goods as soon as possible. The deadline was December 30, 2015. If Hetai Company exceeded the deadline they should bear the storage fee EUR403 a day. Hetai Company should confirm all the payments and interest that.

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Millennium Company should pay. And should be deducted, fulfilled or performed after the related cases about the charges at the port of destination and the freight decided. On December 9, 2015, these five second instance cases ended by conciliation. On December 21, 2015, BLACKS.C.A.S. (hereinafter referred to as Black Company) took delivery of the goods got back under the bills of lading numbered MNGBHAM1500166, MNGBHAM1500206, MNGBHAM1500207, MNGBHAM 1500208 after the Defendant provided the letter of guarantee according to the reconciliation agreement. According to the sales confirmation on December 30, 2015 between the Defendant and the Black Company, the goods got back under the bills of lading numbered MNGBHAM1500166, MNGBHAM1500206, MNGBH AM1500207, MNGBHAM1500208 valued USD112,716.44 resold for USD85,708.50. The value of these goods fell 23.96%. On February 14, 2016, the Plaintiff submitted the dispute over the freights and storage fees to the court according the reconciliation agreement. Moreover, the court investigated the fact that the Plaintiff had paid the storage fees of USD96,642.81 (equal with EUR87,857.1) to Tirsped Company through Millennium Logistics (China) Ltd on February 19, 2016. The freight of the containers under bills of lading numbered MNGBHAM 1500166, MNGBHAM1500206, MNGBHAM1500207, MNGBHAM1500208 were USD1,900, USD975, USD975, USD1,860 according to the agreement signed by Tirsped Company who was the Plaintiff’s agent in the port of the destination and the consignee named Grasshopper Company. The evidence submitted by the Plaintiff and the Defendant showed some warehousing companies in Warsaw charged in a increasing progressively rate and some others charged in a fixed rate including Tirsped Company from the later half of 2015 to the first half of 2016. Some companies’ increasing progressively rates from 30 to 90 days were divided into three steps and some companies’ rates were divided into four steps. The rates were charged from EUR0.2/m3 a day to EUR 4.0/ m3 a day. There was a lower fixed rate charged EUR0.076/m3 a day, and a higher one charged EUR0.2276/m3 a day. The fixed rate of Tirsped Company was EUR0.1248/ m3 a day. In the same period of time, the Defendant sold the hand mowers in the container numbered MSKU0473816, MSKU0360770 under the bill of lading numbered SHAM5020349 to Grasshopper Company. These hand mowers valued USD60,807.50, and their customs declaration value totaled USD57,804. The goods in these two containers were not delivered without presentation of the original bills of lading. The Defendant Hetai Company picked up the goods in the port of the destination and resold the goods to NORTHSOLUTIONS.R.O in April 2015. These goods were sold for USD49,290. The value fell 14.73% compared with customs declaration value of these goods. After trial, the court ascertains that: this case is the dispute over contract of carriage of goods by sea. About the loss of freights, storage fees and the decrease of

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the value of goods after the carrier delivered cargo without presentation of the original bills of lading and got goods back from the consignor. The court analyzed the issues of the parties as follows: 1. Whether or not the Defendant should bear the freight. If the Defendant should pay the freight, how much should it be. The Plaintiff held that: we fulfilled the obligations of carrying the goods and delivering the goods, but we were unpaid now. So we have the right to charge the Defendant for the freight. The freight in this case includes inland freight from Hamburg to Poland and the expenses of customs declaration and customs clearance. Even the expense was not necessary expect ocean freight under the bills of lading. But the Plaintiff provide the service of transport, customs clearance and so on. The consignee appointed by the Defendant picked up goods in Poland, and the consignee did not need to pay extra expense of customs clearance and inland transportation. So it was legitimate for the Plaintiff to claim extra expenses except ocean freight. The Defendant held that: the method to pay the freight referred was freight collect. The Plaintiff should charge the consignee when they delivered the goods, and they should not charge the Defendant for freight. Even the court decide the Defendant should bear a part of the freight. The part of the freight should be Ningbo to Hamburg, but the part of the freight should not include the freight from Hamburg to Warsaw. The Defendant had the right to require the Plaintiff carry the goods got back to Hamburg. It aimed at reducing the loss of parties, so we decided to deal with the goods got back in Warsaw. The Defendant agreed to bear the freights according to the proportion of the goods got back. After trial, the court ascertains that: the method to pay the ocean freight was freight collect, so the person who picked up the goods should pay the freight. After the Plaintiff delivered goods without presentation of the original bills of lading, they had got back the most part of the goods and delivered the goods got back to the Defendant. The Defendant should bear the ocean freight under the bills of lading according to the proportion of the goods delivered. The rate could calculated by the proportion of the value of the goods delivered. All the ports of destination in the bills of lading were Hamburg. The inland freight from Hamburg to Poland and the expense of customs declaration and customs clearance arose from delivery the goods without presentation of the original bills of lading, the Plaintiff should bear the expense for themselves. The Defendant picked up and resold the goods in Warsaw. Even this reduced the inland freight from Hamburg to Warsaw in objective, but it also reduced the inland freight of the Plaintiff carried the goods from Warsaw back to Hamburg. The Defendant did not got benefits from this, so the Plaintiff had no right to require the Defendant to bear the inland freight from Hamburg to Warsaw. Even the ocean freight was arranged by consignee and the agent of carrier, but the freight rates matched the rate in the market. The Defendant as the consignee should bear the ocean freight. The expense in RMB paid by the Defendant were found had no relationship with the ocean freight. The ocean freight the Defendant should bear totaled 1900  93.83% + 975  91.30% + 975 84.27% + 1860  89.63% = 5,161.7 US dollars.

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2. Whether the Defendant should bear the storage fee. If they should bear the expense, how to confirm the rate. The Plaintiff held that: even they released the goods to original consignee for they were cheated, but they reported to the police immediately and got most of the goods back. They informed the Defendant to pick up the goods on April 15, 2015. The Defendant ignored the Plaintiff’s requirement and filed a suit. The Defendant’s act led the goods kept storing in the port of destination. The Defendant asked to deliver the goods after they lost the lawsuit in the first instance. The goods kept storing in the port of destination were caused by the Defendant’s fault. The storage fees the Plaintiff claimed were calculated from April 21, so the Plaintiff had given reasonable period of time for the Defendant to pick up the goods. It was reasonable to charge in a higher rate with consideration of the statement of Tirsped Company and the special storage circumstances of the goods in this case. The Defendant held that: the storage fee was caused by the Plaintiff misdelivered the goods without presentation of the original bills of lading, so the Plaintiff should bear the expense including further losses for themselves. Even the Defendant should bear a part of the storage fee, the rate should be the lowest and fixed for both parties should assume the obligation of reducing the loss. Related evidence the Defendant had got showed the rate of storage fees in Warsaw including Tirsped Company was fixed and in a low level. The Defendant knew details of these goods after the Plaintiff gave the report made by SGS on June 19, 2015. Only the Defendant knew the detailed condition of the goods could they resell the goods, so the Plaintiff should bear the storage fee from the date of misdelivery of cargo without presentation of the original bills of lading to June 19. The delay from October 27, 2015 to November 25 was caused by the Plaintiff, so the Plaintiff should bear the expense. On December 14, the Plaintiff suddenly demand the Defendant to submit the application of delivery, which caused a delay for a week, so the Plaintiff should pay the storage fee during this period. The goods in this case were the equipment of cutting grass and others related. The peak season of sales was missed for the Plaintiff’s misdelivery of cargo without presentation of the original bills of lading. This increased the difficulty of reselling. At the same time, the goods were divided so they could not match with each other. This also caused the difficulty of reselling increased. Totaled 2 months should be given to the Defendant to resell the goods. The Plaintiff should bear the storage fees during this period. After trial, the court ascertains that: the port of the destination of the goods were Hamburg. The storage fee the Defendant should bear for their refuse to pick up the goods were the storage fee in Hamburg. The storage fee of the goods in Warsaw arose from storing the goods got back which the Plaintiff’s misdelivery of cargo without presentation of the bills of lading, so the Defendant should bear the storage fee in Warsaw. The Plaintiff stored the goods in Warsaw. As this reduced the Defendant’s storage fee of the goods related to this case in Hamburg. And the Defendant showed their agreement of bearing reasonable storage fee in litigation. So the court supports the Plaintiff’s claim for reasonable storage fee.

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About the calculation of the storage time. The Plaintiff sent the letter of notification to the Defendant on April 16, 2015. But there was no evidence could prove the Plaintiff had got the goods back before April 16. The expression of the Plaintiff was inconsistent in the context, so the date of the letter of notification be sent could not be the start of the time to calculate. Even the lawyer of the Plaintiff sent a letter to notice Tirsped Company that they had got all the goods the consignee unpaid back on May 26, 2015. These goods were stored in the warehouse of Tirsped Company. But the Plaintiff provided the report made by SGS on June 19, 2015. The report clarified the variety and quantity of the goods got back. So June 19, 2015 can be taken as the start point of the time to calculate the storage fees (to October 27, 2015, totaled for 130 days). From October 27, 2015 the Defendant indicated the Plaintiff they want to pick up the goods related to this case to December 21, 2015 the Defendant picked up them totaled for 56 days. To take all factors into account, the Plaintiff confirmed the procedures slowly and acquired claimed unreasonable ocean freight and storage fee, and the Defendant refused to bear reasonable ocean freight and storage fee. The Plaintiff`s misdelivery of goods without presentation of the original bills of lading influenced reselling the goods. The Defendant need a period to resell the goods related to this case. The court determines the Plaintiff and the Defendant both to take half of the storage fee during this period of time. About the rate of storage fee, the evidence submitted by Plaintiff and the Defendant showed the rates of storage fee of warehousing companies in Warsaw in the latter half of 2015 and in the first half 2016 were not the same. As there were warehousing companies in Warsaw charged lower and fixed rate of storage fees, so the Plaintiff had not fulfilled their obligation of choosing a warehousing companies carefully. The court determined the Defendant shall pay the storage fee to the Plaintiff at the fixed rate of EUR0.18/m3 a day. The volume of the goods related to this case was 155 m3. The Defendant had no objection to the volume. The Defendant should bear the storage fee totaled 155  158  0.18 = 4,408.2 €. 3. Did the loss of price difference caused by delivery cargo without production of original bills of lading. Who should be responsible for selling in December 2015. If the Plaintiff should be responsible for the loss of price difference, how to calculate the loss. The Defendant held that: due to the goods related to this case were all facilities of cutting grass, and April was the season of sales. The price would certainly slide when missing the season of sales. After the Plaintiff misdelivery of cargo without presentation of the original bills of lading, they submitted the report made by SGS to tell the Defendant of the circumstances of the goods got back on June 19. This time had 2 months long from April. The loss of price difference was the direct result of delivery cargo without production of original bills of lading, so the Plaintiff should bear the loss. At the same time, the goods got back were divided so they could not match with each other. There was only a small number of distributors in Warsaw. The expense was expanding with time going. These factors all have an impact on the selling price. The resulting price difference loss caused by these, shall

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be born by the Plaintiff. The loss of price difference should be calculated by the price difference between invoice price and real resold price. The quantity be calculated by the report made by SGS. The Plaintiff held that: the Defendant claimed that the Plaintiff should bear the loss of price difference. They need to make sure was there a necessary causation between the loss of price difference and the misdelivery of cargo without presentation of the original bills of lading. Actually, if these goods were not delivered without presentation of the original bills of lading, these goods stored in the port of destination with nobody picking them up would be depreciate too. Those two container of goods which were not misdelivered without presentation of the original bills of lading were also sold at a reduction of 20%. The goods had depreciated for 20%. The loss of price difference was largely caused by the goods were overstocked in the port of destination for nearly 1 year. The loss of price difference arose from the Defendant was negligent in fulfilling their obligation to pick up the goods, but not caused by the Plaintiff delivered cargo without presentation of the original bills of lading. After trial, the court ascertains that: The price of the cargo kept declining compared with the original price. We could learn this from the prices of the goods were resold and the prices of the goods were not delivered without presentation of the original bills of lading. The price of the cargo had fallen 14.73% by April 2015 and 23.96% by December 2015. According to this, the goods related to this case fell 9.23% from April 2015 to December 2015. In this period some factors result this. The Plaintiff delivered cargo without presentation of the original bills of lading is one of the factors (30 + 31 + 19 = 80 days). The Defendant was negligent in fulfilling their obligation to pick up the goods was one of the factors (130 days). And the Plaintiff and the Defendant dealt with the specific matters of delivering the goods (each party for 28 days). The court determines the Plaintiff be responsible for 40% of the loss of price difference during this period of time. The Plaintiff should compensate for (112,716.44–85,708.50)  9.23%  40% = 997.13 US dollars. On account of all the matters mentioned above, the Defendant should pay ocean freight of the goods refers to this case for USD5,161.7 to the Plaintiff. The ocean freight should have been paid on the day which the Defendant delivered the goods. That means the Defendant should pay it on December 21, 2015. The Defendant was negligent in fulfilling their obligation to pick up the goods. When the Defendant was ready to pick the goods, the Plaintiff and the Defendant spent a period of time to negotiate how to deal with the specific matters of delivering the goods. The court determined ocean freight should be paid on July 20, 2015. The ocean freight converted into RMB according to the rate of the day for 1:6.1197 and to take this day as the start point of the day to calculate the interest. The Defendant should pay the storage fee of the goods related to this case for EUR4,408.2 to the Plaintiff. The storage fee should be paid on the day the Defendant delivered the goods. This means the storage fee should be paid on December 21, 2015. The storage fee converted into RMB according to the rate of the day for 1:7.0420 and to take this day as the start point of the day to calculate the interest. The court supports the reasonable part of the Plaintiff’s claims.

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The Plaintiff should compensate for the Defendant’s loss of the price of the goods related with this case for USD997.13. The compensation arose at the time the Defendant resold the goods. The date the Defendant delivered the goods related to this case on December 21, 2015 could be taken as the start point of the day to calculate the interest. The compensation converted into RMB according to the rate of the day for 1: 6.4753 and calculate the interest on this basic. The court supports the reasonable part of the Defendant’s claims. According to Article 69 and Article 78 Paragraph 1 of the Maritime Code of the People’s Republic of China, Article 119 Paragraph 1 of the Contract Law of the People’s Republic of China, Article 2 and Article 5 of the Provisions of the Supreme People’s Court on Certain Issues concerning the Application of Law to the Trial of Cases Involving Delivery of Goods without Original Bills of Lading and Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: 1. The Defendant Ningbo Hetai Import & Export Co., Ltd. shall pay the ocean freight for RMB31,588.06 and its interest to Millennium Logistics (Shenzhen) Ltd. (The interest shall be calculated according to RMB benchmark lending rate in the same period of time published by the People’s Bank of China. The interest period starts from July 20 to the day of payment decide by Judgment). 2. The Defendant Ningbo Hetai Import & Export Co., Ltd. shall pay the storage fee for RMB31,042.54 and interest to Millennium Logistics (Shenzhen) Ltd. (The interest shall be calculated according to RMB benchmark lending rate in the same period of time published by the People’s Bank of China. The interest period starts from December 21 to the day of payment decided by Judgment). 3. The Plaintiff Millennium Logistics (Shenzhen) Ltd. shall compensate the loss of goods’ price for RMB6,456.72 and interest to Ningbo Hetai Import & Export Co., Ltd. (The interest shall be calculated according to RMB benchmark lending rate in the same period of time published by the People’s Bank of China. The interest period starts from December 21 to the day of payment decided by judgment). 4. Other claims of the Plaintiff Millennium Logistics (Shenzhen) Ltd. shall be rejected. 5. Other counterclaims of the Defendant Ningbo Hetai Import & Export Co., Ltd. shall be rejected. 6. To offset 2 with 3 mentioned above, the Defendant Ningbo Hetai Import & Export Co., Ltd. still needs to pay ocean freight for RMB31,588.06 and its interest to the Plaintiff Millennium Logistics (Shenzhen) Ltd. (The interest shall be calculated according to RMB benchmark lending rate in the same period of time published by the People’s Bank of China. The interest period starts from July 20 to the day of payment decided by judgment) The Defendant Ningbo Hetai Import & Export Co., Ltd. still needs to pay the storage fee for RMB24,585.82 and the interest to the Plaintiff Millennium Logistics (Shenzhen) Ltd. (The interest shall be calculated according to RMB benchmark lending rate in the same period of time published by the People’s Bank of China. The interest

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period starts from December 21 to the day of payment decided by Judgment). These two payments shall be paid within 10 days after this judgment becomes effective. If the party fails to fulfill the obligation to make the payments within the time limit provided by this judgment, the interest for the period of deferred payment thereon shall be double paid according to Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee of the principle claim in amount of RMB11,440. The Plaintiff shall bear RMB10,494 and the Defendant shall bear RMB946. Court acceptance fee of counterclaim in amount of RMB4,860. The Plaintiff shall bear RMB4,728 and the Defendant shall bear RMB132. If not satisfied with this judgment, any parties shall within 15 days as of the service of this judgment submit an appeal to the court, with duplicates in the number of the opposing parties, so as to make an appeal to the Zhejiang High People’s Court. Presiding Judge: WU Yongqi Acting Judge: YANG Shimin Acting Judge: XIA Guangeng November 29, 2016 Clerk: XU Meina

Appendix: Relevant Laws 1. Maritime Code of the People’s Republic of China. Article 69 The shipper shall pay the freight to the carrier as agreed. The shipper and the carrier may reach an agreement that the freight shall be paid by the consignee. However, such an agreement shall be noted in the transport documents. Article 78 The relationship between the carrier and the holder of the bill of lading with respect to their rights and obligations shall be defined by the clauses of the bill of lading. 2. Contract Law of the People’s Republic of China. Article 119 Non-Breaching Party’s Duty to Mitigate Loss in Case of Breach Where a party breached the contract, the other party shall take the appropriate measures to prevent further loss; where the other party sustained further loss due to its failure to take the appropriate measures, it may not claim damages for such further loss.

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3. Provisions of the Supreme People’s Court on Certain Issues concerning the Application of Law to the Trial of Cases Involving Delivery of Goods without Original Bills of Lading. Article 2 Where a carrier, in violation of laws, delivers goods without the original bill of lading, thus injuring the original B/L holder’s right sunder the B/L, the original B/L holder may request the carrier to bear the civil liability for the resultant loss. Article 5 If a person uses a forged B/L for collecting goods from a carrier, the consignee holds original B/L can request the carrier to bear the civil liability for delivering goods without the original bill of lading. 4. Civil Procedure Law of the People’s Republic of China. Article 64 A party shall have the responsibility to provide evidence in support of its own propositions.

Guangzhou Maritime Court Civil Judgment Nanhai Rescue Bureau of the Ministry of Transport v. Archangelos Investments E.N.E et al. (2012) Guang Hai Fa Chu Zi No.898 Related Case(s) This is the judgment of first instance, and the judgment of second instance and the judgment of retrial are on page 683 and page 710 respectively. Cause(s) of Action 227. Dispute over salvage contract. Headnote Awarding the Plaintiff salvor salvage remuneration under general maritime law, despite the fact that the salvage operations were not conducted in accordance with the plan agreed with the Defendant shipowner. Summary The Defendants were bunker suppliers whose ship ran aground during a journey, resulting in a threat to marine pollution. They hired the Plaintiff to provide them salvage services but later argued the Plaintiff’s salvage operation was not in accordance with their agreed upon salvage plan. The court held the ship was in peril and the Plaintiff voluntarily conducted the salvage operation under the maritime law, despite the fact that the towing operation was not in accordance with the initially agreed upon salvage plan. Thus, the Plaintiff was entitled to remuneration.

Judgment The Plaintiff: Nanhai Rescue Bureau of the Ministry of Transport. Domicile: 42 Binjiang W. Road, Guangzhou, Guangdong, the People’s Republic of China. Legal representative: ZHONG Guoqing, director. Agent ad litem: ZHAO Shuzhou, lawyer of Wang Jing & Co. Agent ad litem: GUAN Jian, lawyer of Wang Jing & Co.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_24

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The Defendant: Archangelos Investments E.N.E. Address: 29 Drossopoulou Street, 112 57 Athens, Greece. Legal representative: George Balabanos. Agent ad litem: HUANG Hui, lawyer of Huang & Huang Co. Agent ad litem: Zhang Jing, lawyer of Huang & Huang Co. The Defendant: Alpha & Delta Ocean Limited Shanghai Representative Office. Domicile: Rm 610, Jinzhong Building #1, 680 Zhao Jia Bang Road, Xuhui District, Shanghai, the People’s Republic of China. Legal representative: HE Xijun, chief representative. Agent ad litem: HUANG Hui, lawyer of Huang & Huang Co. Agent ad litem: GUO Xiangcheng, male, Han, born on December 14, 1941, living in Yuexiu District, Guangzhou, Guangdong. On August 30, 2012, the Plaintiff Nanhai Rescue Bureau of the Ministry of Transport brought an action for salvage award before the court against the Defendant Archangelos Investments E.N.E (hereinafter referred to as “Archangelos Investments”) and the Defendant Alpha & Delta Ocean Limited Shanghai Representative Office (hereinafter referred to as “Alpha & Delta Ocean”). The action was entertained on August 30, 2012, and a collegiate panel comprised of Presiding Judge WEN Jing, Acting Judge YANG Yousheng, Acting Judge CHEN Zhenqing and Clerk HUANG Mingdian was formed accordingly in accordance with the law. A hearing was held on November 7, agents ad litem of the Plaintiff, ZHAO Shuzhou and GUAN Jian, agents ad litem of the Defendant Archangelos Investments, HUANG Hui and ZHANG Jing, and agent ad litem of the Defendant Alpha & Delta Ocean, HUANG Hui, appeared in court to attend the hearing. The case has been concluded. The Plaintiff claimed that: Archangelos Investments was the owner of M.V. “Archangelos Gabriel”, and Alpha & Delta Ocean was the agent of Archangelos Investments; on August 12, 2011, M.V. “Archangelos Gabriel” ran aground off the middle channel of the Qiongzhou Strait; the Defendants engaged the Plaintiff to render salvage assistance to the vessel; as per the Defendants’ instructions, the Plaintiff dispatched three tugs, respectively “Nan Hai Jiu 116”, “Nan Hai Jiu 101”, “Nan Hai Jiu 201”, and divers to the scene to render, among other things, salvage, sea transport and standby services which commenced on August 12 and were completed on August 18; in accordance with the agreement reached between the two parties, the salvage charges accruing amounted to RMB7,240,998.24 in total; on August 19, the Plaintiff informed the Defendants of the calculation of the salvage charges and has on many occasions thereafter urged the Defendants to effect payment, but the Defendants haven’t paid anything so far. Therefore, by this action, the Plaintiff requests the court to order the two defendants to pay, jointly and severally: (1) the outstanding salvage charges in the amount of RMB7,240,998.24;

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(2) interest running from August 20, 2011 to the day of payment (temporarily amounting to RMB476,449.64 by August 19, 2012 at the loan interest rate for the corresponding period promulgated by the People’s Bank of China); (3) the court cost. The Plaintiff submitted the following evidence within the time limit for adducing evidence: (1) Letter of Appointment; (2) emails dated August 12 exchanged between the Plaintiff and Alpha & Delta Ocean, to show that the two defendants engaged the Plaintiff to render salvage assistance to M.V. “Archangelos Gabriel” and have confirmed the methodology of calculation of charges payable to the Plaintiff; (3) Certificate of Nationality of “Nan Hai Jiu 101”; (4) deck log extracts of “Nan Hai Jiu 101”; (5) emails dated August 12 exchanged between the Plaintiff and Alpha & Delta Ocean, purporting to show the horse power of “Nan Hai Jiu 101” and the working hours; (6) Certificate of Nationality of “Nan Hai Jiu 201”, purporting to show the horse power of “Nan Hai Jiu 201”; (7) deck log extracts dated August 13 of “Nan Hai Jiu 201”; (8) emails dated August 12 & 13 exchanged between the Plaintiff and Alpha & Delta Ocean, to show the first dispatching and operating time of “Nan Hai Jiu 201”; (9) deck log extracts dated August 16 of “Nan Hai Jiu 201”; (10) emails dated August 15 & 16 exchanged between the Plaintiff and Alpha & Delta Ocean, to show the second dispatching and operating time of “Nan Hai Jiu 201”; (11) deck log extracts dated 18 August of “Nan Hai Jiu 201”; (12) emails dated August 17 & 18 exchanged between the Plaintiff and Alpha & Delta Ocean, purporting to show the third dispatching and operating time of “Nan Hai Jiu 201”; (13) Certificate of Nationality of “Nan Hai Jiu 116”; (14) deck log extracts dated August 12 of “Nan Hai Jiu 116”; (15) emails dated August 12 exchanged between the Plaintiff and Alpha & Delta Ocean, purporting to show the horse power of “Nan Hai Jiu 116” and her working hours; (16) the salvage report; (17) emails dated 12 August exchanged between the Plaintiff and Alpha & Delta Ocean, to show the work done by the divers; (18) emails dated 19 August exchanged between the Plaintiff and Alpha & Delta Ocean; (19) Lawyer’s Letter, to show the charges for the salvage services in the amount of RMB7,240,998.24 computed in accordance with the methodology of calculation agreed between the Plaintiff and the Defendants, payable by the two Defendants to the Plaintiff. After the court trial, the Plaintiff submitted the Explanation by Zhanjiang MSA on the Emergency Salvage Services Rendered to M.V. “Archangelos Gabriel” (hereinafter referred to as “MSA’s Explanation”), to show that the two Defendants had become aware that the lightering-refloating plan made by the MSA would be carried out by not later than August 14, 2011, the tug rate offered by the two defendants on 15 August could not have been affected by “changed circumstances”, and therefore the Plaintiff shall be entitled to calculate the salvage charges at a rate not lower than the one offered by the Defendants on August 15 (namely, RMB2.9/ HP per hour). The Defendant Archangelos Investments argued that: (1) there was no agreement between the Plaintiff and the Defendants on the cost of the tugs and the divers, the agent of M.V. “Archangelos Gabriel” never gave confirmation or reached any final agreement with the Plaintiff on an effective rate; (2) the rate of RMB3.2 per horse

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power per hour claimed by the Plaintiff applied to towing operations only; in the circumstances that the content of the tugs’service had been changed to standby service, the agreed rate ceased to apply accordingly; (3) the claimed tug rate and salvage charges are too exorbitant compared with the service actually provided, and thus shall be altered in accordance with the law; (4) the Plaintiff had failed to fully disclose the necessary information of the tugs to the owner of M.V. “Archangelos Gabriel”, causing the owner of M.V. “Archangelos Gabriel” to have substantial misunderstandings on the rate offered by the Plaintiff, and therefore such rate shall be altered or rescinded; (5) the tug rate offered by the Plaintiff was significantly higher than such generally applied rates for towing service; what’s more, the Plaintiff dispatched tugs with such large horse power as to far exceeding the one actually needed, which suggests that the Plaintiff simply disregarded the actual situation and took advantage of Archangelos Gabriel’s difficulties, and therefore the claimed tug rate should be altered or rescinded in accordance with the law; (6) the Plaintiff hasn’t provided any material salvage service, and therefore has no right to claim any “no-cure no-pay” salvage reward; (7) as to the Plaintiff’s claim for salvage charges, the proportion to be contributed by the owners of M.V. “Archangelos Gabriel” shall be limited to the proportion which the salved value of the vessel bears to the total salved value. In addition to the foregoing, the Defendant Archangelos Investments filed a request in written for adding the consignee of the cargo laden onboard M.V. “Archangelos Gabriel” at the material time, namely China National United Oil Corporation (hereinafter referred to as “China Oil”) to participate in the present proceedings as a third party, on the grounds that the claimed charges fall within the category of general average expenditure which should be contributed for by both the vessel and the cargo and that China Oil has an interest in terms of law in the outcome of these proceedings. The Defendant Archangelos Investments submitted the following evidence within the time limit for adducing evidence: 1. emails exchanged between the Plaintiff and Alpha & Delta Ocean, purporting to prove that (1) M.V. “Archangelos Gabriel” interests had expressly put the Plaintiff on notice that the service requested from “Nan Hai Jiu 116” had been changed to standby service, the Plaintiff replied and confirmed agreement on such change; (2) before dispatching the tugs, the Plaintiff failed to notify the agent of M.V. “Archangelos Gabriel” of the tugs’ horsepower, the distance between the location of the tugs when receiving the dispatching notice and the grounding location, the time needed for the tugs to travel to the grounding location, and other important particulars that had a bearing on the calculation of the tugs’ charges; (3) M.V. “Archangelos Gabriel” interests requested to reduce the rate, the Plaintiff replied “we can discuss it later”; 2. email message showing the rate charged by the Plaintiff for “Nan Hai Jiu 115” dispatched to provide salvage service on another occasion, purporting to prove that the cost of “Nan Hai Jiu 115” which has the same horsepower as “Nan Hai Jiu 116”, for salvage service rendered on another occasion was merely RMB1.8 per horse power per hour, the rate claimed by the Plaintiff in the present case was obviously exorbitant; 3. documents regarding the cost of the tugs “Zhan Gang Tuo 503” and “Zhan Gang Tuo 504” involving in other salvage operations, purporting to prove

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that in other salvage operations, the cost of “Zhan Gang Tuo 503” and “Zhan Gang Tuo 504” owned by Zhanjiang Port Group was merely RMB2.0 per horse power per hour, the rate claimed by the Plaintiff in the present case was obviously exorbitant; 4. the Procedures of the Ministry of Communications of the People’s Republic of China for Collecting Salvage Charges on International Passage (hereinafter referred to as “Procedures”), to prove that (1) tug rates should be such as to show the different situations/operations where the tugs were involved, but the Plaintiff’s rate at the present case failed to show such different situations/operations where their tugs were involved, and instead the Plaintiff charged the highest rate (namely the towing rate) for all the situations and operations, which was highly unreasonable; (2) according to the provisions of the Procedures, in case of a tug engaging in towing operations, the rate while at anchor was RMB0.18/ kwh while the rate at sea was RMB0.54/ kwh, the rate claimed by the Plaintiff in the present case was obviously exorbitant; 5. the Procedures of the Ministry of Communications of the People’s Republic of China for Collecting Port Charges (International Trade), to prove that the tug rate provided for by the Ministry of Communications of the People’s Republic of China for collecting port charges was RMB0.48 per horse power per hour, the rate claimed by the Plaintiff in the present case was obviously exorbitant; 6. the Procedures of Guangdong Province for Collecting Port Charges, to prove that the rate of port tugs provided for by the Price Bureau and the Communications Department of Guangdong was RMB0.45 per horse power per hour, the rate claimed by the Plaintiff in the present case is obviously exorbitant; 7. the Tug Tariffs published by the Water Emergency Rescue Center of Fuzhou Port, to prove that the tugs’ rate provided for by the Water Emergency Rescue Center of Fuzhou Port was RMB0.48 per horse power per hour, the rate claimed by the Plaintiff in the present case was obviously exorbitant; 8. Civil Judgment (2000) Hai Shang Chu Zi No.558, to prove that as to salvage charges, the ship interests only need to pay a proportion which the salved value of the ship bears to the total salved value. The Defendant Archangelos Investments submitted the following evidence after the court hearing: 1. the particulars of M.V. “Archangelos Gabriel”; 2. the Contingency Plan For Lightering and Refloating M.V. “Archangelos Gabriel” provided by Zhanjiang MSA (hereinafter referred to as “Lightering-Refloating Plan”). The Defendant Alpha & Delta Ocean contend: it was only agent of M.V. “Archangelos Gabriel” and had disclosed the persona of agent to the Plaintiff who in return recognized such persona, and therefore the Plaintiff should have no claim against Alpha & Delta Ocean who should not be liable for any of the claimed charges. The Defendant Alpha & Delta Ocean did not provide any evidential documents. During cross-examination, the two Defendants had no issue with the Plaintiff’s evidence 1, 2, 3, 4, 5, 8, 10, 12, 13, 14, 15, 17, 18 and 19 in terms of authenticity, legality and relevancy, but disagreed with the claimed facts which the aforesaid evidence to show according to the Plaintiff. As to the Plaintiff’s evidence 6, 7, 9, 11 & 16, the Defendants disputed in terms of authenticity, legality and relevancy. As to

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the MSA’s Explanation submitted by the Plaintiff after the court trial, the Defendants argued that it was filed out of time and was not “fresh evidence”, and therefore should not be admitted in evidence. The Plaintiff had no issue with evidence 1 of the Defendant Archangelos Investments in terms of authenticity, legality and relevancy. As to the Defendant’s evidence 2 & 8, the Plaintiff had no objection in terms of authenticity and legality, but disputed in terms of relevancy. As to the Defendant’s evidence 4, 5, 6 & 7, the Plaintiff had no issue in terms of authenticity but disputed in terms of legality and relevancy. As to the Defendant’ evidence 3, the Plaintiff disputed in terms of authenticity, legality and relevancy. As for another two evidence filed by the Defendant Archangelos Investments after the court trial, the Plaintiff only recognized the basic particulars of M.V. “Archangelos Gabriel” and the description of the dangerous situation where the tanker was involved while aground. Upon examination, the collegiate panel admitted all the evidence which was not in dispute in terms of authenticity. The Plaintiff’s evidence 6, which was supplemented by the Plaintiff by the renewed certificate of nationality of “Nan Hai Jiu 201” cross-examined by the two defendants, was also admitted in evidence. The Plaintiff’s evidence 7, 9 & 11 were found to be in conformity with their originals and were thus admitted in evidence as well. The Plaintiff’s evidence 16 was copies whose authenticity could not be affirmed and thus was not admitted in evidence. As to the MSA’s Explanation filed by the Plaintiff after the court trial, the Plaintiff provided its original for verification and thus its authenticity was affirmed. evidence 3 of the Defendant Archangelos Investments was copies whose authenticity could not be affirmed and thus was not admitted in evidence. As for those two evidence filed by the Defendant Archangelos Investments after the court trial, except for such part recognized by the Plaintiff, the remaining part was not admitted in evidence because their authenticity could not be affirmed due to the unavailability of their originals for verification. The above admitted evidence would be further examined by the collegiate panel in combination with the circumstances of the court trial and the circumstances of mutual corroboration. Through further examination on the above admitted evidence in combination with the investigation of the court trial, the collegiate panel found the following facts: M.V. “Archangelos Gabriel” was a Greek-registered oil carrier of 40,682 GRT measuring 228.60 m in LOA, 32.26 in breadth and 20.20 m in depth, owned by Archangelos Investments and operated by Diamlemos Shipping Corporation. While en route from Hong Kong to Qinzhou Port, Guangxi, laden with a cargo of 54,580 M.V. Cabinda crude oil and a crew of 26, M.V. “Archangelos Gabriel” ran aground off the light buoy no. 6 in the northern channel of the Qiongzhou Strait at 0500 h on August 12, 2011 (position: 22°21′7.2″N 110°48′7.8″). The MSA’s Lightering-Refloating Plan records: after grounding, the vessel developed a list of 3 degrees to the port side; cracks were found below the waterline in way of the forepeak tank, resulting in ingress of seawater; the vessel and her cargo were in dangerous condition, creating the possibility of oil spills and a serious threat to the safety of the sea; it was an emergency.

Nanhai Rescue Bureau of the Ministry of Transport v. …

671

After the occurrence, Archangelos Investments immediately authorized their agent Alpha & Delta Ocean to instruct the Plaintiff to dispatch “Nan Hai Jiu 116”, “Nan Hai Jiu 101”, “Nan Hai Jiu 201” and divers to the scene to render, among other things, salvage, sea transport and standby services. As M.V. “Archangelos Gabriel” was unable to take effective action to get refloated, in order to prevent the situation from worsening and to avoid an occurrence of pollution of the sea, Zhanjiang MSA determined that the vessel had to be lightened so as to get refloated and decided to take the compulsory lightering-refloating plan. According to the preliminary lightering-refloating plan provided by the Defendant, Zhanjiang MSA decided its Lightering-Refloating Plan through discussion with the various parties involved. As per the arrangement and coordination of Zhanjiang MSA, on 17, China Shipping Development Co. Ltd – Tanker Company dispatched “Dan Chi” to the scene to lighter the crude oil cargo. On 18, M.V. “Archangelos Gabriel” got refloated successfully with high tide, and afterwards proceeded to and safely arrived at Qinzhou Port, Guangxi, her port of destination. The lightered cargo was carried by “Dan Chi” to the port of destination. During the salvage operations in question, the involvement of the Plaintiff was as follows: After the occurrence of the grounding incident, Archangelos Investments through Alpha & Delta Ocean sent an email with the subject “M.V. Archangelos Gabriel/Grounding at Qiongzhou Strait – Top Top Urgent” stating “according to your experience pls arrange 2 tug boats for rescuing, and agree your quotation”. By an email at 2040 h on 12, Alpha & Delta Ocean sent Letter of Appointment to the Plaintiff which states: In consideration of our oil tanker M.V. “ARCHANGELOS GABRIEL” currently remaining aground in the vicinity of the middle channel of the Qiongzhou Strait, we hereby engage your ships “Nan Hai Jiu 116” and “Nan Hai Jiu 101” to assist M.V. “ARCHANGELOS GABRIEL” in getting refloated, and undertake to pay you for such assistance, be it fruitful or not, as per the rate of RMB3.2 hph for a period counting from the moment your ships become standby at their respective waiting places to the moment they return to those place(s) upon our notification of termination of assistance services. “Nan Hai Jiu 116” and “Nan Hai Jiu 101” are only responsible for towing operations. In case of any accident incurred by M.V. “ARCHANGELOS GABRIEL” during the refloating operations, “Nan Hai Jiu 116” and “Nan Hai Jiu 101” shall not be liable therefor. Further, please send divers to carry out an underwater inspection on M.V. “ARCHANGELOS GABRIEL”. Remuneration for such inspection will be calculated as (1) inland dispatching cost RMB10,000.00; (2) water transportation cost RMB55,000.00; (3) operation charges RMB40,000.00 every eight hours, counting from the moment the divers embark the traffic ship to the moment they get ashore from the traffic ship after completion of the underwater inspection.

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1. Work done by “Nan Hai Jiu 116” “Nan Hai Jiu 116” was a rescue ship of 3,681 GRT with a gross power of 9,000 kw (12,240 BHP) owned by the Plaintiff. The Plaintiff and the Defendants both admitted that the Defendant initially instructed the Plaintiff to dispatch the tugs to render towing assistance to M.V. “Archangelos Gabriel”. However, after arrival at the scene, “Nan Hai Jiu 116” did not carry out the agreed towing operations under the Letter of Appointment but kept standby at the scene in accordance with the Defendants’ instruction because Zhanjiang MSA decided to take the lightering-refloating plan. According to the deck log extracts of “Nan Hai Jiu 116”, from 0745 h on 12th August to 1920 h on August 18, the tug provided standby service to M.V. “Archangelos Gabriel” for a period of 155.58 h. As per the agreed RMB3.2 per horse power per hour under Letter of Appointment, the Plaintiff claimed that the payment for “Nan Hai Jiu 116” should be RMB6,093,757.44. In response, the two Defendants contended that the intention for hiring “Nan Hai Jiu 116” was to carry out towing operations and the agreed rate of RMB3.2 per horse power per hour was subject to towing operations, but in fact the tug stayed standby during the entire salvage operations and never actually engaged in any specific part of the salvage operations. Therefore, the Defendants contended that the cost of the tug could not be calculated at the initially agreed rate. 2. Work done by “Nan Hai Jiu 101” “Nan Hai Jiu 101” was a rescue ship of 4,091 GRT with a gross power of 13,860 kw (18,850 BHP) owned by the Plaintiff. At 0938 h on 12, the Plaintiff sent an email to Alpha & Delta Ocean stating: in regard to the requested second tug, our second tug is “Nan Hai Jiu 101”, please confirm. At 0957 h, Alpha & Delta Ocean replied: pls kindly arrange B/M 2 tug boats to rescue our vessel. At 1519 h, the Plaintiff wrote to Alpha & Delta Ocean: Since the master of M.V. “Archangelos Gabriel” insisted on the opinion of Zhanjiang MSA, and selected to refloat the tanker by lightering the cargo, we suggest that “Nan Hai Jiu 116” stay at the scene while “Nan Hai Jiu 101” return to Guishan Anchorage. Please confirm if you agree to our suggestion. At 1544, Alpha & Delta Ocean replied: Further to our telecom before, we hereby confirm just keep your “Nan Hai Jiu 116” alongside our vessel and cancel for “Nan Hai Jiu 101”. The deck log extracts of “Nan Hai Jiu 101” record: At 0930 on August 12, we received a telephone call from the Dispatching Office requiring our vessel to proceed to render salvage assistance to M.V. “Archangelos Gabriel” grounded off the light buoy #6 in the north channel of the Qiongzhou Strait. Our vessel altered heading to proceed towards the grounding location and reported to the Dispatching Office. At 1515, the Dispatching Office ordered our vessel to slow down and wait for further instruction. At 1550, the Dispatching Office instructed our vessel to return to Guishan Anchorage. At 2305, our vessel arrived at Guishan Anchorage, finished with engine and rudder.

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The Plaintiff and the Defendants both admitted that due to the change of the salvage plan, “Nan Hai Jiu 101” turned back to her anchorage before reaching the grounding location. As per the agreed RMB3.2 per horse power per hour under the Letter of Appointment, the Plaintiff claimed that the payment for “Nan Hai Jiu 101” for the period from 0930 to 2305 h on 12 should be RMB819,145.60. In response, the two defendants contended that: “Nan Hai Jiu 101” got ready for proceeding to the grounding at 0930 h on 12, and started returning at 1550 h as per the Plaintiff’s instruction, and arrived at her anchorage at 2305 h on the same day; the tug had not reached the grounding location and had never actually engaged in a towing operation or other operations; all she spent was travelling time; the Plaintiff’s claim for salvage charges as per the rate of RMB3.2 per horsepower per hour was obviously unfair and extremely unreasonable. 3. Work done by “Nan Hai Jiu 201” “Nan Hai Jiu 201” was a rescue ship of 552 GRT with a gross power of 4,480 kw (6093 BHP) owned by the Plaintiff. On 13 August, the Defendants hired “Nan Hai Jiu 201” to take their two representatives from Haikou to board M.V. “Archangelos Gabriel”. At 0000 h on the same day, the Plaintiff wrote to Alpha & Delta Ocean: Kindly be advised that cost for 6,093BHP “Nan Hai Jiu 201” was RMB1.5/per hour per horse power. And total cost would be calculated based on the time used … Alpha & Delta Ocean replied: As agreed, we hereby confirm that your tug boat “Nan Hai Jiu 201” hired for sending our 2 representatives to board of M.V. Archangelos Gabriel, and upon their embarkation on board of M.V. Archangelos Gabriel, then your “Nan Hai Jiu 201” can return to the base immediately. The deck log extracts of “Nan Hai Jiu 201” record: at 0750 on 13, engine standby, navigation aid tested, prepared to take Owner’s two representatives to board the grounded tanker; at 1135, Owner’s representatives embarked the grounded tanker, our ship remained at the scene awaiting further instruction from the Dispatching Office; at 1218, received instruction from the Dispatching Office that our ship can return; at 1540, alongside the naval wharf, F.W.E., reported to the Dispatching Office. The Plaintiff claimed that the working time of “Nan Hai Jiu 201” was 7.83 h. At 1452 h on 15, Alpha & Delta Ocean wrote to the Plaintiff: Further to telecom a while ago, we would like to hire your “Nan Hai Jiu 201” at 0800 h/16th/Aug/11 to send our divers team/port Capt/surveyor (total 16 persons and dive facilities). Our divers will check the situation on spot if it shall be wait [sic] there for couple hours or not, pls cfm by return. Shall we fix the rate for RMB1.30/HP per hour? At 1600 h, the Plaintiff replied that: in regard to your hiring of our “Nan Hai Jiu 201” for sending your personnel and equipment, the cost remained RMB1.5 per hour per horse power, counting from the time of departure from her anchorage to the time of return to the same anchorage after completion of her job. In addition, this tug would be used as a traffic ship only and will not assist in any diving-related operations.

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At 2002 h, Alpha & Delta Ocean replied: through hard negotiation, ok we agree, pls kindly arrange it without any delay. The deck extracts of “Nan Hai Jiu 201” dated 16 record that: at 0750, engine ready, sea trial; at 1110, arrived at the grounding site; at 1155, personnel and equipment were all safely sent onto the grounded vessel; at 1535, made fast, F.W.E. The Plaintiff claimed that the working time of this tug should be 7.75 h. At 1633 h on 17, Alpha & Delta Ocean wrote to the Plaintiff that: further to out telecom a while ago, finally we need your “Nan Hai Jiu 201” for 1 trips [sic] on 18/ Aug/11 only with departure time of 0200 h/18/AUG/11 to send our captains, surveyors on board of M.V. “Archangelos Gabriel”. Confirm RMB1.5/HP per hour. At 1425 h on 18, the Plaintiff replied that: as per your instruction, the working time used by “Nan Hai Jiu 201” for this operation was 8.83 h. The deck log extracts of “Nan Hai Jiu 201” dated 18 record that: at 0110 on 18, engine ready, tested navigation aid and light; at 0555, arrived at the grounding site; at 0633, personnel and luggage were all safely sent onto the lightering vessel; at 1000, made fast, F.W.E, reported to the Dispatching Office. The Plaintiff claimed that the working time of this tug should be 8.83 h. Basing on the rate of RMB1.5/HP per hour as agreed in the email and the total working time of 24.41 h for the three times of services, the Plaintiff claimed that the payment for “Nan Hai Jiu 201” should be RMB223,095.20. In response, the two Defendants contended that the horse power of “Nan Hai Jiu 201”, which was 6093, was just too big for her as a traffic ship, so apparently, it could be seen that the Plaintiff wanted to take advantage to charge more by sending such a high-powered vessel. Besides, the two Defendants did not confirm the authenticity of the deck log extracts, arguing that the entries therein had been modified arbitrarily by the Plaintiff. But the Defendants did not produce evidence in this respect. 4. Work done by the divers At 0957 h on 12, Alpha & Delta Ocean wrote to the Plaintiff that: Pls kindly arrange B/M 2 tug boats to rescue our vessel and also in order to make sure there is no serious damage to our vessel, pls kindly arrange diver to inspect the grounding on mud or rock. At 1554 h, Alpha & Delta Ocean wrote to China Ocean Shipping Agency Zhanjiang, agent of M.V. “Archangelos Gabriel”: Nanhai Rescue Bureau’s rescue team with diver just left their base around 1500 h and will arrive alongside around 1730 h today to carry out diver inspection of water area. We hereby kindly nominate your good firm as owner’s agent to cooperate with Zhanjiang MSA to carry out rescue and arrange our vessel’s further proceeding to Qinzhou. At 1808 h on 13, the Plaintiff wrote to Alpha & Delta Ocean: please confirm the working time used by the divers for the rescue of M.V. “Archangelos Gabriel” as follows: Time of embarking the traffic ship: 1500 h on 12; Time of disembarking the traffic ship: 2300 h on 12; Total working time used by the divers: 8 h.

Nanhai Rescue Bureau of the Ministry of Transport v. …

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Meanwhile, the said email also listed the working hours of “Nan Hai Jiu 101” on 12 and “Nan Hai Jiu 201” on 13. At 1935 h, Alpha & Delta Ocean replied: Thanks a lot for your great efforts, wud u pls kindly reduce a bit. Pls see our comments asfs: 1. Nanhaijiu 101 cancellation fee: HP * 3.2 * 8 h (0930–1530 h); 2. Diver cancellation fee: RMB100,000.00; and 3. Nanhaijiu 201 DD 13/AUG/11: RMB55,000.00. At 2033 h, the Plaintiff replied that: the working times used by “Nan Hai Jiu 101”, “Nan Hai Jiu 201” and the divers, as mentioned in the previous emails, were the times that actually used for this salvage service. We are sorry that your requests in the said email are not acceptable to us. The Plaintiff claimed that the cost of the divers should be RMB105,000, basing on the Letter of Appointment which agrees that the inland dispatching cost shall be RMB10,000, water transportation cost shall be RMB55,000 and operation charges shall be RMB40,000 per 8 h. In response, the two Defendants pointed out that the charges for preparation and mobilization of the divers and the equipment have been covered by the said land dispatching cost and water transportation fee, and that the operation charges, namely RMB40,000 per 8 h, only refer to such charges for actual underwater inspection. Since no underwater inspection has been actually carried out by the divers, the Plaintiff should not be entitled to such kind of charges. The Plaintiff confirmed that the divers did not conduct any actual underwater inspection. 5. Other facts in relation to the cost of “Nan Hai Jiu 116” and “Nan Hai Jiu 101”: The Defendants submitted in Cross-examination Opinions on the MSA’s Explanation that before 0933 h on 12, the Defendant planned to seek towing assistance to refloat the grounded tanker and thus requested the Plaintiff to dispatch “Nan Hai Jiu 116” and “Nan Hai Jiu 101” to the scene to carry out the towing operations. However, by not later than 1425 h on 12, the Defendant had decided to change the refloating plan to “the Lightering-Refloating Plan” and had put the Plaintiff on proper notice accordingly, which can also be shown in the deck log extracts of “Nan Hai Jiu 116”. At 1452 h on 15, Alpha & Delta Ocean wrote to the Plaintiff about the cost: 1. For “Nan Hai Jiu 116” which used from 0740 h/12/Aug/11 till now our insurance kindly ask you to reduce a bit and try to fix it for RMB2.90/HP per hour. 2. For “Nan Hai Jiu 101” which was canceled on 12/Aug/11 due to Zhanjiang MSA’s instruction, pls kindly reduce a bit and give your best offer. 3. For dive work which was canceled on 12/Aug/11 due to time limit, pls kindly reduce a bit and confirm RMB100,000.00 as lumpsum. 4. Tugboat “Nan Hai Jiu 201” hiring for sending our 1 representative on board on 13/Aug/11, we hereby confirm RMB55,000.00. 5. We would like to hire your “Nan Hai Jiu 201” at 0800 h/16/Aug/11 to send our divers team/port capt./surveyor. Shall we fix the rate for RMB1.30/HP per hour?

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At 1600 h, the Plaintiff replied to confirm receipt of the said email and wrote: The rate for “Nan Hai Jiu 201” which you intended to hire tomorrow morning as a traffic ship to send relevant personnel and equipment shall remain to be RMB1.5/ HP per hour. Besides, as for other cost accruing due to the salvage operation effected to M.V. ‘Archangelos Gabriel’, we can discuss it later. The Defendants contended in the written cross-examination opinions that, according to the practice in the industry of towing salvage, the cost for standby service was only half of the cost for towing service at most. In addition, to prove the unreasonableness of the tug rate claimed by the Plaintiff, the Defendant provided three reference standards for the calculation of tug costs, which were: (1) the Procedures of the Ministry of Communications of the People’s Republic of China for Collecting Salvage Charges on International Passage which provide that the rate for towing service by a vessel of 6,651 KW was RMB0.54/KW per hour; (2) the Procedures of the Ministry of Communications of the People’s Republic of China for Collecting Port Charges (International Trade) which provided that the standard rate for harbor towing service was RMB0.48/HP per hour; (3) the Procedures of Guangdong Province for Collecting Port Charges which provided that the standard rate for harbor towing service was RMB0.45/HP per hour. As to the applicable law in this case, the parties concerned all select Chinese law as the applicable law for the addressing of substantive issues in this case. As to the litigation requests, the Plaintiff asserted that Archangelos Investments had confirmed that Alpha & Delta Ocean were acting on the behalf of Archangelos Investments at all material times, and therefore submitted that Alpha & Delta Ocean need not to be held liable. The court holds that this case is the dispute over salvage contract. According to the provisions of Article 26 of the Some Provisions of the Supreme People’s Court on the Scope of Cases to be Entertained by Maritime Courts, this case shall be under the exclusive jurisdiction of the maritime courts. The place where the vessel involved was salved falls with the jurisdiction of the court and thus, in accordance with the provisions of Article 31 of the Civil Procedure Law of the People’s Republic of China, the court shall have jurisdiction over this case. This case is a foreign-related one as Archangelos Investments is a Greek-incorporated company and M.V. “Archangelos Gabriel” a Greek-registered tanker. Since the litigants all agreed during the court trial that Chinese law be applicable, according to Article 3 of the Law of the Application of Law for Foreign-related Civil Relations, Chinese law shall be the applicable law for the addressing of substantive issues in this case. The main issues to be addressed in this case are as follows: 1. Whether there was a salvage contract between the Plaintiff and Archangelos Investments After occurrence of the grounding accident, Archangelos Investments, through its agent Alpha & Delta Ocean, requested the Plaintiff via email to dispatch two tugs to render salvage service according to its experience and agreed to accept the

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Plaintiff’s quotation for such service. Moreover, Archangelos Investments also instructed Alpha & Delta Ocean to issue Letter of Appointment by email to the Plaintiff to agree on, among other things, the tugs and manpower (divers) needed as well as the standard for the calculation of charges for the salvage operation. As per the said agreement, the Plaintiff dispatched “Nan Hai Jiu 116”, “Nan Hai Jiu 101”, “Nan Hai Jiu 201” as well as divers to the scene to render, among other things, salvage, sea transportation, standby services. Judging from the MSA’s Lightering-Refloating Plan and the related emails from Alpha & Delta Ocean describing the dangers involving M.V. “Archangelos Gabriel”, the two defendants were well aware of the dangerous situation at that time. Meanwhile, from the emails exchanged between Alpha & Delta Ocean and the Plaintiff, it can be seen that both parties had fully discussed the issue on the related costs. Therefore, there were no “substantial misunderstandings” or “being taken advantage” circumstances as argued by the two Defendants. In accordance with Article 175 Paragraph 1 of the Maritime Code of the People’s Republic of China (hereinafter referred to as the Maritime Code), which states that “a contract for salvage operations at sea is concluded when an agreement has been reached between the salvor and the salved party regarding the salvage operations to be undertaken”, the salvage contract has been duly reached between the Plaintiff and Archangelos Investments. Such contract did not violate any compulsory provisions provided for by the current laws and administrative regulations of the People’s Republic of China and thus shall be legally effective and be performed by both parties. 2. Whether to add china oil as a third party to participate in these proceedings Archangelos Investments submit that the claimed charges fall within the category of general average expenditure which should be contributed for by both the vessel and the cargo and that China Oil has an interest in terms of law in the outcome of these proceedings. Therefore, they applied to add China Oil as a third party to participate in these proceedings. Archangelos Investments made the said application on the grounds of “peril the ship and the goods involved in a common maritime adventure”, thus, the salvage reward claimed by the Plaintiff shall, according to the provisions of Article 83 of the Maritime Code, be paid by the owners of the salved ship and other property in accordance with the respective proportions which the salved values of the ship and other property bear to the total salved value. It was basing on the salvage contract relation that the Plaintiff claimed on Archangelos Investments for salvage charges at the agreed rate under the contract. The legal relation involved in this present dispute is different from the one involved in the claim of Archangelos Investments for the general average contribution. Therefore, the court holds that there is no need to involve the cargo owner to the present proceedings as a third party, and thus the submission of Archangelos Investments in this regard is rejected.

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3. Whether the salvage service rendered by the plaintiff meets the requirement for constituting salvage at sea (1) The subject matter salved is recognized by law The subject matter salved was M.V. “Archangelos Gabriel”, which was a ship as referred to in Article 3 of the Maritime Code, and a subject of salvage as recognized by law. (2) M.V. “Archangelos Gabriel” was in distress at sea As recorded in the MSA’s Lightering-Refloating Plan, after grounding, both M.V. “Archangelos Gabriel” and the cargo carried onboard were in distress, which was likely to lead to marine pollution and posted a threat to the safety of the marine environment, constituting an urgent situation. At the meantime, the subject of the emails from Alpha & Delta Ocean to the Plaintiff was “M.V. Archangelos Gabriel/ Grounding at Qiongzhou Strait–Top Urgent”, from which, it can be seen that the both defendants have been aware of the dangerous situation M.V. “Archangelos Gabriel” involved. Therefore, the distress which “Archangelos Gabriel” was in shall be affirmed to be objectively existed. 4. The salvage operations were actually and voluntarily conducted by the Plaintiff It is found that the Plaintiff dispatched “Nan Hai Jiu 116”, “Nan Hai Jiu 101”, “Nan Hai Jiu 201” and divers to the scene to render, among other things, sea transportation and standby services. The said services were of great importance to the successful refloating of M.V. “Archangelos Gabriel”. “Nan Hai Jiu 116”, though did not carry out the towing operation as per the initial plan, kept stand-by on the spot as per the arrangement of the owner of M.V. “Archangelos Gabriel” until the grounded tanker got refloated. Besides, no specific form of salvage operation has been provided for by the Maritime Code of the People’s Republic of China. Therefore, the said operations carried out by the Plaintiff shall be deemed as the salvage operations. During the salvage operations when the salvor-salved nexus was created, the actions and inactions of both the Plaintiff and Archangelos Investments were voluntary, showing no conditions that shall not be entitled to remuneration as referred to in Article 186 of the Maritime Code. Therefore, the salvage operations in this case were voluntary. 5. The salvage operations have achieved useful result Judging from the process of the entire salvage operations, it can be seen that the salvage operations were a success, for M.V. “Archangelos Gabriel” has successfully been refloated and all the crew as well as the cargo have been finally reached Qinzhou Port safely. As such, the salvage operations were useful. In conclusion, the salvage services rendered by the Plaintiff meet the requirement for constituting salvage at sea and have a useful result, hence, the Plaintiff shall be entitled to a reward, in accordance with Article 179 of the Maritime Code which states that “where the salvage operations rendered to the distressed ship and other property have had a useful result, the salvor shall be entitled to a reward. Except as

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otherwise provided for by Article 182 of this Code or by other laws or the salvage contract, the salvor shall be entitled to the payment if the salvage operations have had no useful result.” 6. The quantum of the claimed salvage charges and interest First of all, about the amount to be awarded to “Nan Hai Jiu 201”. “Nan Hai Jiu 201” has a gross power of 6093HP. As to the time used by this tug in the salvage operations, the Plaintiff’s submission of 24.41 h is in conformity with the relevant entries in the tug’s deck log extracts whose originals were also made available by the Plaintiff for verification. Even though the two defendants argued that the deck log entries had been arbitrarily modified by the Plaintiff, they failed to provide evidence to support their argument in this regard. Thus, the Plaintiff’s submission in respect of this tug’s working hours is upheld by the court. The Plaintiff submitted that the cost of the tug should be RMB1.5 per horse power per hour, but the Defendants rejected it. However, the foregoing rate finally has been confirmed by both parties as can be seen in the emails exchanged between them. Even though the Defendant at 1452 h on 15 requested the Plaintiff to reduce the rate to RMB1.3 per horse power per hour via email, it was declined by the Plaintiff and later on at 2002 h on 15, the Defendant replied that, “upon hard negotiation, we accept your quotation and please arrange accordingly”. Meanwhile, the Defendant in the email timed at 1633 h on 17 also made confirmation on the rate of RMB1.5 per horse power per hour for “Nan Hai Jiu 201”. It can thus be seen that the rate was fixed upon sufficient negotiation between the parties concerned and shall be binding upon both parties. Therefore, the Plaintiff’s submission in this respect is upheld by the court. As such, upon calculation basing on the gross power of “Nan Hai Jiu 201” of 6,093HP, the working time used for the salvage of 24.41 h and the rate of RMB1.5 per horse power per hour, the salvage remuneration payable to “Nan Hai Jiu 201” in the amount of RMB223,095.20 for the salvage service she rendered shall be upheld by the court. Secondly, about the cost of the divers. The two Defendants confirmed that the divers left from the base at 1500 h on 12 and also confirmed the inland dispatching cost of RMB10,000 and the water transportation cost of RMB55,000. However, they argued that the Plaintiff should not be entitled to the underwater inspection charges of RMB40,000 per 8 h on the grounds that the divers had never actually carried out any underwater inspection at all. From Letter of Appointment from the Defendants to the Plaintiff, it can be seen that the cost of the divers consists of three parts including inland dispatching cost, water transportation cost and operation charges, which as agreed shall be calculated from the time the divers embark the traffic ship to the time of disembarkation after the operation is completed. According to the said agreement, even though the divers did not conduct the actual underwater inspection, if they embarked on the traffic ship, the Defendant shall pay the underwater inspection charges for the divers to the Plaintiff as agreed. Thus the Defendants’ argument mentioned above shall not be upheld by the court. As to the working time, it should start courting the time the

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divers boarded the vessel, and basing on the agreement on the rate which was RMB40,000 per 8 h in the Letter of Appointment and considering that such working time claimed by the Plaintiff was not in excess of eight hours, the amount which Archangelos Investments shall pay to the Plaintiff in this respect is RMB40,000. In consideration of the above, with respect to the cost for the divers, Archangelos Investments shall pay a sum of RMB105,000 which covers the land dispatching cost, water transportation cost and operation charges to the Plaintiff. Thirdly, about the salvage charges payable to “Nan Hai Jiu 116” and “Nan Hai Jiu 101”. The gross powers of “Nan Hai Jiu 116” and “Nan Hai Jiu 101” are 12,240HP and 18,850HP respectively. As to the time used by these two tugs in the salvage operations, the Plaintiff’s submission of 155.58 h and 135.58 h respectively, 24.41 h is in conformity with the relevant entries in the tugs’ deck log extracts whose originals were also made available by the Plaintiff for verification. The Plaintiff’s aforesaid submission was not in dispute and thus upheld by the court. According to Letter of Appointment, “Nan Hai Jiu 116” and “Nan Hai Jiu 101” should be responsible for towing operations only and the cost thereof shall be RMB3.2 per horse power per hour. However, in fact, due to the change of the salvage plan, “Nan Hai Jiu 116” only kept stand-by on the sport as per the instructions of the ship interests, while “Nan Hai Jiu 101” turned back before she reached the grounding location. Thus, neither the tugs actually rendered towing services to M.V. “Archangelos Gabriel”. Even though Article 180 of the Maritime Code stipulates that, “the reward shall be fixed with a view to encouraging salvage operations, at the same time, it stipulates that, the reward shall be fixed by taking into full account the following criteria: … (6) time used and expenses and losses incurred by the salvors; (7) risk of liability and other risks run by the salvors or their equipment, etc.”. In practical work, on the part of the salvor, the cost consumption, technology requirement and risk of liability involved in the stand-by work are different from those involved in the towing operations. In accordance with Article 176 Paragraph 2 of the Maritime Code, “where the payment under the salvage contract is in an excessive degree too large or too small for the services actually rendered, the contract may be modified by a judgment of the court which has entertained the suit brought by either party, or modified by an award of the arbitration organization to which the dispute has been submitted for arbitration upon the agreement of the parties.” Therefore, the collegiate panel agree that, since “Nan Hai Jiu 116” and “Nan Hai Jiu 101” did not render actual salvage service as originally agreed, the rate of RMB3.2 per horse power per hour for the two tugs under Letter of Appointment as claimed by the Plaintiff is excessively high, and in light of that the Defendants have raised objection thereto, the claimed rate should be adjusted. With respect to the three reference standards for the calculation of such rate that were proposed by the Defendants, the first one has been abolished, the second and third ones apply to the harbor towing services only, which shall not be applicable to this case since the salvage involved did not take place on the harbor. Thus, the suggestion for modifying the rate proposed by the Defendants was not adopted.

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As to the adjustment of the tugs’ rate, the collegiate panel holds two different opinions. The opinion of the majority is that: the two tugs’ rate should be adjusted to RMB2.9 per horsepower hour, on the grounds that although the rate agreed under the letter of appointment issued by the Defendant to the Plaintiff was RMB3.2 per horsepower hour, the Defendant subsequently kept asking the Plaintiff through emails to adjust that rate; the Plaintiff replied by email that “as for other cost accruing due to the salvage operation effected to M.V. ‘Archangelos Gabriel’, we can discuss it later”. From this, it can be seen that the Plaintiff at that time left room for adjustment to the rate. The Defendant had decided to alter the refloating plan to “by lightering” by 1425 h on August 12, and had put the Plaintiff on notice of this alteration. However, in an email to the Plaintiff later on August 15, the Defendant asked if the rate for “Nan Hai Jiu 116” could be adjusted to RMB2.9 per horsepower hour. From this, it is apparent that after the Defendant had decided to adopt the “by lightering” plan and after it had been clear “Nan Hai Jiu 116” needed not to render towing service, the Defendant was still willing to hire the Plaintiff’s tugs at the rate of RMB2.9 per horsepower hour. This was the true intention of the Defendant on the hire of the Plaintiff’s tugs after the refloating plan had been altered and no “alterable or cancelable” circumstances as contended by the Defendant existed. Furthermore, the determination of that rate complied with the principle of “to encourage salvage” under the Maritime Code of the People’s Republic of China. Therefore, the adjusted rate of RMB2.9 per horsepower hour for “Nan Hai Jiu 116” and “Nan Hai Jiu 101” should be a reasonable rate. The opinion of the minority is that: considering the costs incurred by “Nan Hai Jiu 116” and “Nan Hai Jiu 101” as a result of the operations they actually performed in the present case and the risks taken, in combination with the tariff standard of “Nan Hai Jiu 201” and the salvage reward actually obtained by “Dan Chi” which carried out the lightering operations, the rate for “Nan Hai Jiu 116” and “Nan Hai Jiu 101” should be adjusted to RMB1.5 per horsepower hour. As the two opinions of the collegiate panel differ quite substantially, with approval from the Court’s president, this case was submitted to the Court’s Adjudication Committee for further deliberation. The Adjudication Committee agreed with the addressing opinion of the majority regarding adjustment of the tugs’ rate, but allowed the collegiate panel to decide a specific figure. In accordance with the majority rule, the rate for “Nan Hai Jiu 116” and “Nan Hai Jiu 101” is thus adjusted to RMB2.9 per horsepower hour. Accordingly, the salvage charges of “Nan Hai Jiu 116” is calculated to RMB5,522,467.68 and “Nan Hai Jiu 101” to RMB742,350.70. In total, the salvage charges awarded to “Nan Hai Jiu 116”, “Nan Hai Jiu 101”, “Nan Hai Jiu 201” and the diving team altogether amount to RMB6,592,913.58. As to the interest on the salvage reward claimed by the Plaintiff, the Plaintiff and the Defendant had neither concluded an agreement nor afterwards reached a supplementary agreement on the period for payment of salvage reward which also cannot be determined in accordance with relevant contract terms or transaction practice, thus, according to Article 62 of the Contract Law of the People’s Republic of China, which

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states that “if the time of performance was not clearly prescribed, the obligor may perform, and the obligee may require performance, at any time, provided that the other party shall be given the time required for preparation”, the Plaintiff shall give Archangelos Investments E.N.E the time necessary to prepare payment of the salvage reward. The reasonable time for such preparation should appropriately be determined as two months after the completion of the salvage service. As such, the interest on the salvage reward in this case shall be calculated from October 19, 2011 to the date of payment under this judgment, at the current fund loan interest rate for the corresponding period promulgated by the People’s Bank of China. In consideration of the above, according to Article 175 Paragraph 1, Article 176 Paragraph 2, Article 179 and Article 180 of the Maritime Code of the People’s Republic of China, upon discussion by the Adjudication Committee, the judgment is as follows: 1. The Defendant Archangelos Investments E.N.E shall pay RMB6,592,913.58 for the salvage reward to the Plaintiff Nanhai Rescue Bureau of the Ministry of Transport, together with the interest thereon from October 19, 2011 to the date of payment under this judgment at the current fund loan interest rate for the corresponding period promulgated by the People’s Bank of China; 2. Other claims of the Plaintiff Nanhai Rescue Bureau of the Ministry of Transport shall be rejected. The obligations with respect to pecuniary payment as aforesaid shall be fulfilled within 10 day after this judgment comes into effect. If the obligations with respect to pecuniary payment failed to be fulfilled within the period specified in this judgment, according to the provisions of Article 253 of the Civil Procedure Law of the People’s Republic of China, double interest on the debt shall be paid for the belated payment. Court acceptance fee in amount of RMB65,822, RMB9,591 shall be born by the Plaintiff, RMB56,231 shall be born by the Defendant Archangelos Investments E. N.E. The part payable by the Defendant Archangelos Investments E.N.E shall be paid directly by it to the Plaintiff, and in such case, the court will not pay back the litigation fee which should be refunded to the Plaintiff. The Plaintiff and the Defendant Alpha & Delta Ocean Limited Shanghai Representative Office shall within 15 days after the date on which this judgment was served, while the Defendant Archangelos Investments E.N.E shall within 30 days, in case of refusal to accept this judgment, file an appeal to the Guangdong High People’s Court by submitting an appeal petition to the court with copies provided according to the number of other parties involved in the case. Presiding judge: WEN Jing Acting Judge: YANG Yousheng Acting Judge: CHEN Zhenqing March 18, 2014 Clerk: HUANG Mingdian

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Guangdong High People’s Court Civil Judgment Nanhai Rescue Bureau of the Ministry of Transport v. Archangelos Investments E.N.E et al. (2014) Yue Gao Fa Min Si Zhong Zi No.117 Related Case(s) This is the judgment of second instance, and the judgment of first instance and the judgment of retrial are on page 665 and page 710 respectively. Cause(s) of Action 227. Dispute over salvage contract. Headnote Modifying lower court order awarding the Plaintiff salvor salvage remuneration, replacing salvage reward with amount based on terms of salvage contract. Summary The Defendants were bunker suppliers whose ship ran aground during a journey, resulting in a threat to marine pollution. They instructed the Plaintiff to provide them salvage service. The Defendants argued the Plaintiff’s salvage operation disobeyed their agreed upon salvage plan. The court of first instance found that the ship was in peril and the Plaintiff voluntarily conducted the salvage operation under the maritime law, though the towing operation was not the initially agreed upon salvage plan. Thus, the Plaintiff was entitled to remuneration. The Defendant Archangelos Investments appealed. The appellate court held that remuneration should be based on rates agreed in the salvage contract rather than a “no cure, no pay” agreement. Therefore the court corrected the trial court judgment and rejected the remaining claims of the Appellant.

Judgment The Appellant (the Defendant of First Instance): Archangelos Investments E.N.E. Address: 29 Drossopoulou Street, 112 57 Athens, Greece. Legal representative: George Balabanos. Agent ad litem: HUANG Hui, lawyer of Huang & Huang Co. Agent ad litem: XIANG Wei, lawyer of Huang & Huang Co.

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The Respondent (the Plaintiff of First Instance): Nanhai Rescue Bureau of the Ministry of Transport Address: 42 Binjiang W. Road, Guangzhou, Guangdong, the People’s Republic of China. Legal representative: LIN Zhihao, director. Agent ad litem: ZHAO Shuzhou, lawyer of Wang Jing & Co. Agent ad litem: GUAN Jian, lawyer of Wang Jing & Co. The Defendant of First Instance: Alpha & Delta Ocean Limited Shanghai Representative Office. Address: Rm. 610, Jinzhong Building #1, 680 Zhao Jia Bang Road, Xuhui District, Shanghai, the People’s Republic of China. Person in charge: HE Xijun, chief representative. Agent ad litem: HUANG Hui, lawyer of Huang & Huang Co. Agent ad litem: GUO Xiangcheng, male, Han, born on December 14, 1941, living in Yuexiu District, Guangzhou, Guangdong. The Appellant Archangelos Investments E.N.E (hereinafter referred to as “Archangelos Investments”) refused to accept Civil Judgment (2012) Guang Hai Fa Chu Zi No.898 made by Guangzhou Maritime Court with respect to the case arising from dispute over salvage contract with the Respondent Nanhai Rescue Bureau of the Ministry of Transport (hereinafter referred to as “NRB”) and Alpha & Delta Ocean Limited Shanghai Representative Office (hereinafter referred to as “Alpha & Delta Ocean”) and thus filed an appeal with the court. The court formed a collegiate panel according to the law to hear the appeal. Agents ad litem of the Appellant, HUANG Hui and XIANG Wei, agents ad litem of the Respondent NRB, ZHAO Shuzhou and GUAN Jian, and agent ad litem of the Defendant of first instance, HUANG Hui, attended the investigation of second instance. The case now has been concluded. NRB in first instance alleged that: Archangelos Investments was the owner of M. V. “Archangelos Gabriel”, and Alpha & Delta Ocean was the agent of Archangelos Investments. On August 12, 2011, M.V. “Archangelos Gabriel” ran aground off the middle channel of the Qiongzhou Strait. Archangelos Investments engaged NRB to render salvage assistance to the vessel. As per Archangelos Investments’ instructions, NRB dispatched three tugs, respectively “Nan Hai Jiu 116”, “Nan Hai Jiu 101”, “Nan Hai Jiu 201”, and divered to the scene to render, among other things, salvage, sea transport and standby services which commenced on August 12 and were completed on 18th August. In accordance with the agreement reached between the two parties, the salvage charges accruing amounted to RMB7,240,998.24 in total. On August 19, NRB informed Archangelos Investments of the calculation of the salvage charges and has on many occasions thereafter urged Archangelos Investments to effect payment, but Archangelos Investments had not paid anything so far. Therefore, NRB requested the court to order Archangelos Investments and Alpha & Delta Ocean to pay, jointly and severally, (1) the outstanding salvage charges in the amount of RMB7,240,998.24; (2) interest running from August 20,

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2011 to the day of payment (temporarily amounting to RMB476,449.64 by August 19, 2012 at the loan interest rate for the corresponding period promulgated by the People’s Bank of China); (3) the court cost. NRB submitted the following evidence within the time limit in the first instance for adducing evidence: (1) Letter of Appointment; (2) Certificates of Nationality of “Nan Hai Jiu 101”, “Nan Hai Jiu 201” and “Nan Hai Jiu 116”; (3) deck log books of “Nan Hai Jiu 101”, “Nan Hai Jiu 201” and “Nan Hai Jiu 116”; (4) the salvage report; and (5) Lawyer’s Letter and (6) emails exchanged between NRB and Alpha & Delta Ocean. Archangelos Investments in first instance alleged that: (1) there was no agreement between NRB and Archangelos Investments on the cost of the tugs and the divers, the agent of M.V. “Archangelos Gabriel” never gave confirmation or reached any final agreement with NRB on an effective rate; (2) the rate of RMB3.2 per horse power per hour claimed by NRB applied to towing operations only; in the circumstances that the content of the tugs’ service had been changed to standby service, the agreed rate ceased to apply accordingly; (3) the claimed tug rate and salvage charges are too exorbitant compared with the service actually provided, and thus shall be altered in accordance with the law; (4) NRB had failed to fully disclose the necessary information of the tugs to the owner of M.V. “Archangelos Gabriel”, causing the owner of M.V. “Archangelos Gabriel” to have substantial misunderstandings on the rate offered by NRB, and therefore such rate shall be altered or rescinded; (5) the tug rate offered by NRB was significantly higher than such generally applied rates for towing service; what’s more, NRB dispatched tugs with such large horse power as to far exceeding the one actually needed, which suggests that NRB simply disregarded the actual situation and took advantage of M.V. Archangelos Gabriel difficulties, and therefore the claimed tug rate should be altered or rescinded in accordance with the law; (6)NRB hasn’t provided any material salvage service, and therefore has no right to claim any “no-cure no-pay” salvage reward; (7) as to NRB’s claim for salvage charges, the proportion to be contributed by the owners of M.V. “Archangelos Gabriel” shall be limited to the proportion which the salved value of the vessel bears to the total salved value. In addition to the foregoing, Archangelos Investments filed a request in written for adding the consignee of the cargo laden onboard M.V. “Archangelos Gabriel” at the material time, namely China National United Oil Corporation (hereinafter referred to as “China Oil”) to participate in the present proceedings as a third party, on the grounds that the claimed charges fall within the category of general average expenditure which should be contributed for by both the vessel and the cargo and that China Oil had an interest in terms of law in the outcome of these proceedings. Archangelos Investments submitted the following evidence within the time limit in the first instance for adducing evidence: (1) emails exchanged between NRB and Alpha & Delta Ocean; (2) email message showing the rate charged by NRB for “Nan Hai Jiu 115” dispatched to provide salvage service on another occasion; (3) documents regarding the cost of the tugs “Zhan Gang Tuo 503” and “Zhan Gang Tuo 504” involving in other salvage operations; (4) the Procedures of the Ministry of Communications of the People’s Republic of China for Collecting

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Salvage Charges on International Passage; (5) the Procedures of the Ministry of Communications of the People’s Republic of China for Collecting Port Charges (International Trade); (6) the Procedures of Guangdong Province for Collecting Port Charges; (7) the Tug Tariffs published by the Water Emergency Rescue Center of Fuzhou Port; (8) Civil Judgment (2000) Hai Shang Chu Zi No.558; (9) the particulars of M.V. “Archangelos Gabriel”; (10) the Contingency Plan For Lightering and Refloating M.V. “Archangelos Gabriel” provided by Zhanjiang MSA (hereinafter referred to as “Lightering-Refloating Plan”). Alpha & Delta Ocean in the first instance contended that: it was only the agent of M.V. “Archangelos Gabriel” and had disclosed the persona of agent to NRB who in return recognized such persona, and therefore NRB should have no claim against Alpha & Delta Ocean who shall not be liable for any of the claimed charges. Alpha & Delta Ocean in the first instance did not provide any evidential documents. The court of first instance found the following facts: M.V. “Archangelos Gabriel” was a Greek-registered oil carrier of 40,682 GRT measuring 228.60 m in LOA, 32.26 in breadth and 20.20 m in depth, owned by Archangelos Investments and operated by Diamlemos Shipping Corporation. While en route from Hong Kong to Qinzhou Port, Guangxi, laden with a cargo of 54,580 M.V. Cabinda crude oil and a crew of 26, M.V. “Archangelos Gabriel” ran aground off the light buoy No.6 in the northern channel of the Qiongzhou Strait at 0500 h on August 12, 2011 (position: 22°21′7.2″N 110°48′7.8″). The MSA’s Lightering-Refloating Plan recorded that: after grounding, the vessel developed a list of 3 degrees to the port side; cracks were found below the waterline in way of the forepeak tank, resulting in ingress of seawater; the vessel and her cargo were in dangerous condition, creating the possibility of oil spills and a serious threat to the safety of the sea; it was an emergency. After the occurrence, Archangelos Investments immediately authorized their agent Alpha & Delta Ocean to instruct NRB to dispatch “Nan Hai Jiu 116”, “Nan Hai Jiu 101”, “Nan Hai Jiu 201” and divers to the scene to render, among other things, salvage, sea transport and standby services. As M.V. “Archangelos Gabriel” was unable to take effective action to get refloated, in order to prevent the situation from worsening and to avoid an occurrence of pollution of the sea, Zhanjiang MSA determined that the vessel had to be lightened so as to get refloated and decided to take the compulsory lightering-refloating plan. According to the preliminary lightering-refloating plan provided by Archangelos Investments, Zhanjiang MSA decided its Lightering-Refloating Plan through discussion with the various parties involved. As per the arrangement and coordination of Zhanjiang MSA, on August 17, China Shipping Development Co. Ltd – Tanker Company dispatched the tanker “Dan Chi” to the scene to lighter the crude oil cargo. On 18, M.V. “Archangelos Gabriel” got refloated successfully with high tide, and afterwards proceeded to and safely arrived at Qinzhou Port, Guangxi, her port of destination. The lightered cargo was carried by “Dan Chi” to the port of destination.

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During the salvage operations in question, the involvement of NRB was as follows: After the occurrence of the grounding incident, Archangelos Investments through Alpha & Delta Ocean sent an email with the subject “MT Archangelos Gabriel/Grounding at Qiongzhou Strait – Top Top Urgent” stating “according to your experience pls arrange 2 tug boats for rescuing, and agree your quotation”. By an email at 2040 h on 12, Alpha & Delta Ocean sent Letter of Appointment to NRB which states: In consideration of our oil tanker M.V. “ARCHANGELOS GABRIEL” currently remaining aground in the vicinity of the middle channel of the Qiongzhou Strait, we hereby engage your ships “Nan Hai Jiu 116” and “Nan Hai Jiu 101” to assist M.V. “ARCHANGELOS GABRIEL” in getting refloated, and undertake to pay you for such assistance, be it fruitful or not, as per the rate of RMB3.2 hph for a period counting from the moment your ships become standby at their respective waiting places to the moment they return to those place(s) upon our notification of termination of assistance services. “Nan Hai Jiu 116” and “Nan Hai Jiu 101” are only responsible for towing operations. In case of any accident incurred by M.V. “ARCHANGELOS GABRIEL” during the refloating operations, “Nan Hai Jiu 116” and “Nan Hai Jiu 101” shall not be liable therefor. Further, please send divers to carry out an underwater inspection on M.V. “ARCHANGELOS GABRIEL”. Remuneration for such inspection will be calculated as: (1) inland dispatching cost RMB10,000.00; (2) water transportation cost RMB55,000.00; (3) operation charges RMB40,000.00 every eight hours, counting from the moment the divers embark the traffic ship to the moment they get ashore from the traffic ship after completion of the underwater inspection. 1. Work done by “Nan Hai Jiu 116” “Nan Hai Jiu 116” was a rescue ship of 3,681 GRT with a gross power of 9,000 kw (12,240 BHP) owned by NRB. NRB and Archangelos Investments both admitted that Archangelos Investments initially instructed NRB to dispatch the tugs to render towing assistance to M.V. “Archangelos Gabriel”. However, after arrival at the scene, “Nan Hai Jiu 116” did not carry out the agreed towing operations under the Letter of Appointment but kept standby at the scene in accordance with Archangelos Investments’ instructions because Zhanjiang MSA decided to take the lightering-refloating plan. According to the deck log extracts of “Nan Hai Jiu 116”, from 0745 h on August 12 to 1920 h on August 18, the tug provided standby service to M.V. “Archangelos Gabriel” for a period of 155.58 h. As per the agreed RMB3.2 per horse power per hour under Letter of Appointment, NRB claimed that the payment by Archangelos Investments for “Nan Hai Jiu 116” should be RMB6,093,757.44. Archangelos Investments and Alpha & Delta Ocean contended that the intention for hiring “Nan Hai Jiu 116” was to carry out towing operations and the agreed rate of RMB3.2 per horse power per hour was subject to towing operations, but in fact the tug stayed standby during the entire salvage operations and never actually engaged in any specific part of the salvage operations. Therefore, the cost of the tug could not be calculated at the initially agreed rate.

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2. Work done by “Nan Hai Jiu 101” “Nan Hai Jiu 101” was a rescue ship of 4,091 GRT with a gross power of 13,860 kw (18,850 BHP) owned by NRB. At 0938 h on 12, NRB sent an email to Alpha & Delta Ocean stating: in regard to the requested second tug, our second tug is “Nan Hai Jiu 101”, please confirm. At 0957 h, Alpha & Delta Ocean replied that: pls kindly arrange B/M 2 tug boats to rescue our vessel. At 1519 h, NRB wrote to Alpha & Delta Ocean: Since the master of M.V. “Archangelos Gabriel” insisted on the opinion of Zhanjiang MSA, and selected to refloat the tanker by lightening the cargo, we suggest that “Nan Hai Jiu 116” stay at the scene while “Nan Hai Jiu 101” return to Guishan Anchorage. Please confirm if you agree to our suggestion. At 1544, Alpha & Delta Ocean replied: Further to our telecom before, we hereby confirm just keep your “Nan Hai Jiu 116” alongside our vessel and cancel for “Nan Hai Jiu 101”. The deck log extracts of “Nan Hai Jiu 101” recorded that: at 0930 on August 12, we received a telephone call from the Dispatching Office requiring our vessel to proceed to render salvage assistance to M.V. “Archangelos Gabriel” grounded off the light buoy #6 in the north channel of the Qiongzhou Strait. Our vessel altered heading to proceed towards the grounding location and reported to the Dispatching Office. At 1515, the Dispatching Office ordered our vessel to slow down and wait for further instructions. At 1550, the Dispatching Office instructed our vessel to return to Guishan Anchorage. At 2305, our vessel arrived at Guishan Anchorage, finished with engine and rudder. Archangelos Investments and Alpha & Delta Ocean both admitted that due to the change of the salvage plan, “Nan Hai Jiu 101” turned back to her anchorage before reaching the grounding location. As per the agreed RMB3.2 per horse power per hour under the Letter of Appointment, NRB claimed that the payment by Archangelos Investments for “Nan Hai Jiu 101” for the period from 0930 to 2305 h on 12 should be RMB819,145.60. Archangelos Investments and Alpha & Delta contended: “Nan Hai Jiu 101” got ready for proceeding to the grounding at 0930 h on 12, and started returning at 1550 h as per NRB’s instructions, and arrived at her anchorage at 2305 h on the same day; the tug had not reached the grounding location and had never actually engaged in a towing operation or other operations; all it spent was travelling time; NRB’s claim for salvage charges as per the rate of RMB3.2 per horsepower per hour was obviously unfair and extremely unreasonable. 3. Work done by “Nan Hai Jiu 201” “Nan Hai Jiu 201” was a rescue ship of 552 GRT with a gross power of 4,480 kw (6,093 BHP) owned by NRB. On August 13, Archangelos Investments hired “Nan Hai Jiu 201” to take their two representatives from Haikou to board M.V. “Archangelos Gabriel”. At 0000 h on the same day, NRB wrote to Alpha & Delta Ocean: Kindly be advised that cost for 6,093BHP “Nan Hai Jiu 201” was RMB1.5/per hour per horse power. And total cost would be calculated based on the time used. Alpha & Delta Ocean replied: As

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agreed, we hereby confirm that your tug boat “Nan Hai Jiu 201” hired for sending our 2 representatives to board of M.V. Archangelos Gabriel, and upon their embarkation on board of M.V. Archangelos Gabriel, then your “Nan Hai Jiu 201” can return to the base immediately. The deck log extracts of “Nan Hai Jiu 201” recorded that: at 0750 on 13, engine standby, navigation aid tested, prepared to take Owner’s two representatives to board the grounded tanker; at 1135, Owner’s representatives embarked the grounded tanker, our ship remained at the scene awaiting further instructions from the Dispatching Office; at 1218, received instructions from the Dispatching Office that our ship can return; at 1540, alongside the naval wharf, F.W.E., reported to the Dispatching Office. NRB claimed that the working time of “Nan Hai Jiu 201” was 7.83 h. At 1452 h on August 15, Alpha & Delta Ocean wrote to NRB: further to telecom a while ago, we would like to hire your “Nan Hai Jiu 201” at 0800 h/16th/Aug/11 to send our divers team/port Capt/surveyor (total 16 persons and dive facilities). Our divers will check the situation on spot if it shall be wait [sic] there for couple hours or not, pls cfm by return. Shall we fix the rate for RMB1.30/HP per hour? At 1600 h, NRB replied that: in regard to your hiring of our “Nan Hai Jiu 201” for sending your personnel and equipment, the cost remains RMB1.5 per hour per horse power, counting from the time of departure from her anchorage to the time of return to the same anchorage after completion of her job. In addition, this tug will be used as a traffic ship only and will not assist in any diving-related operations. At 2002 h, Alpha & Delta Ocean replied: through hard negotiation, ok we agree, pls kindly arrange it without any delay. The deck log extracts of “Nan Hai Jiu 201” dated 16 recorded that: at 0750, engine ready, sea trial; at 1110, arrived at the grounding site; at 1155, personnel and equipment were all safely sent onto the grounded vessel; at 1535, made fast, F.W. E.. NRB claimed that the working time of this tug should be 7.75 h. At 1633 h on 17, Alpha & Delta Ocean wrote to NRB: further to out telecom a while ago, finally we need your “Nan Hai Jiu 201” for 1 trips [sic] on 18/Aug/11 only with departure time of 0200 h/18/AUG/11 to send our captains, surveyors on board of M.V. “Archangelos Gabriel”. Confirm RMB1.5/HP per Hour. At 1425 h on 18, NRB replied that: As per your instruction, the working time used by “Nan Hai Jiu 201” for this operation was 8.83 h. The deck log extracts of “Nan Hai Jiu 201” dated 18 recorded that: at 0110 on 18, engine ready, tested navigation aid and light; at 0555, arrived at the grounding site; at 0633, personnel and luggage were all safely sent onto the lightering vessel; at 1000, made fast, F.W.E, reported to the Dispatching Office. NRB claimed that the working time of this tug should be 8.83 h. Basing on the rate of RMB1.5/HP per hour as agreed in the email and the total working time of 24.41 h for the three times of services, NRB claimed that the payment by Archangelos Investments for “Nan Hai Jiu 201” should be RMB223,095.20. While Archangelos Investments and Alpha & Delta Ocean contended that the horse power of “Nan Hai Jiu 201”, which was 6,093, was just too big for her as a traffic ship, so apparently, it can be seen that NRB wanted to

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take advantage to charge more by sending such a high-powered vessel. Besides, Archangelos Investments and Alpha & Delta Ocean did not confirm the authenticity of the deck log extracts, arguing that the entries therein had been modified arbitrarily by NRB. But Archangelos Investments and Alpha & Delta Ocean did not produce evidence in this respect. 4. Work done by the divers At 0957 h on August 12, Alpha & Delta Ocean wrote to NRB: pls kindly arrange B/M 2 tug boats to rescue our vessel and also in order to make sure there is no serious damage to our vessel, pls kindly arrange diver to inspect the grounding on mud or rock. At 1554 h, Alpha & Delta Ocean wrote to China Ocean Shipping Agency Zhanjiang, agent of M.V. “Archangelos Gabriel”: Nanhai Rescue Bureau’s rescue team with diver just left their base around 1500 h and will arrive alongside around 1730 h today to carry out diver inspection of water area. We hereby kindly nominate your good firm as owner’s agent to cooperate with Zhanjiang MSA to carry out rescue and arrange our vessel’s further proceeding to Qinzhou. At 1808 h on August 13, NRB wrote to Alpha & Delta Ocean: Please confirm the working time used by the divers for the rescue of M.V. “Archangelos Gabriel” as follows: Time of embarking the traffic ship: 1500 h on 12; Time of disembarking the traffic ship: 2300 h on 12; Total working time used by the divers: 8 h. Meanwhile, the said email also listed the working hours of “Nan Hai Jiu 101” on 12 and “Nan Hai Jiu 201” on 13. At 1935 h, Alpha & Delta Ocean replied that: thanks a lot for your great efforts, wud u pls kindly reduce a bit. Pls see our comments asfs: A. Nanhaijiu 101 cancellation fee: HP*3.2*8 h (0930 h–1530 h); B. Diver cancellation fee: RMB100,000.00; C. Nanhaijiu 201 DD 13/AUG/11: RMB55,000.00. At 2033 h, NRB replied that: the working times used by “Nan Hai Jiu 101”, “Nan Hai Jiu 201” and the divers, as mentioned in the previous emails, were the times that actually used for this salvage service. We are sorry that your requests in the said email are not acceptable to us. NRB claimed that the cost of the divers should be RMB105,000, basing on Letter of Appointment which agreed that the inland dispatching cost should be RMB10,000, water transportation cost should be RMB55,000 and operation charges shall be RMB40,000 per 8 h. While Archangelos Investments and Alpha & Delta Ocean pointed out that the charges for preparation and mobilization of the divers and the equipment have been covered by the said land dispatching cost and water transportation fee, and that the operation charges, namely RMB40,000 per 8 h, only refer to such charges for actual underwater inspection. Since no underwater inspection has been actually carried out by the divers, NRB shall not be entitled to such kind of charges. NRB confirmed that the divers did not conduct any actual underwater inspection. 5. Other facts in relation to the cost of “Nan Hai Jiu 116” and “Nan Hai Jiu 101”: Archangelos Investments submitted in the Cross-examination Opinions on the MSA’s Explanation that before 0933 h on 12, Archangelos Investments planned to seek towing assistance to refloat the grounded tanker and thus requested NRB to

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dispatch “Nan Hai Jiu 116” and “Nan Hai Jiu 101” to the scene to carry out towing operations. However, by not later than 1425 h on 12, Archangelos Investments had decided to change the refloating plan to the “Lightering-Refloating Plan” and had put NRB on proper notice accordingly, which can also be shown in the deck log extracts of “Nan Hai Jiu 116”. At 1452 h on August 15, Alpha & Delta Ocean wrote to NRB about the cost: (1) for “Nan Hai Jiu 116” which used from 0740 h/12/Aug/11 till now our insurance kindly ask you to reduce a bit and try to fix it for RMB2.90/HP per hour; (2) for “Nan Hai Jiu 101” which was canceled on 12/Aug/11 due to Zhanjiang MSA’s instruction, pls kindly reduce a bit and give your best offer; (3) for dive work which was canceled on 12/Aug/11 due to time limit, pls kindly reduce a bit and confirm RMB100,000.00 as lumpsum; (4) tugboat “Nan Hai Jiu 201” hiring for sending our 1 representative on board on 13/Aug/11, we hereby confirm RMB55,000.00; (5) we would like to hire your “Nan Hai Jiu 201” at 0800 h/16/ Aug/11 to send our divers team/port capt./surveyor. Shall we fix the rate for RMB1.30/HP per hour? At 1600 h, NRB replied to confirm receipt of the said email and wrote: the rate for “Nan Hai Jiu 201” which you intended to hire tomorrow morning as a traffic ship to send relevant personnel and equipment shall remain to be RMB1.5/HP per hour. Besides, as for other cost accruing due to the salvage operation effected to M.V. Archangelos Gabriel, we can discuss it later. Archangelos Investments contended in the written cross-examination opinions that, according to the practice in the industry of towing salvage, the cost for standby service is only half of the cost for towing service at most. In addition, to prove the unreasonableness of the tug rate claimed by NRB, Archangelos Investments provided three reference standards for the calculation of tug costs, which were (1) the Procedures of the Ministry of Communications of the People’s Republic of China for Collecting Salvage Charges on International Passage which provide that the rate for towing service by a vessel of 6,651 KW is RMB0.54/KW per hour, (2) the Procedures of the Ministry of Communications of the People’s Republic of China for Collecting Port Charges (International Trade) which provided that the standard rate for harbor towing service was RMB0.48/HP per hour, (3) the Procedures of Guangdong Province for Collecting Port Charges which provided that the standard rate for harbor towing service was RMB0.45/HP per hour. As to the applicable law in this case, the parties concerned all select Chinese law as the applicable law for the addressing of substantive issues in this case. As to the litigation requests, NRB asserted that Archangelos Investments had confirmed that Alpha & Delta Ocean were acting on the behalf of Archangelos Investments at all material times, and therefore submitted that Alpha & Delta Ocean need not to be held liable. The court of first instance held that this case was the dispute over salvage contract. According to Article 26 of the Some Provisions of the Supreme People’s Court on the Scope of Cases to be Entertained by Maritime Courts, the case shall be under the exclusive jurisdiction of maritime courts. The place where the vessel involved was salved falls with the jurisdiction of the court of first instance and thus,

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in accordance with Article 31 of the Civil Procedure Law of the People’s Republic of China, the court of first instance should have jurisdiction over this case. This case was a foreign-related one as Archangelos Investments was a Greek-incorporated company and M.V. “Archangelos Gabriel” a Greek-registered tanker. Since the litigants all agreed during the court trial that Chinese law be applicable, according to the provisions of Article 3 of the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China, the People’s Republic of China law should be the applicable law for the addressing of substantive issues in this case. The main issues to be addressed in this case were as follows: 1. Whether there was a salvage contract between NRB and Archangelos Investments After occurrence of the grounding accident, Archangelos Investments, through its agent Alpha & Delta Ocean, requested NRB via email to dispatch two tugs to render salvage service according to its experience and agreed to accept NRB’s quotation for such service. Moreover, Archangelos Investments also instructed Alpha & Delta Ocean to issue Letter of Appointment by email to NRB to agree on, among other things, the tugs and manpower (divers) needed as well as the standard for the calculation of charges for the salvage operation. As per the said agreement, NRB dispatched “Nan Hai Jiu 116”, “Nan Hai Jiu 101”, “Nan Hai Jiu 201” as well as divers to the scene to render, among other things, salvage, sea transportation, standby services. Judging from the MSA’s Lightering-Refloating Plan and the related emails from Alpha & Delta Ocean describing the dangers involving M.V. “Archangelos Gabriel”, Archangelos Investments and Alpha & Delta Ocean were well aware of the dangerous situation at that time. Meanwhile, from the emails exchanged between Alpha & Delta Ocean and NRB, it could be seen that both parties had fully discussed the issue on the related costs. Therefore, there were no “substantial misunderstandings” or “being taken advantage” circumstances as argued by Archangelos Investments and Alpha & Delta Ocean. In accordance with the provisions of Article 175 Paragraph 1 of the Maritime Code of the People’s Republic of China, which stated that “a contract for salvage operations at sea is concluded when an agreement has been reached between the salvor and the salved party regarding the salvage operations to be undertaken”, the salvage contract had been duly reached between NRB and Archangelos Investments. Such contract did not violate any compulsory provisions provided for by the current laws and administrative regulations of the People’s Republic of China and thus should be legally effective and be honored by both parties. 2. Whether to add China oil as a third party to participate in the proceedings Archangelos Investments submitted that the claimed payment fall within the category of general average expenditure which should be contributed for by both the vessel and the cargo and that China Oil has an interest in terms of law in the outcome of the proceedings. Therefore, they applied to add China Oil as a third party to participate in the proceedings on the grounds that the ship and the goods

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involved were in common peril and thus the salvage reward claimed by NRB should be paid by the owners of the salved ship and other property in accordance with the respective proportions which the salved values of the ship and other property bear to the total salved value, according to Article 183 of the Maritime Code of the People’s Republic of China. The court of first instance found that NRB’s claim against Archangelos Investments was salvage payment at the agreed rates under the salvage contract concluded between the two parties. The legal relation involved in this dispute was different from the one involved in general average contribution. Therefore, the court held that there was no need to involve the cargo owner in the proceedings as a third party, and thus the submission of Archangelos Investments in this regard was rejected. 3. Whether the salvage service rendered by NRB met the requirement for constituting salvage at sea (1) The subject matter salved was recognized by law The subject matter salved was M.V. “Archangelos Gabriel”, which was a ship as referred to in Article 3 of the Maritime Code of the People’s Republic of China, and a subject of salvage as recognized by law. (2) M.V. “Archangelos Gabriel” was in distress at sea As recorded in the MSA’s Lightering-Refloating Plan, after grounding, both M.V. “Archangelos Gabriel” and the cargo carried onboard were in distress, which was likely to lead to marine pollution and posted a threat to the safety of the marine environment, constituting an urgent situation. At the meantime, the subject of the emails from Alpha & Delta Ocean to NRB was “M.V. Archangelos Gabriel/ Grounding at Qiongzhou Strait – Top Urgent”, from which, it can be seen that both Archangelos Investments and Alpha & Delta Ocean were aware of the dangerous situation M.V. “Archangelos Gabriel” involved. Therefore, the distress which “Archangelos Gabriel” was in should be ascertained as an objective existence. (3) NRB had actually rendered salvage assistance and the assistance was voluntary It had been found that NRB dispatched “Nan Hai Jiu 116”, “Nan Hai Jiu 101”, “Nan Hai Jiu 201” and divers to the scene to render, among other things, sea transportation and standby services. The said services were of great importance to the successful refloating of M.V. “Archangelos Gabriel”. “Nan Hai Jiu 116”, though did not carry out the towing operations as per the initial plan, was kept on standby at the scene as per the arrangement of the owner of M.V. “Archangelos Gabriel” until the grounded tanker got refloated. Besides, the Maritime Code of the People’s Republic of China does not specify the specific forms of salvage operations. Therefore, the aforesaid said acts conducted by NRB should be deemed as salvage operations. During the salvage operations when the salvor-salved nexus was created, the actions and inactions of both NRB and Archangelos Investments were voluntary, showing no circumstances as provided for in Article 186 of the Maritime Code of

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the People’s Republic of China that would deprive NRB of the right to a salvage payment. Therefore, the salvage operations in this case were voluntary. (4) The salvage operations had achieved useful result Judging from the process of the entire salvage operations, it can be seen that the salvage operations were a success, for M.V. “Archangelos Gabriel” were successfully refloated and her entire crew as well as all the cargo on board finally arrived at Qinzhou Port safely. As such, the salvage operations were useful. In conclusion, the salvage services rendered by NRB meet the requirement for constituting salvage at sea and have a useful result, hence, NRB should be entitled to a reward, in accordance with Article 179 of the Maritime Code of the People’s Republic of China which provided that “where the salvage operations rendered to the distressed ship and other property have had a useful result, the salvor shall be entitled to a reward. Except as otherwise provided for by Article 182 of this Code or by other laws or the salvage contract, the salvor shall be entitled to the payment if the salvage operations have had no useful result.” 4. The quantum of the claimed salvage charges and interest (1) As to the salvage charges payable to “Nan Hai Jiu 201” “Nan Hai Jiu 201” had a gross power of 6,093HP. As to the time used by this tug in the salvage operations, NRB’s submission of 24.41 h was in conformity with the relevant entries in the tug’s deck log extracts whose originals were also made available by NRB for verification. Even though Archangelos Investments and Alpha & Delta Ocean argued that the deck log entries had been arbitrarily modified by NRB, they failed to provide evidence to support their argument in this regard. Thus, NRB’s submission in respect of this tug’s working hours was confirmed by the court. NRB submitted that the cost of the tug should be RMB1.5 per horse power per hour, but Archangelos Investments and Alpha & Delta Ocean rejected it. However, the foregoing rate finally had been confirmed by Archangelos Investments and Alpha & Delta Ocean as can be seen in the emails exchanged between them. Even though Archangelos Investments at 1452 h on 15 requested NRB to reduce the rate to RMB1.3 per horse power per hour via email, it was declined by NRB and later on at 2002 h on 15, Archangelos Investments replied that, “upon hard negotiation, we accept your quotation and please arrange accordingly”. Meanwhile, Archangelos Investments in the email timed at 1633 h on 17 confirmed the rate of RMB1.5 per horse power per hour for “Nan Hai Jiu 201”. It could thus be seen that the rate was fixed upon sufficient negotiation between the parties concerned and shall be binding upon both parties. Therefore, NRB’s submission in this respect was upheld by the court. As such, upon calculation basing on the gross power of “Nan Hai Jiu 201” of 6,093HP, the working time used for the salvage of 24.41 h and the rate of RMB1.5 per horse power per hour, the salvage charges payable to “Nan Hai Jiu 201” for the salvage service amounted to RMB223,095.20.

Nanhai Rescue Bureau of the Ministry of Transport v. …

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(2) As to the cost of the divers Archangelos Investments and Alpha & Delta Ocean confirmed that the divers set out from the base at 1500 h on 12 and also confirmed the inland dispatching cost of RMB10,000 and the water transportation cost of RMB55,000. However, they argued that NRB should not be entitled to the underwater inspection charges of RMB40,000 per 8 h on the grounds that the divers had never actually carried out any underwater inspection. From the Letter of Appointment sent by Archangelos Investments to NRB, it could be seen that the cost of the divers consisted of three parts including inland dispatching cost, water transportation cost and operation charges, which as agreed should be calculated from the time the divers embark the traffic ship to the time of disembarkation after the operation was completed. According to the said agreement, even though the divers did not conduct underwater inspection, if they embarked on the traffic ship, Archangelos Investments shall pay the underwater inspection charges for the divers to NRB as agreed. Thus Archangelos Investments’ argument mentioned above should not be upheld by the court. As to the working time, it should start courting the time the divers boarded the vessel, and basing on the agreement on the rate which was RMB40,000 per 8 h in Letter of Appointment and considering that such working time claimed by NRB was not in excess of eight hours, the amount which Archangelos Investments shall pay to NRB in this respect was RMB40,000. In consideration of the above, with respect to the cost of the divers, Archangelos Investments shall pay a sum of RMB105,000 which covered the land dispatching cost, water transportation cost and operation charges. (3) As to the salvage charges payable to “Nan Hai Jiu 116” and “Nan Hai Jiu 101” The gross powers of “Nan Hai Jiu 116” and “Nan Hai Jiu 101” are 12,240 h.p. and 18,850 h.p. respectively. NRB provided the originals of the relevant deck log extracts for verification. The working hours of the two tugs in the salvage operations as claimed by NRB was found to be in conformity with the relevant entries of the deck log extracts. Besides, Archangelos Investments had no issue with the claimed working hours of the two tugs. Therefore, NRB’s submission of 155.58 h and 13.58 h as the working hours of “Nan Hai Jiu 116” and “Nan Hai Jiu 101” respectively was upheld by the court. According to Letter of Appointment, “Nan Hai Jiu 116” and “Nan Hai Jiu 101” should be responsible for towing operations only and the cost thereof shall be RMB3.2 per horse power per hour. However, in fact, due to the change of the salvage plan, “Nan Hai Jiu 116” only stayed stand-by on the sport as per the instructions of the ship interests, while “Nan Hai Jiu 101” turned back before she reached the grounding location. Thus, the tugs actually never rendered towing services to M.V. “Archangelos Gabriel”. Even though Article 180 of the Maritime Code of the People’s Republic of China stipulated that, “the reward shall be fixed with a view to encouraging salvage operations, at the same time, it stipulates that, the reward shall be fixed by taking into full account the following criteria: …

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(6) time used and expenses and losses incurred by the salvors; (7) risk of liability and other risks run by the salvors or their equipment, etc.”. In practice, on the part of the salvor, there is a certain difference between standby services and towing services in terms of cost and consumption, technology requirement and risk of liability involved, etc. In accordance with Article 176 Paragraph 2 of the Maritime Code of the People’s Republic of China, “where the payment under the salvage contract is in an excessive degree too large or too small for the services actually rendered, the contract may be modified by a judgment of the court which has entertained the suit brought by either party, or modified by an award of the arbitration organization to which the dispute has been submitted for arbitration upon the agreement of the parties.” Therefore, since “Nan Hai Jiu 116” and “Nan Hai Jiu 101” did not actually render the salvage services as originally agreed, the rate of RMB3.2 per horse power per hour for the two tugs under Letter of Appointment as claimed by NRB was excessively high, and in light of that Archangelos Investments had raised objection thereto, the claimed rate should be adjusted. With respect to the three reference standards for the calculation of such rate that were proposed by Archangelos Investments, the first one had been abolished, the second and third ones applied to the harbor towing services only, which should not be applicable to this case since the salvage involved did not take place within a harbor. Thus, the suggestion for modifying the rate proposed by Archangelos Investments was not adopted. As to the adjustment of the tugs’ rate, the collegiate panel of the first instance held two different opinions. The opinion of the majority was that: the two tugs’ rate should be adjusted to RMB2.9 per horse power per hour, on the grounds that although the rate agreed under the Letter of Appointment issued by Archangelos Investments to NRB was RMB3.2 per horse power per hour, Archangelos Investments subsequently kept asking NRB through emails to adjust that rate; NRB replied by email that “as for other cost accruing due to the salvage operation effected to M.V. ‘Archangelos Gabriel’, we can discuss it later”. From this, it could be seen that NRB at that time left room for adjustment to the rate. Archangelos Investments had decided to alter the refloating plan to “by lightering” by 1425 h on August 12, and had put NRB on notice of this alteration. However, in an email to NRB later on August 15, Archangelos Investments asked if the rate for “Nan Hai Jiu 116” could be adjusted to RMB2.9 per horse power hour. From this, it was apparent that after Archangelos Investments had decided to adopt the lightering-refloating plan and after it had been clear “Nan Hai Jiu 116” need not render towing service, Archangelos Investments was still willing to hire NRB’s tugs at the rate of RMB2.9 per horse power per hour. This was the true intention of Archangelos Investments on the hire of NRB’s tugs after the refloating plan had been altered and no “alterable or cancelable” circumstances as contended by Archangelos Investments existed. Furthermore, the determination of that rate complied with the principle of “to encourage salvage” under the Maritime Code of the People’s Republic of China. Therefore, it was reasonable to adjust the rate for “Nan Hai Jiu 116” and “Nan Hai Jiu 101” to RMB2.9 per horse power per hour.

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The opinion of the minority was that: considering the costs actually incurred by “Nan Hai Jiu 116” and “Nan Hai Jiu 101” as a result of the operations and the risks taken, in combination with the tariff standard of “Nan Hai Jiu 201” and the salvage reward actually obtained by “Dan Chi” which carried out the lightering operations, the rate for “Nan Hai Jiu 116” and “Nan Hai Jiu 101” should be adjusted to RMB1.5 per horse power per hour. As the two opinions of the collegiate panel differ quite substantially, with approval from the court’s president, this case was submitted to the court of first instance’s Adjudication Committee for further deliberation. The Adjudication Committee agreed with the addressing opinion of the majority regarding adjustment of the tugs’ rate, but allowed the collegiate panel to decide a specific figure. In accordance with the majority rule, the rate for “Nan Hai Jiu 116” and “Nan Hai Jiu 101” was thus adjusted to RMB2.9 per horse power per hour. Accordingly, the salvage charges of “Nan Hai Jiu 116” was calculated to RMB5,522,467.68 and “Nan Hai Jiu 101” to RMB742,350.70. In total, the salvage charges awarded to “Nan Hai Jiu 116”, “Nan Hai Jiu 101”, “Nan Hai Jiu 201” and the diving team altogether amounted to RMB6,592,913.58. As to the interest on the salvage reward claimed by NRB, NRB and Archangelos Investments had neither concluded an agreement nor afterwards reached a supplementary agreement on the period for payment of salvage reward which also could not be determined in accordance with relevant contract terms or transaction practice. Thus, according to Article 62 of the Contract Law of the People’s Republic of China, which stated that “if the time of performance was not clearly prescribed, the obligor may perform, and the obligee may require performance, at any time, provided that the other party shall be given the time required for preparation”, NRB shall give Archangelos Investments E.N.E the time necessary to prepare payment of the salvage reward. The reasonable time for such preparation should appropriately be determined as two months after the completion of the salvage service. As such, the interest on the salvage reward in this case should be calculated from October 19, 2011 to the date of payment under this judgment, at the current fund loan interest rate for the corresponding period promulgated by the People’s Bank of China. To sum up, through deliberation by the Adjudication Committee, the court of first instance judged as follows in accordance with Article 175 Paragraph 1, Article 176 Paragraph 2, Article 179 and Article 180 of the Maritime Code of the People’s Republic of China: 1. Archangelos Investments should pay RMB6,592,913.58 for the salvage reward to NRB, together with the interest thereon from October 19, 2011 to the date of payment under this judgment at the current fund loan interest rate for the corresponding period promulgated by the People’s Bank of China; 2. other claims made by NRB should be rejected. Archangelos Investments refused to accept the judgment of first instance and appealed to the court, requesting the court to revoke the judgment of first instance and order: the tug rate to be further adjusted; Archangelos Investments to pay only 38.85% of the salvage reward to be awarded as per the further adjusted rate; and NRB to bear the court costs of both the first and second instances. The reasons were

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as follows: 1. there were such circumstances in this case that NRB disregarded the actual situation and took advantage of others’ hardship and that Archangelos Investments and Alpha & Delta Ocean had material misunderstandings on the tug rate, therefore, the claimed tug rate and the related salvage contract should be rescinded or amended. M.V. “Archangelos Gabriel” was an oil tanker, to avoid cracks on the hull and an occurrence of oil leakage, the generally applied salvage method in the industry was to have the grounded vessel lightened to such an extent as necessary to enable her to get refloated with her own engine, rather than to use tugs to tow, pull or push the grounded vessel. In the circumstance, NRB as a professional salvage team should have dispatched a tug with such horse power more matching the site conditions. However, NRB ignored the actual needs, and dispatched tugs with the maximum horse power. Alpha & Delta Ocean always thought that it would take 3 h for “Nan Hai Jiu 201” to arrive at the grounding location at the cost of about RMB22,000. But in fact, one round trip took about 9 h and the cost was up to RMB75,000. NRB had not given any explanation in this respect to Alpha & Delta Ocean or Archangelos Investments. 2. It was a procedural mistake that the court of first instance did not approve the application of Archangelos Gabriel for adding China Oil as a third party to participate in the proceedings, which shall be corrected accordingly. Nevertheless, no matter whether China Oil participated as a third party in the proceedings or not, with regards to any salvage reward awarded in this case, Archangelos Investments only need to pay the proportion (38.85%) of which the salved value of the ship bore to the total salved value. 3. As to the quantum, the cost of “Nan Hai Jiu 116” and “Nan Hai Jiu 101” should be adjusted to RMB1.5 per horse power per hour; the adjusted RMB2.9 per horse power per hour by the court of first instance was absent of reliable grounds and thus shall be rectified. The divers’ fees at RMB40,000 per hour should also be deducted. During the second instance proceedings, Archangelos Investments withdrew the appeal reason that it was a procedure mistake of the court of first instance not adding China Oil as a third party to participate in the proceedings. In the second instance, Archangelos Investments provided the following evidence: (1) Bill of lading, (2) Final Invoice of the cargo, (3) Certificate of Valuation of the ship and Schedule of Damage Repair Costs, (4) Initial Adjustment of Claim. NRB in the second instance argued that: 1. the salvage contract in this case was concluded by both parties on an equal and voluntary basis, without undue influence or serious misunderstanding, and there was no legal reason for the contract to be modified. The contract terms were clearly specified and shall be legally binding upon both parties. 2. Archangelos Investments’ submission that as to the salvage reward, it was only liable to NRB for the proportion that the salved value of the ship bore to the total salved value had no legal basis and thus was untenable. Article 183 of the Maritime Code of the People’s Republic of China regarding payment of salvage reward was applicable only between the ship and the cargo, having no effect on the contractual rights and obligations between NRB and Archangelos Investments. Besides, even if Archangelos Investments had the intention to enter into the salvage contract with NRB on behalf of the cargo interests, NRB still had the right to choose between the ship interests and the cargo interests as the

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contractual subject to undertake the contractual obligations. 3. Archangelos Investments’ submission that the salvage reward decided by the court of first instance was still higher and should be further reduced was unreasonable and thus should be rejected. In consideration of the above, NRB requested the court to dismiss the appeal filed by Archangelos Investments and affirm the judgment of first instance. As to whether Article 183 of the Maritime Code of the People’s Republic of China which provided for the salvage reward to be paid by the owners of the ship and other property in proportion to their respective salved values was applicable in this case, NRB after the court hearing submitted the following opinions: 1. the claimed salvage payment in nature was contractual remuneration/commission, but not the salvage reward as provided for in Article 183 of the Maritime Code of the People’s Republic of China. Therefore, this Article which provided for the salvage reward to be paid by the owners of the ship and other property in proportion to their respective salved values is not applicable in this case. The salvage reward is for “no cure - no pay” contracts, but the salvage contract in this case clearly specified the hourly rates, which in nature was remuneration or commission under the contract, and thus the standard on calculating the salvage reward as provided for in the Maritime Code of the People’s Republic of China did not apply to this case. 2. Speaking from the contract nature, the contract in this case was actually a hire agreement on salvage services, where the rights and obligations of both parties should be subject to the contract and thus NRB has the right to claim salvage payment against Archangelos Investments according to the contract. 3. No matter it was at the time of signing the contract or during the performance of the contract, Archangelos Investments’ declaration of intention and action were enough to show that Archangelos Investments explicitly requested NRB to render salvage services and was willing to pay for the services. 4. According to the stipulation on unnamed agency in the Contract Law, NRB was entitled to demand payment as agreed in the salvage contract directly from Archangelos Investments. In this case, Letter of Appointment and Salvage Agreement were both sent by Alpha & Delta Ocean to NRB, meaning that the person or party who concluded the salvage agreement was neither the master of M.V. “Archangelos Gabriel” nor the ship-owner. Besides, Alpha & Delta Ocean never disclosed to NRB that it represented the cargo interests. Therefore, Article 175 Paragraph 2 of the Maritime Code of the People’s Republic of China which provided that “the Master of the ship in distress or its owner shall have the authority to conclude a contract for salvage operations on behalf of the owner of the property on board” did not apply to this case and NRB should be entitled to claim solely against Archangelos Investments for the salvage charges. To say the least, even though the ship-owner had the authority to conclude the salvage contract on behalf of the cargo interests, according to Article 403 of the Contract Law which states that “where the agent failed to perform its obligation toward the third person due to any reason attributable to the principal, the agent shall disclose the principal to the third person, allowing the third person to select in alternative either the principal or the agent as the other contract party against whom to make a claim, provided that the third person may not subsequently change its selection of

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the contract party”, NRB likewise had the right to select Archangelos Investments as “the other contract party against whom to make a claim” for the salvage payment. NRB in the second instance submitted the following evidence: (1) Salvage Agreement on M.V. “Archangelos Gabriel”, (2) letters of appointment and agreements etc. for salvage services rendered by NRB to M.V. “JIN OCEAN”, “XIN JIN HAI”, “YU ZHOU 1”, “SHENNG FA HAI” and “QIN HAI”. Except for the determination on the amount of the salvage reward, other facts ascertained in the first instance were not in dispute and thus affirmed by the court. The following was further found in the second instance: during the first instance, NRB submitted different salvage contracts that it concluded with different third parties such as Hainan Jiahang Shipping Agency Co., Ltd., Guangdong Haidian Shipping Co., Ltd., Zhejiang Dashan Yuyang Shipping Co., Ltd. and China Shipping (Hainan) Haisheng Co., Ltd. etc., to prove that at around the same time when the grounding accident in this case happened, the tug rates of “Nan Hai Jiu 116” and other similar tugs were not lower than RMB3.0 per horse power per hour. Archangelos Investments had no issue with the tug rates specified in the aforesaid agreements but argued that they were irrelevant to this case. The Explanation on “the Contingency Plan For Lightering and Refloating M.V. ‘Archangelos Gabriel’ issued by Zhanjiang MSA” submitted by Archangelos Investments in the first instance stated that the master of M.V. “Archangelos Gabriel” alerted Zhanjiang MSA immediately after the vessel ran aground at about 0500 h on August 12, 2011. Zhanjiang MSA then enjoined the master and the ship-owner to develop a salvage plan and carried it out as soon as possible. After carefully investigating the accident situation, the master/ship-owner of M.V. “Archangelos Gabriel” decided to choose “the lightering-refloating plan” on the same day of the accident. To practically implement such lightering-refloating plan, M.V. “Archangelos Gabriel” interests dispatched various naval architects, salvage experts and surveyors from different places such as Singapore, Holland and China to render assistance and guidance on board. Although Zhangjiang MSA issued the Contingency Plan For Lightering and Refloating M.V. “Archangelos Gabriel” on August 17, “the lightering-refloating plan” was clearly confirmed by M.V. “Archangelos Gabriel” interests and approved by Zhangjiang MSA before 1425 h of August 12. After the accident, Huang & Huang Co. who was authorized and instructed by the shipowner of M.V. “Archengelos Gabriel” dispatched Captain GUO Xiangcheng to participate in the handling of the accident and preparation of the refloating plan at the first opportunity. GUO Xiangcheng was the senior maritime consultant of Huang & Huang Co. As to the salved value of the ship and the cargo onboard: the B/L submitted by Archangelos Investments specified that the cargo was 401,084 US barrels (at 60°F) of Cabinda cruel oil weighting 54,727.933MT; the final invoice issued by Chinaoil (Hong Kong) Corporation Limited specified that 401,084 net US barrels of Cabinda cruel oil weighting 54,727.933MT (net) under the B/L dated August 11, 2011 carried by mother vessel M.V. “ADVENTURE” was sold at CIF price USD119.81

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per barrel, and the total invoice value was USD48,053,870.48; Certificate of Valuation issued by SSY Valuation Services Limited specified that the appropriate valueof M.V. “Archangelos Gabriel” on August 23, 2011 was about USD32,500,000; Schedule of Damage Repair Costs of M.V. “Archangelos Gabriel” issued by Richards Hogg Lindley specified the particular average was USD1,968,144.37; Adjustment of Claim dated September 5, 2012 issued by Richards Hogg Lindley specified that the sound market value of the vessel on the final day of discharge on August 23, 2011 was valued at USD32,500,000 by the ship evaluator SSY Ltd., so the contributory value of the ship was USD30,531,856 with the cost of damage repairs of USD1,968,188 being deducted. The invoice value of cargo (CIF) was USD48,053,870. NRB had no objection to the qualification of Richards Hogg Lindley. The court holds that since the originals of Certificate of Valuation of the ship, Schedule of Damage Repair Costs and Adjustment of Claim submitted by Archangelos Investments which were formed outside the territory of China have been provided for verification and gone through the required notarization and legalization procedure, the authenticity shall be confirmed by the court. Besides, the qualification of the adjuster Richards Hogg Lindley was not in dispute, the said evidence could match up with each other, and thus the salved value of the ship in this case can be confirmed to be USD30,531,856, the salved value of the cargo be USD48,053,870, and the proportion of the salved value of the ship bears to the total salved value be 38.85%. The court holds that: The dispute to be addressed arose from salvage contract. As Archangelos Investments is a Greece-registered company, the dispute in this case is a foreign-related dispute. The application of law was not in dispute in the second instance and thus shall be confirmed by the court according to law. According to the appeal and the submissions of both litigants and upon their mutual confirmation, the court concludes that the issues to be addressed in the second instance are that: 1. the effectiveness of the salvage contract concluded between NRB and Archangelos Investments; 2. whether the amount of salvage reward claimed by NRB was reasonable; and 3. as to the salvage reward, whether Archangelos Investments may pay only the proportion which the salved value of the ship bears to the total salved value. 1. The effectiveness of the salvage contract concluded between NRB and Archangelos Investments After M.V. “Archangelos Gabriel” ran aground, Archangelos Investments wrote emails and issued the Letter of Appointment to NRB through Alpha & Delta Ocean, instructing NRB to dispatch “Nan Hai Jiu 116” and “Nan Hai Jiu 101” to the grounding location to assist M.V. “Archangelos Gabriel” in getting refloated. In other words, Archangelos Investments engaged NRB to render salvage assistance to M.V. “Archangelos Gabriel”. The salvage contract was concluded between both parties.

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In the process of concluding the salvage contract, M.V. “Archangelos Gabriel” was in distress. After the accident, the ship-owner of M.V. “Archangelos Gabriel” engaged salvage experts, naval architects, surveyors and other professionals to participate in developing and determining a salvage plan. The ship’s P&I Club and the ship interests jointly appointed professional lawyers and domestic maritime experts to participate in the determination of the salvage plan and the conclusion of the salvage contract. Archangelos Investments also confirmed in the first instance that “the lightering-refloating plan”, which was preliminarily selected by M.V. “Archangelos Gabriel” interests, was clearly decided and also approved by Zhanjiang MSA before 1425 h of August 12, 2011. Alpha & Delta Ocean as the agent of the ship-owner participated in the negotiation and conclusion of the salvage contract, who exchanged emails and had full negotiation with NRB before finally concluding the salvage contract. As such, Archangelos Investments was well aware of the on-site situation, had full professional knowledge about the salvage operations in this case, and concluded the salvage contract with NRB and accepted the quotation given by NRB after the “lightering-refloating plan” was selected. Therefore, there existed no such circumstance that Archangelos Investments had substantial misunderstanding on the formation of the contract. Archangelos Investments confirmed that at around the same time when the grounding accident in this case happened, the costs of other tugs of the same type as “ Nan Han Jiu 116” under the agreements on tug services concluded by NRB with third parties were all higher than RMB3.00 per horse power per hour. Therefore, there existed no such circumstance as argued by Archangelos Investments in the appeal that NRB took advantage of others’ hardship or put up the price in the present case. Therefore, Archangelos Investments’ allegation in the appeal that it had material misunderstanding on the contract and NRB induced Archangelos Investments to enter into the salvage contract against its true intention by taking advantage of its hardship and hence the contract should be amended or cancelled according to Article 54 of the Contract Law of the People’s Republic of China was not established. The salvage contract in this case was an expression of both parties’ true intention and did not violate the mandatory provisions in the law and thus was legally effective and shall be honored by both parties in accordance with the law. According to the Letter of Appointment sent by Alpha & Delta Ocean on behalf of Archangelos Investments to NRB, Archangelos Investments instructed NRB to dispatch “Nan Hai Jiu 116” and “Nan Hai Jiu 101” to assist M.V.“Archangelos Gabriel” in getting refloated, and agreed to pay NRB for the assistance, be it fruitful or not, as per the rate of RMB3.2 per horse power per hour, where “Nan Hai Jiu 116” and “Nan Hai Jiu 101” were only responsible for towing operations and should not be held accountable for any accident caused during the refloating operations. The salvage process also showed that NRB followed the ship interests’ instructions while participating in the salvage operations. Therefore, it was apparent that the salvage operations in this case were rendered basing on a salvage contract where the salvor shall follow the salved party’s order to carry out the salvage operations and no matter whether such operations had a useful result or not, the salved party shall pay the salvage reward as agreed by taking into account the

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human recourses and equipments used by the salvor. According to Article 179 of the Maritime Code of the People’s Republic of China which provides that “where the salvage operations rendered to the distressed ship and other property have had a useful result, the salvor shall be entitled to a reward. Except as otherwise provided for by Article 182 of this Law or by other laws or the salvage contract, the salvor shall not be entitled to the payment if the salvage operations have had no useful results”, the aforesaid agreement under the salvage contract in this case was legally effective, and NRB shall have a claim against Archangelos Investments for salvage reward regardless of the result of the salvage operations. Thus, the finding in the judgment of first instance that useful salvage result by reason of the successful refloating of M.V. “Archangelos Gabriel” was one of the bases for NRB to obtain salvage reward was based on an inappropriate application of the law, which is hereby corrected by the court. 2. Whether the salvage reward claimed by NRB is reasonable It has been ascertained in this case that after concluding the salvage contract with Archangelos Investments, NRB as agreed dispatched “Nan Hai Jiu 116” and “Nan Hai Jiu 101” to the grounding site, provided “Nan Hai Jiu 201” as the traffic ship to transport the ship interests’ representatives, and dispatched divers to the scene for underwater inspection. However, as Archangelos Investments decided to take the “lightering-refloating plan”, “Nan Hai Jiu 116” was placed on standby after arriving at the scene and did not render any towing operations to refloat the vessel, “Nan Hai Jiu 101” was cancelled before arrival at the scene, while the divers did not conduct any underwater inspection after arrival at the scene. Basing on the above, Archangelos Investments argued that NRB did not render any salvage operations and thus the salvage reward should be reduced, while NRB contended that it had provided tugs and divers as agreed in the Letter of Appointment to the scene to assist M.V. “Archangelos Gabriel” in getting refloated and thus shall be entitled to a salvage reward in accordance with the relevant terms of the contract, regardless of which salvage method was used and regardless if the salvage operations were rendered by way of staying on standby, or pushing or pulling or towing operations. The dispute concerns the interpretation of the terms of the contract. According to Article 125 of the Contract Law of the People’s Republic of China, in case of any dispute between the parties concerning the construction of a contract term, the true meaning thereof shall be determined according to the words and sentences used in the contract, the terms and the purpose of the contract, and by taking into account the trade practice and the principle of good faith. Letter of Appointment stipulated that Archangelos Investments instructed NRB to dispatch tugs to the scene to assist M.V. “Archangelos Gabriel” in getting refloated. It also stipulated that “Nan Hai Jiu 116” and “Nan Hai Jiu 101” were only responsible for towing operations. Refloating by way of towing operations and refloating by lightering operations were two different and separate ways of salvage operations. Refloating by lightering operations does not necessarily requires a tug on standby. In addition, Archangelos Investments instructed NRB to dispatch “Nan Hai Jiu 116” and “Nan Hai Jiu 101” to render salvage operations on the morning of August 12, 2011 when it remained

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unclear if the “lightering-refloating plan” would be taken. In view of this and also the literary meaning of the terms of Letter of Appointment, the court found that the tugs which Archangelos Investments instructing NRB to dispatch to the scene were intended for salvage operations by such a way as appropriate for tugs to refloat M. V. “Archangelos Gabriel” but not by standby. In fact, after arrival at the scene, as Archangelos Investments decided to take the “lightering-refloating plan”, NRB’s tugs and divers did not carry out any salvage operations as agreed. Article 176 Paragraph 2 of the Maritime Code of the People’s Republic of China provides that if the payment under the salvage contract is in an excessive degree too large or too small for the services actually rendered, the contract may be modified by a judgment of the court which has entertained the suit brought by either party, or modified by an award of the arbitration organization to which the dispute has been submitted for arbitration upon the agreement of the parties. Therefore, the request of Archangelos Investments that the salvage contract should be modified by reason that the agreed salvage operations under the contract were not rendered should be supported in accordance with the law. Considering that the judgment of first instance has taken into full account the criteria provided for in Article 180 of the Maritime Code of the People’s Republic of China to adjust the salvage reward in response to the request of Archangelos Investments, the court will not make a further adjustment. Both litigants agreed that if calculated as per the rates found in the judgment of first instance, the salvage reward would be in the amount of RMB6,592,913.58. The amount is hereby confirmed by the court. 3. As to payment of the salvage reward, whether Archangelos Investments may pay only the proportion which the salved value of the ship bears to the total salved value Because of the special risks in the carriage of goods by sea, once a marine accidents occur, the ship and the cargo are inseparable and in common peril. The salvage assistance called for by the master or the ship-owner shall be aimed at both the ship and the cargo and thus the master or the owner of the ship in distress are conferred by the Maritime Code of the People’s Republic of China to conclude a contract for salvage operations on behalf of the owner of the property on board and hold both the ship and cargo interests jointly accountable for the salvage reward, without being required to obtain authorization from the owner of the property or declare that the salvage assistance is sought for the owner of the cargo as well. As such, Article 175 of the Maritime Code of the People’s Republic of China stipulates that, “the master of the ship in distress shall have the authority to conclude a contract for salvage operations on behalf of the shipowner. The Master of the ship in distress or its owner shall have the authority to conclude a contract for salvage operations on behalf of the owner of the property on board”, and Article 183 thereof stipulates that, “the salvage reward shall be paid by the owners of the salved ship and other property in accordance with the respective proportions which the salved values of the ship and other property bear to the total salved value.” Since the Maritime Code of the People’s Republic of China does not distinguish among different types of

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salvage with regards to the application of the aforesaid provisions, they are applicable to the contractual salvage in this case. The salvage contract was concluded by Alpha & Delta Ocean and NRB. However, both litigants confirmed that Alpha & Delta Ocean was an agent of the ship-owner Archangelos Investments. According to Article 63 of the General Principle of the Civil Law of the People’s Republic of China, which states that “citizens and legal persons may perform civil juristic acts through agents. An agent shall perform civil juristic acts in the principal’s name within the scope of the power of agency. The principal shall bear civil liability for the agent’s acts of agency”, the legal effect of an act done by the agent within the scope of his/her authority shall be assumed by the principal. The salvage contract concluded with NRB by Alpha & Delta Ocean according to the authorization from Archangelos Investments has the same effect as that concluded by Archangelos Investments for itself. It is not good for the timely rendering of salvage operations and does not conform to the shipping practice if the ship-owner or master is required to execute the salvage contract in person when the ship is in distress. Article 175 of the Maritime Code of the People’s Republic of China provides for two kinds of statutory representation rights. The said provision does not conflict with the agency system. Therefore, NRB’s submission that Article 175 of the Maritime Code of the People’s Republic of China does not apply to this case because the one who concluded the salvage contract was neither the master nor the ship-owner of M.V. “Archangelos Gabriel” and Alpha & Delta Ocean never disclosed to NRB that it represented the cargo interests shall not be supported according to law. Moreover, NRB argued that salvage reward was for “no cure- no pay” contracts, but the charges involved was contractual remuneration or commission but not the salvage reward prescribed in Article 183 of the Maritime Code of the People’s Republic of China, and thus the provisions in the said article shall not apply. Article 172 of the Maritime Code of the People’s Republic of China stipulates that “‘payment’ means any reward, remuneration or compensation for salvage operations to be paid by the salved party to the salvor according to the provisions of this Chapter”, from which it can be seen that the salvage payment as prescribed by the Maritime Code of the People’s Republic of China has different forms including reward, remuneration or compensation for salvage operations. According to relevant provisions in Chap. 9 of the Maritime Code of the People’s Republic of China, remuneration is aimed at the salvage of human life, while special compensation is aimed at salvage operations in respect of a ship which by itself or its goods threatened pollution damage to the environment, so the payment under the salvage contract in this case shall not be regarded as the remuneration or compensation under the Maritime Code of the People’s Republic of China. Article 179 of the Maritime Code of the People’s Republic of China prescribes that “where the salvage operations rendered to the distressed ship and other property have had a useful result, the salvor shall be entitled to a reward. Except as otherwise provided for by Article 182 of this Code or by other laws or the salvage contract, the salvor shall be entitled to the payment if the salvage operations have had no useful result”. Salvage reward is one form of salvage payments, in contractual salvage, both the salvor and

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the party salved can agree on a form of payment for the salvage operations, including salvage reward, so NRB’s argument that the salvage reward under Article 183 of the Maritime Code of the People’s Republic of China applied to “no cure-no pay” salvage contracts only is be baseless and thus shall not be supported. This case concerns contract salvage, where both parties agreed that economic return shall be paid to the salvor for its performance of the contract by the salved party. The said agreed payment shall be listed as salvage reward, and thus Article 183 shall apply in accordance with the law. NRB’s submission that Article 183 of the Maritime Code of the People’s Republic of China was not applicable in this case shall not be supported. Therefore, with regards to the salvage reward, Archangelos Investments may pay only the proportion which the salved value of the ship bears to the total salved value, which is 38.85% of the salvage reward. It means that share of the salvage reward payable by Archangelos Investments shall be RMB2,561,346.93. The refusal of Archangelos Investments to pay constituted a breach of contract, and therefore NRB’s claim for interest on the belated payment is well grounded and thus shall be supported according to law. The salvage operations involved were completed on August 18, 2011 and it was on August 19, 2011 that NRB notified Archangelos Investments of the payment incurred, thus it is reasonable that the judgment of first instance according to the circumstances found that Archangelos Investments shall effect the appropriate payment within two months after receiving the payment notice from NRB. As such, the interest shall be calculated from October 19, 2011 to the date of payment under this judgment, at the current fund loan interest rate(s) promulgated by the People’s Bank of China for the corresponding period(s). To sum up, in the judgment of first instance, part of the facts were not clearly ascertained, part of the law was inappropriately applied and the result of the judgment was in error, which shall be corrected by the court accordingly. Since part of Archangelos Investments’ appeal is reasonable, the court shall uphold the part which is reasonable and reject the part which is unreasonable. According to Article 175, Article 183 of the Maritime Code of the People’s Republic of China, Article 107 of the Contract Law of the People’s Republic of China, Article 64 and Article 170 Paragraph 1 Sub-paragraph 2 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: 1. Civil Judgment (2012) Guang Hai Fa Chu Zi No.898 issued by Guangzhou Maritime Court shall be revoked; 2. Archangelos Investments E.N.E shall pay the amount of RMB2,561,346.93, being its share of the salvage reward to Nanhai Rescue Bureau of the Ministry of Transport together with interest on the amount running from October 19, 2011 to the date of payment under this judgment as per the current fund loan interest rate promulgated by the People’s Bank of China for the corresponding period; 3. Reject other claims of Nanhai Rescue Bureau of the Ministry of Transport. The obligations with respect to pecuniary payment mentioned above shall be fulfilled within 10 days after this judgment comes into effect.

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In case of failure to fulfill the obligations with respect to pecuniary payment within the period specified by this judgment, double interest on the debt for the belated payment shall be paid according to Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee of first instance in amount of RMB65,822, RMB23,283.11 shall be born by Archangelos Investments E.N.E and RMB42,538.89 shall be born by Nanhai Rescue Bureau of the Ministry of Transport. Nanhai Rescue Bureau of the Ministry of Transport agreed that the court of first instance did not need to return the share of the court cost payable by Archangelos Investments E.N.E and thus Archangelos Investments E.N.E shall directly effect its share of the court cost to Nanhai Rescue Bureau of the Ministry of Transport. Court acceptance fee of second instance in amount of RMB65,822, Archangelos Investments E.N.E shall bear RMB23,283.11, and Nanhai Rescue Bureau of the Ministry of Transport shall bear the other RMB42,538.89. Archangelos Investments E.N.E has prepaid the court cost of RMB65,822, as such, the court shall return RMB42,538.89 payable by Nanhai Rescue Bureau of the Ministry of Transport to Archangelos Investments E.N.E, and Nanhai Rescue Bureau of the Ministry of Transport shall pay the court acceptance fee in the amount of RMB42,538.89 to the court within 10 days from the date when this judgment comes into effective. The judgment is final. Presiding Judgment: DU Yixing Acting Judge: MO Fei Acting Judge: GU Enzhen June 16, 2015 Clerk: LI Junsong

Appendix: Relevant Laws 1. Contract Law of the People’s Republic of China Article 107 If a party fails to perform its obligations under a contract, or rendered non-conforming performance, it shall bear the liabilities for breach of contract by specific performance, cure of non-conforming performance or payment of damages, etc. 2. Maritime Code of the People’s Republic of China Article 175 A contract for salvage operations at sea is concluded when an agreement has been reached between the salvor and the salved party regarding the salvage operations to be undertaken.

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The Master of the ship in distress shall have the authority to conclude a contract for salvage operations on behalf of the shipowner. The Master of the ship in distress or its owner shall have the authority to conclude a contract for salvage operations on behalf of the owner of the property on board. Article 176 The salvage contract may be modified by a judgment of the court which has entertained the suit brought by either party, or modified by an award of the arbitration organization to which the dispute has been submitted for arbitration upon the agreement of the parties, under any of the following circumstances: (1) The contract has been entered into under undue influence or the influence of danger and its term are obviously inequitable; (2) The payment under the contract is in an excessive degree too large or too small for the services actually rendered. Article 179 Where the salvage operations rendered to the distressed ship and other property have had a useful result, the salvor shall be entitled to a reward. Except as otherwise provided for by Article 182 of this Code or by other laws or the salvage contract, the salvor shall be entitled to the payment if the salvage operations have had no useful result. Article 180 The reward shall be fixed with a view to encouraging salvage operations, taking into full account the following criteria: (1) Value of the ship and other property salved; (2) Skill and efforts of the salvors in preventing or minimizaing the pollution damage to the environment; (3) Measure of success obtained by the salvors; (4) Nature and extent of the danger; (5) Skill and efforts of the salvors in salving the ship, other property and life; (6) Time used and expenses and losses incurred by the salvors; (7) Risk of liability and other risks run by the salvors or their equipment; (8) Promptness of the salvage services rendered by the salvors; (9) Availability and use of ships or other equipment intended for salvage operations; (10) State of readiness and efficiency of the salvor’s equipment and the value thereof. The reward shall not exceed the value of the ship and other property salved. Article 183 The salvage reward shall be paid by the owners of the salved ship and other property in accordance with the respective proportions which the salved values of the ship and other property bear to the total salved value.

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3. Civil procedure law of the People’s Republic of China Article 170 After trying a case on appeal, the people’s court of second instance shall, in the light of the following situations, dispose of it accordingly: (1) If the facts were clearly ascertained and the law was correctly applied in the original judgment, the appeal shall be rejected in the form of judgment and the original judgment or order shall be affirmed; (2) If the facts were wrongly ascertained or the application of law was incorrect in the original judgment, the said judgment shall be modified, repealed or amended according to the law by a judgment or a written order; (3) If the basic facts were not clearly ascertained in the original judgment, the people’s court of second instance shall make a written order to revoke the original judgment and remand the case to the original people’s court for retrial, or the people’s court of second instance may amend the judgment after investigating and clarifying the facts; or (4) It there was serious violation of legal procedures such as omitting any party or making an illegal absentee judgment in the original judgment, the said judgment shall be revoke by a written order and the case remanded to the original people’s court for retrial. If the party files an appeal against the judgment made in the retrial by the court originally tried the case, the people’s court of second instance shall not remand the case again to the original court for retrial again.

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The Supreme People’s Court of the People’s Republic of China Civil Judgment Nanhai Rescue Bureau of the Ministry of Transport v. Archangelos Investments E.N.E et al. (2016) Zui Gao Fa Min Zai No.61 Related Case(s) This is the judgment of retrial, and the judgment of first instance and the judgment of second instance are on page 665 and page 683 respectively. Cause(s) of Action 227. Dispute over salvage contract. Headnote Modifying intermediate appeal court’s order that modified trial court’s order awarding the Plaintiff salvor salvage remuneration; intermediate appellate court was right to base salvage reward on contract, but amount calculated by trial court was nevertheless to be sustained. Summary The Defendants were bunker suppliers whose ship ran aground during a journey, resulting in a threat to marine pollution. They instructed the Plaintiff to provide them salvage service. The Defendants argued the Plaintiff’s salvage operation disobeyed their salvage agreement. The court of first instance held that the ship was in peril and the Plaintiff voluntarily conducted the salvage operation though the towing operation was not in accordance with the initial agreed upon plan. Thus, the Plaintiff was entitled to remuneration. The Defendant appealed. The intermediate appellate court modified the trial court’s decision, holding that remuneration should be based on rates in the salvage contract instead of a “no cure, no pay” contract. The Defendant applied for a retrial by submitting new evidence. The Supreme People’s Court denied the application for a new trial since the evidence had no relation to the case. The Supreme People’s Court held that although the court of first instance’s decision was incorrect, the salvage reward calculated by that court was more accurate than the amount calculated by the intermediate appellate court.

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Judgment The Claimant of Retrial (the Plaintiff of first instance, the Respondent of second instance): Nanhai Rescue Bureau of the Ministry of Transport. Address: 42 Binjiang W. Road, Guangzhou, Guangdong, the People’s Republic of China. Legal representative: LIN Zhihao, director. Agent ad litem: WAN Renshan, lawyer of Shanghai Chuangyuan Law Firm. The Respondent of Retrial (the Defendant of first instance, the Appellant of second instance): Archangelos Investments E.N.E. Address: 29 Drossopoulou Street, 112 57 Athens, Greece. Representative: George Balabanos, director. Agent ad litem: HUANG Hui, lawyer of Huang & Huang Co. Agent ad litem: ZHANG Jing, lawyer of Huang & Huang Co. The Defendant of first instance: Alpha & Delta Ocean Limited Shanghai Representative Office. Address: Rm 610, Jinzhong Building #1, 680 Zhao Jia Bang Road, Xuhui District, Shanghai, the People’s Republic of China. Representative: HE Xijun, chief representative. Agent ad litem: HUANG Hui, lawyer of Huang & Huang Co. With respect to the case arising from dispute over salvage contract between the Claimant of Retrial Nanhai Rescue Bureau of the Ministry of Transport (hereinafter referred to as “NRB”) and the Respondent of Retrial Archangelos Investments E.N. E (hereinafter referred to as “Archangelos Investments”) and the Defendant of first instance Alpha & Delta Ocean Limited Shanghai Representative Office (hereinafter referred to as “Alpha & Delta Ocean”), the Claimant of Retrial refused to accept the Civil Judgment (2014) Yue Gao Fa Min Si Zhong Zi No.117 made by Guangdong High People’s Court and thus applied to the court for retrial. On December 24, 2015, the court issued Civil Order (2015) Min Shen Zi No.3182 to bring the case to trial and a collegiate panel comprised of Deputy President and Judge HE Rong, Judges ZHANG Yongjian, WANG Shumei, YU Xiaohan and Acting Judge GUO Zaiyu were formed in accordance with law and the court heard the case in public on July 7, 2016. Legal representative of NRB, LIN Zhihao, agent ad litem of NRB WAN Renshan, and agents ad litem of Archangelos Investments, HUANG Hui and ZHANG Jing, and agent ad litem of Alpha & Delta Ocean, HUANG Hui, attended the hearing. Now the case has been concluded. NRB alleged before Guangzhou Maritime Court of the People’s Republic of China (hereinafter referred to as “the court of first instance”) that: Archangelos Investments was the owner of M.V. “Archangelos Gabriel”, and Alpha & Delta Ocean was the agent of Archangelos Investments. On August 12, 2011, M.V. “Archangelos Gabriel” ran aground off the middle channel of the Qiongzhou Strait. NRB, as engaged by Archangelos Investments, dispatched three tugs, “Nan Hai Jiu

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116”, “Nan Hai Jiu 101” and “Nan Hai Jiu 201” respectively, and a group of divers to the scene to render, among other things, salvage, sea transport and standby services. In accordance with the agreement reached between the two parties, the salvage charges accruing amounted to RMB7,240,998.24 in total, but Archangelos Investments had not paid anything so far. Therefore, NRB requested the court to order Archangelos Investments and Alpha & Delta Ocean to pay, jointly and severally: (1) the salvage charges in the amount of RMB7,240,998.24; (2) interest running from August 20, 2011 to the day of payment (temporarily amounting to RMB476,449.64 by August 19, 2012 at the loan interest rate for the corresponding period promulgated by the People’s Bank of China); (3) the court cost. The court of first instance found the following facts: M.V. “Archangelos Gabriel” was a Greek-registered oil carrier of 40,682 GRT, the port of registry being Piraeus, and was owned by Archangelos Investments. While en route from Hong Kong to Qinzhou Port, Guangxi, laden with a cargo of 54,580 Cabinda crude oil and a crew of 26, M.V. “Archangelos Gabriel” ran aground off the light buoy No.6 in the northern channel of the Qiongzhou Strait at 0500 h on 12th August 2011 (position: 22°21′7.2″N 110°48′7.8″), after which, the vessel developed a list of 3 degrees to the port side, cracks were found below the waterline in way of the forepeak tank, resulting in ingress of seawater, the vessel and her cargo were in dangerous condition, creating a serious threat to the safety of the sea. After the occurrence of the grounding incident, Archangelos Investments through Alpha & Delta Ocean sent an urgent email regarding the accident suffered by M.V. “Archangelos Gabriel” to NRB, requesting NRB to arrange 2 tug boats for rescuing according to its experience, and indicating to agree NRB’s quotation. By an email at 2040 h on 12, Alpha & Delta Ocean sent Letter of Appointment to NRB, engaging NRB’s ships “Nan Hai Jiu 116” and “Nan Hai Jiu 101” to assist M. V. “Archangelos Gabriel” in getting refloated, and undertaking to pay NRB for such assistance, be it fruitful or not, as per the rate of RMB3.2 hph for a period counting from the moment NRB’s ships became standby at their respective waiting places to the moment they returned to those place(s) upon Alpha & Delta Ocean’s notification of termination of assistance services. “Nan Hai Jiu 116” and “Nan Hai Jiu 101” were only responsible for towing operations. In case of any accident incurred by M.V. “ARCHANGELOS GABRIEL” during the refloating operations, “Nan Hai Jiu 116” and “Nan Hai Jiu 101” should not be liable therefor. Further, Archangelos Investments requested NRB to send divers to carry out an underwater inspection on M.V. “Archangelos Gabriel”. Remuneration for such inspection would be calculated as (1) inland dispatching cost RMB10,000.00; (2) water transportation cost RMB55,000.00; (3) operation charges RMB40,000.00 every eight hours, counting from the moment the divers embarked the traffic ship to the moment they got ashore from the traffic ship after completion of the underwater inspection. Meanwhile, in order to prevent the situation from worsening and to avoid an occurrence of pollution of the sea, Zhanjiang MSA of the People’s Republic of China (hereinafter referred to as “Zhanjiang MSA”) determined that the vessel had

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to be lightened so as to get refloated and decided to take the compulsory lightering-refloating plan. As per the arrangement and coordination of Zhanjiang MSA, on August 17, China Shipping Development Co., Ltd. - Tanker Company dispatched the tanker “Dan Chi” to the scene to lighter the crude oil cargo. On 18, M.V. “Archangelos Gabriel” got refloated successfully with high tide, and afterwards proceeded to and safely arrived at Qinzhou Port, Guangxi, her port of destination. The lightered cargo was carried by “Dan Chi” to the port of destination. 1. Work done by “Nan Hai Jiu 116” “Nan Hai Jiu 116” was a rescue ship of 3,681 GRT with a gross power of 9,000 kw (12,240 BHP) owned by NRB. After arrived at the scene, “Nan Hai Jiu 116” did not carry out the agreed towing operations because Zhanjiang MSA decided to take the lightering-refloating plan. From 0745 h on August 12 to 1920 h on August 18, “Nan Hai Jiu 116”, in accordance with Archangelos Investments’ instructions, provided standby service to M.V. “Archangelos Gabriel” for a period of 155.58 h. As per the agreed RMB3.2 per horsepower hour, NRB claimed that the payment by Archangelos Investments for “Nan Hai Jiu 116” should be RMB6,093,757.44. Archangelos Investments and Alpha & Delta Ocean contended that the intention for hiring “Nan Hai Jiu 116” was to carry out towing operations and the agreed rate of RMB3.2 per horsepower hour was subject to towing operations, but in fact the tug stayed standby during the entire salvage operations and never actually engaged in any specific part of the salvage operations. Therefore, the cost of the tug could not be calculated at the initially agreed rate. 2. Work done by “Nan Hai Jiu 101” “Nan Hai Jiu 101” was a rescue ship of 4,091 GRT with a gross power of 13,860 kw (18,850 BHP) owned by NRB. At 0938 h on 12, NRB sent an email to Alpha & Delta Ocean, requesting Alpha & Delta Ocean to confirm the second tug “Nan Hai Jiu 101”. At 0957 h, Alpha & Delta Ocean replied and requested NRB to send the said 2 tug boats to rescue. At 0930 h on August 12, “Nan Hai Jiu 101” proceeded to the scene to render assistance in M.V. “Archangelos Gabriel”. When “Nan Hai Jiu 101”was on the way to the scene, NRB wrote to Alpha & Delta Ocean at 1519 h saying that owing to the master of M.V. “Archangelos Gabriel”’s insistence on the opinion of Zhanjiang MSA, and selected to refloat the tanker by lightering the cargo, they suggested that “Nan Hai Jiu 116” stay at the scene while “Nan Hai Jiu 101” return to Guishan Anchorage. At 1544, Alpha & Delta Ocean replied and stated that, further to their telecom before, they hereby confirmed to keep “Nan Hai Jiu 116” alongside their vessel and cancel for “Nan Hai Jiu 101”. At 1550, “Nan Hai Jiu 101” started to return, even at this time she did not reach the grounding location yet. At 2305, “Nan Hai Jiu 101” arrived at the anchorage. NRB claimed that, as per the agreed RMB3.2 per horsepower hour, the payment by Archangelos Investments for “Nan Hai Jiu 101” for the period totally 13.58 h should be RMB819,145.60. Archangelos Investments and Alpha & Delta contended that, because “Nan Hai Jiu

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101” turned back to her anchorage as per NRB’s instructions before reaching the grounding location, she had never actually engaged in the towing operation or other operations, NRB’s claim for salvage charges at the initially agreed rate was obviously unfair and extremely unreasonable. 3. Work done by “Nan Hai Jiu 201” “Nan Hai Jiu 201” was a rescue ship of 552 GRT with a gross power of 4,480 kw (6,093 BHP) owned by NRB. On August 13, Archangelos Investments made a request that it wanted to hire “Nan Hai Jiu 201” to take their two representatives from Haikou to board M.V. “Archangelos Gabriel”. NRB sent email to Alpha & Delta Ocean stating that cost for “Nan Hai Jiu 201” was RMB1.5/per hour per horse power and total cost would be calculated based on the time used. Alpha & Delta replied to agree with the cost and stated that upon their two representatives’ embarkation on board of M.V. “Archangelos Gabriel”, “Nan Hai Jiu 201” could return to the base immediately. On August 13, “Nan Hai Jiu 201” shipped the 2 representatives to M.V. “Archangelos Gabriel” and then returned back, this working time of “Nan Hai Jiu 201” was 7.83 h. At 1452 h on August 15, Alpha & Delta Ocean wrote to NRB to make a request that they wanted to hire “Nan Hai Jiu 201” at 0800 h on August 16, 2011 to send relevant persons and facilities to M.V. “Archangelos Gabriel, and asked if she could wait there for couple hours or not and also the rate could be RMB1.30 per horsepower hour or not. At 1600 h, NRB replied that the cost remains RMB1.5 per horsepower hour, counting from the time of departure from her anchorage to the time of return to the same anchorage after completion of her job. In addition, this tug would be used as a traffic ship only and would not assist in any diving-related operations. At 2002 h, Alpha & Delta Ocean replied that they agreed with the NRB’s plan and cost after hard negotiation and asked NRB to arrange it without any delay. On August 16, “Nan Hai Jiu 201” shipped the related work staff and related facilities to M.V. “Archangelos Gabriel”, and made fast, F.W.E., and this working time of “Nan Hai Jiu 201” was 7.75 h. At 1633 h on August 17, Alpha & Delta Ocean wrote to NRB to request to hire “Nan Hai Jiu 201” for 1 trip on August 18 only with departure time of 0200 h on 18th to send their captains, surveyors on board of M.V. “Archangelos Gabriel” and confirmed RMB1.5 per horsepower hour. On August 18, “Nan Hai Jiu 201” shipped the related personnel and luggage to M.V. “Archangelos Gabriel” and then made fast, F.W.E, and this working time of “Nan Hai Jiu 201” was 8.83 h. Basing on the rate of RMB1.5 per horsepower hour as agreed and the total working time of 24.41 h, NRB claimed that the payment by Archangelos Investments for “Nan Hai Jiu 201” should be RMB223,095.20. While Archangelos Investments and Alpha & Delta Ocean contended that the horse power of “Nan Hai Jiu 201”, which was 6,093, was just too big for her as a traffic ship, so apparently, it could be seen that NRB wanted to take advantage to charge more by sending such a

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high-powered vessel. Besides, Archangelos Investments and Alpha & Delta Ocean did not confirm the authenticity of the deck log extracts, arguing that the entries therein had been modified arbitrarily by NRB. But Archangelos Investments and Alpha & Delta Ocean did not produce evidence in this respect. 4. Work done by the Divers At 0957 h on August 12, Alpha & Delta Ocean sent email to NRB asking them to arrange divers to inspect the details about the damage and grounding for M.V. “Archangelos Gabriel”. At 1554 h, Alpha & Delta Ocean wrote to China Ocean Shipping Agency Zhanjiang, agent of M.V. “Archangelos Gabriel”, saying that NRB’s rescue team with diver left their base around 1500 h and would arrive alongside around 1730 h that day to carry out diver inspection of water area, also nominated China Ocean Shipping Agency Zhanjiang as their agent to cooperate with Zhanjiang MSA to carry out rescue and arrange M.V. “Archengelos Gabriel”’s further proceeding to Qinzhou. At 1808 h on August 13, NRB wrote to Alpha & Delta Ocean asking them to confirm the time for the divers to embark the traffic ship was 1500 h on 12th, the time of disembarking the traffic ship was 2300 h on 12 and the total working time used by the divers was 8 h. In this email, it also listed the working hours of “Nan Hai Jiu 101” on 12 and “Nan Hai Jiu 201” on 13. At 1935 h, Alpha & Delta Ocean replied to NRB expressing thankness for their effort and hoped they could reduce the cost a little. Meanwhile, Alpha & Delta Ocean put forward to cancel the cost of RMB100,000.00 for diver and RMB55,000 for “Nan Hai Jiu 201”. At 2033 h, NRB replied to claim that they could not accept the said advice. NRB claimed that the cost of the divers should total to RMB105,000, basing on the inland dispatching cost of RMB10,000, water transportation cost of RMB55,000 and operation charges of RMB40,000. While Archangelos Investments and Alpha & Delta Ocean pointed out that the charges for preparation and mobilization of the divers and the equipment had been covered by the said land dispatching cost and water transportation cost, and that the operation charges, namely RMB40,000 per 8 h, only refer to such charges for actual underwater inspection. Since no underwater inspection had been actually carried out by the divers, NRB should not be entitled to such kind of charges. 5. Other facts in relation to the cost of “Nan Hai Jiu 116” and “Nan Hai Jiu 101”: At 1452 h on August 15, Alpha & Delta Ocean wrote to NRB for negotiation of the cost and requested to: (1) reduce the rate for “Nan Hai Jiu 116” to RMB2.90/HP per hour; (2) cancel the rent for “Nan Hai Jiu 101”, reduce the rate and make the best offer; (3) reduce the cost for dive work to RMB100,000.00; (4) confirm that the cost of hiring “Nan Hai Jiu 201” on August 13 was RMB55,000.00; (5) reduce the rate to RMB1.30/HP per hour in case of hiring “Nan Hai Jiu 201” on 16 to send the divers team/port capt./surveyor to board the vessel. At 1600 h, NRB replied that the rate for “Nan Hai Jiu 201” should remain to be RMB1.5/HP per hour, while other cost accruing due to the salvage operation effected to M.V. “Archangelos Gabriel” would be discussed later.

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In the first instance, NRB confirmed not to hold Alpha & Delta Ocean liable for the case. The court of first instance held that: This case arose from a dispute over contract of salvage at sea. According to the provisions of Article 26 of Some Provisions of the Supreme People’s Court on the Scope of Cases to be Entertained by Maritime Courts, the case should be under the exclusive jurisdiction of maritime courts. The place where the vessel involved was salved fell with the jurisdiction of the court of first instance and thus, in accordance with the provisions of Article 31 of the Civil Procedure Law of the People’s Republic of China, the court of first instance should have jurisdiction over this case. This case was a foreign-related one as Archangelos Investments was a Greek-incorporated company and M.V. “Archangelos Gabriel” a Greek-registered tanker. Since the litigants all agreed during the court trial that Chinese law shall be applicable, according to the provisions of Article 3 of the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China, Chinese law shall be the applicable law for the addressing of substantive issues in this case. 1. Establishment and effectiveness of the salvage contract After occurrence of the grounding accident, Archangelos Investments, through its agent Alpha & Delta Ocean, requested NRB via email to dispatch two tugs to render salvage service and agreed to accept NRB’s quotation for such service. Moreover, Archangelos Investments also instructed Alpha & Delta Ocean via the Letter of Appointment by email to NRB to agree on, among other things, the tugs and manpower (divers) needed as well as the standard for the calculation of charges for the salvage operation. From the emails exchanged it could be seen that Archangelos Investments and Alpha & Delta Ocean were well aware of the dangerous situation at that time. Meanwhile, both parties had fully discussed the issue on the related costs. Therefore, there were no “substantial misunderstandings” or “being taken advantage” circumstances. In accordance with the provisions of Article 175 Paragraph 1 of the Maritime Code of the People’s Republic of China, which stated that “a contract for salvage operations at sea is concluded when an agreement has been reached between the salvor and the salved party regarding the salvage operations to be undertaken”, the salvage contract had been duly reached between NRB and Archangelos Investments. Such contract did not violate any compulsory provisions provided for by the current laws and administrative regulations of the People’s Republic of China and thus should be legally effective and be honored by both parties. 2. Whether to add china oil, the owners of the cargo, as a third party to participate in the proceedings The reason for Archangelos Investments to apply to add China Oil as a third party to participate in the proceedings was that, in this case, the ship and the goods involved were in common peril. According to Article 183 of the Maritime Code of the People’s Republic of China, the salvage reward shall be paid by the owners of the salved ship and other property in accordance with the respective proportions

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which the salved values of the ship and other property bear to the total salved value. The court of first instance found that NRB’s claim against Archangelos Investments was salvage payment at the agreed rates under the salvage contract concluded between the two parties. The legal relation involved in this dispute was different from the one involved in general average contribution. Therefore, the submission of Archangelos Investments to add the cargo owner in the proceedings as a third party could not be established. 3. Whether the salvage service rendered by NRB met the requirement for constituting salvage at sea M.V. “Archangelos Gabriel” was a ship as referred to in Article 3 of the Maritime Code of the People’s Republic of China, and a subject of salvage as recognized by law. After her grounding, both M.V. “Archangelos Gabriel” and the cargo carried onboard were in distress, which was likely to lead to marine pollution and posted a threat to the safety of the marine environment, constituting an urgent situation. Archangelos Investments and Alpha & Delta Ocean were aware of the dangerous situation M.V. “Archangelos Gabriel” involved. NRB dispatched “Nan Hai Jiu 116”, “Nan Hai Jiu 101”, “Nan Hai Jiu 201” and divers to the scene to render, among other things, sea transportation and standby services. The said services were of great importance to the successful refloating of M.V. “Archangelos Gabriel”. “Nan Hai Jiu 116”, though did not carry out the towing operations as per the initial plan, kept on standby at the scene as per the arrangement of the owner of M.V. “Archangelos Gabriel” until the grounded tanker got refloated. Besides, the Maritime Code of the People’s Republic of China did not specify the specific forms of salvage operations. Therefore, the aforesaid said acts conducted by NRB should be deemed as salvage operations. During the salvage operations, the actions and inactions of both NRB and Archangelos Investments were voluntary, showing no circumstances as provided for in Article 186 of the Maritime Code of the People’s Republic of China that would deprive NRB of the right to a salvage payment. Judging from the process of the entire salvage operations, it could be seen that the salvage operations were a success, for M.V. “Archangelos Gabriel” were successfully refloated and her entire crew as well as all the cargo on board finally arrived at Qinzhou port safely. Considering the above, the salvage services rendered by NRB met the requirement for constituting salvage at sea. Hence, NRB should be entitled to a reward, in accordance with Article 179 of the Maritime Code of the People’s Republic of China. 4. The quantum of the claimed salvage charges and interest (1) As to the salvage charges payable to “Nan Hai Jiu 201” Regarding the working time of “Nan Hai Jiu 201”, even though Archangelos Investments argued that her deck log entries had been arbitrarily modified by NRB, they failed to provide evidence to support their argument in this regard. “Nan Hai Jiu 201”’s total working time was 24.41 h for the three times of services. The rate of RMB1.5/HP per hour for “Nan Hai Jiu 201” was fixed upon sufficient

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negotiation between NRB and Archangelos Investments and thus was confirmed by the court of first instance. Upon calculation basing on the gross power of “Nan Hai Jiu 201” of 6,093HP, the salvage charges payable to “Nan Hai Jiu 201” by Archangelos Investments for the salvage service amounted to RMB223,095.20. (2) As to the cost of the divers According to the Letter of Appointment sent by Archangelos Investments to NRB, the cost of the divers shall be calculated from the time the divers embarked the traffic ship to the time of disembarkation after the operation was completed. According to the said agreement, even though the divers did not conduct underwater inspection, if they embarked on the traffic ship, Archangelos Investments shall pay the underwater inspection charges of RMB40,000 for the divers to NRB as agreed, also with the inland dispatching cost of RMB10,000 and the water transportation cost of RMB55,000, the total cost was RMB105,000. (3) As to the salvage charges payable to “Nan Hai Jiu 116” and “Nan Hai Jiu 101” Archangelos Investments had no issue with the gross powers and the claimed working hours of the two tugs, but held that because the tugs actually never rendered towing services to M.V. “Archangelos Gabriel”, the initial agreed rate should be reduced, with reference to the Procedures of the Ministry of Communications of the People’s Republic of China for Collecting Salvage Charges on International Passage, the Procedures of the Ministry of Communications of the People’s Republic of China for Collecting Port Charges and the Procedures of Guangdong Province for Collecting Port Charges. The court of first instance held that, among the three reference standards proposed by Archangelos Investments, the first one had been abolished, the second and third ones applied to the harbor towing services only, therefore, the three reference standards shall not be applicable to the case. According to the stipulations of Article 180 of the Maritime Code of the People’s Republic of China, the reward should be fixed by taking into full account such factors as time used and expenses and losses incurred by the salvors, and risk of liability and other risks run by the salvors or their equipment. In practice, on the part of the salvor, there was a certain difference between standby services and towing services in terms of cost and consumption, technology requirement and risk of liability involved, etc. In accordance with Article 176 Paragraph 2 of the Maritime Code of the People’s Republic of China, where the payment under the salvage contract was in an excessive degree too large or too small for the services actually rendered, the contract might be modified by a judgment of the court or an award of the arbitration organization during the litigation or arbitration procedures. Since “Nan Hai Jiu 116” and “Nan Hai Jiu 101” did not actually render salvage services as originally agreed, the rate of RMB3.2 per horsepower hour for the two tugs as originally agreed claimed by NRB was excessively high, and in light of that Archangelos Investments had raised objection thereto, the court of first instance held that this claimed rate should be adjusted. On one hand, Archangelos Investments subsequently kept asking NRB through emails to adjust that rate, NRB

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replied by email that “as for other cost accruing due to the salvage operation effected to M.V. ‘Archangelos Gabriel’, we can discuss it later”. From this, it could be seen that NRB at that time left room for adjustment to the rate. On the other hand, after Archangelos Investments had decided to alter the salvage plan to “lightering-refloating operations” and notified NRB about this alteration, Archangelos Investments, in an email to NRB later on August 15, still asked if the rate for “Nan Hai Jiu 116” could be adjusted to RMB2.9 per horsepower hour. From this, it was apparent that after Archangelos Investments had altered to adopt the lightering-refloating plan, Archangelos Investments was still willing to hire NRB’s tugs at the rate of RMB2.9 per horsepower hour. The determination of this rate complied with the principle of “to encourage salvage” of the Maritime Code of the People’s Republic of China. Therefore, the court of first instance adjusted the rate for “Nan Hai Jiu 116” and “Nan Hai Jiu 101” to RMB 2.9 per horsepower hour. Accordingly, the salvage charges of “Nan Hai Jiu 116” was calculated to RMB5,522,467.68 and “Nan Hai Jiu 101” to RMB742,350.70. In total, the salvage charges awarded to “Nan Hai Jiu 116”, “Nan Hai Jiu 101”, “Nan Hai Jiu 201” and the diving team altogether amounted to RMB6,592,913.58. As to the interest on the salvage reward claimed by NRB, NRB and Archangelos Investments had neither concluded an agreement nor afterwards reached a supplementary agreement on the period for payment of salvage reward which also could not be determined in accordance with relevant contract terms or transaction practice. Thus, according to Article 62 of the Contract Law of the People’s Republic of China, which stated that “if the time of performance was not clearly prescribed, the obligor may perform, and the obligee may require performance, at any time, provided that the other party shall be given the time required for preparation”, the court of first instance held that the reasonable time for such preparation should appropriately be determined as two months after the completion of the salvage service and the interest shall be calculated from October 19, 2011 to the date of payment under the judgment, at the current fund loan interest rate for the corresponding period promulgated by the People’s Bank of China. To sum up, through deliberation by the Adjudication Committee, the court of first instance ruled as follows in accordance with Article 175 Paragraph 1, Article 176 Paragraph 2, Article 179 and Article 180 of the Maritime Code of the People’s Republic of China: Archangelos Investments should pay RMB6,592,913.58 for the salvage reward to NRB, together with the interest thereon from October 19, 2011 to the date of payment under the judgment at the current fund loan interest rate for the corresponding period promulgated by the People’s Bank of China; and other claims of NRB should be rejected. Court acceptance fee of first instance in amount of RMB65,822, RMB9,591 should be born by NRB, RMB56,231 should be born by Archangelos Investments. Archangelos Investments refused to accept the judgment of first instance, requesting the second instance court to revoke the judgment of first instance and order Archangelos Investments to pay only 38.85% of the salvage reward to be awarded as per the adjusted rate and NRB to bear the court costs of both the first and second instances.

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During the second instance trial, except for the ascertainment of salvage reward, all parties had no objection to other facts found by the court of first instance which were thus confirmed by the second instance court. The court of second instance further found that: After M.V. “Archengelos Gabriel” ran aground, the master of M.V. “Archangelos Gabriel” alerted Zhanjiang MSA immediately, Zhanjiang MSA then enjoined the master and the ship-owner to develop a salvage plan and carried it out as soon as possible. After careful investigation, the master/ship-owner of M.V. “Archangelos Gabriel” decided to choose “the lightering-refloating plan” on the same day of the accident. To practically implement such plan, the owner of M.V. “Archangelos Gabriel” dispatched various naval architects, salvage experts and surveyors from different places such as Singapore, Holland and China to render assistance and guidance on board. Although Zhangjiang MSA issued the Contingency Plan For Lightering and Refloating M.V. “Archangelos Gabriel” on August 17, 2011, “the lightering-refloating plan” was clearly confirmed by M.V. “Archangelos Gabriel” interests and approved by Zhangjiang MSA before 1425 h of August 12. The salved value of the ship in this case was confirmed to be USD30,531,856, the salved value of the cargo be USD48,053,870, and the proportion of the salved value of the ship bears to the total salved value be 38.85%. The court of second instance held that: 1. As to the effectiveness of the salvage contract concluded between NRB and Archangelos Investments In the process of negotiation and concluding the salvage contract between the NRB and Archangelos Investments through emails, M.V. “Archangelos Gabriel” was in distress. The ship-owner of M.V. “Archangelos Gabriel” engaged relevant professionals to participate in developing and determining a salvage plan. The ship’s P&I Club and the ship interests jointly appointed professional lawyers and domestic maritime experts to participate in the determination of the salvage plan and the conclusion of the salvage contract. Alpha & Delta Ocean representing the ship-owner participated in the negotiation and conclusion of the salvage contract. Various emails exchanged between Alpha & Delta Ocean and NRB proved could prove that Archangelos Investments was well aware of the on-site situation, had full professional knowledge about the salvage operations in this case. After the “lightering-refloating plan” was selected, Archangelos Investments, having full negotiation with NRB, concluded the salvage contract with NRB and accepted the quotation given by NRB. The allegation of Archangelos Investments that it had substantial misunderstanding on the formation of the contract thus was not upheld by the court of second instance. Archangelos Investments confirmed that at around the same time when the grounding accident in this case happened, the costs of other tugs of the same type as “Nan Han Jiu 116” under the agreements on tug services concluded by NRB with out-siders were all higher than RMB3.00 per horse power per hour. Therefore, there was no such circumstance that NRB took advantage of others’ hardship in the

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present case. The grounds which Archangelos Investments’ took that the contract should be amended or canceled according to Article 54 of the Contract Law of the People’s Republic of China were not established. Archangelos Investments instructed NRB to dispatch “Nan Hai Jiu 116” and “Nan Hai Jiu 101” to assist M.V. “Archangelos Gabriel” in getting refloated, and agreed to pay NRB for the assistance, be it fruitful or not, as per the rate of RMB3.2 per horsepower hour, where “Nan Hai Jiu 116” and “Nan Hai Jiu 101” were only responsible for towing operations and should not be held accountable for any accident caused during the refloating operations. The salvage process also showed that NRB followed the ship interests’ instructions while participating in the salvage operations. Therefore, it was apparent that the salvage operations in this case were rendered basing on a salvage contract where the salvor should follow the salved party’s order to carry out the salvage operations and no matter whether such operations had a useful result or not, the salved party should, according to stipulation of Article 179 of the Maritime Code of the People’s Republic of China, pay the salvage reward as agreed by taking into account the human recourses and equipments used by the salvor. The finding in the judgment of first instance that useful salvage result by reason of the successful refloating of M.V. “Archangelos Gabriel” was one of the bases for NRB to obtain salvage reward was based on an inappropriate application of the law. 2. As to whether the salvage reward claimed by NRB was reasonable Letter of Appointment stipulated that Archangelos Investments instructed NRB to dispatch tugs to the scene to assist M.V. “Archangelos Gabriel” in getting refloated. It also stipulated that “Nan Hai Jiu 116” and “Nan Hai Jiu 101” were only responsible for towing operations. Refloating by way of towing operations and refloating by lightering operations were two different and separate ways of salvage operations. Refloating by lightering operations did not necessarily require a tug on standby. In addition, Archangelos Investments instructed NRB to dispatch “Nan Hai Jiu 116” and “Nan Hai Jiu 101” to render salvage operations when it remained unclear if the “lightering-refloating plan” would be taken. In view of this and also the literary meaning of the terms of the Letter of Appointment, it could be found that the tugs which Archangelos Investments instructing NRB to dispatch to the scene were intended for salvage operations by such a way as appropriate for tugs to refloat M.V. “Archangelos Gabriel” but not by standby. However, after arrival at the scene, as Archangelos Investments altered the salvage plan, NRB’s tugs and divers did not carry out any salvage operations as agreed. Therefore, the request of Archangelos Investments that the salvage contract should be modified by reason that the agreed salvage operations under the contract were not rendered had legal basis. Considering that the judgment of first instance had taken into full account the criteria provided for in Article 180 of the Maritime Code of the People’s Republic of China to adjust the salvage reward in response to the request of Archangelos Investments, the second instance court would not make a further adjustment. Both litigants agreed that if calculated as per the rates found in the judgment of first

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instance, the salvage reward would be in the amount of RMB6,592,913.58. The amount was hereby confirmed by the second instance court. 3. As to whether Archangelos Investments may pay the salvage reward only according to the proportion which the salved value that the ship should bear to the total salved value Article 175 of the Maritime Code of the People’s Republic of China stipulated that, “the master of the ship in distress shall have the authority to conclude a contract for salvage operations on behalf of the shipowner. The Master of the ship in distress or its owner shall have the authority to conclude a contract for salvage operations on behalf of the owner of the property on board”, and Article 183 thereof stipulated that, “the salvage reward shall be paid by the owners of the salved ship and other property in accordance with the respective proportions which the salved values of the ship and other property bear to the total salved value.” Since the Maritime Code of the People’s Republic of China did not distinguish among different types of salvage with regards to the application of the aforesaid provisions, they were applicable to the contractual salvage in this case. It was not good for the timely rendering of salvage operations and did not conform to the shipping practice if the ship-owner or master was required to execute the salvage contract in person when the ship was in distress. Article 175 of the Maritime Code of the People’s Republic of China provided for two kinds of statutory representation rights. The said provision did not conflict with the agency system. Therefore, NRB’s submission that Article 175 of the Maritime Code of the People’s Republic of China did not apply to this case because the one who concluded the salvage contract was neither the master nor the ship-owner of M.V. “Archangelos Gabriel” and Alpha & Delta Ocean never disclosed to NRB that it represented the cargo interests shall not be supported according to law. According to the stipulation of Article 172 and Article 179 of the Maritime Code of the People’s Republic of China, salvage reward was one form of salvage payments, in contractual salvage, both the salvor and the party salved could agree on a form of payment for the salvage operations, including salvage reward, so NRB’s argument that the salvage reward under Article 183 of the Maritime Code of the People’s Republic of China applied to “no cure-no pay” salvage contracts only was baseless. The payment both parties agreed was economic return paid to the salvor for its performance of the contract by the salved party and should be listed as salvage reward, thus, Article 183 should apply in accordance with the law. Thus, Archangelos Investments might pay only the proportion which the salved value of the ship bears to the total salved value, which was 38.85% of the salvage reward. It meant that share of the salvage reward payable by Archangelos Investments should be RMB2,561,346.93. The refusal of Archangelos Investments to pay constituted a breach of contract, and therefore NRB’s claim for interest on the belated payment was well grounded and thus shall be supported according to law. It was reasonable that the judgment of first instance according to the circumstances found that Archangelos Investments shall effect the appropriate payment within two months after receiving the payment notice from NRB. As such, the interest shall be

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calculated from October 19, 2011 to the date of payment under this judgment, at the current fund loan interest rate(s) promulgated by the People’s Bank of China for the corresponding period(s). To sum up, according to Article 175, Article 183 of the Maritime Code of the People’s Republic of China, Article 107 of the Contract Law of the People’s Republic of China, Article 64 and Article 170 Paragraph 1 Sub-paragraph 2 of the Civil Procedure Law of the People’s Republic of China, the court of second instance made Civil Judgment (2014) Yue Gao Fa Min Si Zhong Zi No.117, which was that: the judgment of first instance should be revoked; Archangelos Investments should pay the amount of RMB2,561,346.93, being its share of the salvage reward to NRB together with interest on the amount running from October 19, 2011 to the date of payment under the judgment as per the current fund loan interest rate promulgated by the People’s Bank of China for the corresponding period; other claims of NRB should be rejected. Court acceptance fee of second instance in amount of RMB65,822, Archangelos Investments should bear RMB23,283.11, and NRB should bear the other RMB42,538.89. NRB refused to accept the judgment of the court of second instance, applied for retrial of the case and stated that: (1) Letter of Appointment of Archangel Investments stated that, Archangelos Investments undertook to pay NRB for the assistance to M.V. “ARCHANGELOS GABRIEL” in getting refloated, be it fruitful or not, as per the rate of RMB3.2 hph, which showed that both parties had made consensus on the rate etc. in advance. Besides, NRB had provided such services as salvage, standby and transport as agreed, so the contract between both parties had become effective and had been fulfilled according to law. The judgment of second instance confirmed that Archangelos Investments paid only 38.85% of the salvage reward was against the privity of contract principle and the basic principle that contract obligations should be fully fulfilled. (2) The evidence “Average Bond” submitted by NRB in the retrial showed that the insurer of the cargo onboard undertook on August 18, 2011 to pay the share of the salvage reward of the cargo owner. Nevertheless, the second instance court failed to ascertain the said fact and still ruled in the judgment that Archangelos Investments paid only part of the contract price, which caused reduction in the final salvage costs payable by both the ship and cargo interests and was not good for realizing the principle about encouraging salvage at sea under the International Convention on Salvage, 1989 (hereinafter referred to as “Salvage Convention”). This evidence was enough to overrule the judgment of the second instance court. (3) NRB as a specialized marine salvage authority of the state had engaged in the salvage operations regarding M.V. “Archengelos Gabriel” and thus should be entitled to the full salvage reward agreed under the salvage contract. The judgment of second instance had deprived NRB of the deserved legal interests, and was also in breach of the social public interests secured by marine salvage. (4) The subject contract used the agreed rates and fees as the basis to calculate the salvage reward and thus should belong to employment salvage contract. Even the payment under the subject contract could be construed as salvage reward, Archengelos Investments should be obliged to require the cargo interests to provide security for the salvor namely NRB according to Article 188 of

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the Maritime Code of the People’s Republic of China, but not require the insurer of the cargo interests to provide security for Archangelos Investments as in this case. In conclusion, NRB requested to revoke the judgment of second instance and order Archengelos Investments to pay the sum of RMB6,592,913.58 according to the salvage contract plus interest and to bear the court costs of both the first and second instances. Archangelos Investments defended that: (1) The judgment of second instance that Archangelos Investments paid only the salvage reward according to the proportion which the salved value that the ship should bear to the total salved value was in strict conformity with the principle of privity of contract and the law was correctly applied. Firstly, two “statutory rights of representation” were conferred by Article 6 of the Salvage Convention and Article 175 of the Maritime Code of the People’s Republic of China upon the master and the owner of the vessel. The subject salvage contract was concluded by and between Archangelos Investments for and on behalf of the cargo interests and NRB, Archangelos Investments and the cargo interests both being “Party A”. Secondly, Article 183 of the Maritime Code of the People’s Republic of China did not give specific provisions that the reward therein only applied to “no cure no pay” salvage contract rather than employment salvage contract, thus the salvage reward deserved by NRB shall fall within the scope of Article 183 of the Maritime Code of the People’s Republic of China. “Except as otherwise provided for by the salvage contract” specified in Article 179 of the Maritime Code of the People’s Republic of China has provided institutional norms for employment salvage that the salvor and the party salved could through contract cause the salvage reward irrelevant to the salvage result that whether the salvage operations had a useful result or not, the salvor could charge for salvage payment (any reward, remuneration or compensation for salvage operations) at a fixed rate agreed. The salvage in the subject case were property salvage, so NRB should an could only be entitled to the salvage reward specified in the Maritime Code of the People’s Republic of China. (2) At the beginning of the salvage operations or prior to institution of the legal proceedings, before conclusion of the second instance trial at the latest, NRB should discover the existence of the Average Bond, but NRB did not discover it until conclusion of the second instance trial due to its own negligence rather than objective reasons. Thus, the Average Bond should not be regarded as a piece of new evidence. Even supposing that the Average Bond was a piece of new evidence, it was baseless for NRB to demand the full salvage reward from Archangelos Gabriel basing on such evidence, because the judgment of second instance only ruled that Archangelos Investments should make the contributions payable by it as per the proportion of the salved value of the ship, but had nothing to do with the cargo interests’ contributions guaranteed in the Average Bond. The Average Bond and the judgment of the second instance court did not require the ship interests to disburse the salvage reward for the cargo interests, did not deprive NRB of its right to demand the cargo interests to pay salvage reward proportionally or exempt the cargo interests from such obligation.

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(3) General average and salvage at sea were two independent systems, so it was groundless to deprive Archangelos Investment basing on the rules for general average adjustment of the legal right to pay the salvage reward in proportion. (4) The salvage plan was changed from “owing-refloating operations” to “lightering-refloating operations” as per the instruction of Zhanjiang MSA. It would be obviously unfair if still adopting the hourly rate for the towing operations originally agreed (RMB3.2 per horsepower hour). According to the principle of change of circumstances, the said rate shall be modified or adjusted. In order to protect public interests, NRB as an institutional organization shall only charge reward which was just enough to make up the expenses actually incurred but shall in no way make excessive profits. To undertake life salvage was the first administrative duty of NRB and thus shall not be charged at all. Even as to the adjusted salvage reward, the proportion of the life salvage (at least 50%) should be further deducted. In conclusion, Archangelos Investments requested the court to order to reject the NRB’s application for retrial and sustain the judgment of second instance. Alpha & Delta Ocean shared the same opinions with Archangelos Investments in defense. After examination, the court confirmed the facts found in the first and second instance courts. The court holds that: This case is dispute over salvage contract. The principle established in the Salvage Convention which China acceded to about encouraging to carry out timely and efficient salvage operations in respect of a vessel or any other property in danger, or any activities which have threatened damage to the environment and ensuring that adequate incentives are available to persons who undertake salvage operations shall be followed in this case. After occurrence of the collision accident, Archengelos Investments sought salvage timely and NRB took active part in the salvage operations as agreed, which have made contribution to prevent pollution to the ocean and thus should be advocated. This case is a foreign-related one as Archangelos Investments is a Greek-incorporated company and M.V. “Archangelos Gabriel” a Greek-registered tanker. Since the litigants all decided during the legal proceedings to choose Chinese law as the applicable law, according to the provisions of Article 3 of the Law of the Application of Law for Foreign-related Civil Relations, Chinese law is applied by the court to try the case. The Maritime Code of the People’s Republic of China, as a special law enacted with a view to regulating the relations arising from maritime transport and those pertaining to ship shall apply preferentially. In the absence of provisions in the Maritime Code of the People’s Republic of China, the Contract Law of the People’s Republic of China and other relevant laws shall apply. According to the reasons for which NRB filed the retrial application and the statements of defense from Archangelos Investments and Alpha & Delta Ocean, the disputable issues of this case involved both the facts and the application of law, which included: (1) whether the evidential document submitted by NRB during the retrial proceedings is a piece a new evidence and if so, whether it is sufficient to overturn the second instance judgment; (2) how to comprehend the salvage contract

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stipulated by the Salvage Convention and the Maritime Code of the People’s Republic of China; (3) the nature of the contract in question and the application of law; (4) how to determine the amount of salvage reward claimed by NRB. (1) As to whether the evidential document submitted by NRB during the trial proceedings is a piece a new evidence and if so, whether it is sufficient to overturn the second instance judgment NRB during the retrial proceedings submitted the Average Bond issued by PICC Property and Casualty Company Limited, Beijing Branch (hereinafter referred to as “PICC Beijing”), to prove that Archangelos Investments can obtain compensation from PICC Beijing after paying the salvage reward to NRB, and viewed that it was sufficient to overturn the second instance judgment. Archangelos Investments and Alpha & Delta Ocean during cross-examination at court had no objection to the authenticity and legality of such evidence but opined that it was not a piece of new evidence and did not confirm the probative force of it. The court held that, the said evidential document was issued by PICC Beijing for the owner of M.V. “Archangelos Gabriel” and other relevant interests of the voyage, which could help the court to get knowledge about how the salvage reward was undertaken but did not have direct relation with the issue regarding salvage reward in dispute among the litigants and thus shall not be adopted by the court. (2) As to how to comprehend the salvage contract stipulated by the Salvage Convention and the Maritime Code of the People’s Republic of China Salvage at sea is a traditional international maritime law system and both the Salvage Convention and the Maritime Code of the People’s Republic of China have specific provisions therefor. Chapter 9 of the Maritime Code of the People’s Republic of China has taken advantage of the main contents of the Salvage Convention. Both Article 12 of the Salvage Convention and Article 179 of the Maritime Code of the People’s Republic of China have provided for principles to pay “no cure no pay” salvage reward, basing on which, Article 13 of the Salvage Convention, Article 180 and Article 183 of the Maritime Code of the People’s Republic of China have further provided for the criteria for fixing the reward and the details of undertaking the reward. Such articles provide for specific stipulations for contract of salvage at sea under which the salvage reward is determined by the parties based on “no cure no pay” principle. Meanwhile, both the Salvage Convention and the Maritime Code of the People’s Republic of China allow the parties to agree otherwise for the determination of salvage reward. Therefore, except for the “no cure no pay” salvage contract provided for in the Salvage Convention and the Maritime Code of the People’s Republic of China, an employment salvage contract can also be established according to the parties’ agreement.

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(3) As to the nature of the contract in question and the application of law According to the facts found in this case, it was specifically agreed by Archangelos Investments and NRB through full consultation that Archangelos Investments undertook to pay for the salvage operations, be they fruitful or not and in case of any accident incurred by M.V. “Archangelos Gabriel” during the refloating operations, NRB shall not be liable therefor. Basing on such agreement, whether NRB shall be entitled to the salvage reward had no direct connection to whether the salvage operations have had practical results. Moreover, the salvage reward was counted based on fixed rates and charged according to per horsepower hour of the tugs engaging in the salvage and the labor input and thus had nothing to do with the salved value of the property. Therefore, the salvage contract in this case shall belong to employment salvage contract rather than the “no cure no pay” salvage contract stipulated in the Salvage Convention and the Maritime Code of the People’s Republic of China. No specific provisions on the conditions and criteria for rewards under employment salvage contract have been provided for in both the Salvage Convention and the Maritime Code of the People’s Republic of China. The application of law was incorrect that the first instance and second instance courts adjusted the fixed rate agreed by the parties concerned in the employment salvage contract according to the relevant criteria specified in Article 180 of the Maritime Code of the People’s Republic of China. In this case, the rights and obligations of the litigants shall be regulated and determined in accordance with relevant provisions of the Contract Law of the People’s Republic of China. (4) As to how to determine the amount of salvage reward claimed by NRB Regarding the amount of salvage reward claimed by NRB, Archangelos Investments maintained that such salvage reward should be paid as per the provisions of Article 183 of the Maritime Code of the People’s Republic of China in accordance with the proportion which the salved value that the ship should bear to the total salved value. The court holds that, Article 183 of the Maritime Code of the People’s Republic of China shall apply to the “no cure no pay” salvage reward other than the employment salvage reward in this case, so it was not improper that NRB demand the full salvage reward as agreed under the contract between both parties. Archangelos Investments put forward that changed circumstance occurred as the salvage plan was changed from “towing-refloating operations” to “lightering-refloating operations”, so the hourly rated originally agreed should be adjusted. The court holds that, Article 26 of the Interpretation of the Supreme People’s Court on Several Issues concerning the Application of the Contract Law of the People’s Republic of China (II) states that, “where, after conclusion of the contract, the objective situation undergo significant changes that were unforeseeable by the concerned parties at the time of conclusion of the contract, and such

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changes are not caused by force majeure and do not constitute commercial risks, and to continue with the performance of the contract will be obviously unfair to one concerned party or will not realize the purpose for which such contract was concluded, the people’s court shall, upon the request for modifying or terminating the contract by a concerned party, determine whether to modify or terminate the contract on the basis of the principles of fairness and by considering the actual situation prevalent in the case”, the change of salvage plan in this case was not significant change due to objective situation but the result of negotiation by relevant parties, the litigants inclusive, and to continue with the performance of the contract would not be obviously unfair to Archangelos Investments or cause the purpose for which such contract was concluded impossible to realize, thus, the change of salvage plan was not the changed circumstance in legal sense. Archangelos Investments’ assertion to reduce the rates and fees agreed lacked factual and legal basis and thus shall not be upheld by the court. NRB had dedicated tugs and human resources for the salvage services in this case as per the agreement with Archangelos Investments, so Archangelos Investments should pay the salvage reward at the agreed rate taking into account of the tugs and human resources as well as the time consumed by NRB. The ruling in the judgment of first instance that Archangelos Investments shall pay for “Nan Hai Jiu 201” and the divers as agreed under the contract was correct; meanwhile, the judgment of first instance ruled that the rate for “Nan Hai Jiu 116” and “Nan Hai Jiu 101” shall be adjusted from RMB3.2 per horsepower hour to RMB2.9 per horsepower hour according to the actual salvage situation, as NRB neither appealed to it nor applied for retrial of such issue, such ruling is hereby affirmed by the court. In conclusion, the application of law and possessing result were incorrect in the second instance court which ruled that Archengloes Investments should pay the salvage reward according to the proportion the salved value that the ship should bear to the total salved value basing on the amount of salvage reward affirmed in the judgment of first instance in accordance with the provisions of the Maritime Code of the People’s Republic of China and thus shall be amended. The application of law in the judgment of first instance was incorrect, but considering the adjustments to relevant rates therein were made on a basis of the contract agreed between the parties concerned and NRB did not perform its litigation right to raise objection thereto, the judgment of first instance can be sustained. In accordance with Article 8 and Article 107 of the Contract Law of the People’s Republic of China, Article 170 Paragraph 1 Sub-paragraph 2 of the Civil Procedure Law of the People’s Republic of China and Article 407 Paragraph 1 of the Interpretation of the Supreme People’s Court Concerning the Application of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: 1. Revoke Civil Judgment (2014) Yue Gao Fa Min Si Zhong Zi No.117 of Guangdong High People’s Court; 2. Affirm Civil Judgment (2012) Guang Hai Fa Chu Zi No.898 of Guangzhou Maritime Court.

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Court acceptance fee of first instance in amount of RMB65,822, RMB9,591 shall be born by NRB, RMB56,231 shall be born by Archangelos Investments. Court acceptance fee of second instance in amount of RMB65,822, shall be born by Archangelos Investments. The judgment is final. Presiding Judge: HE Rong Judge: ZHANG Yongjian Judge: WANG Shumei Judge: YU Xiaohan Acting Judge: GUO Zaiyu July 7, 2016 Judge Assistant: MA Ling Clerk: LI Na

Haikou Maritime Court Civil Judgment Nanjing Hengye Tanker Co., Ltd. v. Sansha Jiangpeng Shipping Development Co., Ltd. (2015) Qiong Hai Fa Chu Zi No.289 Related Case(s) None. Cause(s) of Action 193. Dispute over liability for ship collision damage. Headnote Apportionment of liability in collision case; moving vessel held to be 100% responsible for striking stationary vessel, but owner of stationary vessel held to be unable to recover damages for some of its loss, which was caused by lack of water-tightness of its vessel. Summary The Plaintiff-Tanker Company sued the Defendant-Shipping Company in a dispute over liability following a vessel collision. On a November morning, as the Plaintiff’s vessel M.V. “Futong 7” was unloading at its berth, it was struck on its starboard side hull by the Defendant’s vessel M.V. “Jiangpeng 337”, which was attempting to enter its own berth. The Plaintiff’s vessel immediately began to take on water in its #2 cargo hold. The flooding continued and water began to leak into the #1 cargo hold and the engine room until both were also flooded. Within half an hour, the keel of M.V. “Futong 7” was sitting on the harbor floor. The vessel was refloated three days later, and the Defendant paid for repair work and towage to another port for further repairs. No further work was done, however, and the Plaintiff paid for a tow back to Nanjing harbor. The Plaintiff sued for damages to compensate for repair costs, towing and berthage costs, lost future earnings, crew’s wages, and court costs. The Defendant, claiming that the Plaintiff was contributorily negligent in illegally modifying its vessel and failing to maintain its water tightness, filed a counterclaim seeking payment by the Plaintiff of 30% of collision related repair costs suffered by the Defendant’s vessel, reimbursement for towing and berthage costs, and court costs. The court held that the Defendant failed to exercise good seamanship and was entirely at fault for the collision and, therefore, must pay for the damage to M.V. “Futong 7”’s #2 cargo hold. The court judged, however,

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_25

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that the Plaintiff was responsible for the lack of water tightness of its vessel and could not recover for the damage to its #1 cargo hold nor its engine room. The rest of the Plaintiff’s claims were rejected along with all of the Defendant’s counterclaims, and the court costs were apportioned between the two parties.

Judgment The Plaintiff (the Counterclaim Defendant): Nanjing Hengye Tanker Co., Ltd. Domicile: Room 617, No.300, Emei Road, Xiongzhou Street, Liuhe District, Nanjing, Jiangsu Province. Legal representative: CHEN Mingzhu. Agent ad litem: WANG Yong, lawyer of RICC & CO. Agent ad litem: FANG Li, staff of Nanjing Hengye Tanker Co., Ltd. The Defendant (the Counterclaim Plaintiff): Sansha Jiangpeng Shipping Development Co., Ltd. Domicile: Xisha Hotel 106–31, Xuande Road, Woody Island, Sansha, Hainan Province. Legal representative: LIANG Hui. Agent ad litem: LI Zhenhai, lawyer of GUANGYU & CO. With regard to the case arising from dispute over ship collision damage, the Plaintiff (the counterclaim Defendant) Nanjing Hengye Tanker Co., Ltd. (hereinafter referred to as “Hengye Company”) sued the Defendant (the counterclaim Plaintiff) Sansha Jiangpeng Shipping Development Co., Ltd. (hereinafter referred to as “Jiangpeng Company”) before the court on December 20, 2014. The court accepted the case according to law. Jiangpeng Company filed a counterclaim against the Plaintiff of principal claim before the court on July 29, 2015. After entertaining the counterclaim, the court decided to combine the counterclaim with principal claim. The court formed a collegiate panel composed of Judge CAI Binhang as Presiding Judge, Acting Judge BAI Wenying and Acting Judge ZHANG Yifang. Then because of work arrangements, the collegiate panel changed to the composition of Judge CAI Binhang, the Presiding Judge, Judge BAI Wenying and Judge ZHANG Yifang. Because of the application of the party and objective circumstances, the court issued (2015) Qiong Hai Fa Chu No.8-1 Civil Order on March 16, 2015 to suspend the trial of this case. After the reason of suspension eliminated, the court made (2015) Qiong Hai Fa Chu No.8 Hearing Recovery Notice on July 14, 2015 to continue the proceedings. The court held the hearings on September 11, 2015 and December 14, 2015. WANG Yong and FANG Li, agents ad litem of the Plaintiff (the counterclaim Defendant) Hengye Company and LI Zhenhai, agent ad litem of the Defendant (the counterclaim Plaintiff) Jiangpeng Company appeared in court and participated in the hearing. After trial, this case has been concluded.

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Hengye Company requested the court to order: 1. Jiangpeng Company compensate the direct losses including repair costs in sum of CNY2,855,322.75 and interest thereon (calculated from the day the repair costs of the ship actually incurred to the day the judgment designated the Defendant should pay); 2. Jiangpeng Company pay the sum of CNY129,428 including berthage and towage costs advanced by Hengye Company and the interest thereon (calculated from the day the costs of the ship actually incurred to the day the judgment designated the Defendant should pay); 3. Jiangpeng Company compensate loss of earning in sum of CNY1,237,500 and the interest thereon (calculated from the day the loss of earning of the ship actually incurred to the day the judgment designated the Defendant should pay); 4. Jiangpeng Company compensate the crew’s wage in sum of CNY300,000 and the interest thereon (calculated from the day the costs of the ship actually incurred to the day the judgment designated the Defendant should pay); and 5. Jiangpeng Company should assume the legal costs of this case and other costs arising from litigation. Facts and reasons were stated as follows: On November 9, 2014, M.V. “Futong 7” owned by Hengye Company was collided by M.V. “Jiangpeng 337” owned by Jiangpeng Company when berthing and unloading at Woody Island, Sansha, Hainan Province. It caused damage to cargo hold, engine room and part of cargo on M.V. “Futong 7”, the total loss was CNY4,522,250.75. Jiangpeng Company should take whole liability for this collision accident, but it refused to compensate up to now. Hengye Company requested the court to order Jiangpeng Company to compensate for those losses of Hengye Company. Jiangpeng Company argued that M.V. “Futong 7” was a ship which was illegally modificated and should not be put into operation according to law; the approved navigation areas of this ship was coastal waters, the voyage of this accident exceeded navigation areas and crews did not fulfil watchkeeping duties, so M.V. “Futong 7” should take 30% of liability in this collision accident. This collision accident only caused damage of 2# cargo hold of M.V. “Futong 7”, so the reasonable repair costs should not beyond CNY216,596.6; the losses were caused by the defects of M.V. “Futong 7”, such as water tightness of the ship did not meet specification requirements, it had no causal relationship with the accident involved and Hengye Company had no right to request Jiangpeng Company to compensate, so most of the losses claimed by Hengye Company was unreasonable. Berthing and towage costs claimed by Hengye Company was irrelative with this case, the shipment costs, crew’s wage or other costs had no basis as well. If the loss of this case exceeded the ship’s limitation of liability for maritime claims, Jiangpeng Company as the owner of M.V. “Jiangpeng 337” was entitled to limit liability according to Article 204 and Article 207 of the Maritime Code of the People’s Republic of China.

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Jiangpeng Company made a counterclaim, requesting the court to order: 1. Hengye Company pay repair costs in sum of CNY215,798 and the interest thereon (calculated from the day the repair costs of the ship actually incurred to the day the judgment designated Hengye Company should pay); 2. Hengye Company pay towage cost, berthage and other our-of-pocket expenses in sum of CNY417,091 and the interest thereon Jiangpeng Company (calculated from the day the repair costs of the ship actually incurred to the day the judgment designated Hengye Company should pay); and 3. Hengye Company should assume the legal costs of this case. Facts and reasons were as follows: The collision accident caused repair costs of the ship, shipment costs and other economic losses of M.V. “Jiangpeng 337” in sum of CNY719,327; M.V. “Futong 7” should at least take 30% of liability in this collision accident, so Hengye Company should compensate the losses caused by the accident in accordance with 30% of collision liability ratio. Hengye Company should compensate Jiangpeng Company towage cost and berthage in sum of CNY417,091 advanced by Jiangpeng Company, which was caused by the reason and defects of M.V. “Futong 7” such as illegal modifications and water tightness of the ship not conforming to the specification requirements. So Jiangpeng Company requested the court to order Hengye Company to compensate the losses above. Hengye Company argued in respect of the counterclaim of Jiangpeng Company, M.V. “Jiangpeng 337” should take the whole liability for the collision according to fact and accident investigation report issued by maritime department; there was not any evidence of illegal plot of M.V. “Futong 7” such as illegal modifications and exceeding navigation areas, while M.V. “Jiangpeng 337” had many illegal plots. So Jiangpeng Company’s counterclaim claiming Hengye Company should take the liability for the losses of collision had no factual basis. Expressions that the water tightness of M.V. “Futong 7” did not meet with the specification requirements referred by Jiangpeng Company was not true. M.V. “Futong 7”’s certificate of ship’s inspection proved both insubmersibility and water tightness of this ship met the specification requirements of statutory survey. Jiangpeng Company’s claims for towage cost and berthage in the counterclaim were irrelevant to this case. To sum up, Hengye Company held that Jiangpeng Company’s counterclaim was unreasonable and should not to be protected according to law. The parties submitted the evidence in terms of the principal claim and the counterclaim and the issues. The court took relevant evidence according to application of the parties and needs of the trial. During the trial, the court organized the two parties to exchange evidence and cross-examine evidence. List of evidence and the cross-examination of the parties are as follows: 1. Evidence material submitted by the Plaintiff (the counterclaim Defendant) Hengye Company are as follows: Evidence H1. Certificate of Ship Ownership of M.V. “Futong 7”, to prove subject capability of the Plaintiff.

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Evidence H2. Business license of the Plaintiff, to prove identification of the Plaintiff. Evidence H3. Business registration enquiry information of the Defendant, to prove identification of the Defendant. Evidence H4. Maritime Traffic Accident Report, to prove the process of the subject accident; the Defendant should take whole liability for the accident. Evidence H5. Marine Investigation Report, to prove the process of the subject accident; the Defendant should take whole liability for the accident. Evidence H6. Survey Report, to prove the process of the subject accident; the Defendant should take whole liability for the accident; the details of the Plaintiff’s amount of losses. Evidence H7. Repairing Damage Assessment Report, to prove the damaged parts and situation of damage caused by the subject accident. Evidence H8. Ship Repair Contract, to prove repair costs. Evidence H9. Shipyard Project Quotation, to prove the details of the repair project and cost of ship. Evidence H10. Crew’s ID card and Seaman’s Record Book, to prove circumstances of crew on the ship. Evidence H11. Crew’s wages monthly report form, to prove the wages paid by the Plaintiff under the case where ship cannot normally operate due to the collision accident. The Defendant (the counterclaim Plaintiff) Jiangpeng Company’s major cross-examination opinions are as follows: 1. Jiangpeng Company raised no objection to authenticity of evidence H1-H3; 2. Jiangpeng Company raised no objection to authenticity in form of evidence H4, but questioned authenticity or legality of content thereof. Maritime Investigation Report unilaterally by the Plaintiff, and was an unilateral statement. Part of contents were untrue, on the contrary it could prove that the Plaintiff had fault in collision accident; 3. Jiangpeng Company raised no objection to authenticity, legality or relevancy of evidence H5, but purpose of proof thereof. The Plaintiff’s claim that the Defendant should take whole liability was not in conformity with Marine Investigation Report. That report affirmed M.V. “Jiangpeng 337” took main liability rather than whole liability; 4. Jiangpeng Company had objection to authenticity, legality and relevancy of evidence H6. The issuer of Survey Report, Mintaian Survey Co., Ltd. did not have the qualification of judicial expertise, so it did not have the qualification to assess or identify the damage; the report clearly indicated that only for insurance claim rather than evidence of this case; surveyor who made the report did not appear for question, which affected the Defendant’s right to cross-examination; 5. Jiangpeng Company raised objection to authenticity, legality or relevancy of evidence H7, and held the report was made by Boarding Assay Office after July 20, 2015 (more than eight months after the accident) when the ship’s condition was different from the condition when the collision occurred because of long periods of immersion in seawater, so it could not prove the damage caused by the accident;

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6. Jiangpeng Company had objection to authenticity, legality or relevancy of evidence H8. Actually, M.V. “Futong 7” did not repair the ship. That contract was untrue and was not actually performed, it was an illusory contract for litigation, so it could not be admitted as evidence to prove repair costs of the ship; 7. Jiangpeng Company had objection to authenticity, legality or relevancy of evidence H9. Reason was the same as cross-examination opinions of evidence H8. The quotation was maliciously made for litigation and the costs were unreal, so it should not be accepted; 8. As for H10, although there was no original to check, the certificate of competency which was in accordance with Marine Investigation Report could be affirmed. This set of evidence could only prove M.V. “Futong 7”’s manning of crew was not qualified. It had fault to man Class D crew instead of Class C crew; and 9. Jiangpeng Company had objection to authenticity, Legitimacy and relativity of evidence H11. The report form was made by the Plaintiff unilaterally and there was no signatures of the crew, so the report form is not authentic; also, whether the collision happened or not, the Plaintiff should pay the salary of the crew, so claim for wages no legal basis. 2. Evidence material submitted by the Defendant (the counterclaim Plaintiff) Jiangpeng Company: Evidence J1. Certificate of Ship Ownership of M.V. “Jiangpeng 337”, to prove the Defendant was the shipowner of M.V. “Jiangpeng 337”and the ship’s gross tonnage was 1,683 tons. Evidence J2. Certificate of Ship’s Inspection of M.V. “Futong 7”; evidence J3. Schedule of machinery and equipment; evidence J4. Ship repair form; evidence J5. Project quotation, to prove: 1. the approved navigation areas of M.V. “Futong 7” was coastal waters; 2. M.V. “Futong 7” as an illegally modified ship should be confiscated and stopped operating; 3. the damages and costs had no relevancy to this case, excepting reasonable repair costs of 2# hold of M.V. “Futong 7”, so the Plaintiff had no right to claim against Jiangpeng Company. Evidence J6. Accident Investigation Report, to prove M.V. “Futong 7” should take secondary liability for the accident. Evidence J7. Repair agreement of M.V. “Jiangpeng 337”, to prove repair costs paid by Jiangpeng Company. Evidence J8. Simple project contract, to prove M.V. “Futong 7” paid repair cost for mending-leakage in sum of CNY130,000. Evidence J9. Towage Agreement, to prove Jiangpeng Company paid towage costs in sum of CNY380,000 for M.V. “Futong 7”. Evidence J10. Ship berthing agreement, to prove Jiangpeng Company paid berthage for M.V. “Futong 7”.

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Evidence J11. Inspection report, to prove reasonable repair costs of M.V. “Futong 7” should not be more than CNY216,596.6; and loss of hold had no causality with collision accident and value of M.V. “Futong 7” before the accident should not be more than CNY1,060,000. Evidence J12. Time Charter Party, to prove loss of earning of M.V. “Jiangpeng 337”. Evidence J13. Remittance vouchers and receipts of repair costs of M.V. “Jiangpeng 337”, to prove details of repair costs of M.V. “Jiangpeng 337”. Evidence J14. Remittance vouchers and receipts of repair costs of M.V. “Futong 7”, to prove repair details advanced by Jiangpeng Company. Evidence J15. Remittance vouchers and receipts of towage cost of M.V. “Futong 7”, to prove towage costs advanced by Jiangpeng Company. Evidence J16. Remittance vouchers and receipts of berthage of M.V. “Futong 7”, to prove berthage advanced by Jiangpeng Company and details of electric charge. About evidence J11, Jiangpeng Company requested surveyor ZHONG Jijian (ZHONG Jijian, male, 38 years old, Han, inspector and engineer of Guangdong Consulting and Inspection of Maritime Project Company), to be inquired in court. The Plaintiff (the counterclaim Defendant) Hengye Company’s cross-examination opinions are as follows: 1. As for evidence J1, Hengye Company confirmed that Jiangpeng Company was the shipowner of M.V. “Jiangpeng 337” and had right as principal. But when the accident happened, Jiangpeng Company had not gained that certificate yet. 2. Hengye Company had no objection to authenticity of evidence J2-J5, but not the content and purpose of proof thereof. 3. Hengye Company had no objection to authenticity of evidence J6, but not the content of proof. According to the reports of Maritime Bureau, M.V. “Jiangpeng 337” took whole liability for this collision accident and M.V. “Futong 7” had no liability. 4. Hengye Company did not recognize evidence J7-J10’s purpose of proof. Hengye Company thought M.V. “Jiangpeng 337” should take whole liability, so the repair costs for mending-leakage of M.V. “Jiangpeng 337”, towage cost and berthage of M.V. “Futong 7” paid by Jiangpeng Company and other costs showed by this set of evidence should all be assumed by Jiangpeng Company. There was no basis and reason for Jiangpeng Company to claim against Hengye Company. Moreover, the repair contract was not a formal legal ship repair contract and ship repair party was individual, which was a clear violation of ship repair specification. 5. Hengye Company did not recognize the qualification of inspector in evidence J11. His conclusion was not objectively impartial. 6. As for evidence J12, the authenticity cannot be verified as there was no appropriate payment voucher provided. M.V. “Jiangpeng 337” should take the whole liability for this accident, so the direct and consequential damage to M.V.

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“Jiangpeng 337” caused by this accident should assumed by itself. Jiangpeng Company had no right to claim against Hengye Company. 7. As for evidence J13-J16, cross-examination opinion thereon was the same as that of evidence J7-J10. 3. Evidence material obtained by the court: (1) Evidence material obtained from Nanjing Ship Inspection Bureau: N1. “MIinchangtai” (namely “Futong 7”) ship’s hull specification. N2. “MIinchangtai” (namely “Futong 7”) ship’s marine engine specification. N3. “MIinchangtai” (namely “Futong 7”) ship’s electrical equipment specification. (2) Evidence material obtained from Sansha Maritime Bureau. S1. Collision Accident Survey Reports. S2. Water Traffic Accident Report submitted by LIN Jihe, the captain of M.V. “Jiangpeng 337” and LIN Jinhua, the captain of M.V. “Futong 7”. S3. Two Marine Accident on Site Survey Records. S4. Seventeen Inquiry Records of the crew made by Sansha Maritime Bureau. The Plaintiff (the counterclaim Defendant) Hengye Company’s crossexamination opinions are as follows: Hengye Company had objection to authenticity, legality and relevancy of the evidence obtained by the court. As for the evidence obtained from Nanjing Ship Inspection Bureau, Hengye Company thought that the seaworthiness of the subject ship should be comprehensively determined by marine basic data and ship’s inspection certificate. M.V. “Futong 7”, as a ship with normal ship, had a full set of valid statutory certificates, it was enough to prove its legal operation qualification. As for evidence obtained from Sansha Maritime Bureau, Hengye Company alleged that site survey records and records of the crew proved the following facts: 1. M.V. “Jiangpeng 337” was sailing into the harbor at the time of the collision accident happened, while M.V. “Futong 7” was berthing; 2. M.V. “Jiangpeng 337” the voyage involved was an illegal voyage without any ship’s certificate, also this voyage did not apply for the visa application procedures; 3. M.V. “Jiangpeng 337” the voyage involved was not equipped with sea chart or other essential navigational materials, also it was the first voyage for the main crew like captain and chief mate to voyage in Xisha Sea Area; and 4. Jiangpeng Company failed to fulfil obligations for work safety and neglected to manage the safety of M.V. “Jiangpeng 337” because of disordered management. In conclusion, M.V. “Jiangpeng 337” should take the whole liability for this accident. The Defendant (the counterclaim Plaintiff) Jiangpeng Company’s major cross-examination opinions are as follows: Jiangpeng Company had objection to authenticity, legality and relevancy of the evidence obtained by the court. As for evidence obtained from Nanjing Ship Inspection Bureau, Jiangpeng Company alleged that those materials especially the

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machinery and equipment schedule of the ship could prove M.V. “Futong 7” was illegally modified by the Plaintiff. Its main engine registered by ship inspection bureau was marine diesel engine produced by Czech Skoda Company, but when the accident happened, it was found the main engine of M.V. “Futong 7” was one produced by Japan Hanshin. The two main engines were produced by two different countries and were different models, which proved the ship was illegally modified. According to the laws, the ship should stop operation and be confiscated. As for evidence obtained from Sansha Maritime Bureau, Jiangpeng Company argued that: 1. The crew records of M.V. “Futong 7” could prove that the voyage of M.V. “Futong 7” falsely alleged to unload in Sanya without undergoing marine visa; 2. watertightness of the ship was not qualified. The damaged part in this case was 2# cargo hold, then 1# cargo hold and engine room were flooding immediately. JIANG Kai admitted that there was a spiracle in the cargo hold and engine room and also admitted that there was a leakage between cargo hold and engine room, according his records. The chief engineer of M.V. “Futong 7” also admitted that leakage of raceway caused flooding of engine room when being accepted investigation. There was no causal relationship between the damage to 1# cargo hold and engine room in this case. The damage was caused by the ship’s inherent defect; and 3. M.V. “Futong 7” did not take steps to reduce and prevent further loss after the accident happened. The ship waited for other parties to help instead of reducing the flooding of cargo hold through its drainage pumps, it proved that M.V. “Futong 7” did not meet the seaworthiness requirements, while a normal ship could completely drain away water in cargo hold through drainage pumps. In conclusion, M.V. “Futong 7” should take secondary liability for this accident. Considering insufficient manning of crew and illegally modification, M.V. “Futong 7” should take at least 30% of liability, also there was no relevancy between damage to engine room claimed by the Plaintiff. The court confirms and supports the evidence that the parties had no objection to. As for disputed evidence and facts, the court analyzes and affirms them as follows: 1. Evidence and facts about liability of the subject collision accident. Evidence H5 provided by Hengye Company, evidence J6 provided by Jiangpeng Company and evidence S1 obtained by the court were same evidence, which was Sansha Collision Accident Survey Reports of M.V. “Jiangpeng 337” and M.V. “Futong 7” on November 9 issued by Sansha Maritime Bureau. The parties had no objection to the authenticity thereof, but disapproved purpose of the other party. The court holds that the collision accident of this case happens on the sea areas under administration of Sansha Maritime Bureau, so the investigation report made by Sansha Maritime Bureau, which was issued by an official accident investigation department, has probative force. Maritime Traffic Accident Report provided by Hengye Company (evidence H4), Survey Report (evidence H6), Crew’s ID card and Seaman’s Record Book (evidence H10) and other evidence are all unilateral evidence. But those evidence materials are formed at the beginning of the

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occurrence of the accident and have strong reference value in identification of facts and liability, they should be comprehensively identified in combination with other evidence. Jiangpeng Company used M.V. “Futong 7”’s Certificate of Ship’s Inspection (evidence J2), schedule of machinery and equipment (evidence J3) and evidence N1-N3 obtained by the court to prove the facts that M.V. “Futong 7” sailed beyond the approved navigation areas and was illegally modified. The court holds that M.V. “Futong 7” has a full set of valid ship’s certificates and has legal operating qualification, so disapproves the purpose of proof that Jiangpeng Company claimed to confiscate the ship for illegal modification just because the main engine lacked power; as for the fact that the ship sailed beyond the approved navigation areas, to which Hengye Company has no objection, whether there is causal relationship or not between it and the collision should be comprehensively identified in combination with other evidence and facts of this case. 2. Evidence and facts about identification of losses in collision accident of this case. According to Hengye Company’s claims of the principal claim, it provided Survey Report (evidence H6), Repairing Damage Assessment Report (evidence H7), Ship Repair Contract (evidence H8), Shipyard Project Quotation (evidence H9) and other evidence to the direct damage which is repair costs. The court holds that, as M.V. “Futong 7” has not been actually repaired yet, the evidence of Hengye Company above is estimation and inquiries which belong to circumstantial evidence instead of documents of settlement formed after the subject ship was actually repaired, so it cannot prove the repair costs independently and should be comprehensively identified in combination with other evidence and facts of this case. Hengye Company only provided Survey Report (evidence H6) to prove the berthage, towage costs and loss of earning, and did not provide basis of calculation or other evidence. The court disapproves the content and purpose of proof thereof as Hengye Company did not fulfill the burden of proof. As for crew’s wage, Hengye Company provided Survey Report (evidence H6) and crew’s wages paid monthly report form (evidence H11). It was estimated in Survey Report, while crew’s wages monthly report form had no signature, which was insufficient to prove the actual payment. So the court disapproves Hengye Company’s content and purpose of proof thereof. According to Jiangpeng Company’s counterclaim, it provided Repair Agreement of M.V. “Jiangpeng 337” (evidence J7), simple project contract (evidence J8), remittance vouchers and receipts of repair costs of M.V. “Jiangpeng 337” (evidence J13), remittance vouchers and receipts of repair costs of M.V. “Futong 7” (evidence J14) and other evidence to prove the repair costs. As evidence J7 could corroborate J13, as well as evidence J8 and J14, the fact of actual payment of repair costs can be proved, so the court admits the probative force of the evidence. It provided Time Charter Party (evidence J12) to prove loss of earning and did not submit other evidence. The court disapproves the contents and purpose of proof thereof as Jiangpeng Company did not fulfill the burden of proof. It provided Towage Agreement (evidence J9), the ship berthing agreement (evidence J10), remittance

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vouchers and receipts of towage cost of M.V. “Futong 7” (evidence J15), remittance vouchers and receipts of berthage of M.V. “Futong 7” (evidence J16) and other evidence to prove Jiangpeng Company’s payment of towage costs and berthage for M.V. “Futong 7” in advance. As there was a mutually verifying relationship between evidence J9 and J15, also evidence J10 and J16, the court holds actual payment of towage and berthage can be proved thereby, so the court affirms the probative force of the evidence. Moreover, as for the probative force of Survey Report (evidence H6) provided by Hengye Company and Inspection Report (evidence J11) provided by Jiangpeng Company, the court holds that those two pieces of evidence are both issued by a third party through unilaterally entrustment. Survey Report was issued by an survey company authorized by M.V. “Futong 7”’s insurer and Inspection Report was issued by an inspection organization authorized by Jiangpeng Company. As for the qualification of them, Mintaian Survey Co., Ltd. who issued Survey Report did not submit any files to prove its qualification except the report, while Guangdong Maritime Project Inspection and Consulting Co., Ltd., who issued Inspection Report submitted business license, qualification certificate of inspector, files of being listed in professional and technical institutions listed by courts of Guangdong Province and other files to prove its qualification; meanwhile, the issuer of Survey Report did not appoint the surveyor to court, while the issuer of Inspection Report appointed ZHONG Jijian, the inspector who signed the report to explain and receive question in court. Summing up the above, the probative force of Inspection Report should prevail that of Survey Report. In accordance with the parties’ claims and evidence confirmed upon examination, the court confirms the facts as follows: At 0803 on November 9, 2014, when berthing at the oiling berth in the north of Xisha Yongxing Comprehensive Dock, M.V. “Jiangpeng 337” owned by Jiangpeng Company crashed M.V. “Futong 7” owned by Hengye Company which was unloading at the fishery patrol ship berth in the north of the dock (position approximate was 16°50′43″N, 112°19′4″E). The stem and bulbstem of M.V. “Jiangpeng 337” crashed starboard quarter of M.V. “Futong 7”. Collision angle was about 80°. Before the collision, M.V. “Jiangpeng 337” was under sail entering the harbor at speed 2 knots; M.V. “Futong 7” was berthing and unloading. The collision caused the damage to right rear bilge of M.V. “Futong 7”’s 2# cargo hold, floating of cargo hold, sag of side plate above the waterline and fracture of deck railing, and. the ship bow of M.V. “Jiangpeng 337” sagged. About 0805, the captain of M.V. “Jiangpeng 337” gave an order to weigh anchor, asternway to keep stem away from M.V. “Jiangpeng 337”’s hull and then berthing at the oiling berth in the north of Yongxing Comprehensive Dock. After the two ships were separated, M.V. “Futong 7”’s No.2 cargo hold was bilging rapidly, the water got over the half-flat division board between No.1 and No.2 cargo hold and flooded into No.1 cargo hold, and the cable through No.2 cargo hold and hold isolation plate at the meanwhile. M.V. “Futong 7” took steps of survival course by cutting off transmission lines and mending leakage, but there was no effect, 1# and 2# cargo hold was worse bilging and the engine room was bilging more. At about 0830, the whole

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of M.V. “Futong 7” was sitting on the sea bed, sea water was drown to 1 m under the ship’s freeboard deck, no tilt or oil spilling, the crew were safe and the engine room was bilging about 1 m. After rescue and self-help of the ship such as draining and mending leakage organized by maritime department, at about 1700 on November 12, the hull of M.V. “Futong 7” floated. On the morning of November 17, Jiangpeng Company authorized the project brigade of Yangpu Zhonglong Ship Project Co., Ltd. to undertake mending work of M.V. “Futong 7”, costs of which were paid by Jiangpeng Company. After that, Jiangpeng Company rented a tug boat to towed M.V. “Futong 7” to be under repair in Macun port of Haikou, because Xisha Woody Island did not possess the qualification of berthing and repairing the damaged ship. Towage costs and berthage during this period was paid by Jiangpeng Company. M.V. “Jiangpeng 337” sailed to Haikou for repair. In March, 2015, Hengye Company rented a tug boat to tow M.V. “Futong 7” back to Nanjing and no actual repair had been conducted till now. After the accident happened, the parties failed to negotiate on issues concerning repairing costs and compensation for damages. Hengye Company applied to the court for maritime preservation before litigation on November 24, 2014. The court made (2014) Qiong Hai Fa Bao No.27 Civil Ruling after review and arrested M.V. “Jiangpeng 337” owned by Jiangpeng Company at Haikou New Port on November 25. After this litigation was docketed, maritime preservation before litigation automatically turned into litigation preservation in accordance with law. On February 15, 2015, Jiangpeng Company provided a guarantee to the court for procedural preservation. The court made (2015) Qiong Hai Fa Chu Zi No.8 Civil Ruling after review and released M.V. “Jiangpeng 337”. The court holds that this case is arising from dispute over ship collision damage and compensation. The outstanding issues lie in liability of collision accident in this case; and identification of losses incurred in the subject collision accident. As for the liability of the subject collision accident, the court holds that it is a collision accident between a sailing ship and anchoring ship. As M.V. “Jiangpeng 337” owned by Jiangpeng Company was a sailing ship, the captain on duty did not comprehend the concrete conditions of channel and port basin to make scientific berthing scheme, neither did he use good seamanship when sailing into the port. He did not take a noticeable slowdown measures in the case where the chief mate who was responsible for watching-out at the bow reminded him the speed was too fast for many times, the speed was remained 4.5 knots when there were about 80 m away from M.V. “Futong 7”. It caused close quarters situation and unavoidable circumstances of collision. Though the captain took measures such as asternway and drop anchor at the last moment, M.V. “Jiangpeng 337”’s bow finally collided with M.V. “Futong 7’”s starboard. Therefore, this collision is a unilateral liability caused by M.V. “Jiangpeng 337”’s improper operation when sailing into port and the shipowner of M.V. “Jiangpeng 337”, Jiangpeng Company, should take the whole liability for this accident. M.V. “Futong 7” owned by Hengye Company was berthing and unloading as a anchoring ship, did not occupy channel and port basin or impeded M.V. “Jiangpeng 337”. So Hengye Company shall not take any liability for collision accident. The allegation of Jiangpeng Company that according to

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Accident Investigation Report issued by Sansha Maritime Bureau Hengye Company should take 30% of liability for this accident, and it’s a misconception of identification of liability by the maritime department, the court does not admit. Sailing beyond approved navigation areas and lack of competence of part of the crew of M. V. “Futong 7” as defended by Jiangpeng Company have no causal relationship with the happening of the accident, the court does not admit. As for identification of losses caused by the subject collision accident, the court holds that the costs should be limited to costs used to repair damaged parts in this collision. Facts of this case shows that collided part of M.V. “Futong 7” was 2# cargo hold on the starboard quarter. So Jiangpeng Company who should take whole liability for collision shall compensate the losses of 2# cargo hold. But M.V. “Futong 7” did not keep watertightness between 1# cargo hold, engine room and 2# cargo hold in accordance with the norms and certification requirements, it was own defects of M.V. “Futong 7” that caused the flooding of 1# cargo hold and engine room. The losses of 1# cargo hold and engine room were not caused necessarily by the collision, and had no direct causal relationship with collision accident, so should be undertaken by Hengye Company the shipowner of M.V. “Futong 7”. Considering that M.V. “Futong 7” has’t be actually repaired yet, there is no direct evidence to prove its repair costs, while secondary evidence provided about estimation and inquiries of repair costs did not distinguish the losses of 1# cargo hold, 2# cargo hold or engine room. M.V. “Futong 7” should take the liability for failure on burden of proof, but according to the facts affirmed by the court, losses of 2# cargo hold is objective and real and has direct causal relationship with collision, which should be supported extenuatorily. The parties separately submitted a third-party report on losses of M.V. “Futong 7”, namely Survey Report submitted by Hengye Company and Inspection Report submitted by Jiangpeng Company. In accordance with the analysis above, the probative force of Inspection Report shall prevail that of Survey Report, also Inspection Report made comprehensive identification on the damage to 2# cargo hold and outfit on deck, and then proposed a budget for repair. So the court holds that conclusion of Inspection Report on the direct loss can be evidence to affirm the losses of Hengye Company. The court affirms the direct losses of M.V. “Futong 7” is CNY216,596.6. According to analysis above, berthage, towage costs, loss of earning and crew’s wages claimed by Hengye Company are not protected by the court. In accordance with the ascertainment that Jiangpeng Company should take the whole liability for accident, repair costs and other costs of M.V. “Jiangpeng 337” paid by Jiangpeng Company as claimed in the counterclaim should be assumed by Jiangpeng Company itself; temporary repair costs, towage costs and berthage of M. V. “Futong 7” paid by Jiangpeng Company, as a part of compensation for Hengye Company’s direct losses caused by the collision, should be assumed by Jiangpeng Company. Jiangpeng Company is not entitled to request Hengye Company to return. To sum up, the court does not support the claims of Jiangpeng Company in the counterclaim. To sum up, in accordance with Article 168 of the Maritime Code of the People’s Republic of China, Article 3 Paragraph 2 of the Provisions of the Supreme People’s Court on the Trial of Compensation for Property Damage in Cases of Collision and

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Contract of Ships and Article 11 of the Provisions of the Supreme People’s Court on the Trial of Certain Issues in Cases of Disputes over Collision of Ships, the court renders the judgment as follows: 1. The Defendant (the counterclaim Plaintiff) Sansha Jiangpeng Shipping Development Co., Ltd. shall pay CNY216,596.6 of loss directly caused by the collision to the Plaintiff (the counterclaim Defendant) Nanjing Hengye Tanker Co., Ltd. within 10 days as of the effective date of this judgment; 2. Reject other claims of the Plaintiff (the counterclaim Defendant) Nanjing Hengye Tanker Co., Ltd.; and 3. Reject all the claims of the Defendant (the counterclaim Plaintiff) Sansha Jiangpeng Shipping Development Co., Ltd. in the counterclaim. If pecuniary obligation is not fulfilled within the specified period according to this judgment, the Defendant shall pay the double interest over the delayed period in accordance with the Civil Procedure Law of the People’s Republic of China. Court acceptance fee as to claim in amount of CNY38,800, the Plaintiff (the counterclaim Defendant) Nanjing Hengye Tanker Co., Ltd. shall pay CNY17,125.53 and the Defendant (the counterclaim Plaintiff) Sansha Jiangpeng Shipping Development Co., Ltd. shall pay CNY2,274.47. Court acceptance fee in amount of CNY9,600 as to counterclaim shall be borne by the Defendant (the counterclaim Plaintiff) Sansha Jiangpeng Shipping Development Co., Ltd., in half, CNY4,800. In case of dissatisfaction with this judgment, the parties may within 15 days upon the service of this judgment submit statements of appeal to the court, together with copies in accordance with the number of the opposite parties, to lodge an appeal before Hainan High People’s Court. Presiding Judge: CAI Binhang Acting Judge: BAI Wenying Acting Judge: ZHANG Yifang August 8, 2016 Clerk: XIE Huijing

Appendix: Relevant Laws 1. Maritime Code of the People’s Republic of China. Article 168 If the collision is caused by the fault of one of the ships, the one in fault shall be liable therefor.

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2. Provisions of the Supreme People’s Court on the Trial of Compensation for Property Damage in Cases of Collision and Contact of Ships. III. Indemnities for vessel damage include compensations for total damage and partial damage of the vessel. …… 2. Compensations for partial damage cover reasonable fees for temporary repairs, fees for permanent repairs and auxiliary costs and supporting expenses, if following requirements are met: Vessels should be overhauled nearby unless the claimant could prove that losses would be reduced and costs saved if repair is made in other places or based on other reasonable grounds. The claimant has the obligation to fix the damaged vessel temporarily, if such kind of repairs can make it continue to operate. Compensations are only confined to the costs and losses incurred for repairing the damaged part of this one collision alone when the repair goes along with the claimant’s overhauling for seaworthiness, or repair due to other accident or the vessel’s routine maintenance. …… 3. Provisions of the Supreme People’s Court on the Trial of Certain Cases of Disputes over Collision of Ships. Article 11 The investigation documents concerning ship collision made by the governing authorities according to law and confirmed by the related parties or persons, may be used as evidence to ascertain the facts of case by the People’s Court, unless those documents could be invalidated sufficiently by contrary evidence.

Wuhan Maritime Court Civil Judgment Nanjing Boyang Shipping Co., Ltd. v. PICC Property and Casualty Company Limited Dalian Branch (2015) Wu Hai Fa Shang Zi No.00041 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 755. Cause(s) of Action 231. Dispute over contract for protection and indemnity insurance on the sea or sea-connected waters. Headnote The Plaintiff shipowner failed in its attempt to recover collision damages directly from P&I insurer because claim against insurer was brought outside the time limit of two years. Summary Boyang Shipping Co.’s vessel collided with the vessel of Tengxiang Shipping Co. Boyang individually sued Tengxiang for the accident and was awarded damages. Tengxiang did not comply with the award. Boyang then sued Tengxiang’s insurer and Tengxiang for damages and court fees. The insurer asserted four defenses: lack of subject matter jurisdiction; the ship collision accident alleged by Boyang Company had already been tried by the court; the alleged accident occurred on May 31, 2011, two-year time limitation all expired on May 31, 2013; and Tengxiang did not possess any due creditor’s right. The court determined there were only three issues: (1) whether the court had jurisdiction over the case; (2) whether Insurance Company was liable for the loss of Boyang Company, if so, how to calculate the amount of loss; (3) whether the litigation initiated by Boyang Company commenced after the statute of limitations. The court held that the statute of limitations had run because the claim against the insurer occurred two years after the incident. The court assigned court fees to Boyang.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_26

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Judgment The Plaintiff: Nanjing Boyang Shipping Co., Ltd. Domicile: Donghu Village, Zhendong Town, Gaochun District, Nanjing City, Jiangsu Province. Legal representative: XU Guoqing, general manager. Agent ad litem: CHANG Wen, lawyer of Jiangsu T&M Law Firm. Agent ad litem: ZHANG Lu, lawyer of Jiangsu T&M Law Firm. The Defendant: PICC Property and Casualty Company Limited Dalian Branch. Domicile: No.39 Shiji Street, Zhongshan District, Dalian City, Liaoning Province. Representative: DONG Guangen, general manager. Agent ad litem: ZHANG Zhiyong, lawyer of Liaoning Tytop Law Firm. Agent ad litem: X XWen, lawyer of Liaoning Tytop Law Firm. The Third Party: Yingkou Tengxiang Shipping Co., Ltd. Domicile: Room 702, No.3 East Bayuquan News Tower, Yingkou City, Liaoning Province. Legal representative: SONG Wei, chairman. With respect to the case arising from dispute over the insurer’s subrogation right, the Plaintiff Nanjing Boyang Shipping Co., Ltd. (hereinafter referred to as “Boyang Company”) filed a lawsuit against the Defendant PICC Property and Casualty Company Limited Dalian Branch (hereinafter referred to as “Insurance Company”) and the Third Party Yingkou Tengxiang Shipping Co., Ltd. (hereinafter referred to as “Tengxiang Company”), before the court on December 10, 2014. After Boyang Company submitted all the documents, the court entertained the case on December 25 in the same year. The case was entertained by Acting Judge XIONG Jing at first. Due to the change of post, the case was changed to be entertained by Judge XIONG Wenbo as the Presiding Judge, together with Judge PI Weining and Acting Judge LI Yan, forming the collegiate bench and trying the case under formal procedure. On May 29, 2015, the court held a hearing in public. CHANG Wen and ZHANG Lu, agents ad litem of Boyang Company, ZHANG Zhiyong, agent ad litem of Insurance Company, appeared in court to attend the trial. Tenxiang Company refused to appear in court without justifiable reasons after being summonsed and the court heard the case in absence of Tenxiang Company according to the law. The case has been concluded. Boyang Company alleged that on May 31, 2011, the M.V. “Boyang 6” which belonged to Boyang Company shipped 12,543-ton mineral powder from Jinzhou to Zhenjiang and when it was passing XX area, continuous collision occurred between it and the M.V. “Tengxiang 8” belonging to Tengxiang Company, which resulted in a serious damage to the hull of M.V. “Boyang 6” and a repair cost of RMB973,011. After trying the case, Wuhan Maritime Court rendered a judgment with the case number (2012) Wu Hai Fa Shi Zi No.00029, in which Tengxiang Company was

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ordered to compensate Boyang Company for the loss of RMB486,505.5 and its interest. Insurance Company was the insurer of Tengxiang Company, and according to the contract of insurance, Insurance Company shall be liable for the direct loss caused by the vessel M.V. “Tengxiang 8” insured colliding another vessel M.V. “Boyang 6” under the responsibility of ship collision. Insurance Company and Tengxiang Company did not pay the compensation so far, and according to the Contract Law of the People’s Republic of China, Boyang Company requested the court to rule that: 1. Insurance Company paid Boyang Company for cost of repair RMB486,505.5 and its interest; and 2. Insurance Company paid the litigation expenses. Insurance Company defended that: Firstly, according to the relevant regulations regarding the jurisdiction on claims arising from maritime accidents such as collision of ship, the regulations regarding the jurisdiction on litigation of subrogation right and the regulations regarding the jurisdiction on contract of insurance, Wuhan Maritime Court did not have the jurisdiction over the case. Secondly, the ship collision accidents alleged by Boyang Company had already been tried by the court. Boyang Company determined to claim on Tengyang Company and did not sue Insurance Company, therefore, it could not file an action against Insurance Company for the second time, otherwise, this would violate the principle of non bis in idem. Thirdly, the alleged accident occurred on May 31, 2011, two-year time limitation all expired on May 31, 2013, whether the cause of action was the dispute over ship collision or the dispute over contract of maritime insurance, Boyang Company failed to initiate the litigation within the time limitation. Fourthly, Tengxiang Company did not possess any due creditor’s right, so Tengxaing Company was not remiss in exercising its due creditor’s right. Thereby, the court should reject the claims of the Boyang Company. Tengxiang Company did not respond to the action. In order to support its claim, Boyang Company submitted the following evidence to the court: 1. Civil Judgment with the case number (2012) Wu Hai Fa Shi Zi No.00029 to prove that Tengxiang Company should compensate Boyang Company for the loss of RMB486,505.5 and its interest. 2. Insurance claim letter to prove that Tengxiang Company insured costal and river hull against all risks and additional quarter collision risk with Insurance Company, the number of insurance policy was PCBA201121021800000002, thereby Insurance Company shall be liable for the loss of vessels. The cross-examination opinions of Insurance Company: with regard to evidence 1, Insurance Company recognized its authenticity but had objection to its relevancy and the content of the civil judgment, which could not reach Boyang Company’s purpose of proof; it had objection to the authenticity of evidence 2 and did not receive the letter.

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Tengxiang Company did not submit any cross-examination opinions. The court affirms that: as for evidence 1, Insurance Company recognizes its authenticity and this evidence is an effective judgment rendered by the court, it shall be a basis to ascertain the facts of the case; as for evidence 2, Boyang Company mainly proved the content of the insurance contract between Tengxiang Company and Insurance Company, and Insurance Company did not deny this fact, the court confirms this fact. Insurance Company and Tengxiang Company did not submit any evidence to the court. No cross-examination opinions were submitted by Tengxiang Company. The court finds out: On May 31, 2011, the M.V. “WAN CHI ZHOU HOU 2828” belonging to Chizhou City Shipping Company (hereinafter referred to as “Shipping Company”), the M.V. “Tengxiang 8” belonging to Tengxiang Company, the M.V. “Boyang 6” which belongs to Boyang Company and the M.V. “Changjiang 82013” belonging to Shanghai Changjiang Shipping Company collided one after another. After investigation, the maritime authority determined that the M.V. “Tengxiang 8” should take primary responsibility for the collision, and the M.V. “WAN CHI ZHOU HOU 2828” should take secondary responsibility and the M.V. “Boyang 6”, the barge “Changyangbo 3” (belonging to one of the M.V. “Changjiang 82013” fleet) should also take some responsibility in the accidence. After Boyang Company filed an action in terms of its loss, the court rendered Civil Judgment with the case number (2012) Wu Hai Fa Shi Zi No.00029 on December 19, 2013 and ordered Tengxiang Company to compensate Boyang Company for cost of repair RMB486,505.5 and its interest (the interest shall be calculated, based on the capital RMB486,505.5 and according to benchmark interest rate for loans of the same type in the same period prescribed by the People’s Bank of China, from June 24, 2011 to the date when it was payable, which was designated by the judgment), and the compensation should be paid according to the limitation liability (3,154,299.92 yuan) within 7 days from the effective date of the judgment. After the judgment took effect, Tengxiang Company refused to comply with the judgment. It is also found out that the M.V. “Tengxiang 8” was a bulk cargo ship and it was allowed by the vessel inspection institute to sail offshore. Tengxiang Company insured costal and river hull insurance against all risks with Insurance Company. The insurance policy recorded that the additional insurance was 1/4 collision insurance; the duration of the insurance was from 0000 on May 1, 2011 to 2400 on April 30, 2012; the amount covered was 20 million yuan; the deductible for per accidence was expressly appointed to be 100 thousand yuan or 10% of loss, the higher of which was applicable, and the rate of deductible for the total loss was 20% (deductible was not expressly appointed to be applicable to collision). According to Clauses of Costal and River Hull Insurance (2009) attached on the insurance policy, article 2 stipulated that responsibility for contact and collision referred to

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that the insured vessel collided other vessels, port, port installations or navigation marks in the navigable waters, thus leading to the direct loss or charges of the referred items, including the direct loss of the cargo loaded on the contacted vessel; its article 11 regulated that the insurer would pay indemnity according to the agreed deductible franchise of insurance policy ( the responsibility for total loss and collision was excluded). On July 16, 2016, Insurance Company issued letter of indemnity in order to deal with the accidence. With regard to the referred accidence, Tengxiang Company did not claim against Insurance Company by filing an action or applying for arbitration, but Insurance Company paid 1.5 million yuan as compensation in the case in which Shipping Company applied for enforcement. Shipping Company also filed an action against Insurance Company in the court and its case number was (2014) Wu Hai Fa Shi Zi No.40. Insurance Company raised objection to jurisdiction after defense period and deemed that the case should be transferred to Dalian Maritime Court. The court holds that: This case is the dispute over the insurer’s subrogation right. After court investigation, the issues of the case are as follows: 1. whether the court has jurisdiction over the case; 2. whether Insurance Company should be liable for the loss of Boyang Company, if so, how to calculate the amount of loss; and 3. whether the litigation initiated by Boyang Company expired the limitation of action. Firstly, the issue of jurisdiction in this case. Before this case was accepted, the litigation related to the accident, initiated by Boyang Company against Tengxiang Company and other company had been already judged by the court. When the judgment took effect, Tengxiang Company, as the obligor, did not fully perform its obligation to Boyang Company which was obligee. Tengxiang Company could claim against Insurance Company for the loss in the accident according to the insurance contract, however, it did not claim against Insurance Company in the way of filing an action or applying for arbitration. According to Article 13 of the Interpretation of the Supreme People’s Court on Several Issues concerning the Application of the Contract Law of the People’s Republic of China (I), it could be determined that Tengxiang Company was remiss in exercising its due creditor’s right to its secondary debtor. According to Article 15 Paragraph 1 of the judicial interpretation referred above, it regulates that after lodging a lawsuit against the debtor in the people’s court, a creditor lodges a subrogation lawsuit against the secondary debtor in the same people’s court, the people’s court shall accept the case that is in line with the provisions of Article 14 of this interpretation and the conditions for bringing an lawsuit as prescribed in Article 108 of the Civil Procedure Law of the People’s Republic of China. The trial of the case in which the obligee, Boyang Company sued the obligor, Tengxiang Company had been completed, and it sued secondary debtor again before the court, which was in accordance with the referred regulation, therefore, the court has jurisdiction over this case.

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Secondly, the issue of whether Insurance Company should be liable for the loss of Boyang Company and how to calculate the amount of loss. The M.V. “Tengxiang 8” was a sea-going ship, so the insurance contract relation between Tengxiang Company and Insurance Company was marine insurance contract relation and shall be governed by the Maritime Code of the People’s Republic of China (hereinafter referred to as “Maritime Code”), but the Maritime Code does not regulate liability insurance. According to the Article 1 of the Provisions of the Supreme People’s Court on Several Issues about the Trial of Cases concerning Marine Insurance Disputes, it stipulates that the trial of cases involving the disputes over marine insurance contracts shall be governed by the Maritime Code; if there is no such provision in the Maritime Code, the relevant provisions in the Insurance Law shall apply; and if there is no such provision in the Maritime Code and the Insurance Law, the relevant legal provisions in the Contract Law shall apply, therefore, the Insurance Law of the People’s Republic of China shall be applied to the issues of liability of insurance in this case. Article 65 Paragraph 2 of this law stipulates that where the insured in liability insurance causes any damage to a third party and the insured’s liability for indemnity to the third party has been determined, at the request of the insured, the insurer shall directly pay insurance money to the third party. If the insured is slow to make a request, the third party shall have the right to directly request the insurer to pay indemnity for the damage for which the third party shall be indemnified and its Paragraph 4 regulates that liability insurance means a type of insurance which takes the insured’s legal liability for indemnity to a third party as the subject matter insured. According to the regulations referred above, it could be determined that the responsibility of Insurance Company for collision compensation for the loss of the third party, Boyang Company, due to the damage caused by the insured Tengxiang Company, belonged to liability insurance. With regard to the loss caused of the M.V. “Boyang 6” caused by collision of the M.V. “Tengxiang 8” owned by Tengxiang Company, the court had rendered an effective judgment which ordered Tengxiang Company to compensate for the loss of Boyang Company RMB486,505.5 yuan and its interest. Under the circumstances that Tengxiang Company did not fully perform its obligation, Boyang Company were allowed to demand that Insurance Company should pay the compensation within its limited liability under the liability insurance, and its filing an action did not violate the non bis in idem principle. The loss referred above was the direct loss of M.V. “Boyang 6”, so Insurance Company should pay the compensation. The effective judgment rendered by the court determined that the liability limit that Tengxiang Company should afford was RMB3,154,299.92 yuan, although there were special rules on deductible in the insurance policy, it also ruled that deductible shall not be applied in the conditions of collision, therefore, with respect to the loss of the M.V. “WAN CHI ZHOU HUO 2828” and the M.V. “Tengxiang 8” caused by Tengxiang Company, Insurance Company should pay the compensation within its limited liability subject to 3,154,299.92 yuan, and with regard to the opinion held by Insurance Company that 10% of loss should be deducted, the

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court does not support it. Insurance Company had paid 1.5 million yuan in the case in which Shipping Company applied for enforcement, therefore, the final amount of compensation that Insurance Company shall pay to Boyang Company should be subject to RMB3,154,299.92 and after being deducted 1.5 million yuan, the rest of money should be divided by Boyang Company and Shipping Company. Thirdly, issue of limitation of action. Article 264 of the Maritime Code regulates that the limitation period for claims with regard to contracts of marine insurance is two years, counting from the day on which the peril insured against occurred; Article 267 stipulates that the limitation of time shall be discontinued as a result of bringing an action or submitting the case for arbitration by the claimant or the admission to fulfill obligations by the person against whom the claim was brought up. The limitation period shall be counted anew from the time of discontinuance. The accidence occurring on May 31, 2015, the time limitation of Tengxiang Company should be counted from this date. The letter of indemnity issued by Insurance Company on June 16, 2011 could be regarded as the consent to perform the compensation obligation, therefore, the time limitation of insurance contract should be discontinued and counted anew from June 17, 2011 to June 16, 2013. According to Article 18 Paragraph 1 of the Interpretation of the Supreme People’s Court on Several Issues concerning the Application of the Contract Law of the People’s Republic of China (I), it regulates that in a subrogation lawsuit, the secondary debtor may invoke defenses against the debtor to be against the creditor. Boyang Company failed to prove that other conditions that could lead to suspension or interruption of time limitation, therefore, the Insurance Company as secondary debtor claimed against the obligee, Boyang Company that the time limitation had expired, which was supported by the court. In conclusion, the court has jurisdiction over this case and Boyang Company shall pay the compensation, but due to the fact that Boyang Company failed to file an action within the time limitation, it lost right to obtain satisfaction of a claim. According to Article 264 and Article 267 of the Maritime Code of the People’s Republic of China, and Article 64 Paragraph 1, Article 142 and Article 144 of the Civil Procedure Law of the People’s Republic of China, the judgment is rendered as follows: Reject the claims of the Plaintiff Nanjing Boyang Shipping Co., Ltd. Court acceptance fee in amount of RMB8,598 yuan shall be borne by the Plaintiff Nanjing Boyang Shipping Co., Ltd. In case of dissatisfaction with this judgment, the Plaintiff and the Defendant may within 15 days as of the service of this judgment, submit 3 originals of a statement of appeal to the court and present copies in accordance with the number of parties. The appellate court shall be Hubei High People’s Court. The Appellant shall prepay acceptance fee of the appeal case when submitting the appeal petition, according to the amount of the appeal request of dissatisfaction with this judgment, and according to the provisions of Article 13 Paragraph 1 of Measures on the Payment of Litigation Costs. The remittance payee: Non-taxable Income Financial Account of Finance Department of Hubei Province, account number: 05xxx69-1, deposit

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bank: Agricultural Bank of China, Wuhan Donghu Branch. Payers who pay through bank transfer or bank remittance shall indicate the “Hubei High People’s Court” or Hubei High People’s Court unit code “103001” on usage column of bank receipts. The Appellant who fails to prepay acceptance fees within 7 days after the expiration of the time limit shall withdraw the appeal automatically. Presiding Judge: XIONG Wenbo Judge: PI Weining Acting Judge: LI Yan June 18, 2015 Clerk: YUE Juan

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Hubei High People’s Court Civil Judgment Nanjing Boyang Shipping Co., Ltd. v. PICC Property and Casualty Company Limited Dalian Branch (2015) E Min Si Zhong Zi No.00178 Related Case(s) This is the judgment of second instance and the judgment of first instance is on page 747. Cause(s) of Action 231. Dispute over contract for protection and indemnity insurance on the sea or sea-connected waters. Headnote Affirming lower court decision that the Plaintiff shipowner was not entitled to recover collision damages directly from P&I insurer because claim against insurer was brought outside the time limit of two years. Summary After a four-vessel collision, Nanjing Boyang Shipping Co., Ltd., the Appellant, sought remedy against Yingkou Tengxiang Shipping Co., Ltd., the Third Party Respondent, for damages done to the Appellant’s vessel. The Appellant was awarded damages and interest against the Third Party Respondent. The Third Party Respondent did not comply with the decision. The Appellant then brought suit against the Third Party Respondent’s insurer, PICC Property and Casualty Company Limited Dalian Branch, the Respondent. The court evaluated claims against the Respondent and determined the statute of limitations had run. The Appellant now appeals this verdict. This decision determines whether: (1) the court of first instance had right of jurisdiction over the case between the Appellant and the Respondent; (2) whether the Respondent was liable for the loss of the Appellant, and if so, how to calculate the amount of loss; and (3) whether the litigation of the Appellant was initiated after the statute of limitations had expired. The court held that the statute of limitations had run, dismissed the Appellant’s claims, and assigned the Appellant court fees. The court reasoned that the Maritime Code statute of limitations is two years and, in the present case, is only interruptible by commencing legal action against the particular party or the insurer issuing an indemnity letter pertaining to the relevant instance and party. The accident occurred on May 31, 2011; the Appellant sued the Respondent on December 12, 2014; the Respondent issued an indemnity letter pertaining to another party involved in the collision.

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Judgment The Appellant (the Plaintiff of First Instance): Nanjing Boyang Shipping Co., Ltd. Domicile: Donghu Village, Zhendong Town, Gaochun District, Nanjing City, Jiangsu Province. Legal representative: XU Guoqing, general manager. Agent ad litem: CHANG Wen, lawyer of Jiangsu T&M Law Firm. Agent ad litem: ZHANG Lu, lawyer of Jiangsu T&M Law Firm. The Respondent (the Defendant of First Instance): PICC Property and Casualty Company Limited Dalian Branch. Domicile: No.39 Shiji Street, Zhongshan District, Dalian City, Liaoning Province. Representative: DONG Guangen, general manager. Agent ad litem: ZHANG Zhiyong, lawyer of Liaoning Tytop Law Firm. Agent ad litem: X XWen, lawyer of Liaoning Tytop Law Firm. The Third Party of First Instance: Yingkou Tengxiang Shipping Co., Ltd. Domicile: Room 702, No.3 East Bayuquan News Tower, Yingkou City, Liaoning Province. Legal representative: SONG Wei, chairman of this company. Dissatisfied with the Civil Judgment (2015) Wu Hai Fa Shang Zi No.00041 rendered by Wuhan Maritime Court in respect of the case of dispute over the insurer’s subrogation right in which the Respondent PICC Property and Casualty Company Limited Dalian Branch (hereinafter referred to as “PICC Dalian Branch”) and the Third Party of first instance Yingkou Tengxiang Shipping Co., Ltd. (hereinafter referred to as “Tengxiang Company”) were involved, the Appellant Nanjing Boyang Shipping Co., Ltd. (hereinafter referred to as “Boyang Company”) filed an appeal before the court on October 27, 2015. After accepting the appeal, the court constituted a collegiate panel according to the law to try the case. In view that the Appellant Boyang Company did not file any claim against the Third Party Tengxiang Company, the court of first instance rendered a default judgment under the circumstance that Tengxiang Company refused to appear in court without justifiable reasons after being summoned, during second instance, Boyang Company and PICC Dalian Branch did not adduce new fact, new evidence and new reason. Based on the consent by both parties, thereby, according to Article 169 of the Civil Procedure Law of the People’s Republic of China, the court decided to hold the hearing in written. Now the case has been concluded. Boyang Company filed an action on December 10, 2014, and requested the court to sentence that: 1. PICC Dalian Branch should compensate Boyang Company for the loss of RMB486,505.5 and its interest; and 2. court acceptance fee shall be assumed by the PICC Dalian Branch.

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The court of first instance found out that: On May 31, 2011, the M.V. “WAN CHI ZHOU HUO 2828” belonging to Chizhou City Shipping Company (hereinafter referred to as “Shipping Company”), the M.V. “Tengxiang 8” belonging to Tengxiang Company, the M.V. “Boyang 6” belonging to Boyang Company and the M.V. “Changjiang 82013” belonging to Shanghai Changjiang Shipping Company collided one after another. After investigation, the maritime authority determined that the M.V. “Tengxiang 8” should take primary responsibility for the collision, and the M.V. “WAN CHI ZHOU HUO 2828” should take secondary responsibility and the M.V. “Boyang 6”, the barge “Changyangbo 3” (belonging to “Changjiang 82013” fleet) should also take some responsibility in the accident. After Boyang company filed an action to claim for its loss, the court of first instance rendered the Civil Judgment with the case number (2012) Wu Hai Fa Shi Zi No.00029 on December 19, 2013 and ordered Tengxiang Company to compensate Boyang Company for repair charge of RMB486,505.5 and its interest (the interest shall be calculated, based on the capital RMB486,505.5 and according to benchmark interest rate for loans of the same type in the same period prescribed by the People’s Bank of China, from June 24, 2011 to the date when it was payable, which was designated by the judgment), and the compensation should be paid within the limitation liability of RMB3,154,299.92 within 7 days from the effective date of the judgment. After the judgment took effect, Tengxiang Company refused to comply with the judgment. It was ascertained otherwise that the M.V. “Tengxiang 8” was a bulk cargo ship and it was allowed by the vessel inspection institution to sail offshore. Tengxiang Company insured costal and river hull insurance for the vessel with PICC Dalian Branch. The insurance policy recorded that the additional insurance was 1/4 collision insurance; the duration of the insurance was from 0000 on May 1, 2011 to 2400 on April 30, 2012; the assured amount was RMB20,000,000; the deductible for per accident was expressly appointed to be RMB100,000 or 10% of loss, the higher of which shall be applicable, and the rate of deductible for the total loss was 20% (deductible was not expressly appointed to be applicable to collision). According to the attachment, Clauses of Costal and River Hull Insurance (2009) attached on the insurance policy, its article 2 regulated that responsibility for contact and collision referred to that the insured vessel collided other vessels, port, port installations or navigation marks in the navigable waters, thus leading to the direct loss or charges of the referred items, including the direct loss of the cargo loaded on the touched vessel; its article 11 regulated that the insurer would deduct the deductible before paying indemnity according to the insurance policy (the responsibility for total loss and collision was excluded). On July 16, 2016, PICC Dalian Branch issued Letter of Indemnity in order to deal with the accident. With regard to the referred accident, Tengxiang Company did not claim against PICC Dalian Branch by filing an action or applying for arbitration, but PICC Dalian Branch paid RMB1,500,000 as compensation in the case in which Shipping Company applied for enforcement. Shipping Company also filed an action against PICC Dalian Branch in the court and its case number was (2014) Wu Hai Fa Shi Zi

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No.40. PICC Dalian Branch raised objection to jurisdiction after the period of submitting a written statement of defense and deemed that the case should be transferred to Dalian Maritime Court. The court of first instance held that: This case involved the dispute over the insurer’s subrogation right. After court’s investigation, the issues of the case were follows: 1. whether the court had right of jurisdiction over the case; 2. whether PICC Dalian Branch should be liable for the loss of Boyang Company, if so, how to calculate the amount of loss; and 3. whether the litigation initiated by Boyang Company expired the statute of limitation. Firstly, the issue of jurisdiction in this case. Before this case was accepted, the litigation related to the accident, initiated by Boyang Company against Tengxiang Company and other company had been already judged by the court. When the judgment took effect, Tengxiang Company, as the obligor, did not fully perform its compensation obligation to the obligee, Boyang Company. Tengxiang Company could claim against PICC Dalian Branch for the loss in the accident according to its insurance contract relationship with PICC Dalian Branch, however, it did not claim against PICC Dalian Branch in the way of filing an action or applying for arbitration. According to Article 13 of the Interpretation of the Supreme People’s Court on Several Issues concerning the Application of the Contract Law of the People’s Republic of China (I), it could be determined that Tengxiang Company was remiss in exercising its due creditor’s right to its secondary debtor. According to Article 15 Paragraph 1 of the judicial interpretation referred above, it regulated that Where, after lodging a lawsuit against the debtor in the people’s court, a creditor lodges a subrogation lawsuit against the secondary debtor in the same people’s court, the people’s court shall accept an docket such a case if the provisions of Article 13 of this Interpretation and the conditions for bringing a lawsuit as prescribed in Article 108 of the Civil Procedure Law of the People’s Republic of China are satisfied. The trial of the case in which the obligee, Boyang Company sued the obligor, Tengxiang Company had been completed in the court of first instance, and it sued secondary debtor, PICC Dalian Branch again, which was in accordance with the referred regulation, therefore, the court of first instance had jurisdiction over this case. Secondly, the issue of whether PICC Dalian Branch should be liable for the loss of Boyang Company and how to calculate the amount of loss. The M.V. “Tengxiang 8” was a sea-going ship, so the insurance contract relation between Tengxiang Company and PICC Dalian Branch was marine insurance contract relation and shall be governed by the Maritime Code of the People’s Republic of China (hereinafter referred to as “Maritime Law”), but the Maritime Law did not regulate liability insurance. According to the Article 1 of the Provisions of the Supreme People’s Court on Several Issues about the Trial of Cases concerning Marine Insurance Disputes, it stipulated that the trial of cases involving the disputes over marine insurance contracts shall be governed by the Maritime Law; if there is no such provision in the Maritime Law, the relevant provisions in the Insurance Law shall apply; and if there is no such provision in the Maritime Law and the Insurance Law, the relevant legal provisions in the Contract Law shall

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apply, therefore, the Insurance Law of the People’s Republic of China shall apply to the issues of liability of insurance in this case. Article 65 Paragraph 2 of this law stipulated that where the insured in liability insurance causes any damage to a third party and the insured’s liability for indemnity to the third party has been determined, at the request of the insured, the insurer shall directly pay insurance money to the third party. If the insured is slow to make a request, the third party shall have the right to directly request the insurer to pay indemnity for the damage for which the third party shall be indemnified and its Paragraph 4 regulated that liability insurance means a type of insurance which takes the insured’s legal liability for indemnity to a third party as the subject matter insured. According to the regulations referred above, it could be determined that the collision compensation responsibility that PICC Dalian Branch shall bear for the loss of the third party Boyang Company, due to the damage caused by the insured Tengxiang Company, belonged to liability insurance. With regard to the loss of the M.V. “Boyang 6” suffered after being collided by the M.V. “Tengxiang 8” owned by Tengxiang Company, the court had rendered an effective judgment which ordered Tengxiang Company to compensate Boyang Company for the loss of RMB486,505.5 and its interest. Under the circumstances that Tengxiang Company did not fully perform its compensation obligation, Boyang Company was allowed to demand that PICC Dalian Branch should pay the compensation within its ships collision liability, and its initiation of the litigation did not violate the non bis in idem principle. The loss referred above was the direct loss of the M.V. “Boyang 6”, so PICC Dalian Branch should pay the compensation. The effective judgment rendered by the court determined that the liability that Tengxiang Company should afford was limited to RMB3,154,299.92, although there were special rules on deductible in the insurance policy, it also ruled that deductible shall not be applied in the conditions of collision, therefore, with respect to the loss of the M.V. “WAN CHI ZHOU HUO 2828” and the M.V. “Tengxiang 8”caused by Tengxiang Company, PICC Dalian Branch should pay the compensation within its limited liability of RMB3,154,299.92, and with regard to the opinion held by PICC Dalian Branch that 10% of loss should be deducted, the court of first instance did not support it. PICC Dalian Branch had paid 1.5 million yuan in the case in which Shipping Company applied for enforcement, therefore, the final amount of compensation that PICC Dalian Branch shall pay to Boyang Company should be subject to RMB3,154,299.92 and after 1.5 million yuan was deducted, the rest of money should be divided by Boyang Company and Shipping Company. Thirdly, issue of time limitation. Article 264 of the Maritime Code of the People’s Republic of China regulated that the limitation period for claims with regard to contracts of marine insurance is two years, counting from the day on which the peril insured against occurred; Article 267 ruled that the limitation of time shall be discontinued as a result of bringing an action or submitting the case for arbitration by the claimant or the admission to fulfill obligations by the person against whom the claim was brought up. The limitation period shall be counted anew from the time of discontinuance. The accident occurred on May 31, 2015, and the time limitation of Tengxiang

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Company should be counted from this date. The letter of indemnity issued by PICC Dalian Branch on June 16, 2011 could be regarded as the consent to perform the compensation obligation, therefore, the time limitation of insurance contract should be discontinued and counted anew from June 17, 2011 to June 16, 2013. According to Article 18 Paragraph 1 of the Interpretation of the Supreme People’s Court on Several Issues concerning the Application of the Contract Law of the People’s Republic of China (I), it regulated that in a subrogation lawsuit, the secondary debtor may invoke defenses against the debtor to be against the creditor. Boyang Company failed to prove other conditions that could lead to suspension or interruption of the limitation, therefore, the defense of secondary debtor, PICC Dalian Branch, against the obligee, Boyang Company that the time limitation had expired was supported by the court of first instance. In conclusion, the court of first instance had jurisdiction over this case and Boyang Company should pay the compensation, but due to the fact that Boyang Company failed to file an action within the time limitation, it lost right to win a lawsuit. According to Article 264 and Article 267 of the Maritime Code of the People’s Republic of China, and Article 64 Paragraph 1, Article 142 and Article 144 of the Civil Procedure Law of the People’s Republic of China, the judgment of first instance was rendered as follows: reject the claims of the Plaintiff Nanjing Boyang Shipping Co., Ltd. Court acceptance fee in amount of RMB8,598 should be assumed by the Plaintiff Nanjing Boyang Shipping Co., Ltd. Boyang Company was dissatisfied with the above judgment, therefore, filed an appeal to the court and pleaded that: 1. revoking the Civil Judgment with case number (2015) Wu Hai Fa Shang Zi No.00041 rendered by Wuhan Maritime Court or reversing the judgment and determined that PICC Dalian Branch should compensate Boyang Company for the loss of RMB486,505.5 yuan and its interest; and 2. court acceptance fee for first instance and second instance shall be assumed by the PICC Dalian Branch. Main facts and reasons were listed as follows. Firstly, the facts of judgment rendered at first instance were unclear. PICC Dalian Branch automatically performed the warranty obligation of Letter of Warranty issued by itself in the end of July 2014. Because the warranty contained the M.V. “WAN CHI ZHOU HUO 2828” and other parties involved in the accident, Boyang Company was entitled to be compensated partly from the compensation paid by PICC Dalian Branch, but the judge who was responsible for the enforcement transferred all the compensation to Chizhou Shipping Company. But in terms of PICC Dalian Branch’s performance of its warranty obligation, PICC Dalian Branch automatically performed the warranty obligation, so the interruption of prescription shall be in the end of July 2014, other than the date June 16, 2011 when the letter of warranty was issued. Since PICC Dalian Branch was taking part in the litigation, it was reasonable that it could not reach a compensation agreement with its insured Tengxiang Company.

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In addition, the Third Party claimed against PICC Dalian Branch on October 9, 2014. The Third Party did not waive its right of indemnity and PICC Dalian Branch did not issue refusal notice either. Secondly, there was error in the application of the law. 1. Because the Third Party Tengxiang Company was remiss in exercising its indemnity right to PICC Dalian Branch, Boyang Company was not able to exercise its right, therefore, Boyang Company decided to exercise its subrogation right according to Article 73 of the Contract Law of the People’s Republic of China, which was not governed by the regulations on time limitation in the Maritime Code of the People’s Republic of China. 2. The court of first instance applied Article 18 Paragraph 1 of the Interpretation of the Supreme People’s Court on Several Issues concerning the Application of the Contract Law of the People’s Republic of China (I) and held that insurance company could exercise its right of defense against Tengxiang Company to defense against Boyang Company, in other words, it could refute the time limitation, but this should be also in accordance with Article 11 and conform to the conditions of initiating a subrogation litigation. In this case, the No.29 judgment confirmed the legality of Boyang Company’s requirement that Tengxiang Company should compensate the loss of vessel, and provided the due date when Tengxiang Company should perform its compensation obligation, therefore only when the judgment took into effect, could the legality of Boyang Company’s subrogation be confirmed, which was held by the court. Since the legality of subrogation was confirmed, the time limitation for the insurance company to exercise its right to recover the money from the third party should begin when Tengxiang Company was remiss in claiming against insurance company, and the start date of time limitation should be the date when Tengxiang Company was ordered by the court to pay the compensation and it is the effective date of No.9 judgment. 3. Since the insurance contract belonged to liability insurance, and there was no regulations on liability insurance company in the Maritime Law, according to the Provisions of the Supreme People’s Court on Several Issues about the Trial of Cases concerning Marine Insurance Disputes, the issue of time limitation shall be governed by the General Principles of the Civil Law of the People’s Republic of China, and the time limitation shall begin when the entitled person knows or should know that his rights have been infringed upon. Tengxiang Company’s being remiss in exercising its right should start during the enforcement procedure, PICC Dalian Branch informed Tengxiang Company that it could not pay to Boyang Company due to the fact that Tengxiang Company did not claim. So, the beginning of the time limitation should be the date when the court found the referred situation during enforcement procedure. Article 267 of the Maritime Law did not regulate who could initiated the litigation, so the understanding of the court of first instance that the time limitation could be discontinued only by the litigation initiated by Boyang Company was wrong. On the contrary, without No.29 judgment and the situations found

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during enforcement process that Tengxiang Company did not claim against PICC Dalian Branch, there was no fact that Boyang Company exercised its subrogation right and legal basements. PICC Dalian Branch defensed at second instance that: the court of first instance was clear in fact finding and application of law was correct, and the reason of Boyang Company for appealing was unacceptable, so, it should be dismissed. Firstly, Boyang Company’s replacement of the insured to exercise the subrogation right under the insurance contract should be limited by the time limitation of maritime insurance contract between the insurer and the insured. Boyang Company expressly admitted that the basic contractual relation its litigation it based on was vessel insurance contract. According to the basic principle of subrogation right in contract law, if Boyang Company exercised subrogation right as an obligee, its replaced legal status (the insured) was the obligor and the right it exercised was the right of the insured under the insurance contract. Under the condition that subrogation right was exercised, the extent to which the subrogation rights can be exercised is limited to the insured’s rights. Meanwhile, the defense that the insurant was entitled to against the insurer applied to replace the obligee of insured, including the defense about time limitation. Since Boyang Company aimed to exercise subrogation right according to Article 73 of the Contract Law of the People’s Republic of China, its time limitation should be ruled by the basic contractual relation, which means vessel insurance contract. Boyang Company held that its subrogation right under the contract law should not be ruled by regulations in the Maritime Law, which obviously violated the related law and was not legally binding. The determination of the court of first instance that the two-year time limitation expired when Boyang Company initiated the litigation was totally right. Secondly, PICC Dalian Branch’s payment of RMB1.5 million yuan should be regarded as performing the warranty obligation under the letter of warranty, rather than performing indemnity obligation under insurance contract. To begin with, PICC Dalian Branch did not automatically perform warranty obligation on its own, instead, it exercised the obligation ordered by the enforcement ruling issued by Wuhan Maritime Court. Next, the issuance of the letter of warranty and payment of compensation was according to insurance contract relation, and this could not be regarded as confirmation of any indemnity responsibility in vessel collision tort relation, furthermore, this also could not be regarded as the consent to perform any compensation responsibility caused by collision of the owner of the M.V. “Tengxiang 8”. Thirdly, it could not affect the basic fact that Boyang Company was not entitled to directly sue the insurer whether the time limitation expired. To begin with, this case involved dispute over the maritime insurance contract, therefore, Chapter XII Contract of Maritime Insurance of the Maritime Code of the People’s Republic of China should apply, other than applied contract law, and Boyang Company had no right to sue the insurer directly. Next, in order to execute the subrogation right regulated by contract law and its judiciary interpretation, some requirements must

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be fulfilled, which was not fulfilled in this case. Although the amount of compensation was clear in the No.9 judgment, it did not sentence how much damages should be paid by the insurer and the insured respectively and the insurer was not liable for all the losses listed in the judgment. Therefore, the liability of the insurer was not determined. The deductible and liability agreed which could exempt or reduce indemnity compensation liability existed in the insurance policy, which could lead to uncertainty of the insurer’s liability; Boyang Company did not submit any evidence to prove that the insurer was remiss in exercising its right, instead, the insured claimed for 1.5 million yuan against the insurer, which could contradict the opinion of Boyang Company. After the trial, the court of first instance was clear in fact finding, which is confirmed by the court. After comprehensively analyzing the pleas and arguments of each party, the issue of the case is concluded as whether the litigation of Boyang Company was initiated after the time limitation expired. The discussion and judgment of the court is listed as follows: Boyang Company held that: the insurance involved was liability insurance and the time limitation shall be governed by the regulations in the General Principles of the Civil Law of the People’s Republic of China that the time limitation shall begin when the entitled person knows or should know that his rights have been infringed upon. Until enforcement process of No.29 judgment, Boyang Company knew that Tenxiang Company was remiss in claiming against PICC Dalian Branch. Therefore, the time limitation shall be counted from 2014. Boyang Company, as the third party in the accident, initiated the subrogation litigation against PICC Dalian Branch according to the Contract Law of the People’s Republic of China, and its time limitation should also be counted from the date determined by No.29 judgment when the insured Tengxiang Company should be liable for the third party Boyang Company. In addition, after the occurrence of the accident, several conditions, such as litigations, enforcement, issuance of letter of warranty, automatic performance of obligation, which could discontinue the time limitation occurred, so the litigation was initiated within the time limitation. PICC Dalian Branch held that: the litigation initiated by Boyang Company was a subrogation litigation according to the Contract Law of the People’s Republic of China, and its litigation did not conform to the requirements regulated by the contract law and its judiciary interpretation. The insurance involved was maritime vessel insurance. Although there was additional collision insurance, it was not a pure liability insurance. Therefore, the beginning, discontinuing and suspending of the time limitation shall be governed by the Maritime Code of the People’s Republic of China and the Provisions of the Supreme People’s Court on Several Issues about the Trial of Cases concerning Marine Insurance Disputes. The time limitation for Boyang Company’s initiating subrogation litigation against PICC Dalian Branch should be counted when the insurance accident occurred. PICC Dalian Branch did not willingly pay 1.5 million yuan, instead it was as a result of compulsory execution by the court. So, it could not discontinue the time litigation. In conclusion, the litigation was initiated by Boyang Company after the time limitation expired.

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The court holds that: Firstly, the basic fact of litigation that Boyang Company initiated was costal and river hull insurance contract against all risks signed between Tengxiang Company and PICC Dalian Branch in collision accident, so the basic legal relation of the dispute in this case was maritime insurance contract and according to Article 1 of the Provisions of the Supreme People’s Court on Several Issues about the Trial of Cases concerning Marine Insurance Disputes, the trial of cases involving the disputes over marine insurance contracts shall be governed by the Maritime Law, which should be applied in this case. Although this article also regulates that if there is no such provision in the Maritime Law, the relevant provisions in the Insurance Law shall apply; and if there is no such provision in the Maritime Law and the Insurance Law, the relevant legal provisions in the Contract Law shall apply, Article 264 of the Maritime Code of the People’s Republic of China ruled the time limitation of claims with regard to contracts of marine insurance, therefore, the related regulations in the Maritime Code of the People’s Republic of China shall apply to the time limitation in this case. Next, according to Article 264 of the Maritime Code of the People’s Republic of China that the limitation period for claims with regard to contracts of marine insurance is two years, counting from the day on which the insurance accident occurred, the time limitation with regard to the claim of Boyang Company against the insurer PICC Dalian Branch should be counted from the date when the involved collision accident occurred, counting from May 31, 2011. The reasons for appeal of Boyang Company that the time limitation of this case should be counted from the effective date of No.29 judgment is not supported by the court due to its lack of factual and legal basis. Thirdly, Boyang Company held that after the occurrence of the involved collision accident, the time limitation of this case shall be discontinued by initiating litigation, applying for enforcement and PICC Dalian Branch’s issuing letter of warranty and automatic performing its obligation. The court holds that according to Article 267 of the Maritime Code of the People’s Republic of China, it regulates that the limitation of time shall be discontinued as a result of bringing an action or submitting the case for arbitration by the claimant or the admission to fulfill obligations by the person against whom the claim was brought up, however, the No.29 judgment was litigation initiated by Boyang Company against Tengxiang Company, rather than against PICC Dalian Branch, therefore, neither Boyang Company’s litigation of No.29 case nor its application for enforcing the effective judgment complied with the rules on discontinuing the time limitation in the Maritime Code of the People’s Republic of China. The counter party of the letter of warranty issued by PICC Dalian Branch on June 16, 2011 was Chizhou Shipping Company, shipowner of the M.V. “WAN CHI ZHOU HUO 2828”, shipowners by shares, joint owners and any other interested parties, and it only warrant such loss as repair cost of the M.V. “WAN CHI ZHOU HUO 2828” and the range of damages warranted by the letter of warranty did not contain the losses of Boyang Company, therefore, PICC Dalian Branch did not consent to pay the compensation to Boyang Company by issuing letter of warranty and this also did not discontinue the time limitation. Boyang company initiated the litigation on December 10, 2014, which was initiated after the

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two-year time limitation regulated by law, therefore, its holding lack factual and legal basis, and the court does not support it. In conclusion, the judgment rendered by the court of first instance was clear in fact finding, correct in application of law, lawful in procedure and proper in judging the case. After the deliberation of the collegiate bench, in accordance with Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the court renders the judgment as follows: Dismiss the appeal and affirm the original judgment. Court acceptance fee of second instance in amount of RMB8,598 yuan shall be borne by Nanjing Boyang Shipping Co., Ltd. The judgment is final Presiding Judge: WAN Haili Acting Judge: HU Zhengwei Acting Judge: ZENG Cheng December 16, 2015 Clerk: CHENG Jianxiao

Beihai Maritime Court Civil Judgment Nanning City Gongli Steel Tubes Manufacturing Co., Ltd. v. Beihai Jun Hui Sand & Stone Co., Ltd. et al. (2015) Hai Shang Chu Zi No.342 Related Case(s) None. Cause(s) of Action 213.(1) Dispute over time charter party. Headnote The Plaintiff time charterer held to be entitled to recover damages from shipowner for failing to tender adequate vessel under time charter. Summary The Plaintiff, Gongli Steel Tubes Manufacturing (Gongli), filed an action against the first Defendant, Beihai Jun Hui Sand & Stone Co. (Jun Hui), as well as the second Defendant, company’s legal representative, YANG Sajun, for failing to adequately provide a vessel sufficient to perform the tasks required within the charter party signed by the parties. The first Defendant originally tendered the ship M.V. “Hubei Galaxy 9618” to the Plaintiff for the purpose of transporting piling pipe. However, due to this being an inland vessel unable to carry out the operations requested by the Plaintiff, the first Defendant later tendered the ship M. V. “Xinhua 18” to the Plaintiff. This vessel completed one voyage before the Tieshan Port Marine Department restricted the vessel from leaving port due to various safety violations concerning the vessel and crew. This detention and delay caused the Plaintiff to seek vessels from other charterers in order to timely fulfill its orders and obligations. The Plaintiff sued the first Defendant for breach of the charter party. The Plaintiff also filed suit against the second Defendant, alleging that he had abused the legal status of the first Defendant company by depositing company funds into his personal account. The court held that Gongli was entitled to terminate the charter party with written notice and further, that the second Defendant had abused the legal status of the company as a juridical person. As a result, the court held that the first Defendant was liable to the Plaintiff for the return of all charter hire and expenses provided in the charter from the time the Plaintiff had properly terminated the agreement, and that the second Defendant was jointly liable to pay the damages. © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_27

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Judgment The Plaintiff: Nanning City Gongli Steel Tubes Manufacturing Co., Ltd. Domicile: No.1068 Yinhai Avenue, Liangqing District, Nanning City, Guangxi Zhuang Autonomous Region. Legal representative: LIU Xinting, chairman. Agent ad litem: LI Wanfeng, lawyer of Beijing Dentons (Nanning) Law Firm. Agent ad litem: WU Yunyan, lawyer of Beijing Dentons (Nanning) Law Firm. The Defendant: Beihai Jun Hui Sand & Stone Co., Ltd. Domicile: No.302, Unit 1, Building J, Hongyuan Ecological Community, Yunnan Road, Beihai City, Guangxi Zhuang Autonomous Region. Legal representative: YANG Sujun, general manager. Agent ad litem: TAN Xiaoyan, lawyer of Guangxi GUISANLI Law Firm Beihai Branch. Agent ad litem: LI Xiaofang, apprentice of Guangxi GUISANLI Law Firm Beihai Branch. The Defendant: YANG Sujun, Female, Born on October 25, 1957, Han, Living in Haicheng District, Beihai City, Guangxi Zhuang Autonomous Region. Agent ad litem: TAN Xiaoyan, lawyer of Guangxi GUISANLI Law Firm Beihai Branch. Agent ad litem: LI Xiaofang, trainee lawyer of Guangxi GUISANLI Law Firm Beihai Branch. With respect to the case arising from dispute over time charter party, the Plaintiff, Nanning City Gongli Steel Tubes Manufacturing Co., Ltd. (hereinafter referred to as Gongli Company) filed an action against the Defendant, Beihai Jun Hui Sand & Stone Co., Ltd. (hereinafter referred to as Jun Hui Company). The court entertained the case on December 15, 2015, a summary procedure shall be applied in accordance with the law. On December 28, the Plaintiff applied to add YANG Sujun as a Defendant to participate in the case on the grounds of YANG Sujun, the legal representative of the Defendant Jun Hui Company, violates the law and stores the assets of the company in the name of the individual, abuses of the independent status of the legal person and limited liability of shareholders to evade debts, harms the interests of the creditors severely. On January 11, 2016, the court notified YANG Sujun in accordance with the law as the Defendant to participate in the proceedings of the case, and held a hearing in public on January 28. In the process of the trial, because of the complexity of the case, the two parties have a bigger dispute, the case should not continue to be tried in summary procedure, the court judged the case shall be transferred to a general procedure on March 2, 2016, and organized the trial bench according to the law, and held a hearing to try the case for the second time on March 30. In the two trials, agent ad litem of the Plaintiff, WU Yunyan, the legal representative of the Defendant Jun Hui Company, YANG Sujun, and agents ad litem of the two Defendants, TAN Xiaoyan and LI Xiaofang appeared in court to attend the trial. After trial, the court has concluded the case.

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The Plaintiff claimed that: the Plaintiff, Gongli Company and the Defendant, Jun Hui Company signed Ship Leasing Agreement on September 13, 2014, and agreed that Jun Hui Company chartered the M.V. “Hubei Galaxy 9618”, the lease term is more than one month (including one month). The lease shall begin on the day when the Defendant moves the ship to the Plaintiff’s designated place for acceptance by the Plaintiff, until the day when the Plaintiff returns the ship, the monthly rent is RMB270 thousand; the Plaintiff prepaid RMB100 thousand to the Defendant within 3 working days from the date of signing the contract. The Defendant will ship the ship to the Plaintiff’s named place after received the advance payment within 3 days; the Plaintiff bear the fuel costs RMB15,000 of the lease time from Guangxi Qinzhou Port to Tieshan Port round-trip, which shall be deducted from the prepayments RMB100 thousand of the Plaintiff after the confirmation of both sides. On September 19, the Plaintiff paid RMB100 thousand in advance to the Defendant. On September 30, the Plaintiff paid RMB270 thousand to the Defendant for the rent. During the performance of the contract, as the M.V. “Hubei Galaxy 9618” provided by the Defendant, the inland craft cannot rely on the port to unload cargo and transportation, construction of the owner of the piling pipe has begun in the process of construction. In the case of emergency of the construction, strongly requested by the Plaintiff, the Defendant in addition provided the M.V. “Xinhua 18” for the Plaintiff to use. The ship M.V. “Xinhua 18” finished loading at the port appointed by the Plaintiff, Qinzhou port, on September 29 and bound for Tieshan port, and shipped a batch of piling pipe to Tieshan port on September 30, unloading for 7 days in Tieshan port. But due to the ship M.V. “Xinhua 18” did not apply the port entry and exit visas and did not equipped with a qualified crew, and without hold safe operation and safety management certificate, the ship was administrative fined by the People’s Republic of China Beihai Tieshan Port Marine Department (hereinafter referred to as Tieshan Port Marine Department). The vessel was investigated during the period of maritime violations, and before the Defendant pays the administrative fine, the ship was restricted to off the harbor by Tieshan Port Marine Department, which caused the ship cannot carry the goods at all during the lease term. The time charter party signed by the Plaintiff and the Defendant is only one month, the Defendant’s ship was restricted from leaving the port for a month, the Plaintiff has been demanding that the Defendant provide another seaworthy vessel to continue its performance of the contract, the Defendant refused to provide. According to Ship Leasing Contract, the Defendant shall be equipped with airworthiness crew to ensure safe navigation, and handle the port entry and exit visas in accordance with the law and holds a valid certificate with the vessel, but the Defendant does not perform, the behavior has constituted a serious breach of contract, resulting in the purpose of the contract of shipping the piling pipe cannot be achieved. Therefore, according to the provisions of article 11 paragraph 2 of Ship Leasing Contract, the Plaintiff delivered the notification of termination of contract to the Defendant on July 23, 2015, and the contract was terminated. Because the period of the ship is limited to departure from the port, the owner of the piling works has commissioned another vessel to transport the piling pipe. Since the signing of the contract has been more than a year, the contract objectively has been

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unable to perform, the contract shall be terminated. The Defendant YANG Sujun as a controlling shareholder of the Defendant, Jun Hui Company, the actual controller, the legal representative, the executive director, general manager, in the name of individual to open an account and store the company assets, and instructed the Plaintiff to remit the charter hire and advance payment to the personal account, which confuse the company’s assets and the personal assets. Now the whereabouts of the money are unknown, the behavior has seriously violated the company law, the commercial bank law, interim measures for the administration of RMB settlement prohibitions, which belongs to a serious abuse of rights of shareholders, and in violation of the duties of company executives, abusing the independent status of legal person, reduces the company’s ability to repay the debt objectively, damaging the interests of creditors, which shall bear joint liability for the return rent, interest payments and prepayments. According to the contract, the actual use time of the ship is 9 days, calculated according to the daily rent RMB9,000, the Plaintiff shall pay the rent for RMB81,000, the Defendant shall refund the RMB189,000, the Defendant has returned the rent RMB20 thousand to the Plaintiff, there has more than RMB169,000 of the rent is not returned. According to the contract, the Plaintiff shall pay the fuel fee of RMB15,000 for the actual use of the ship rotations. The amount shall be deducted from the advance payment of RMB100 thousand, and the Defendant shall return the Plaintiff’s advance payment of RMB85,000. The above sum amounts to RMB254,000, after the Plaintiff repeatedly urges, the Defendant refuses to fulfill the obligation to refund the money. Therefore, the Plaintiff requested the court order the Defendant in accordance with law, firstly, the Defendant Jun Hui Company return the Plaintiff prepayments RMB85,000; secondly, the Defendant Jun Hui Company to return the Plaintiff the rent RMB169,000; thirdly, the Defendant Jun Hui Company paid the above overdue interest of the first, the second payment RMB143,51 (take RMB254,000 as the base, according to bank lending rates for the same period from October 10, 2014 until October 31, 2015, the interest was calculated to the day of the money is paid off); fourthly, the Defendant YANG Sujun bear joint liability to the Plaintiff of the three debts; Fifthly, the litigation costs shall born by the two Defendants. The Defendant, Jun Hui Company argued that firstly, Jun Hui Company has performed the obligation of providing the applicable ship M.V. “Xinhua 18”, the Plaintiff completed the first shipment of the vessel, which was 18 days in-service, The Plaintiff has no further notice Jun Hui Company to return the Qinzhou port or the re-shipment of the goods, so the ship leasing contract in question of the case actually has been fulfilled; secondly, The ship M.V. “Xinhua 18” provided by Jun Hui Company was the airworthiness ship, the ship;easing contract of the ship has been fulfilled objectively. It is not within one month’s term stipulated by the Defendant when the ship was fined by Tieshan port Marine Department, Jun Hui Company has never received notification from the Plaintiff that the ship shall leave the port, so Jun Hui Company did not break the contract, the ship leasing contract has also been fulfilled, the Plaintiff has no right to exercise the right of unilateral rescission; thirdly, the duty of a lease for less than a month is lies in the Plaintiff, the Plaintiff has caused losses and expected benefits losses of Jun Hui Company’s

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salaries, insurance, ship maintenance costs and so on, the Plaintiff shall pay the rent in accordance with one month. Therefore, the Plaintiff’s claims to request Jun Hui Company to return the advance payment and rent have no factual and legal basis, and the Defendant requested the court to reject the Plaintiff’s claims. The Defendant, YANG Sujun argued that: this case is the ship leasing contract disputes between the Plaintiff and the Defendant, Jun Hui Company, YANG Sujun as the legal representative, the Plaintiff remitted the ship rent into YANG Sujun’s personal account is the agreement between the Plaintiff and Jun Hui Company, Yang Sujun made collections is just to perform the duty, and no violation of the mandatory provisions of law, and Jun Hui Company is a limited liability company rather than a one-man company or unlimited joint company, the property of the company and the personal property of shareholders can be distinguished. Therefore, YANG Sujun does not have the behavior of abusing the power of corporation, confusing the property of individual and company, infringing the rights of the Plaintiff, corporate debt shall be born by the property of the company, its shareholders as the only investor undertakes limited liability, and shall not assume joint responsibility, therefore the Defendant requested the court to reject the Plaintiff’s claims. The Plaintiff submitted the following evidence to the court in support of the claim: Evidence 1, Ship Leasing Contract proves that there has reached the ship leasing contract and the rights and obligations of the two parties between the Plaintiff and the Defendant Jun Hui Company; Evidence 2, E-bank electronic receipt (RMB100 thousand) proves the Plaintiff paid the advance payment RMB100 thousand to the Defendant on September 19, 2014; Evidence 3, instruction details proves the Plaintiff paid the rent RMB270 thousand to the Defendant, Jun Hui Company on September 30, 2014; Evidence 4, Handing-over List and Waterway Bill of Lading proves the Defendant, Jun Hui has shipped piling pipe from Qinzhou port to Tieshan port on September 29, 2014; Evidence 5, the letter on the termination of Ship Leasing Contract; Evidence 6, SF express list; Evidence 5–6 proves that due to the Defendant, Jun Hui Company is in breach of contract, which caused the Plaintiff’s the purpose of the contract for the delivery of the piling pipe shall not be fulfilled. The Plaintiff notified Jun Hui Company in written of the cancellation of the contract according to the contract on July 22, 2015; Evidence 7, Junhui Company’s shareholders () investment information, regulations, capital verification report, letter of appointment of executive director, legal representative, supervisor, manager to prove that the Defendant YANG Sujun is controlling shareholder of the Defendant Jun Hui Company, the actual controller, the legal representative, the executive director and manager; Evidence 8, Guangxi liquefied natural gas (LNG) project wharf engineering steel pipe pile procurement contract proves CCCC Second Harbor Consultants Co., Ltd. (hereinafter referred to as CCCC Second Harbor Consultants Co., Ltd.) bought 275

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pile drivers to the Plaintiff. Place of delivery is Beihai City Tieshan port Guangxi liquefied natural gas (LNG) project wharf engineering construction site, the term of delay unloading a ship of the goods shall not exceed 7 days. Evidence 9, daily statistics list of execution of productive tasks release orders; Evidence 10, the shipping list of Nanning City Gongli Steel Tubes License Co., Ltd. Evidence 11, handing-over list and waterway bill of lading; Evidence 12, cargo port operation agreement and supplementary agreement; Evidence 9–12 proves the Plaintiff has been producing the piling pipe and supplied to CCCC Second Harbor Consultants Co., Ltd. from May 2014 to November 15, 2014, steel pipes are all loaded and shipped in Qinzhou port. the ship M.V. “Xinhua 18” of the Defendant was restricted to leave the Tieshan port due to the investigation and punishment of Tieshan port; The ship is in unavailability, During the term of the charter party, which shall not engage in piling tube transportation, causing the purpose of the Plaintiff to use the ship’s piling pipe cannot be achieved, the dissolution of the contract by the Plaintiff is in conformity with the stipulations of the contract and the law. Evidence 13, Progress Letter on the Construction of Steel Pipe Pile for Wharf of Guangxi Liquefied Natural Gas (LNG) Project to prove that the Plaintiff’s obligation of supply of material is urgent. The ship M.V. “Xinhua 18” supplied by the Defendant is not seaworthy, which seriously affects the performance of the Plaintiff’s contract, causing the purpose of the contract that the Plaintiff transports the steel pipe as soon as possible to fulfill the obligation of supply of material cannot be realized. The Defendants, Jun Hui Company and YANG Sujun, cross-exmained that they have no objection to the authenticity, legality, relevancy of the evidence of 1–4, 7, but have objection to the content of evidence, it cannot prove that the ship M.V. “Xinhua 18” is unseaworthy, the evidence 5, 6, 8–13 shall not be recognized. The Defendants, Jun Hui Company and YANG Sujun submitted the following evidence to the court in support of their defenses: Evidence 1, the marine vessel inspection certificate book proves that the ship M. V. “Xinhua 18” provided by the Defendant Jun Hui Company is in conformity with the contract, and the vessel is a coastal vessel, and the seaworthiness certificate of the vessel is within the validity period; Evidence 2, inland ship inspection certificate book proves that M.V. “Hubei Galaxy 9618” is navigable inland ship, the navigable area is grade A J2 area, according to the navigation practice, The ship’s certificate is also in the period of validity, and are suitable for the use of the Plaintiff; Evidence 3, Wuhu Anshun Shipping Co., Ltd. (hereinafter referred to as Anshun Company) on the description of ship’s delivery of M.V. “Xinhua 18” proves the conditions concerning M.V. “Xinhua 18” carried the Plaintiff’s goods. The cross-examination opinion of the Plaintiff: the authenticity and legality of evidence 1 and 2 shall not be confirmed, the court finds that there is objection to the relevancy, two copies of the evidence cannot prove that the ship provided by the

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Defendant, Junhui Company is seaworthy in actual transportation; the authenticity, legality, relevancy of evidence 3 shall not be recognized, facts stated by Anshun Company are only the reporting facts, which is not objective facts. Applied by the Plaintiff and the Defendant, the court obtained the evidence from Beihai Maritime Safety Administration and CCCC Second Harbor Consultants Co., Ltd. Guangxi liquefied natural gas (LNG) terminal project department (hereinafter referred to as LNG project department), Tieshan Port Marine Department as follows: Evidence 1, 3 copies of the maritime written decision of administrative penalty involving M.V. “Xinhua 18” and 3 copies of punish in the act receipts, 6 copies of the detailed information about inbound and outbound of M.V. “Xinhua 18” (later renamed as M.V. “Shun Hui 198”) from September 13, 2014 to December 31, 2014; Evidence 2, the description of LNG project department on the ship delivery of M.V. “Xinhua 18” and ending pile record issued from June 1, 2014 to November 30; Evidence 3, the record of inquiry on May 23, 2016 on the staff of Tieshan port Marine Department, ZHENG Feng, made by the court. The cross-examination opinion of the Plaintiff: the authenticity, legality, relevancy of the three groups of evidence collected by the court shall be recognized, but for the evidence 3, of which ZHENG Feng did not restrict the unloading of M.V. “Xinhua 18” and asked for a landing guarantee shall not be recognized, the statement cannot prove that M.V. “Xinhua 18” is not subject to actual discharge limits and was not required to provide guarantees in discharge. The Defendants, Jun Hui Company and YANG Sujun cross-examined that there is no objection to the authenticity and legality, relevancy of evidence 1, the second notice of a penalty decision (No.195016) cannot prove that it was the penalty decision of M.V. “Xinhua 18”. The penalty decision was made after the performance of the vessel leasing agreement on which the case was concerned. It has no objection to the authenticity and legality of evidence 2, but think that the content is not true, LNG project department cannot represent as piling pipe buyer, CCCC Second Harbor Consultants Co., Ltd. M.V. “Xinhua 18” arrived at the port of Qinzhou on September 27, finished shipment on September 29, and arrived at Tieshan port on September 30. There are corresponding documents, there has been no piling for several days because the machine in the project department is out of order, when to unload and when to pile, which obey the shipper’s arrangement. The punishment was made on October 30, 2014, that is, after unloading the goods, it is not true that the discharge cannot be made without paying a fine. The description that the project department found Tieshan port Marine Department on October 18 and requested M.V. “Xinhua 18” to unload and promised not to allow the ship to leave the port after unloading is not true. For the ending pile record, it admitted completing unloading the goods on October 14, 2014. As to when to begin the unloading is entirely decided by the shipper. There is no objection to the authenticity, legality and relevancy of evidence 3.

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The Defendant Jun Hui Company applied for witnesses PAN Mou and YANG Mou to appear in court to prove. The witness PAN Mou, male, born on May 10, 1983, Han, living in No.27, Fifteenth Team, Kongwu Village, Dawo Pond Village Committee, Xichang Town, Hepu County, Guangxi Zhuang Autonomous Region, citizenship number:, liberal professions. The witness said: PAN Mou served in Jun Hui Company in September 2014, serve as a management personnel, he is responsible for check and accept the stones sent by others to the company, Jun Hui Company mainly deals in the transportation of sand and gravel. Before signing the charter party, the Defendant, YANG Sujun, took the Plaintiffs to see the ship, and back to sign the agreement, but it is not clear whether the person who see the ship is the Plaintiff’s company or not, it is not clear which ship YANG Sujun took to see, and do not know the specific amount of rent; PAN Mou did not participate in the business negotiation, but he heard YANG Sujun and the person who see the ship talked before see the ship in Jun Hui Company’s office, which shall be settled according to a month if the rent less than a month. He is unclear to the signing conditions of written charter party. The witness YANG Mou, male, born on June 11, 1983, Han, living in No.703, Unit 3, Building 46, Zhaowu Village, Haicheng District, Beihai City, Guangxi Zhuang Autonomous Region, citizenship number:, he is the manager of the Defendant, Jun Hui Company, the Defendant YANG Sujun’s son. The witness said: the version of ship leasing agreement signed between the Plaintiff and the Defendant Jun Hui Company was provided by the Plaintiff, the two sides consulted that the rent was calculated by month, If it does not have a full month, count it for a month, if more than one month it will be calculated according to the actual number of days, but it was not clear the date of rent; the Defendant and YANG Sujun is mother–child relationship (MCR), the Defendant Jun Hui Company’s finance is administered by mother YANG Sujun, the witness was not involved in the management, and did not know the specific financial conditions; the Plaintiff signed agreement with the Jun Hui Company after seeing M.V. “Hubei Galaxy 11” and the ship’s certificate. The witness was not on the spot while looking at the ship, when the agreement is signed the witness was at the scene; but the ship arrived at the Plaintiff’s named place, the Plaintiff said that the ship is not appropriate, the Defendant YANG Sujun offered another ship to the Plaintiff and made the modification; the witness was not clear that details of ship rental and rental payments. Jun Hui Company has no other company account after setting up a temporary account, in business operations, payments are received through two bank accounts, one is the public account, which is the temporary account when the company was established, the other is YANG Sujun’s personal account. The cross-examination opinion of the Plaintiff for the above two witness testimonies: the witness PAN Mou is the staff of the Defendant Jun Hui Company, which has an interest with Jun Hui Company, and he did not participate in the charter business negotiations between the Plaintiff and the Defendant, it was unable to verify whether the person that was talking to the Plaintiff for the business is the personnel of the Plaintiff’s Company, which is not responsible for the chartering; The witness YANG Mou did not actually participate in the management of the

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company, and not to the scene to view with the Plaintiff, and is not clear to agreement situation of the rent, and is not clear to the performance of the agreement, so the testimonies of the two witnesses were unable to prove that the conclusion and the performance of the ship leasing contract between the Plaintiff and the Defendant. The cross-examination opinion of the Defendants Jun Hui Company and YANG Sujun: the authenticity of the testimonies of the two witnesses shall be recognized. The court holds that evidence 1–4, 7, submitted by the Plaintiff, because the two Defendants have no objection to the authenticity, legality and relevancy, shall be adopted as the basis for finding the facts; evidence 5, 6 submitted by the Plaintiff has the original copy to check, and can confirm each other, the Defendant did not propose contrary evidence, evidence 5 of the Defendant exists the clerical error of Jun Hui Company’s name of the Defendant, which does not affect the true meaning of the letter and the determined object. Therefore, the two copies of evidence are hereby adopted by the court. Evidence 8–13 submitted by the Plaintiff is supplementary submission after the first hearing, which belongs to the reinforcing evidence of factual aspect that the Plaintiff fulfilled the obligations of supply to CCCC Second Harbor Consultants Co., Ltd., because the first hearing is before the Spring Festival holiday, the Plaintiff applied for proof of delay and explained the objective reason, and the case is also referred to as a general procedure, the court finds that the evidence submitted by the Plaintiff did not exceed the time limit for adducing evidence; evidence 8–13 except for the two waybills of M.V. “Xin Heng 79” have no originals, the rest of the evidence have original, can confirm each other, which can prove that the Plaintiff does have sustained sale and transportation of steel pipe business with CCCC Second Harbor Consultants Co., Ltd., the port of shipment of steel pipe is Qinzhou, the port of discharge is Tieshan port, so the court shall recognize the authenticity, legality and relevancy of the evidence, the content of the evidence shall be verified by the comprehensive evidence of the case. Evidence 1, 2 submitted by the two Defendants, because they conform to the usual type of ship’s certificate, and the original of the ship’s certificate is in general with the ship, the Defendant cannot submit the original to check which has the objective reasons, the court confirms the pro forma authenticity, the content of the evidence shall be verified by the comprehensive evidence of the case. Evidence 3 submitted by the two Defendants was the written testimony of Anshun shipping Company of M.V. “Xinhua 18”’s owner, which has the pro forma authenticity and legality, because there is interest relationship with the Defendant, Jun Hui Company, the evidence cannot be separately the basis of the facts of the case, the court confirms the authenticity of the content synthesized the evidence of the case to review, and on contents of the other evidence which can confirm each other, the count adopts them. As for the three sets of evidence retrieved by the court, which has the pro forma authenticity, legality and relevancy, The court shall adopt it, and the authenticity and probative force of its content shall be verified by synthesizing the evidence of the case to review.

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As for the testimonies of the witness, PAN Mou, YANG Mou, due to the two persons are not clear to the actual performance of chartering in question, and the Plaintiff and the Defendant have no much dispute over the stipulations of the charter party and the fact that the ship has actually been changed, so the witness’s testimonies are not very relevant to the case. The statement of the witnesses YANG Mou has been confirmed by the Defendant, he stated “it is unclear whether the ship has been rented or leased, the Defendant Junhui Company’s finance is managed by mother YANG Sujun, the witness was not involved in the management, and he did not know the specific financial situation”, the fact that “the business of the company uses both YANG Sujun’s personal account and the temporary account opened by the company when it is registered, no other company account was opened”, the Defendant also has no objection to the fact, which conformed to the fact that the sum paid by the Plaintiff was remitted to YANG Sujun’s personal account as agreed in the charter party, so the court adopts it and confirms its authenticity. The court finds out that: On March 3, 2014, the Plaintiff signed Guangxi Liquefied Natural Gas (LNG) Project Wharf Engineering Steel Pipe Pile Procurement Contract with CCCC Second Harbor Consultants Co., Ltd., agreed that CCCC Second Harbor Consultants Co., Ltd. purchased 275 steel pipe piles from the Plaintiff (that is, steel canister, which is subject to the actual quantity supplied). The Plaintiff should transport the steel pipe pile to the Guangxi liquefied natural gas (LNG) wharf project site by barge that meets the engineering requirements, and bear all the costs, risks and responsibilities before shipment to the site. During the period from May to November, the Plaintiff successively produced the steel pipe pile, and delivered the goods to CCCC Second Harbor Consultants Co., Ltd., and loading, departure in Qinzhou port. On September 13, 2014, the Plaintiff Gongli Company (Party A) and the Defendant Jun Hui Company (Party B) to sign Ship Leasing Contract, agreed that: Party B shall rent M.V. “Hubei Galaxy 9618” to Party A for use in marine transport piling pipe ships, for a term of more than one month (including one month). The term of lease shall be deemed to be the starting date of the lease term from the day when Party B will ship the vessel to the designated place of Party A and accept the assignment of Party A. The term of the lease shall remain as of the date when Party A retreats. Party B guarantees at the date of delivery and the lease term, the ship shall be tight, solid and strong, and in good working condition, it is suitable for transported the piling pipes with a diameter of 1320 and a length of 58 m in all respects, and to ensure that they are in full, effective, normal seaworthiness. The monthly rent was RMB270 thousand, the rent is calculated on actual days (RMB9,000 per day) when it exceed more than a month. Party A shall prepaid RMB100 thousand to the Party B within 3 working days from the date of signing the contract. Party B shall ship the vessel to the designated place within 3 days after receipt of the advance payment. Owing to Party A, the lease is less than one month, Advance payment of RMB100 thousand as compensation for Party B’s round-trip expenses, it shall not be returned; Before Party A sailing after carries the first boat piling pipe, Party A paid the rent RMB270 thousand to Party B. Party A fails to pay

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the rent on time or end the lease in advance, which shall compensate Party B for all losses. Party B has the right to terminate the contract, and stop operation; the charterer must navigate at a safe port, anchorage, or place, and perform legal duties; Party B shall deliver the vessel in Qinzhou port (the specific wharf designated by Party A), Party A shall return the vessel in Qinzhou port or Tieshan port; Party A shall bear the lease period each port of Qinzhou Tieshangang round-trip fuel costs RMB15,000, which shall be deducted from the advance payment RMB100 thousand after confirmed by both sides; Party B shall be equipped with seaworthy crew to ensure the safety of navigation, and to ensure adequate personnel to meet the need that the continuous construction of Party A; the unseaworthiness or innavigation of the ship due to Party B, Party A has the right to terminate the contract, Party B shall compensate for damages and losses it has caused to Party A; the rent and advance payment of the Plaintiff shall remit into the Defendant YANG Sujun’s personal account which opened in the Agricultural Bank of China (account number: 62    61). As a representative of Jun Hui Company, YANG Sujun negotiated and signed the charter party with the Plaintiff. After the charter party was signed, on September 19, 2014, the Plaintiff paid the advance payment of RMB100 thousand to the Defendant Jun Hui Company. On September 30, the Plaintiff paid the Defendant RMB270 thousand for the ship rental. For the above sums, the Plaintiff shall remit into the personal account of the Defendant YANG Sujun, which was opened at the Agricultural Bank of China. During the performance of the contract, due to the ship M.V. “Hubei Galaxy 9618” provided by Jun Hui Company is an inland ship, which is not suitable for the transportation of the pile pipe in case involving coastal ports, by mutual consultation, the Defendant also provides the ship M.V. “Xinhua 18” leased to the Plaintiff, the Plaintiff accepted it, both parties confirm that the charter party of the ship M.V. “Hubei Galaxy 9618” continues to apply to M.V. “Xinhua 18”, that is, the ship leasing changed to M.V. “Xinhua 18”. The owner and operator of the ship is Anshun Company. On September 29, M.V. “Xinhua 18” loading steel 27 weights of 948 tons in the designated port of the Plaintiff, Qinzhou port, completion of loading at about 1200, start shipment to Tieshan port at about 2130, arrived at Tieshan port at 1930 on September 30. After the ship arrived at the port, Tieshan Port Marine Department’s routine inspection found on September 29 that the ship was loading pipe which failed to handle port entry and exit visas, certificate of safety operation and pollution prevention management system certification and safety management certificate are not held in the voyage, and without a qualified crew on the ship. Because of the existence of illegal facts above, Tieshan Port Marine Department withheld ship certificate of the vessel to investigate, and limit the ship from the port, and notified the owner of the ship to cooperate with the investigation. Because the cargoes loaded on the ship were just ordinary goods, it did not affect the safety and security of the marine environment, Tieshan Port Marine Department did not prohibit the ship unloading, but also did not require the ship to provide security as the unloading condition. On October 7, the ship M.V. “Xinhua 18” began to work in with pile driving barge to driving in Guangxi liquefied natural gas (LNG) project wharf construction site, the completion of the

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unloading operation until October 14. On October 30, Tieshan Port Marine Department made three copies of maritime penalties (2014) No.195014, No.195015, No.195016. to Anshun Company, and punished RMB5,000 for the act in violation of regulations on M.V. “Xinhua 18” on September 29 in Qinzhou loading steel pipe did not handle the ship’s port entry and exit visas, punished RMB9,000 for the act in violation of regulations on the crew of a ship that is not equipped with a standard quota sufficient to ensure the safety of the ship, punished RMB9,000 for the act in violation of regulations on certificates and safety management certificates that are not held in the safe operation and pollution prevention management system. On the same day, Anshun Company paid off all the fines. During the period under which the maritime offence was investigated, and before the owner to pay administrative fines, M.V. “Xinhua 18” has been limited from leaving the port by Tieshan Port Marine Department. Because the ship has been restricted from leaving the port after the completion of unloading operations on October 14, CCCC Second Harbor Consultants Co., Ltd. in order not to delay the schedule of Guangxi liquefied natural gas (LNG) terminal project, which chartered other vessels for the purpose of transporting the remaining steel pipe piles under the contract of purchase with the Plaintiff, and completed all transportation on November 15. After M.V. “Xinhua 18” handled the illegal treatment, it did not transport the goods for the Plaintiff. On July 22, 2015, the Plaintiff sent a letter to terminate the case involving Ship Leasing Contract to the Defendant Jun Hui Company, thought that M.V. “Xinhua 18” was unseaworthy and constituted a serious breach of contract, requesting Junhui Company to return the remaining rent and advance payment within 7 days after receipt of the letter, the letter arrived at Jun Hui and was signed on July 23. Before the lawsuit of the case, the Defendant Jun Hui Company has returned the rent RMB20 thousand to the Plaintiff. It is also found out that the industrial and commercial registration data shows the Defendant Jun Hui Company was founded on November 15, 2012, the registered capital was RMB500 thousand, paid in capital was RMB500 thousand, the Defendant YANG Sujun invested RMB400 thousand, 80% shareholding, YANG Mou (i.e. a witness of this case) invested RMB100 thousand, 20% shareholding; YANG Sujun acts as Jun Hui Company’s legal representative, executive director, general manager, YANG Mou acts as the supervisor of Jun Hui Company; place where the principal business office is situated of Jun Hui Company, that is company’s domicile, located in No.302, Unit 1, J Building, Hongyuan Eco-district, Yunnan Road, Beihai City, the property is owned by YANG Sujun alone. YANG Sujun and YANG Mou was mother-son relationship. Jun Hui Company’s finance is administered by YANG Sujun, the signing and fulfilling of the charter party at that time, YANG Mou did not participate in the company management, and did not know the specific financial situation, and was not clear the specific ship lease payment and rent. The company has opened an account at the time of its establishment and has not opened any other company accounts. The company’s business activities in payment flows through two accounts, one is the public account, that is, the account opened when the company is registered, the other is a YANG Sujun’s personal account, which was the collection account noted on the charter party in question.

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The port of registry of M.V. “Xinhua 18” was Anhui Wuhu, the ship’s owner and operator was registered as Wuhu Anshun Shipping Co., Ltd., the type of ship is deck cargo ship, the total length is 78.50 m, width is 15 m, the depth is 3.60 m, the total tonnage is 1,884 tons, a net tonnage of 1,055 tons, which was permitted to sail along the HNA area (route), operating area is A1 + A2. In this case, the Plaintiff filed an application for property preservation to the court, and requested to freeze the two Defendant’s bank deposit RMB268,351. After investigation, the court made the civil ruling (2015) Hai Shang Chu Zi No.342-1 on February 29, 2016 according to law, and permitted property preservation application raised by the Plaintiff, and the implementation of the freeze of bank deposits RMB268,351 was on March 1, the actual freeze on bank balances of the Defendant Jun Hui Company was RMB1,038.01, the actual freeze on bank balances of the Defendant YANG Sujun was RMB11.48. The court holds that the case is a dispute over time charter party. The Ship Leasing Contract involved is a true and consistent declaration of meaning on the basis of equality and voluntary negotiation by the parties, the content does not violate the mandatory provisions of the laws and regulations, it also does not damage the legitimate interests of others, so it is legally effective. According to the agreement, the charter party came into effect upon signing, which will come into effect on September 13, 2014. In actual performance, according to the actual situation to make adjustments, the two parties agreed to the lease ship changed from M.V. “Hubei Galaxy 9618” to M.V. “Xinhua 18”, it does not affect the validity of the agreement. In accordance with the terms of this agreement, the lease term shall start counting from the date that the Defendant Jun Hui Company sailed the ship to the designated place of the Plaintiff for dispatch of the Plaintiff. When did M.V. “Xinhua 18” arrive at the port of Qinzhou designated by the Plaintiff? The Defendant has dispute about this. As the vessel did not apply for entry and exit visas at Qinzhou port at that time, the written evidence from Anshun Company alone on the basis of the Defendant’s proof is not sufficiently proof. According to the Plaintiff’s statement, M.V. “Xinhua 18” completed the shipment at about 1200 on September 29, 2014 at the port of Qinzhou, while the cargo was 27 steel piles, weighing 948 tons, 35.10 tons of each steel pipe. The court holds that the Defendant argued that it had arranged for M.V. “Xinhua 18” to arrive at the port of the Qinzhou appointed by the Plaintiff on September 27, which shall bear the burden of proof, but it failed to provide adequate evidence, which shall bear adverse legal consequences. At the same time, considering the special difficulty of loading large steel tubes, shipping need to spend a day is reasonable, so the court presumes M.V. “Xinhua 18” had arrived at the loading location at 1200 on September 28, which commenced counting the lease. The contractual lease was more than 1 month, that is, Jun Hui Company shall provide the vessel with sufficient airworthiness and sufficient legal certificates to the Plaintiff for use for more than 1 months, and Jun Hui Company has fully fulfilled its contractual obligations. However, because M.V. “Xinhua 18” was investigated by the marine department at the unloading port because the illegal act of failure to apply for vessel entry and exit visa, in possession of safe operation and pollution prevention management system, compliance with

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certificate and safety management certificate, manning shortage, which was restricted from leaving the port and was fine. It has constitutes a breach of contract, in accordance with the Chartering agreement, the Plaintiff has the right to terminate the contract and claim the Jun Hui Company to compensate for the losses. At the same time, due to the M.V. “Xinhua 18” completed the first voyage within the term of the lease, that is, after completion of piling pipe unloading operations on October 14, 2014, until October 30 to pay the fine, and was restricted from leaving the port because the investigation of Tieshan Port Marine Department, and cannot perform the charter party, and as the buyer of steel tube pile, CCCC Second Harbor Consultants Co., Ltd., in order not to delay the project duration, CCCC Second Harbor Consultants Co., Ltd. has leased other steel pipe piles by oneself to transport remaining steel pipe pile and completed whole shipment on November 15, which makes the Plaintiff objectively unable to achieve the purpose of the contract during the term. Therefore, according to Paragraph 2 of Article 93 of the Contract Law of the People’s Republic of China, “the parties may prescribe a condition under which one party is entitled to terminate the contract. Upon satisfaction of the condition for termination of the contract, the party with the termination right may terminate the contract”, Sub-paragraph 4 of Article 94, “the parties may terminate a contract if: (iv) the other party delayed performance or otherwise breached the contract, thereby frustrating the purpose of the contract”, Article 96, “the party availing itself of termination of a contract in accordance with Paragraph 2 of Article 93 and Article 94 hereof shall notify the other party. The contract is terminated when the notice reaches the other party”, the Plaintiff has the right to claim for the termination of the charter party, the Plaintiff has sent the written letter terminating the contract to the Defendant Jun Hui Company. Therefore, the charter party shall be terminated as of the date of receipt of the letter by Jun Hui Company on July 23, 2015. According to Article 97 of the Contract Law of the People’s Republic of China, “upon termination of a contract, a performance which has not been rendered is discharged; if a performance has been rendered, a party may, in light of the degree of performance and the nature of the contract, require the other party to restore the subject matter to its original condition or otherwise remedy the situation, and is entitled to claim damages”, due to the Plaintiff has prepaid the rent and advance payment of the Plaintiff, the requirement that the Defendant to deducting the rent for the actual rental of M.V. “Xinhua 18” during the transit period, fuel costs and refunded after payment, refund the balance and payment of interest (calculate according to the loan interest rate of banks during the same period) is a legal basis, which shall be supported. The court holds that as mentioned earlier, M.V. “Xinhua 18” started renting from September 28, 2014, and completed unloading until October 14, the actual lease was 17 days. The Plaintiff claims from October 1 to October 7, it is the reason of the Defendant that caused unable to unload the cargo and delay the discharge time, namely, the illegal act of ship itself and is investigated by Tieshan Port Marine Department, so it is prohibited unloading, then it is allowed to unload because CCCC Second Harbor Consultants Co., Ltd. provided a corresponding guarantee, but it did not provide sufficient evidence to prove the fact, the court shall not adopt. The Defendant claimed that the lease should be calculated for

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one month for less than one month, it was not in accordance with the charter party, and the contract has been dissolved, and there is no factual and legal basis, the court shall not support it. Therefore, the actual rental of M.V. “Xinhua 18” to transport was RMB153,000 (9,000 yuan/day  17 days), the Plaintiff has paid the Defendant Jun Hui Company a monthly rent RMB270 thousand, deducting the actual rent generated and the rent RMB20 thousand that Jun Hui Company has returned to the Plaintiff, Jun Hui Company shall return the rent of RMB97,000 to the Plaintiff (270 thousand-153,000 -20 thousand). The Plaintiff actually used the ship to complete the single voyage from Qinzhou port to Tieshan port, according to the agreement, the Plaintiff should bear a round-trip fuel costs RMB15,000, the Plaintiff has paid the Defendant Jun Hui Company advance payment RMB100 thousand, deduct what should be assumed, Junhui Company shall return the Plaintiff RMB85,000 (100 thousand-15,000). As for whether the Defendant YANG Sujun shall bear joint and several liability with the Defendant Jun Hui Company. The court holds that Defendant Jun Hui Company is a business entity as by law established, and has a lawful and effective independent personality. YANG Sujun as a controlling shareholder of the company’s holdings of 80%, and act as the legal representative, executive director and general manager of the company, finance is administered by her, another shareholder YANG Mou is her son, holding a smaller proportion, as involving the signing and performing of the agreement, he is not involved in the management of the company, and is not clear about the company’s financial situation, and is also not clear about the details of ship rental and rental payments. It can be seen that YANG Sujun has substantial dominance and decision-making power to Jun Hui Company, that is, has controlling right to the company. In this case, the negotiation, signing and performance of ship leasing agreement was handled and manipulated by YANG Sujun, in the case of a public account opened by Jun Hui Company, YANG Sujun only provided her personal account to receive the rent and advance payment paid by the Plaintiff, and actually received Jun Hui Company’s capital gains, and YANG Sujun failed to prove that her personal account receive and keep the capital of the Junhui Company whether return to the company’s account or payment in lieu the costs of the company and other fund flow. The court holds that the act violates Sub-paragraph 2 of Paragraph 1 of Article 148 of the Company Law of the People’s Republic of China, “no director or senior manager may have any of the following acts: (2) depositing the company’s funds into an account in his own name or in any other individual’s name” and Article 171, “no company asset may be deposited into any individual’s account”. Because YANG Sujun is in charge of company’s finance, the signing and execution of the contract on behalf of the company, she directly collected from the personal account, which obviously a violation of the financial management system, caused the hotchpot between individuals and shareholders. And, from the point of view of the finding of facts, YANG Sujun as the controlling shareholder and actual controller of Jun Hui Company, has repeatedly used the personal account to deposits and payments in the business activities of the company, the hotchpot is easily lead to the company’s property’s being hidden, or illegally transferred, misappropriation and

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embezzlement by shareholders etc. At the same time, the property right of Jun Hui Company’s business place is owned by YANG Sujun separately, and Jun Hui Company lacks independent property or property rights. In summary, the court holds that the Defendant YANG Sujun in its exercise of the controlling right to the Defendant Jun Hui Company, causing the corporate personality without personality, and cannot guarantee that the company shall adhere to the principle of capital maintenance and capital stability, and then affect the company’s external commitment to the material basis for debt repayment. Therefore, the Defendant YANG Sujun constitutes an abuse of controlling right of the company and the independent status of legal person, damaging the interests of creditors objectively, according to Paragraph 3 of Article 20 of the Company Law of the People’s Republic of China, “where any of the shareholders of a company evades the payment of its debts by abusing the independent status of juridical person or the shareholder’s limited liabilities, and thus seriously damages the interests of any creditor, it shall bear joint liabilities for the debts of the company”, the Defendant YANG Sujun shall bear joint liability with the Defendant Jun Hui Company for the debts of the case. In summary, the court holds that the Defendant Jun Hui Company has the maritime illegal act because of the ship lease to the Plaintiff for use, and failed to fully perform its obligations of the contract, the Plaintiff has the right to exercise the right to terminate the contract in accordance with the law and charter party. the Plaintiff terminated the charter party in written notice, the Defendant Jun Hui Company as the lessor shall return the balance RMB97,000 deduct the rent of the period of the actual hire of the ship and the balance of the advance payment RMB85,000 of the actual fuel consumed by the chartered ship to the Plaintiff, 7 days after from the Plaintiff’s written letter that requested for cancellation of the contract arrived to the Defendant Jun Hui Company, that is, from July 31, 2015 onwards, the Defendant paid to the Plaintiff for the above loss of interest, in accordance with the loan interest rate stipulated by the People’s Bank of China for the corresponding period. The Defendant YANG Sujun abused the control right of the company and the independent status of the legal person to seriously damaged the interests of creditors, which shall assume joint liability with the Defendant Jun Hui Company for the debts of the case. In accordance with the provisions of Article 97 of the Contract Law of the People’s Republic of China, Paragraph 3 of Article 20 of the Company Law of the People’s Republic of China, the judgment is rendered as follows: 1. The Defendant, Beihai Jun Hui Sand & Stone Co., Ltd. shall return prepayment RMB85,000 and ship rent RMB97,000 to Nanning City Gongli Steel Tubes Manufacturing Co., Ltd., in aggregate amount of RMB182,000, and pay the loss of interest (on the base of RMB182,000, in accordance with the loan interest rate stipulated by the People’s Bank of China for the corresponding period, from July 31, 2015 onwards to the last day of the deadline for implementation of the final decision, if performed in advance, then calculated to the date of actual payment);

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2. The Defendant YANG Sujun shall bear joint and several liability for the above-mentioned debts to the Plaintiff Nanning City Gongli Steel Tubes Manufacturing Co., Ltd.; 3. Reject the other claims of the Plaintiff Nanning City Gongli Steel Tubes Manufacturing Co., Ltd. Court acceptance fee in amount of RMB5,325, property preservation fee in amount of RMB1,862, in aggregate amount of RMB7,187, the Plaintiff Nanning City Gongli Steel Tubes Manufacturing Co., Ltd. shall bear RMB2,037, the Defendant Beihai Jun Hui Sand & Stone Co., Ltd. and the Defendant YANG Sujun shall bear RMB5,150. As for the above debt, the obligor shall complete the execution within ten days from the date when the judgment comes into effect. If the obligor fails to fulfil the obligation of paying money in accordance with the period specified in this judgment, it shall double pay the interests of the debt during the delay in accordance with the provisions of Article 253 of the Civil Procedure Law of the People’s Republic of China. The obligee may apply to the court for the implement in two years from the last day of the performance of the judgment stipulated in the present case. In case of dissatisfaction with the judgment, the Plaintiff and the Defendant may submit a statement of appeal to the court within 15 days upon service of the judgment, and submit the copies according to the number of the opposite party and appeal to the Guangxi Zhuang Autonomous Region High People’s Court and prepaid appeal fee within seven days from the date of expiration of the appeal period (payee: the Guangxi Zhuang Autonomous Region High People’s Court, account number: 20    77, bank of account: Agricultural Bank of China, Nanning Vientiane Branch). If the payment is delayed or no holdover of payment is applied, the appeal shall be withdrawn automatically. Presiding Judge: HUANG Siqi People’s Juror: HUANG Xiuxing People’s Juror: WEN Quanlian June 28, 2016 Clerk: YANG Qian

Wuhan Maritime Court Civil Judgment Nantong City Fang Zhou Shipping Agency Co., Ltd. v. China People’s Property Insurance Co., Ltd. Nantong City Branch (2016) E 72 Min Chu No.115 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 794. Cause(s) of Action 230. Dispute over marine insurance contract on the sea or sea-connected waters. Headnote Rejecting the Plaintiff cargo-owner’s claim for an indemnity for cargo damage under an open cover cargo policy because the Plaintiff had failed to provide evidence that the policy was finalized before the goods were transported. Summary The Plaintiff brought a claim against the Defendant for the Defendant’s failure to perform its obligations under Open Insurance Agreement between the parties. The Plaintiff contracted with the Defendant to insure its goods during a domestic transportation through an open cover policy. During the voyage, the vessel on which the Plaintiff’s goods were being carried encountered tropical storm force rain and wind resulting in water damage to the Plaintiff’s cargo. After the Defendant refused to reimburse the Plaintiff for this damage, the Plaintiff filed an action. The Wuhan Maritime Court found that the Plaintiff did not provide any proof that it finalized Open Insurance Agreement with the Defendant before the goods were transported. The court further found that Maritime Freight Waybill— that the Plaintiff claimed they used for the application of insurance before the shipment of goods—contained the signature of consignee. Given this, the court concluded that Maritime Freight Waybill could only be valid after the goods arrived at destination and was signed by consignee. It was held by the Wuhan Maritime Court that the claim raised by the Plaintiff shall be rejected, and the Plaintiff shall pay the expenses and fees related to this litigation—which are RMB3,307 in total.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_28

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Judgment The Plaintiff: Nantong City Fang Zhou Shipping Agency Co., Ltd. Domicile: Room 1501, No.2, Ming Du Building, Nantong City, Jiangsu Province, China. Organizing institution bar code: 68587173-X. Legal representative: ZHOU Chengtie, executive director. Agent ad litem: LI Jingming, lawyer of Beijing Dentons (Nantong) Law Firm. Agent ad litem: ZHOU Fangren, male, Han, born on January 17, 1963, living in Pingyang County, Zhejiang Province, staff of the company. The Defendant: China People’s Property Insurance Co., Ltd. Nantong City Branch. Domicile: No.90, Qingnian Middle Road, Chongchuan District, Nantong City, Jiangsu Province, China. Organization code: 83829978-X. Legal representative: GAO Feng, general manager. Agent ad litem: LIU Weijun, lawyer of Jiangsu Pu Tai Law Firm. With respect to the case arising from dispute over insurance contract about waters adjacent to sea, the Plaintiff Nantong City Fang Zhou Shipping Agency Co., Ltd. (hereinafter referred to as “Fang Zhou Company”) filed an action against the Defendant China People’s Property Insurance Co., Ltd. Nantong City Branch (hereinafter referred to as “Nantong PICC”), before the court on January 11, 2016. This case belonged to maritime contract dispute which should be governed by the maritime court. Since Nantong City, Jiangsu Province, the domicile of the Defendant Nantong PICC, is in the range of jurisdiction of the court, according to Article 24 of the Civil Procedure Law of the People’s Republic of China, the court has jurisdiction over the case. After accepting this case, according to the law, the court appointed Acting Judge DENG Yi to hear this case independently in a summary procedure. The case was heard in public on January 25, 2016. Then, due to its complexity, according to the law, this case was changed into the ordinary procedures for trial. A collegiate panel composed of Judge WANG Zhaoqing as Presiding Judge, Judge DENG Yi, and Acting Judge FENG Xingyuan heard the case in public on May 16, 2016. Agents ad litem of the Plaintiff Fang Zhou Company, LI Jingming and ZHOU Fangren, agent ad litem of the Defendant Nantong PICC, LIU Weijun appeared in court to attend the hearing. The parties were unable to reach an agreement after mediation by the court, and now the case has been concluded. The Plaintiff Fang Zhou Company alleged: on June 20, 2011, it signed Domestic Cargo Transportation Open Insurance Agreement (hereinafter referred to as “open insurance agreement”) No.PYAE201132069900000005 with the Defendant Nantong PICC and agreed that the Defendant Nantong PICC insured the Plaintiff Fang Zhou Company’s goods of domestic transportation by open cover policy during the period between 0000 of June 21, 2011 to 2400 of June 20, 2012. After

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signing the open insurance agreement, the Plaintiff Fang Zhou Company paid insurance premium as per the agreement. On September 24, 2011, the Plaintiff Fang Zhou Company entrusted M.V. “Jin Ma 698” which belonged to Jiangsu Jin Ma Shipping Industry Co., Ltd. (hereinafter referred to as Jin Ma Company) to shipped 1,300 tons of anhydrous sodium sulphate of Jiangsu Province Ceramics Import & Export (Group) Co., Ltd. (hereinafter referred to as Ceramics Company) from Nantong City, Jiangsu Province to Hainan Province and issued the bill of lading to the salesman of the Defendant SHAN Xiaoxiao to declare the insurance. On October 3, 2011, M.V. “Jin Ma 698” encountered “Nigel” tropical storm in the process of transporting the goods, which allowed the rainwater to enter into the cabin and made approximately 200 tons of goods wet. The Plaintiff Fang Zhou Company reported to the Defendant Nantong PICC in time and the Defendant sent a survey. Thereafter, the Defendant Nantong PICC informed the Plaintiff that the insurance business involved in the case was not recorded into its operational systems, so claims cannot be performed. Although it had been coordinated by all parties, it had yet to be resolved. The Plaintiff Fang Zhou Company filed an action to the court, requesting the court to order the Defendant Nantong PICC to pay reasonable compensation RMB150,361.12 (hereinafter referred to as CNY) immediately, and bear the costs of litigation. The Defendant Nantong PICC argued: the Plaintiff Fang Zhou Company’s prosecution had surpassed the time statute of limitations and the insurance contract it pleaded was not in force; the Plaintiff Fang Zhou Company’s claim had no evidence to prove, and should be rejected. The Plaintiff Fang Zhou Company submitted the following evidence to the court to support its claim: Evidence 1: original copy of insurance policy and original copy of insurance premium invoice, to prove the relationship of open insurance agreement and the Plaintiff Fang Zhou Company had already paid the insurance premium of the agreement. The Defendant Nantong PICC affirmed the authenticity of this evidence. Evidence 2: original copy of Waterway Freight Waybill No.0018445 (hereinafter referred to as waybill) issued by M.V. “Jin Ma 698”; copy of Status Statement issued by SHAN Xiaoxiao, to prove that the Plaintiff, in accordance with the stipulation of the open insurance agreement, had insured on the Defendant Nantong PICC on the goods involved in the case. The Defendant Nantong PICC did not recognize the authenticity, legality and relevancy of this evidence. Evidence 3: original copy of Letter of Business which was issued from Ceramic Company to the Third Branch of Hongze Shipping Company; Maritime Declaration and Extended Maritime Statement issued by M.V. “Jin Ma 698”; copy of Weather Proof issued by Huizhou Meteorological Observatory of Guangdong Province; original copy of Receipt issued by Yang Pu Wen Bin Logistics Co., Ltd.; copy of Receipt issued by Hainan Yang Pu CNNC Industry Co., Ltd., to prove the loan contract relationship between the Plaintiff Fang Zhou Company and the Defendant Nantong PICC.

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The Defendant Nantong PICC did not recognize the authenticity of this evidence. Evidence 4: copy of Inquiry Letter and original copy of EMS delivery form, to prove that the Plaintiff Fang Zhou Company’s lawsuit did not exceed the statute of limitations. The Defendant Nantong PICC recognized the authenticity of this evidence, but not the purpose of proof. The court confirms that: evidence 1 was an original copy and pertinent to this case. The Defendant Nantong PICC held no dissent to its authenticity. Hence, the court adopts it. Evidence 2, freight bill was an original copy and pertinent to this case. The Defendant Nantong PICC held no dissent to its authenticity. Hence, the court adopts that freight bill. Upon that Status Statement, it was a photocopy with confirmation from the witness SHAN Mou, but SHAN Mou claimed that he created this Status Statement and delivered to SHAN Xiaoxiao for signature. Hence, the court does not adopt this Status Statement as evidence. Evidence 3, Letter of Business, Maritime Declaration, Extended Maritime Statement and Receipt given by Yang Pu Wen Bin Logistics Co., Ltd. were original copies and pertinent to this case. The Defendant Nantong PICC held dissent to its authenticity, but it cannot provide any counter evidence for dissent. Hence, the court adopts those documents aforesaid as evidence. Weather Proof and Receipt issued by Hainan Yang Pu CNNC Industry Co., Ltd. were photocopies. No relevant evidence existed for their authenticity. The Defendant Nantong PICC held dissent to their authenticity. Hence, the court does not adopts them. Evidence 4, Inquiry Letter was sent by Fang Zhou Company via EMS to the Defendant Nantong PICC. Mailing address was the same as Nantong PICC’s business address. The fact that the Plaintiff Fang Zhou Company sent Inquiry Letter to the Defendant Nantong PICC had high probability. Hence, the court adopts it. Meanwhile, the court granted the applications, from the Plaintiff and the Defendant for proving their own positions, of putting SHAN Mou (male, retiree of Nantong PICC, former specialist of loss assessment in non-vehicle insurance) and JI Huiping (female, issuer of policy issuing center, Nantong PICC) as witnesses. SHAN Mou stated: 1. he facilitated the establishment of the open policy of insurance in this case; 2. in the eligibility period of goods included in the insurance policy, his daughter SHAN Xiaoxiao had been working as an employee of Nantong PICC. Her work included receiving fax. After the conflict of this case raised, SHAN Xiaoxiao remembered and stated that she had memory of that freight bill related to this case and received that freight bill; 3. Status Statement was made upon the dictation of SHAN Xiaoxiao. It was delivered to Nantong PICC after signed by SHAN Xiaoxiao; and 4. a policy was given by Nantong PICC on goods related to this case, whether this fact was verified before survey, it depended on whether surveyor had an idea of this verification. Upon this case, the Plaintiff Fang Zhou Company reported about the loss of related goods. After that, the Defendant Nantong PICC sent agent for survey, but only after survey, Nantong PICC found that no policy had been provided for related goods.

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JI Huiping stated: 1. in the eligibility period of goods included in the insurance policy, she worked at policy issuing center of Nantong PICC. There were two persons in that center, who had the authorization of issuing policy. She was the primary one; 2. at Nantong PICC, for insurance documents delivered by fax, that agent should bring those documents to policy issuing center after receiving them. Issuer then reviewed documents and made insurance policy. If missing necessary information in related documents, agent should contact applicant for the information and then told issuer. Issuer made and delivered policy to agent. Agent provided policy to applicant; 3. during the period of being issuer in Nantong PICC, she had not processed the insurance related to goods claimed by the Plaintiff. After the conflict of this case occurred, the Defendant Nantong PICC investigated internally and did not find the insurance documents claimed by the Plaintiff. With evidence raised by the Plaintiff Fang Zhou Company, cross-examination by the Defendant Nantong PICC, statements of witnesses and confirmation of the court, combined with the court investigation, the court finds the following facts: On June 20, 2011, the Plaintiff and the Defendant signed open policy of insurance and agreed that: 1. the Defendant Nantong PICC provided service of all risks with open policy to the Plaintiff Fang Zhou Company’s goods of domestic transportation. The Plaintiff Fang Zhou Company sent waterway freight waybill via fax for insurance application, before the start of shipment, it responded to the Defendant Nantong PICC’s question with true facts for the Defendant’s timely issuing of insurance policy. The Defendant Nantong PICC took responsibility only for the loss of goods which was applied for insurance by the Plaintiff, before the start of shipment. 2. Agreement period started at 0000 on June 21, 2011 and ended at 2400 on June 20, 2012. Insured amount was RMB80 million and will be adjusted at the end of agreement, as per the Plaintiff’s actual loss. 3. Premium was expected to be RMB60 thousand and would be adjusted at the end of agreement, as per the actual insured amount. 4. Deductible excess of each incident was RMB1,000 or 8% of amount of loss, whichever is the higher. After establishment of agreement, the Plaintiff paid premium as agreed. In the period of this open policy insurance, the Plaintiff Fang Zhou Company acted as an agent of the Third Branch of Hong Ze Shipping Company on the shipment of anhydrous sodium sulphate consigned by Jiangsu Ceramics Import & Export Groups, and delegated to M.V. “Jin Ma 698” for actual shipment. On September 24, 2011, M.V. “Jin Ma 698” issued freight bill and stated that: goods are 1,300 packs of anhydrous sodium sulphate; consignor is Jiangsu Ceramics Import & Export Groups; consignee is Hainan Jinhai Pulp Ltd.; place of departure is Nantong, Jiangsu; destination is Hainan; weight is 1,300 tons; actual received goods are 1,119 packs. No goods’ value is denoted on that freight bill, but with consignee’s signature. On October 13, 2011, M.V. “Jin Ma 698” sent Maritime Declaration and stated: It loaded anhydrous sodium sulphate 950 tons at Dagang Pier, Jiuxu Port, Nantong and completed loading at 1630. Then, it headed towards Hainan Yangpu Jinhai Pulp Ltd. It dropped anchor at Shitang port, Taizhou, Zhejiang on September 27 and embarked at 1300 on September 28. At 0900 on October 2, meteorological

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observatory reported that affected by severe tropical storm No.19 Nigel, coastal area of Guangdong would encounter strong wind. At 1800 on October 2, it dropped anchor at Pinghai Bay for taking shelter from wind. On October 3, meteorological observatory reported coastal area of Guangdong would encounter gale of force 10. At 1300 of the same day, it started raining. Rain became heavier and was accompanied by strong wind, at 1900. Wind blew over tarpaulin. Rain and water came into cargo holds. Chief engineer switched on fire pump. At 2130, cargo hold was inspected and water was pumped over. Then, tarpaulin was covered back. At 1300 on October 5, it weighed anchor from Pinghai Bay. It arrived No.6 Anchorage of Yangpu, Hainan and waited for unloading. Due to potential damage of goods by flooding in cargo hold, the maritime declaration was raised. On October 15, 2011, M.V. “Jin Ma 698” sent Extended Maritime Statement. It was a complimentary statement based on Maritime Declaration: M.V. “Jin Ma 698” berthed at No.2 pier of Jinhai Port at 1800 on October 13, 2011 and unloaded goods at 0830 on the second day. 200 tons of goods were found wet and clotted at 1700 on October 15. Unloading was stopped and a case was reported to insurance company. It then waited for inspection by insurance company. On the morning of October 16, consignee refused water damaged goods and did not allow the vessel to berth at pier. The vessel contacted warehouse and pier. The vessel berthed at pier of Yangpu Port. Refused goods were shipped to warehouse of Hainan Yangpu CNNC Ltd. for packaging. On October 16, 2011, Yangpu Wenbin Logistics Ltd. provided Receipt and stated that payment was received, of loading and shipping anhydrous sodium sulphate by M.V. “Jin Ma 698”. On November 1, 2011, Jiangsu Ceramics Import & Export Co. Ltd. sent Business Letter to the Third Branch of Hongze Shipping Company and stated that the delivered price of anhydrous sodium sulphate related to this case was 648 yuan/ ton. 178 tons of goods were unqualified when related goods arrived at destination. The value of damaged goods was up to RMB115,344 and should be deducted from freight payable. The Plaintiff Fang Zhou Company demanded the Defendant Nantong PICC should settle the claims of damaged goods related to this case. Nantong PICC notified the Plaintiff that the application of insurance on related goods had not received. The claims were rejected. On June 21, 2013, the Plaintiff Fang Zhou Company sent Inquiry Letter to the Defendant Nantong PICC and stated that: the Plaintiff signed agreement on open policy of insurance on June 20, 2011; premium was paid. Relevant insurance and settlement of claims had been processed properly under the guidance of agent SHAN Mou. In terms of the goods (178 tons, worth 115 thousand yuan) related to this case, freight waybill was faxed to the Defendant before the shipment of goods. After damage was found, the Plaintiff reported the damage and provided relevant documents. The Defendant also sent agent for inspection. Due to no further progress of settlement, the Plaintiff sent that letter for inquiry and asked for reply. As the result of nonfeasance by Nantong PICC on settlement of claims by the Plaintiff, the Plaintiff filed an action against Nantong PICC to the court.

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The court holds that this case is dispute over maritime insurance contract. The open policy agreement was the representation of genuine intention of all parties. It was established under the law and was valid according to the law. Each party should exercise respective rights in accordance with agreement of contract and the law, and fulfill civil obligations. According to the major dispute between the Plaintiff and the Defendant, the issues of this case are as follows: 1. whether the Plaintiff and the Defendant established insurance contract of related goods; 2. whether the Plaintiff filed an action within prescribed period of litigation; and 3. if those conditions were confirmed as positive, then whether the Defendant Nantong PICC should fulfill the commitment of settlement and corresponding value of money. 1. Whether the Plaintiff and the Defendant established insurance contract of related goods. The Plaintiff Fang Zhou Company claimed that it applied open policy of insurance on related goods. The contract of insurance was established as agreed. The Defendant Nantong PICC denied about this. The court holds that: 1. as agreed in the open policy of insurance, the Plaintiff should fax maritime waybill to the Defendant, for applying insurance before shipment of related goods started. The Plaintiff cannot provide evidence that Waterway Freight Waybill was faxed to the Plaintiff and necessary information was provided to Nantong PICC for issue corresponding policy. 2. Witness SHAN Mou confirmed Status Statement was made in accordance with SHAN Xiaoxiao’s memory and she signed for confirmation of it. In this case, if SHAN Xiaoxiao received Waterway Freight Waybill, she should send it to the policy issuing center of Nantong PICC. Agent should then issue policy of insurance corresponding with Waterway Freight Waybill. By this measure, it should be the scenario that the Defendant does not have any record of the Plaintiff’s application. 3. According to agreement of open policy, settlement of policy should be adjusted as per actual value of related goods and its minimum was 60 thousand yuan. With this condition in place, the Defendant expected the Plaintiff to add more goods into this policy and more premium can be paid with those goods. If the scenario of the Defendant could not record the application due to system issue, claimed by the Plaintiff, the Defendant would contact the Plaintiff for further remedy. To the Defendant, this can guard its own interest and prevent conflict from happening. As asserted by the Plaintiff, it placed application of insurance to the Defendant on September 24, 2011 and found the damage of goods on October 15. Between these two dates, there were 20 days. The Plaintiff was a participant of maritime freight business. The Defendant was an insurance company. Both the parties had related professional knowledge and practicing experiences on insurance of maritime freight. Both the parties had enough time to take measures of remedy. For the Plaintiff, it was a basic responsibility that it should contact the Defendant on application of insurance, even with the application sent by fax. However, it did not comply with common sense, that the Plaintiff just found the Defendant did not record that insurance policy, after the damage of goods happened. 4. Waterway Freight Waybill provided by the Plaintiff contained the signature of consignee.

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Hence, that Waterway Freight Waybill can only be valid after the goods arrived at destination and it was signed by consignee. The Plaintiff claimed that the waybill was used for application of insurance before the shipment of goods. This claim cannot be valid as the facts suggest. In conclusion, the claim made by the Plaintiff, that related goods were insured as per open policy, was not based on facts and did not comply with common sense. Due to lack of evidence to prove that related goods were insured by the Defendant, its claim of policy settlement to the Defendant shall not be supported by the court. 2. Whether the Plaintiff filed an action within prescribed period of litigation. According to Paragraph 1, Article 26 of the Insurance Law of the People’s Republic of China, the prescribed time of litigation for the Plaintiff to claim policy settlement or compensation to the Defendant was 2 years, counted from the day when it was aware or should be aware of the incident of insurance. The Plaintiff asserted it found the damaged goods on October 15, 2011. Then, it should raise the claim of compensation within 2 years from that date then on. The Plaintiff sent Inquiry Letter on June 21, 2013 to the Defendant, and required the Defendant to process affairs of compensation. This action complied with Article 140 of the General Principles of the Civil Law of the People’s Republic of China. It can trigger the break of prescribed time and the prescribed time should be recounted from that day. This meant the prescribed time of litigation ended on June 20, 2015. The Plaintiff filed an action on January 14, 2016 which exceeded the prescribed time of litigation. The Plaintiff claimed that it had tried multiple times on requiring the Defendant settling the policy, but it cannot provide evidence about those actions. The court does not support this claim. Hence, even with valid contract of insurance between the parties on related goods, the demand and claim made by the Plaintiff exceeded prescribed time of litigation. Therefore, the demand and claim cannot be protected by the law. In view of the analysis above, about whether the Defendant should take responsibility of settling the insurance policy and related value of settlement, there was no necessity of further exposition. No further comment will be given by the court. In conclusion, the claims of the Plaintiff have no factual or legal basis and the court does not support them. According to Paragraph 1, Article 26 of the Insurance Law of the People’s Republic of China and Article 142 of the General Principles of the Civil Law of the People’s Republic of China, the judgment is rendered as follows: Reject the claims of the Plaintiff Nantong City Fang Zhou Shipping Agency Co., Ltd. Court acceptance fee in amount of RMB3,307 shall be borne by the Plaintiff Nantong City Fang Zhou Shipping Agency Co., Ltd. If not satisfied with this judgment, any party may within fifteen days as of the service of this judgment, submit a statement of appeal to the court, with duplicates in the number of the opposing parties, so as to make an appeal before Hubei High People’s Court. (When submitting statement of appeal, the Appellant shall

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according to the amount of money in petition and Article 13 Paragraph 1 of the Measures on the Payment of Litigation Costs, pay in advance the processing fee of appellation petition. Related payment shall be remitted to non-tax revenue account of Hubei Department of Finance; deposit bank: Agricultural Bank of China Wuhan Donghu Branch; account name: non-tax revenue account of Hubei Department of Finance; account number: 05XXX69. If the payment is remitted via bank transfer or bank remittance, the payer should denote “Hubei High People’s Court” or unit code of Hubei High People’s Court “103001” in the blank of usage on receipt. If no payment is advanced within 7 days after the period of appeal, the appeal shall be withdrawn automatically.) Presiding Judge: WANG Zhaoqing Judge: DENG Yi Acting Judge: FENG Xingyuan June 8, 2016 Clerk: ZHANG Yijing

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Hubei High People’s Court Civil Judgment Nantong City Fang Zhou Shipping Agency Co., Ltd. v. China People’s Property Insurance Co., Ltd. Nantong City Branch (2016) E Min Zhong No.1214 Related Case(s) This is the judgment of second instance and the judgment of first instance is on page 785. Cause(s) of Action 230. Dispute over marine insurance contract on the sea or sea-connected waters. Headnote Affirming lower court’s decision rejecting the Plaintiff cargo-owner’s claim for an indemnity for cargo damage under an open cover cargo policy because the Plaintiff had failed to provide evidence that the policy was finalized before the goods were transported. Summary The Plaintiff brought a claim against the Defendant for the Defendant’s failure to perform its obligations under Open Insurance Agreement between the parties. The Plaintiff contracted with the Defendant to insure its goods during a domestic transportation through an open cover policy. During the voyage, the vessel encountered tropical storm force rain and wind resulting in water damage to the Plaintiff’s cargo. After the Defendant refused to reimburse the Plaintiff for this damage, the Plaintiff filed an action. The court of first instance found that the Plaintiff did not provide any proof that they finalized Open Insurance Agreement with the Defendant before the goods were transported. The Maritime Freight Waybill contained the signature of consignee proving that Maritime Freight Waybill was only valid after the goods arrived at their destination. The claim raised by the Plaintiff was rejected, and the Plaintiff was ordered to pay the court fees. The Plaintiff appealed. It was held by the Hubei High People’s Court that the original judgment shall be affirmed, and that the claim shall be rejected with Plaintiff covering the court fees of RMB3,307 in total.

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Judgment The Appellant (the Plaintiff of First Instance): Nantong City Fang Zhou Shipping Agency Co., Ltd. Domicile: Room 1501, No. 2 Ming Du Building, Nanjing City, Jiangsu Province, China. Legal representative: ZHOU Chengtie, executive director. Agent ad litem: ZHOU Fangren, male, Han born on January 17, 1963, living in Pingyang County, Zhejiang Province, staff of this company. Agent ad litem: WANG Yili, lawyer of Hubei S&H (Xiaogan) Law Firm. The Respondent (the Defendant of First Instance): China People’s Property Insurance Co., Ltd. Nantong City Branch. Domicile: No.90, Qingnian Middle Road, Chongchuan District, Nanjing City, Jiangsu Province, China. Organization Code: 83829978–X. Legal representative: GAO Feng, general manager. Agent ad litem: LIU Weijun, lawyer of Jiangsu Putai Law Firm. Dissatisfied with the Civil Judgment (2016) E 72 Min Chu No.115 rendered by Wuhan Maritime Court in respect of the case arising from dispute over insurance contract on the sea-connected waters, the Appellant Nantong City Fang Zhou Shipping Agency Co., Ltd. (hereinafter referred to as “Ark Company”) filed an action against the Respondent China People’s Property Insurance Co., Ltd. Nantong City Branch (hereinafter referred to as “PICC Nantong”), before the court. The court entertained the case on September 20, 2016 and constituted a trial bench in light of law and held a hearing in public to try the case. ZHOU Fangren and WANG Yili, agents ad litem of the Appellant Ark Company, LIU Weijun, agent ad litem of the Respondent PICC Nantong, appeared in court to attend the trial. After trial, this case has been concluded. Ark Company appealed to request: 1. revoke the judgment of first instance, and change to support its claims; and 2. the Defendant should bear the first and second court fees. Main facts and reasons: 1. the facts were wrongly confirmed in the first instance, the contract relationship in connection with the cargo was established, and PICC Nantong should settle a claim. (1) Although SHAN Xiaoxiao had retired from PICC Nantong, she was this company staff while this case happened. Once she accepted the waybill faxed from Ark Company, which meant PICC Nantong accepted it, and then the insurance in connection with the cargo was founded. Whether SHAN Xiaoxiao handed the waybill fax to the documents-making center, was a internal work process of PICC Nantong, and did not influence the valid establishment of insurance. (2) The waybill fax should be sent to the destination port with the ship after PICC Nantong accepted it, the consignee should sign on the freight note after accepting the cargo. Ark Company settled the freight with the freight note carrying shipper’s signature. Therefore, the freight note provided to the court of first instance by Ark Company had the consignee’s signature. The court of

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first instance identified the view that Ark Company failed to buy insurance was wrong. (3) After the distressing of the cargo concerned, Ark Company reported the case to PICC Nantong, and then PICC Nantong sent adjusters to go to examine on the spot. All these evidence disproved that PICC Nantong accepted the freight note in connection with the cargo. 2. Ark Company never stopped demanding claims, and engaged a lawyer to negotiate with PICC Nantong several times. A testimony of SHAN Xiaoxiao also expressed that Ark Company had claimed rights all the time. And the lawsuits of Ark Company was not beyond the limitation of action, so the lawsuit should be protected in light of law. PICC Nantong defended: the claims of Ark Company had no facts and legal basis, so it requested the court to dismiss the appeal and affirm the original judgment. 1. SHAN Xiaoxiao did not appear in the court, so her testimony cannot be taken as a basis for finding the facts. And her statement had speculation which cannot express the freight note was faxed before the accident or after. 2. After the cargo arrived in port, the consignee would sign on the freight note, the identification of the court of first instance was right. 3. Although PICC Nantong had examined the spot, whether PICC Nantong settled the claim should be comprehensively identified under the insurance contract. Because there was no signed insurance policy in this case, so the insurance contract was not effective. 4. The cases had been beyond the litigation prescription. Ark Company claimed to the court of first instance: PICC Nantong should pay the claims of RMB150,361.12 (hereinafter are all RMB), and bear the litigation fees of the case. The court of first instance ascertained the facts of the subject case as follows: on June 20, 2011, Open Policy Insurance Agreement was signed between Ark Company and PICC Nantong, which stipulated: 1. PICC Nantong shall adopt the appointment mode to cover all risks for the domestic cargo of Ark Company. Ark Company should fax the water freight bill to PICC Nantong for declaring insurance before cargo departure. Ark Company shall also provide the real situation for the question of PICC Nantong for signing the insurance policy. And PICC Nantong only bore insurance responsibility for loss of actual covered cargo before the cargo departure. 2. The term of agreement was from 0000 on June 21, 2011 to 2400 on June 20, 2012, and the insurance amount was RMB80,000,000. PICC Nantong shall adjust the insurance amount as per the actual amount of Ark Company at the end of the term of agreement. 3. The insurance premium is predicted to be RMB60,000, and PICC Nantong shall adjust the insurance amount as per the actual amount, while the lowest insurance is no less than the predicted insurance premium. 4. The deductible excess of every accident is RMB1,000 or 8% of the loss amount, the amount is subject to the higher one. After signing the agreement, Ark Company paid the insurance fee according to the agreement. During the period of Open Policy Insurance Agreement, Ark Company acted as an agent for the anhydrous sodium sulfate which China Jiangsu Ceramics Import & Export (Group) Corp., Ltd. (hereinafter referred to as “Ceramics Company”) entrusted Third Branch of Hongze Shipping Company to carry. And Ark Company entrusted the M.V. “Jinma 698” to carry, on September 24, the M.V. “Jinma 698”

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signed the freight note, which noted that: the cargo is 1,300 packages of anhydrous sodium sulfate, and Ceramics Company is the shipper, Hainan Jinhai Pulp & Paper Co., Ltd. is the consignee. The port of shipment is Nantong City of Jiangsu Province, and the destination is Hainan Province. The total weight of the cargo is 1,300 tons, and gave a clear indication of “actual accepting 1,119 packages”. The cargo value was not indicated, but there was a signature of the consignee. On October 13, 2013, M.V. “Jinma 698” provided Maritime Declaration and claimed that: 1, M.V. “Jinma 698” had loaded 950 tons of anhydrous sodium sulfate in the Nantong Jiuwei Harbor Dagang Port on September 25, 2011. And the loading duty finished at half past sixteen, then sailing to Hainan Jinhai Pulp & Paper Co., Ltd. During the navigating period, the M.V. “Jinma 698” returned for dropping anchor in Shitang Port of Taizhou City in Zhejiang Province on September 27. And the M.V. “Jinma 698” sailed again at 1300 on September 28. At 0900 on October 2, the meteorological observatory reported that there would be high wind which was influenced by tropical storm Nigel. At 1800 on October 2, the M.V. “Jinma 698” sailed to the Harlem’s Bay and dropped anchor for avoiding strong wind. On October 3, the meteorological observatory reported that the Guangdong coastal would have 10bft strong wind which was influenced by the Nigel. It started raining at 1300 at the same day, and the rain was heavier with strong wind at 1900. The tarpaulin was overturned by the wind, so rain and wave entered the cargo hold. And then the chief engineer started the fire pump to draw water from the cargo hold. At 2130, the wind stopped and the chief engineer checked the hold, finding the water had been full drawn, so the chief engineer covered the tarpaulin. At 1300 on October 5, the M.V. “Jinma 698” sailed from the Harlem’s Bay and arrived at the No.6 Anchorage in Yangpu of Hainan at 1430 on October 7, and then waited for discharging. The M.V. “Jinma 698” provided Maritime Declaration for the cargo losses which was caused by water getting into the hold. On October 15, 2011, M.V. “Jinma 698” provided Outstretched Maritime Declaration, which added some statement on the basis of the first one: the M.V. “Jinma 698” docked at the No.2 berth in Jinhai Port at 1800 on October 13 and waited for discharging. On the next day M.V. “Jinma 698” started opening hold and discharging the cargo at 0830. At 1700 on October 15, there were about 200 tons of wet cargoes found in the bottom. So the M.V. “Jinma 698” stopped discharging and reported the case to the insurance company, and then waited for checking. On the morning of October 16, M.V. “Jinma 698” contacted the warehouse and wharf for the consignee refused to accept the wet and damaged cargo, and allowed M.V. “Jinma 698” not to dock at the pier. At 1730 at the same day, M.V. “Jinma 698” docked at the wharf of Yangpu Port and discharged, while the refused cargo was carried to the warehouse of Hainan Yangpu Zhonghe Co., Ltd. for package. On October 16, Yangpu Wenbin Logistics Ltd. provided Receipt, and claimed that it accepted RMB7,092 of anhydrous sodium sulfate freight and discharge from the M.V. “Jinma 698”. On November 1, 2011, Ceramics Company sent Business Letter to Third Branch of Hongze Shipping Company, claimed that the delivery price of the anhydrous sodium sulfate concerned was RMB648 per ton, and there were 178 tons of cargoes

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unqualified after arriving at the port of destination. The amount of loss was RMB115,344 which should be deducted in the due freight. Ark Company demanded PICC Nantong to settle the claim after the cargo losses in the case happened. But PICC Nantong stated that it did not accept the policy of the cargo concerned from Ark Company, so PICC Nantong did not settle the claim. Ark Company sent Query Letter to PICC Nantong on July 21, 2013, claimed that: Ark Company had signed an open insurance agreement with PICC Nantong on June 20, 2011, and paid the insurance amount. The relevant insurance and claim projects were common transacted under the guide of the operator SHAN Zhihui. Ark Company had faxed the freight note to PICC Nantong before carrying the cargo which lost 178 tons and of which the value was RMB115,000. And it reported the case after cargo losses happened and the receipt was provided. PICC Nantong also sent staff to examine the spot, but PICC Nantong did not settle the claim up to now. So Ark Company sent letter to urge PICC Nantong. The court of first instance held that this case was dispute over insurance contract on the sea-connected waters. The open policy of insurance agreement concerned was the real meaning of the parties. It was established and valid in light of law. Each party of the contract shall exercise civil rights in accordance with the contract agreement and legal regulations strictly, and each party shall fulfill civil liability. According to the two parties’ main disputes, the issues in this case were as follows: 1. whether an insurance contract relationship existed between Ark Company and PICC Nantong in terms of the cargo concerned; 2. whether Ark Company filed an action within prescribed period of litigation; and 3. whether PICC Nantong should bear the relative insurance claim obligation and insurance claim amount or not, when the above conditions were met. 1. Whether an insurance contract relationship existed between Ark Company and PICC Nantong in terms of the cargo concerned. Ark Company claimed it had bought insurance in terms of the cargo in this case as per the open insurance policy. The relationship of guarantee contract existed in light of law, while PICC Nantong denied that. The court of first instance held: 1. according to Open Insurance Agreement, Ark Company shall fax water freight note of the cargo concerned to PICC Nantong for applying for insurance before carrying the cargo. But Ark Company did not submit evidence to prove it had faxed Waterway Freight Bill to PICC Nantong in the case, as well as the necessary information to PICC Nantong for signing relevant lists. 2. Although the witness SHAN Zhihui identified Situation Representation made by Ark Company was in accordance with SHAN Xiaoxiao’s memory and was signed by SHAN Xiaoxiao. However, in this case, if SHAN Xiaoxiao had got Waterway Freight Bill from Ark Company, SHAN Xiaoxiao should submit it to the documents-making center of PICC Nantong. And the insurance officer signed relevant material according to Waterway Freight Bill, and then sent it to Ark Company. If things above were all be done, there was no situation where PICC Nantong did not have the insurance buying record of the cargo concerned of Ark Company. 3. According to the agreement, the insurance premium would be adjusted as per the actual insurance

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amount and would be no less than RMB60,000. As to this condition, PICC Nantong must hope Ark Company increased insurance amount, and got more insurance premium. Therefore, although PICC Nantong did not recorded Ark Company’s claim because of the system problem, as convention, PICC Nantong would connect with Ark Company in time. And then every party would not only realize their interest but avoid the dispute. As to what Ark Company claimed, Ark Company bought insurance from PICC Nantong on September 24, 2011, and the cargo losses happened on October 15. There were 20 days between the two dates. Ark Company as a practitioner of waterway transporting, PICC Nantong as an insurance company, both of them had professional knowledge and practice experience. So they had enough time to take remedy measures. As to Ark Company, because it bought insurance by faxing, so it was its basic duty to verify the insurance projecting condition with PICC Nantong. However, Ark Company found there was no insurance of the cargo concerned in PICC Nantong after the cargo losses occurred, it did not conform to common sense. 4. There was a sign of consignee in Waterway Freight Bill which was supported by Ark Company, so the freight note must form after arriving at the destination and being signed by the consignee. It’s unable to establish that Ark Company claimed that it sent the freight note to PICC Nantong before carrying the cargo concerned. From the above, there was no fact and it did not conform to common sense that Ark Company claimed it had bought insurance in terms of the cargo concerned as per the agreement. Because Ark Company could not prove it had bought insurance for the cargo concerned from PICC Nantong, so the claim of asking PICC Nantong to settle the claim cannot be supported by the court of first instance. 2. Whether Ark Company filed an action within prescribed period of litigation. According to Article 26 Paragraph 1 of the Insurance Law of the People’s Republic of China, the statute of limitations was two years of Ark Company asked PICC Nantong to pay the compensation or insurance amount in terms of the cargo concerned, the time counted from the date of learning about the happening of an insurance accident. Ark Company claimed it found the cargo losses concerned on October 15, 2011, so it should ask PICC Nantong to pay compensation within two years as of that day. Ark Company sent Query Letter to PICC Nantong on June 21, 2013 asking PICC Nantong to settle the claim, this behavior comforted to Article 140 of the General Principles of the Civil Law of the People’s Republic of China, this can cause the statute of limitations of the prosecution concerned ceased and the statute of limitations should be calculated again. But the limitation period of the prosecution concerned had been ended on June 20, 2015. Ark Company brought this lawsuit in the case on January 14, 2016, which had beyond the statute of limitations. Although Ark Company claimed it had asked PICC Nantong to settle the claim before filing the action, while it did not provide any evidence to prove, so the court of first instance did not support its claim. Therefore, although the legal insurance guarantee contract relationship existed between Ark Company and PICC Nantong in terms of the cargo losses concerned, and the lawsuit claim of Ark Company had been beyond the statute of limitations, so its claim cannot be protected.

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According to the aforementioned discussion, it was not necessary to have the argumentation of whether PICC Nantong shall bear the insurance claim obligation and claim the corresponding amount, the court of first instance did not make any further comments on that. To sum up, The claims of Ark Company had no factual or legal basis and the court of first instance did not support them. According to Article 64 Paragraph 1 and Article 142 of the Civil Procedure Law of the People’s Republic of China, the judgment of first instance was rendered as follows: reject the claims of Ark Shipping Agency Nantong Co., Ltd. and court acceptance fee in amount of RMB3,307 shall be born by Ark Shipping Agency Nantong Co., Ltd. During the period of the second instance, the parties submitted evidence around the appealing claims. The court organized the parties to conduct evidence exchanging and cross-examination. Ark Company submitted to the court the following evidence: Evidence 1: one copy of Waterway Freight Bill (the freight number: 0018446), this evidence to prove (a) the freight note was “reserve note in shipping port”. This was the only one and real freight note which was faxed to PICC Nantong by Ark Company. (b) The insurable value was noted on the freight note, which conformed to the necessary information of buying insurance. (c) Freight note recorded the insurable value was RMB900,000, which did not apply to article 11 of Open Insurance Agreement that the insurance amount of one insurance policy more than RMB1,000,000 should provide the single insurance policy. Evidence 2: the printed pieces of two e-mails and one mail attachment, to prove (a) SHAN Xiaoxiao had accepted the freight note faxed by Ark Company. And the freight number was 0,018,446, the insurable value was RMB900,000, the insurance premium was RMB675. All those purported to prove the purpose of proof of evidence 1. (b) Ark Company had paid the insurance premium in full. (c) This evidence was found after the first instance. Evidence 3: one copy of SHAN Xiaoxiao’s ID card and one piece of written testimony, to prove (a) SHAN Xiaoxiao had accepted the freight note fax concerned; (b) Situation Representation provided by SHAN Xiaoxiao was real, and was the real meaning of SHAN Xiaoxiao; and (c) the evidence of SHAN Xiaoxiao acceping the fax was found after the first instance. Evidence 4: two work diaries, to prove the first instance confirmed that the limitation period of this lawsuit had been ceased on June 21, 2013, and had been ceased in January 2015 again, in fact, this lawsuit was not beyond the statute of limitations. The witnesses SHAN Zhihui, LI Jingming and ZHOU Peixin appeared in the court to testify after the application of Ark Company, The witness SHAN Zhihui reported: 1. as to Situation Representation, SHAN Xiaoxiao was her daughter, SHAN Zhihui wrote Situation Representation after asking SHAN Xiaoxiao about the insurance operation process concerned, and was signed by SHAN Xiaoxiao after her identify; 2. as to the time limitation of action, SHAN Zhihui retired from PICC Nantong in June 2013, and left the company up to the end of 2016. When she handed over the relevant material, the insurance claim concerned had not been written off. In 2014, there was a man whose surname was

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HUANG, he said he acted as Ark Company to know about the claim situation, and asked the detail from SHAN Zhihui until the second half year. At the beginning of 2015, PICC Nantong asked SHAN Zhihui to write Situation Representation; and 3. as to the e-mail, the authenticity of the e-mail can be proved by logging her e-mail. This testimony tended to prove that (a) the verified Situation Representation in the first instance; (b) the problem of the time limitation of action; and (c) the authenticity of the two e-mails. The witness LI Jingming stated: in December 2012, ZHOU Fangren showed him a contract and invoice of paying for insurance and asked him how to deal them. On January 6, 2015, ZHOU Peixin and LI Jingming went to the claim center to look for WANG Yuechun, and showed him the contract and invoice. WANG said they would give a reply after internal researching within one week. Later, WANG said that he had difficulties, because PICC Nantong had no this record in the system. After one month, ZHOU Peixin and LI Jingming went to the insurance company and looked for a vice president. Until October 2015, they arranged a manager whose surname was WANG in the claim department, and brought some material and prepared for the prosecution. Ark Company filed an action in January 2016. The witness ZHOU Peixin reported: after the new year of 2015, he and LI Jingming went to look for manager of the claim departure WANG Yuechu. LI Jingming showed WANG the insurance premium certificate, WANG said they should settle the claim while they needed negotiating. After a month, ZHOU Peixin and LI Jingming went to look for the vice president SUN Runan who managed the claim in PICC Nantong. While after several months, ZHOU Peixin and LI Jingming went to look for WANG Yuechun and the legal person WANG Yabing, but WANG said this claim cannot be compensated for the project windows had been closed, and they can ask the compensation by litigation. The testimonies of LI Jingming and ZHOU Peixin jointly proved that: this case was not beyond the limitation of action. PICC Nantong cross-examined: evidence 1 was not an original, and the freight number and the cargo quantity were both different from that on the freight note which was provided by Ark Company. PICC Nantong could not identify the authenticity and purpose of proof of this evidence; Ark Company should submit the original of evidence 2, the email was unilaterally sent by SHAN Zhihui and that was her own meaning. The insurance contract did not come into force because the cargo concerned was not covered up by insurance and the insurance policy was not issued as per the agreement. As to evidence 3, the witness did not appear in the court. And according to the testimony content, SHAN Xiaoxiao just said she got the fax but could not identify the time of accepting the fax. This order of goods existed a situation in which Ark Company would ask a post-record for the faxed freight note after the accident of the cargo concerned. Evidence 4 was not new evidence, PICC Nantong could not identify the authenticity of this evidence. And because the evidence was a unilateral note written in the first instance by the agent ad litem of Ark Company, so this evidence cannot achieve its purpose of proof. As to the testimony of SHAN Xiaoxiao, Situation Representation was based on the description of SHAN Xiaoxiao, so the authenticity cannot be identified. As to the

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statement of time limitation of action, it was personal idea of SHAN Xiaoxiao, so the testimony cannot achieve its purpose of proof. As to the testimony of LI Jingming, LI Jingming was the agent ad litem of Ark Company, there was an interested relationship between LI Jingming and Ark Company, so his testimony was not proper as the evidence. As to the testimony of ZHOU Peixin, he was the friend of LI Jingming, LI Jingming turned to him for getting the insurance compensation from PICC Nantong, so ZHOU Peixin and this case had stake. So his testimony cannot be taken as the basis of finding facts. The court confirms them as follows: Evidence 1 was a copy and Ark Company did not provide the original, and PICC Nantong had objection to the authenticity and purpose of proof of this evidence, and the court does not adopt it; evidence 2 was an e-mail sent to PICC Nantong Wang Yuechun by SHAN Zhihui. Although the two mails sent by SHAN Zhihui was a fact and could be identified, by combining with the court statement of ZHANG Zhihui and the mail logging keyword of her, the content of email was unilateral statement, in the absence of other evidence, the reality of the content of the two mails cannot be identified, and the court does not adopt it; evidence 3 was an affidavit of SHAN Xiaoxiao, because of her absence in the court, and there was no other evidence, so this evidence cannot be identified. There was no difference between evidence 4 and the original, although LI Jingming was the agent ad litem of Ark Company and there was stake between LI Jingming and this case, and there was stake between ZHOU Peixin and Ark Company because of his relationship with LI Jingming, the content of the work diary in evidence 4 can be mutually corroborated with the testimony of LI Jingming and ZHOU Peixin, which proved LI Jingming and ZHOU Peixin had gone to PICC Nantong for negotiating the insurance claim on January 6, 2015. So evidence 4 and the testimony of LI Jingming and ZHOU Peixin shall be adopted. The testimony of SHAN Zhihui about the issuing procedure of Situation Representation in evidence 2 in the first instance accorded with that in the court of first instance. But her report only can prove the issued procedure of the Situation Representation, but the authenticity of the content cannot be identified. In the evidence, PICC Nantong asked her to issue Situation Representation in her testimony, which corroborated with the fact that Situation Representation was issued on January 7, 2015. That proved that PICC Nantong had responded to the claim of Ark Company, and the part about the email in the testimony had been argued before, so the court will not make any further statement. Combined with evidence 4, the testimony of LI Jingming and ZHOU Peixin and the content of the testimony of SHAN Zhihui that PICC Nantong asked her to provide Situation Representation at the beginning of 2015, all these can prove that the time limitation of action had been ceased on January 6, 2015. PICC Nantong did not submit any evidence to the court in second instance. After hearing, facts ascertained in the first instance was true and shall be confirmed by the court. The court also finds out that the agent ad litem of Ark Company in first instance LI Jingming and the person not involved in the case ZHOU Peixin had gone to PICC Nantong for negotiating the claim matters on January 6, 2015.

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The court holds that the issues of the case are: 1. whether Ark Company filed an action within prescribed period of litigation; and 2. whether an insurance contract relationship had existed between Ark Company and PICC Nantong in terms of the cargo concerned. The court comments and judges as follows: 1. Whether Ark Company filed an action within prescribed period of litigation. Ark Company claimed it found the cargo losses on October 15, 2011, according to Article 26 Paragraph 1 of the Insurance Law of the People’s Republic of China, the time limitation of action for an insurant or beneficiary in any insurance other than life insurance to claim indemnity or insurance money against the insurer shall be two years, which shall be counted from the day when the insurant or beneficiary knows or should have known the occurrence of the insured incident. So Ark Company should asked PICC Nantong to settle the compensation within two years from the day on October 15, 2011. The first instance found out that Ark Company had sent Query Letter to PICC Nantong for urging the claim on June 21, 2013, this behavior conformed to Article 10 Paragraph 1 Sub-paragraph 2 of the Provisions of the Supreme People’s Court on Several Issues concerning the Application of Statute of limitations during the Trial of Civil Cases, and had the effectiveness of ceasing the statute of limitation. According to Article 140 of the General Principles of the Civil Law of the People’s Republic of China, a statute of limitations shall be discontinued if suit is brought or if one party makes a claim for or agrees to fulfillment of obligations. A new limitation shall be counted from the time of the discontinuance. The two years limitation period should be calculated again from the day of June 21, 2013. The second instance finds out that, the agent ad litem of Ark Company in first instance LI Jingming and the person not involved in the case ZHOU Peixin had gone to PICC Nantong for negotiating the claim matters on January 6, 2015. So the two-year statute of limitation of Ark Company was ceased, and was calculated again from January 6, 2015. Therefore, Ark Company filed an action on January 14, 2016 which was not beyond the statute of limitation. The fact ascertained by the first instance was that the lawsuit of Ark Company was beyond the statute of limitation was not proper, so the appealing grounds of Ark Company that its lawsuit was not beyond the statute of limitation cannot stand. 2. Whether an insurance contract relationship had existed between Ark Company and PICC Nantong in terms of the cargo concerned. The first instance ascertained that on June 20, 2011, Open Policy Insurance Agreement was signed between Ark Company and PICC Nantong. According to article 3 of underwriting method of the agreement: Ark Company shall fax the water freight bill to PICC Nantong for declaring insurance before cargo departure. Ark Company shall also provide the real situation to the question of PICC Nantong for signing the insurance policy. As per the agreement, Ark Company faxed the water freight bill to PICC Nantong for declaring insurance before cargo departure. And PICC Nantong signed the freight note for the cargo concerned. According to Article 91 Paragraph 1 of the Interpretation of the Supreme People’s Court concerning Application of the Civil Procedure Law of the People’s Republic of China,

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the party who claims the existence of legal relationship shall bear the liability of providing evidence to prove the basic facts of the legal relationship. Ark Company should provide evidence to prove its claim that there was insurance contract relationship between it and PICC Nantong. Because Ark Company did not provide evidence to prove it had faxed the water freight bill to PICC Nantong for declaring insurance before cargo departure and the latter had signed the freight note, Ark Company shall bear the unbeneficial result of failure on burden of proof. There was a signature of consignee in the Cargo Water Freight which was provided by Ark Company, so the freight note must be formed after goods arrived at the destination and it was signed by the consignee. So the freight cannot be faxed to PICC Nantong for declaring insurance before cargo departure. The first instance held that the claim of Ark Company that it faxed the water freight note to PICC Nantong for declaring insurance before cargo departure was not improper. As to PICC Nantong that sent staff to check the spot, it was not equal to insurance claim, and the open insurance relationship existed between the two parties. Therefore, the checking of PICC Nantong cannot prove the insurance contract relationship existed between it and Ark Company in terms of the cargo concerned. Therefore, the first instance ascertained that Ark Company could not prove that it had bought insurance from PICC Nantong in terms of the cargo concerned which was not improper, the grounds of appeal by Ark Company concerning wrong identification of the first instance cannot stand. To sum up, although the court of first instance was not proper in ascertaining the statute of limitation of the case, the judge result is right, so the court does not support the appealing request of Ark Company. According to Article 140 of the General Principles of the Civil Law of the People’s Republic of China, Article 10 Paragraph 1 Sub-paragraph 2 of the Provisions of the Supreme People’s Court on Several Issues concerning the Application of Statute of limitations during the Trial of Civil Cases, Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China and Article 334 of the Interpretation of the Supreme People’s Court concerning Application of the Civil Procedure Law of the People’s Republic of China, the judgment is rendered as follows: Dismiss the appeal and affirm the original judgment. Court acceptance fee of second instance in amount of RMB3,307 shall be born by Nantong City Fang Zhou Shipping Agency Co., Ltd. and the transportation and accommodation expenses of the witnesses SHAN Zhihui, LI Jingming and ZHOU Peixin paid for fulfilling the obligation to testify in court shall be born by Nantong City Fang Zhou Shipping Agency Co., Ltd. The judgment is final. Presiding Judge: LU Yang Judge: YU Jun Judge: LIN Xianghui November 9, 2016 Clerk: WU Di

Shanghai Maritime Court Civil Judgment Ningbo Arts and Crafts Import & Export Co., Ltd. v. Shanghai Wan Shi Hong Logistics Warehousing Co., Ltd. et al. (2014) Hu Hai Fa Shang Chu Zi No.57 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 836. Cause(s) of Action 221. Dispute over contract on custody of cargo in port. Headnote Import agent and warehouse manager held to be complicit in fraud that enabled a third party to steal part of the Plaintiff cargo importer’s cargo stored in warehouse; the Plaintiff’s customs broker held not liable. Summary The Plaintiff imported several thousand tons of the chemical PTA into the port of Shanghai. The Plaintiff sued its customs broker, import agent, and warehouse manager, accusing them of complicity in a fraud that enabled a third party to make off with a portion of the import. The court held that the case was proved as to the import agent and warehouse manager, but the customs broker was not found liable as there was no specific duty found in relation to the customs broker.

Judgment The Plaintiff: Ningbo Arts and Crafts Import & Export Co., Ltd. Domicile: Ningbo, Zhejiang Province. Legal representative: ZHENG Yonggang, chairman. Agent ad litem: LIU Yan, lawyer of Shanghai Liuyan Law Firm. Agent ad litem: CHEN Hui, lawyer of Shanghai Liuyan Law Firm. The Defendant: Shanghai You Bei Trading Co., Ltd. Domicile: Room 210, No. 589 Liaoning Road, Xinƶhuang Industrial Park, Minhang District, Shanghai City. Legal representative: LIU Tao. © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_29

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The Defendant: Shanghai Wan Shi Hong Logistics Warehousing Co., Ltd. Domicile: Room 4-410, No. 1 5300 Lane, Wenchuan Road, Baoshan District, Shanghai City. Legal representative: YV Xizhong, chairman. Agent ad litem: ZHAI Deping, lawyer of Shanghai Dahwa Law Firm. The Defendant: Sinotrans East China Co., Ltd. Jinling Branch. Domicile: Hongkou District, Shanghai City. Legal representative: XIONG Zhenghua, general manager. Agent ad litem: CHEN Jianhua, male, Han, born on November 19, 1951, living in Hongkou District, Shanghai City. Agent ad litem: ZHANG Chen, female, Han, born on May 31, 1976, living in Pudong New Area, Shanghai City. With respect to the case arising from dispute over tort liability by the Plaintiff, Ningbo Arts and Crafts Import & Export Co., Ltd. (the company changed name to Ningbo Arts and Crafts Import & Export Co., Ltd. on December 14, 2004, hereinafter referred to as Arts and Crafts Company) against the Defendant, Shanghai You Bei Trading Co., Ltd. (hereinafter referred to as Shanghai You Bei Company), the Defendant, Shanghai Wan Shi Hong Logistics Warehousing Co., Ltd. (the company changed name to Shanghai Wan Shi Hong Logistics Warehousing Co., Ltd. on October 22, 2008, hereinafter referred to as Wan Shi Hong Company), the Defendant, Sinotrans East China Co., Ltd. Jinling Branch (hereinafter referred to as Jinling Company). The court entertained the case on January 21, 2014, organized the trial bench and had two evidence exchange on June 12, 2014 and July 1, 2014, held a hearing in public on July 2, 2014. Agents ad litem of Arts and Crafts Company, LIU Yan and CHEN Hui, agent ad litem of Wan Shi Hong Company, ZHAI Deping, agents ad litem of Jinling Company, CHEN Jianhua and ZHANG Chen appeared in court to attend the trial. Summoned by the court according to law, Shanghai You Bei Company did not appear in court without justified reasons. After trial, the court has concluded the case. The Plaintiff (Arts and Crafts Company) alleged that Arts and Crafts Company signed three No.GYAC01031-137, GYAC01031-138, GYAC01031-140 agent import agreements with Shanghai You Bei Company in October 2004, agreed that Arts and Crafts Company acts as the agent of Shanghai You Bei Company to import pure terephthalic acid (hereinafter referred to as PTA), Arts and Crafts Company appointed the declaration company to handle the import customs. After customs clearance, it shall take delivery of goods with money. If the goods were not paid off, the ownership of goods belongs to Arts and Crafts Company. After signed the agreement, Arts and Crafts Company promised to conclude the contract with foreign investors, issued a usance letter of credit and made payment. At the same time, Arts and Crafts Company signed the warehousing agreement with Shanghai You Bei Company and Wan Shi Hong Company, agreed that the goods imported by the agent (Arts and Crafts Company) stored in the warehouse of Wan Shi Hong Company, placing goods according to the instructions of Arts and Crafts Company.

Ningbo Arts and Crafts Import & Export Co., Ltd. v. …

807

Arts and Crafts Company commissioned Jinling Company to handle the import declaration of the goods, and clearly informed that the goods were stored in the warehouse of Wan Shi Hong Company, controlled by Arts and Crafts Company. After Jinling Company completed the customs clearance, it did not deliver the goods to the warehouse of Wan Shi Hong Company for storage according to the requirements of Arts and Crafts Company under the conditions of knowing that the said agent import agreement noted goods reserved clause, and deliver the stamped with the customs release chapter to the outsider, leading to the goods taken away illegally. Under the condition that the goods are not in storage, Wan Shi Hong Company has issued a godown entry to fraud Arts and Crafts Company. You Bei Company took delivery of the good, but did not made payments and the agency fees to Arts and Crafts Company. The fault of the three Defendants commonly infringed the ownership of goods of Arts and Crafts Company, which caused Arts and Crafts Company not only has not received the payment and the agency cost but also lost the rights of the goods. The three Defendants should assume the several and joint liability for losses suffered by Arts and Crafts Company. Therefore, the Plaintiff requested to compensate the three Defendant RMB20,661,450.92 (USD2,492,665, calculated according to USD1 amount to RMB8.2889), import agent fee RMB165291.60, bank charges RMB30992.17, the issuing fee RMB21694.52, postage RMB600, follow-up payment deducting the criminal cases RMB183337.06, a total of RMB20696692.16 and the corresponding interest (the interest should be calculated on the basis of the one year loan prime interest rate over the same period RMB promulgated by of the People’s Bank of China from January 14, 2015 to the date of effectiveness of the judgment), and the three Defendants were jointly and severally liable for the court acceptance fee, property preservation application fee, service by publication fee and so on. The Defendant You Bei Company did not defend. The Defendant Wan Shi Hong Company defended that: 1. the goods in question were not stored in the warehouse of Wan Shi Hong Company. Only when goods were stored in warehouse would Wan Shi Hong Company have obligations of supervising the goods. The godown entry and stores list provided by were forged by the outsider YAO Moumou, Wan Shi Hong Company should not be responsible for the goods in question not stored in the warehouse; 2. 990 tons of PTA stored in the warehouse of Wan Shi Hong Company belonged to the outsider (Zhongji Ningbo Foreign Trade Co., Ltd.), they were not the goods of Plaintiff. Due to swindling gang operated a number of goods in the same time, which resulted in warehouse general manager NI Moumou of Wan Shi Hong Company previously mistaking the goods belong to the Plaintiff; 3. the goods were declared by Jinling Company, Jinling Company shall quote where the goods in question has gone; and 4. the loss of goods was because the employees of Jinling Company delivered bill of lading to the outsider LIN Moumou, and Jinling Company has no evidence to prove that LIN Moumou was the employee of You Bei Company. The Defendant Jinling Company defended that: 1. there was no shipping agent contractual relationship between the Plaintiff and Jinling Company. The two sides did not have a written declaration of the contract, and had no factual relationship of

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delegation. You Bei Company entrusted Jinling customs to declare, the behavior of submitting documents after customs clearance was based on the instructions of You Bei Company, Jinling Company did not participate in any arrangements after customs clearance. 2. The direct reason that caused the Plaintiff out of control the goods in question was deliberate fraud and nonperformance of Wan Shi Hong Company and You Bei Company. Jinling Company completed customs clearance according to the commission of You Bei Company and delivered bill of lading in accordance with the instructions of You Bei Company. Subjectively, Jinling Company had no fault, there was no joint tort with Jinling Company, Wan Shi Hong Company and You Bei Company. 3. The amount of compensation for Arts & Crafts Company has no basis, the amount of payment for goods was USD2492665, calculated according to the current exchange rate of USD1 amount to RMB6.25, the actual value of the loss shall be RMB15591370.31; the agency fee, opening charge, post and telecommunications fee under the import contract claimed by the Plaintiff to Jinling Company has no basis; the Plaintiff has confirmed to receive the advanced payment RMB3.1 million paid by You Bei Company, the amount shall be deducted from the amount of loss of the Plaintiff; the Plaintiff has confirmed that the company had issued a delivery order of 600 tons of PTA to Wan Shi Hong Company, the value of 600 tons of PTA shall be deducted from the amount of the loss of the Plaintiff. 990 tons of PTA has been stored in warehouse of Wan Shi Hong Company, the value shall be deducted from the petition of the Plaintiff to Jinling Company; the loss of interest claimed by the Plaintiff have beyond the limitation of action, the bank loans voucher has no relevancy with the case; the Plaintiff’s service by publication fee has nothing to do with Jinling Company notice of service charges and Jinling Company. In summary, the Defendant requested to reject the claim of the Plaintiff to Jinling Company. The evidence presented by the Plaintiff to support its claims, the crossexamination opinions of Wan Shi Hong Company, Jinling Company and the ascertainment opinions of the court are as follows: Evidence 1, three copies of trade contract and Chinese versions; evidence 2, three copies of commercial invoice and Chinese versions; evidence 3, three copies of packing list and Chinese versions; evidence 4, three copies of letter of credit and Chinese versions to prove that Arts & Crafts Company respectively purchased PTA 990 tons and PTA 1,001 tons from Sinochem Trade (Singapo) Co., Ltd., the unit price both were USD815 per ton, the gross price was respectively USD806, USD850, USD815, USD815. Arts & Crafts Company has also purchased PTA 1,000 tons from LG commercial (Hong Kong) Co., Ltd., the unit price was USD870 / ton, the gross price was USD870,000, which were delivered in warehouse of Shanghai Free Trade Zone. Evidence 5, three copies of delivery order and Chinese versions to prove Arts & Crafts Company was the holder of the goods in question. Evidence 6, three copies of bank debit notes to prove that Arts & Crafts Company paid for the opening commission of three consignments of goods to Shanghai Pudong Development Bank (hereinafter referred to as Shanghai Pudong Development Bank) on October 18, 2004, which were separately RMB7,022.29,

Ningbo Arts and Crafts Import & Export Co., Ltd. v. …

809

RMB7,100.32, RMB7,571.91, and expenses for post for each was RMB200, the amount of grand total was RMB22,249.52. Evidence 7, three copies of bank debit notes and table on exchange rates to prove that Arts & Crafts Company has paid the payment of the goods in question by Shanghai Pudong Development Bank on January 14, 2015, which were separately USD806, USD850, USD815, USD815, USD870,000, for a grand total of USD2,492,665, USD100 for the selling rate was RMB828.89 of that day. Evidence 8, three copies of bank debit notes to prove that Arts & Crafts Company has paid the letter of credit accepting charge of goods in question by Shanghai Pudong Development Bank on October 28, 2004, which were separately RMB10,031.85, RMB10,143.31,and RMB10,817.01, for a grand total of RMB30,992.17. Evidence 9, three copies of the agreement for import by agency to prove that Arts & Crafts Company imported goods on behalf of You Bei Company. The agreement agreed that Arts & Crafts Company appointed the custom brokers Company to handle with the import declaration, but the customs duties and added-value tax was handled by themselves (You Bei Company). Jinling Company submitted the agreement to the customs when made the customs declaration. Evidence 10, three copies of customs duty and added-value tax special covering warrant to prove that the customs duty and added-value tax of goods in question have been paid, for a grand total of RMB5,197,918.20. Evidence 11, bank loans certificate to prove that Arts & Crafts Company made loans in order to acting import the goods in question, which agreed the lending rate in the contract. Evidence 12, litigation expense special bill to prove that Arts & Crafts Company has paid the court acceptance fee and property preservation application fee. Evidence 13, payment instrument of announcement fee to prove Arts & Crafts Company has paid the service by publication fee for lawsuit. Evidence 14, pressing payment remittance certificate of criminal case to prove Arts & Crafts Company has received money of pressing payment of criminal case. Wan Shi Hong Company raised no objection to evidence mentioned above. Jinling Company believed that the authenticity and the relevancy of evidence 1– 8 cannot be identified because of it is not the party of the foreign trade contract on its own. The quote payment for goods of the Plaintiff was USD2492665, so the compensation for damage shall be calculated in dollars, loss of the USD of 2005 against the RMB exchange rate conversion has no basis. As for evidence 9, Jinling Company was not the party of the agreement, the agreement was not binding on Jinling Company, which cannot be identified customs declaration relationship subject to the agreement. As for evidence 10, Jinling Company raised no objection to the authenticity, legality and relevancy, the taxation was paid by You Bei Company not Arts & Crafts Company. As for evidence 11, it has no relevancy with the case, and Arts & Crafts Company had not claimed interests in (2005) Yong Min Er Chu Zi No.52 and (2007) Yong Min Er Chong Zi No.1, so the claim of interest exceeded the statute of limitations. As for evidence 12, Jinling Company raised no objection to the authenticity, but Jinling Company thought that it shall be born by

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the party losing the lawsuit. As for evidence 13, Jinling Company raised no objection to the authenticity, but Jinling Company thought that the cost has no relevancy with Jinling Company, and the cost shall be born by the Plaintiff. As for evidence 14, Jinling Company raised no objection. The court holds that evidence 1–10, 14 submitted by the Plaintiff are available for verification, and the content can be confirmed each other, so the effectiveness of the evidence shall be recognized. As for evidence 11, although the time shown in the loan contract is later than the time of the dispute in this case, it can be shown that the Plaintiff did borrow from a bank and have the loss of loan interest, the effectiveness of its evidence shall be recognized. Some costs of evidence 12 and 13 are not the legal costs incurred in this case, the effectiveness of this part of evidence shall not be recognized, the effectiveness of other parts of evidence shall be recognized. Evidence 15, customs declaration proxy for import and export agent to prove that Arts and Crafts Company has commissioned Jinling Company to declare according to the import agent agreement, and issued the blank customs proxy of mandatary, which was written by Jinling Company. Wan Shi Hong Company raised no objection. Jinling Company raised no objection to the authenticity, but thought that the company accepted customs declaration commission of You Bei Company on October 20, 2004, and received customs declaration proxy on October 26. The blank proxy was just the required material of customs declaration provided to the customs, which cannot prove that there was an establishment of the customs declaration commission between Arts and Crafts Company and Jinling Company. Evidence 16, three copies of agent import agreement (same as the Plaintiff’s evidence 9) to prove the documents submitted by Jinling Company. Jinling Company shall know the customs declaration agent was Arts and Crafts Company. Wan Shi Hong Company raised no objection. Jinling Company believes that it was not the parties of the import agency agreement, the agreement was not binding on Jinling Company. The agreement neither required the Plaintiff to be responsible for the declaration of goods in question nor set You Bei Company cannot entrust Jinling Company to declare. Article 3 of the agreement stipulated that Arts and Crafts Company appointed custom brokers company to handle with the import declaration. According to WANG Mengsheng’s statement of the agent of Arts and Crafts Company of November 1, 2005, custom brokers company of goods in question was appointed by LI Moumou of You Bei Company, and LI Moumou in his record was also confirmed that You Bei Company commissioned Jinling Company to declare. Evidence 17, the express list to prove that Arts and Crafts Company mailed a set of declaration materials of 2,991 tons of cargo (including contract, bill of lading, invoice, packing list, agency agreement) and declaration proxy to Jinling Company on October 25, 2004. Wan Shi Hong Company raised no objection. Jinling Company raised no objection to its authenticity, legality and relevancy, but thought that the evidence can only prove that Arts and Crafts Company sent customs declaration materials according to the requirements of You Bei Company, it cannot prove that there was the relationship between Arts and Crafts Company and Jinling Company.

Ningbo Arts and Crafts Import & Export Co., Ltd. v. …

811

Evidence 18, three copies of declarations to prove the import of goods in question. Wan Shi Hong Company raised no objection. Jinling Company raised no objection of its authenticity, legality and relevancy, but thought that the record of declaration was double order, the operation entity was Arts and Crafts Company, the recipient entity was You Bei Company, customs broker may not be the owner of the goods. Evidence 19, Situation Explanations respectively issued by customs broker sub-mandated from Jinling Company to prove that after Jinling Company received the declaration materials provided by Arts and Crafts Company, which submandated to other custom brokers company to declare. Wan Shi Hong Company raised no objection. Jinling Company raised no objection to the authenticity, but thought that it does not prove that the Plaintiff entrusted Jinling Company to declare customs, Jinling Company accepted the commission of You Bei Company. Evidence 20, material collecting approval list and picking list of the bonded warehouse, to prove that the person picked goods and delivery unit was Arts and Crafts Company. Wan Shi Hong Company raised no objection. Jinling Company raised no objection to the authenticity, but thought that approval lists and picking list were made according to the customs clearance document record when the goods were stored in the bonded warehouse, units in operation shall be marked as picker and consignee. Due to these goods were stored in the customs warehouse, so it is necessary to fill in the import and export business units, but it was not mean that only the business unit can take delivery of goods. The fact show that Arts and Crafts Company appointed You Bei Company to handle the customs clearance and delivery matters. The disputes of this case was between Arts and Crafts Company and You Bei Company, which had nothing to do with Jinling Company. The court confirms the competence of evidence 15–20, the affirmation of the probative force will be combined with other effective evidence. Evidence 21, the instruction letter of the Plaintiff to Jinling Company to prove that Arts and Crafts Company sent a letter to Jinling Company and indicated the goods stored in Wan Shi Hong Company on November 1, 2004. Wan Shi Hong Company raised no objection. Jinling Company did not recognize the authenticity, and said that Jinling Company never received the letter. The court holds that in view of Jinling Company explicitly denied to receive the letter of instructions, and no other effective evidence can prove that Jinling Company received a letter of instructions, the effectiveness of the evidence shall not be recognized. Evidence 22, inquiry transcripts of ZHANG Jihang to prove that Jinling Company sub-mandated other companies to declare after received customs proxy and declaration materials. There was a commission contract relationship between Arts and Crafts Company and Jinling Company. Under the circumstance of knowing that Arts and Crafts Company was the owner of the goods and the goods were stored in the warehouse of Wan Shi Hong Company, Jinling Company still delivered the bill of lading to the fleet appointed by the outsider LIN Moumou, which caused Arts and Crafts Company to lose control of the goods. Wan Shi Hong Company raised no objection. Jinling Company raised no objection to the authenticity, but thought that the criminal police who made the record was

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prejudiced by first impressions, made an inquiry under the premise of setting the Plaintiff was the company’s principal, and misled ZHANG Jihang made a wrong statement. ZHANG Jihang in the Ningbo Intermediate People’s Court has served as a witness to appear in court for questioning, the effectiveness of the testimony in court is greater than that of the record. ZHANG Jihang in the record mentioned that Jinling Company issued the invoice to You Bei Company, which shown that You Bei Company and Jinling Company reached a consensus in terms of customs commission, there was no contract between the Plaintiff and Jinling Company, there was also no expressed intention of consignation. In addition, ZHANG Jihang explained that it was not the responsibility of Jinling Company to deliver the goods to the warehouse of Wan Shi Hong Company. The court confirms the competence of evidence of this piece of evidence, ZHANG in the record said “both sides have errors in the transcript, and thought that it was a small business, so commissioned other companies to declare, no money can be made, so the agreement was not signed”, the court holds that it was ZHANG Jihang’s subjective view that ZHANG Jihang was asked by Ningbo Public Security Bureau investigators “why the four consignment of goods of Arts & Crafts Company has not written entrusted customs agreement”, its probative force will be confirmed combined with other effective evidence. Evidence 23, inquiry transcripts of YANG Moumou to prove that the goods in question were not deposited in the warehouse of Wan Shi Hong Company. Wan Shi Hong Company raised no objection. Jinling Company raised no objection to the authenticity, but thought that it cannot be considered that 990 tons of PTA did not enter the warehouse of Wan Shi Hong Company, the record can only prove that the fleet delivered the goods in question to where was You Bei Company’s instructions, and it has nothing to do with Jinling Company. The court confirms the competence of the evidence, but not the object claimed by the Plaintiff. According to the Shanghai Second Intermediate People’s Court (hereinafter referred to as the Shanghai Second Intermediate People’s Court) criminal judgment, involving more than 900 tons of goods have entered the warehouse of Wan Shi Hong Company. Evidence 24, inquiry transcripts of CAI Jinlin to prove that LI Moumou entrusted the fleet to pick up 1,000 tons of goods, after that the goods did not enter the warehouse of Wan Shi Hong Company, the fleet has no business with Arts & Crafts Company. Wan Shi Hong raised no objection to the authenticity, and thought that the relevancy has nothing to do with itself and did not express their opinions. Jinling Company raised no objection to the authenticity, but thought that You Bei Company only commissioned Jinling Company to declare, so Jinling Company does not know the transport matters of the goods in question. The court confirms the probative force of the evidence. Evidence 25, the statement issued by Jinling Company to prove there was the commission relationship between Jinling Company and Arts and Crafts Company. Wan Shi Hong Company raised no objection. Jinling Company raised no objection to the authenticity, but think that it was issued according to the requirements of Arts and Crafts Company, the purpose is to explain the reason that foreign exchange was not cancelled after verification to Ningbo Administration of Exchange Control;

Ningbo Arts and Crafts Import & Export Co., Ltd. v. …

813

from the point of view, the statement was issued to the outsider who did not know the situation of case, which shown that Arts and Crafts Company and Jinling Company has no business contact before that; if it was Arts and Crafts Company entrusted Jinling Company to declare, Arts and Crafts Company can completely prompt cash and retire up bill, but Arts and Crafts Company did not have the meaning. Jinling Company did not ask for the agency fee, which showed that both sides agreed that there was no commission contract relationship between Arts and Crafts Company and Jinling Company and no unpaid commission fees. The court confirms the competence of the evidence, the probative force will be identified combined with other effective evidence of the case. Evidence 26, archives reading materials of You Bei Company to prove that the outsider LIN Moumou does not have any relationship with You Bei Company. Wan Shi Hong Company raised no objection. Jinling Company raised no objection to the authenticity, but think that the industrial and commercial registration materials only can prove the relationship between shareholders and the investment enterprises, and cannot prove LIN Moumou out of the shareholders and You Bei Company does not have any relationship. While You Bei Company’s controller LI Moumou was also admitted in the inquiry transcripts that LIN Moumou was subject to the instructions and deliver specific instructions to Jinling Company, so regardless of whether LIN Moumou was the employee of You Bei Company, the instructions to Jinling Company was delivered on behalf of You Bei Company, it can completely be regarded as the commission issued by You Bei Company. The court confirms the competence of the evidence, the object claimed by the Plaintiff shall not be recognized. According to the criminal judgment of the Shanghai Second Intermediate People’s Court, the goods in question were You Bei Company controlled by LI Moumou illegal possessed and punished, thus LIN Moumou’s behavior was on behalf of You Bei Company in this case, which was not the situation that LIN had no relation with You Bei Company as claimed by the Plaintiff. Evidence 27, the excerpts of the Customs Law of the People’s Republic of China to prove that in accordance with the law, in this case only the consignee of goods, namely, Arts and Crafts Company has the right to declare to the customs. Wan Shi Hong Company, Jinling Company both thought the legal provisions are not evidence. The court holds that the material did not fall in a category of evidence in civil proceedings, which cannot prove the fact of the case, and the effectiveness of evidence shall not be confirmed. Evidence 28, the warehouse service agreement to prove that Arts & Crafts Company, Wan Shi Hong Company and You Bei Company signed the warehouse service agreement on October 30, 2004, agreed that the goods stored in warehouse of Wan Shi Hong Company were possessed by Arts & Crafts Company, Wan Shi Hong Company delivered the goods according to the original bill of lading issued by Arts & Crafts Company. Wan Shi Hong Company raised no objection to the authenticity, but thought that because the object did not enter the warehouse, the contract actually was not fulfilled. Jinling Company raised no objection to the authenticity, but thought that the evidence has nothing to do with Jinling Company,

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M. Davies and J. Lin

which proved that Wan Shi Hong Company shall assume custody responsibility of the goods in question stored in the warehouse. Evidence 29, three copies of the godown entry to prove Wan Shi Hong Company respectively issued the godown entry on October 29, 2004, October 29 and November 5, which confirmed receipt of 990 tons, 1,001 tons, 1,000 tons of goods in question. Wan Shi Hong Company did not recognize them, which thought that the evidence was forged by the outsider YAO Moumou. Jinling Company raised no objection. Evidence 30, the expertise report of Shanghai Public Security Bureau Physical Evidence Identification Center to prove that the official seal of the cash statement was Wan Shi Hong Company. Wan Shi Hong Company did not recognize it, which thought that Wan Shi Hong Company did not issue the cash of statement to YAO Moumou. Jinling Company raised no objection. The court holds that the evidence 28–30 could be verified by each other, and the effectiveness of the evidence shall be recognized. Evidence 31, vehicle registration form of outsiders (including excerpts), evidence 32, situation explanation, evidence 33, clearance of goods documents of Zhong Ji to prove that the 990 tons of goods noted in the transcripts of YAO Moumou and NI Moumou were not the goods in question. Actually, It was the imported goods of Ningbo Foreign Trade Co., Ltd. The goods in question have never entered the warehouse of Wan Shi Hong Company. Wan Shi Hong Company raised no objection. Jinling Company did not recognize the authenticity, legality and relevancy. According to the executed criminal judgment (2011) Hu Er Zhong Xing Chu Zi No.147 of the Shanghai Second Intermediate People’s Court, warehouse manager of Wan Shi Hong Company confirmed receipt of the 990 tons of goods. The court holds that the Shanghai Second Intermediate People’s Court has identified that more than 900 tons of goods in question have entered the warehouse of Wan Shi Hong Company, the authenticity and relevancy of the above evidence 31–33 all have doubtful points, which were not enough to overthrow the verification of the criminal judgment of the Shanghai Second Intermediate People’s Court, the effectiveness of the evidence shall not be recognized. Evidence submitted by Wan Shi Hong Company, the cross-examination opinions of Arts & Crafts Company and Jinling Company and the ascertainment opinions of the court are as follows: Evidence 1, the Criminal Judgment (2006) Hu Yi Zhong Xing Chu Zi No.44 to prove that YAO Moumou is the business manager of Shanghai Baoshan Fanpabang Warehouse, he is not the employee of Wan Shi Hong Company. YAO Moumou issued false godown entry to the outsider for many times, which was not an isolated action, it participated in the swindle of You Bei Company. Arts and Crafts Company and Jinling Company raised no objection to the authenticity, but think that it does not affect the identity of YAO Moumou who acted as the representative of Wan Shi Hong Company in this case. Evidence 2, receipt for accepting the case to prove that Wan Shi Hong Company reported to public security organ in time after knowing YAO Moumou forged godown entry in the name of Wan Shi Hong Company. Arts and Crafts Company

Ningbo Arts and Crafts Import & Export Co., Ltd. v. …

815

and Jinling Company raised no objection to the authenticity, but thought that whether the documents were forged shall be subject to the expert conclusion of the public security organ. Evidence 3, vehicle registration form of outsiders, evidence 4, situation explanation issued by the outsider Shanghai East International Container Transportation Co., Ltd., evidence 5, import container cargo delivery note, evidence 6, the customs documents of the outsider Zhongji Ningbo Foreign Trade Co., Ltd. to prove that 990 tons of PTA loaded in 45 containers entered into the Wan Shi Hong warehouse from November 6, 2004 to November 8, 2004 were the goods of Zhongji Ningbo Foreign Trade Co., Ltd., not the imported goods of Arts and Crafts Company. Arts and Crafts Company raised no objection. Jinling Company did not recognize the authenticity, legality, relevancy of evidence 3, 4, 6, and recognized the seal of evidence 5 but it has no relevancy with the case. Jinling Company held that according to the executed Criminal Judgment (2011) Hu Er Zhong Xing Chu Zi No.147 of the Shanghai Second Intermediate People’s Court, Wan Shi Hong Company’s warehouse manager NI Moumou and YAO Moumou have confirmed receipt of the Plaintiff’s 990 tons of goods, there is no reason to hold that 990 tons of cargo received by Wan Shi Hong Company belonged to Zhongji Ningbo Foreign Trade Co., Ltd. Evidence 7, seal style of You Bei Company to prove that special seal for contractual uses of You Bei Company was inconsistent with special seal for contractual uses of the commission fax provided by Jinling Company on October 20, 2004. Arts and Crafts Company raised no objection. Jinling Company raised objection to the authenticity, and think that it was not the original, and the evidence had no relevancy with the case, the contrast is not objective. Evidence 8, the style of business special seal of Wan Shi Hong Company to prove that business special seal of Wan Shi Hong Company was inconsistent with the style of seal of three godown entry made by YAO Moumou provided by Arts & Crafts Company, godown entry was forged by the outsider YAO Moumou. Arts & Crafts Company and Jinling Company held that the public security departments have identified the authenticity of Wan Shi Hong Company seal, which shall be subject to expert conclusion of public security organ. The court confirms the competence of evidence 1, 2, 7, 8, the probative force will be identified combined with other effective evidence of the case. Evidence 3–6 contradicts the executed criminal judgment of the Shanghai Second Intermediate People’s Court, and it was not enough to overturn the recognition of the executed criminal judgment, the effectiveness of the four evidence shall not be recognized. Evidence submitted by Jinling Company, the cross-examination opinions of Arts & Crafts Company and Wan Shi Hong Company and the ascertainment opinions of the court are as follows: Evidence 1, the inquiry transcripts of the operator LI Moumou of You Bei Company (April 30, 2014) to prove that You Bei Company was responsible for customs clearance of the goods in question; LI Moumou informed the Plaintiff to directly mailed the declaration documents to Jinling Company; You Bei Company paid 15% deposit of the payment to the Plaintiff; in the inquiry transcripts, LI

816

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Moumou confirmed the customs fees, tariff, and bond store costs shall be paid by You Bei Company, so LI Moumou required Jinling Company issued invoice to You Bei Company, which can prove that the fax of You Bei Company of October 20, 2004 was true and the statement of WANG Mengsheng’s inquiry transcripts of November 1, 2005 was true. Arts & Crafts Company raised no objection to the authenticity, but thought that the evidence was the record who was identified as a swindler associated with this case, which only recognized the statement in which were beneficial to the Plaintiff. Jinling Company and LI Moumou confirmed that according to the contract, Arts & Crafts Company is a declaration Company; LIN Moumou is not the employee of You Bei Company; Jinling Company accepted the commission of Arts & Crafts Company, and also claimed that it is entrusted by You Bei Company, the fault is obvious. Wan Shi Hong Company agreed to Arts & Crafts Company’s cross examination opinion. The court holds that because the parties concerned raised no objection to the authenticity, legality and relevancy of the inquiry transcripts, the court confirms the competence of evidence, and the probative force of the evidence will be recognized combined with other effective evidence of the case. Evidence 2, the commission fax of You Bei Company on October 20, 2004 to prove that You Bei Company faxed to Jinling Company, which commissioned Jinling Company to agent three consignment of goods in question and by the import declaration of another consignment of goods. You Bei Company informed Arts & Crafts Company to send the customs declaration documents to Jinling Company; the taxes relates to declaration shall be born by You Bei Company and settle accounts. After the customs clearance was finished, the goods in question were picked up by You Bei Company. Arts & Crafts Company did not recognize the authenticity, legality and relevancy, which thought that the agent import agreement of Arts & Crafts Company and You Bei Company agreed that by Arts and Crafts Company was commissioned to declare, so it is not possible that You Bei Company commissioned Jinling Company to declare. The content of the fax is inconsistent with the facts. Wan Shi Hong Company held that the evidence has nothing to do with the case. The court holds that because the evidence was copy, You Bei Company showed on the evidence did not express any cross examination opinion on the evidence, so the probative force of the evidence will be recognized combined with the other effective evidence of the case. Evidence 3, the taxes certificate of the goods in question paid by You Bei Company, tariff added-value tax covering warrant and the customs declaration to prove that You Bei Company has paid for the import tariffs and value-added tax of the goods to Jinling Company. Arts & Crafts Company did not recognize the authenticity, legality and relevancy. Under this circumstance of discarding the authenticity, it only showed that You Bei Company and the outsider Shanghai Zizhuo Trading Company Co., Ltd. (hereinafter referred to as Zizhuo Company) have ever made a payment to Jinling Company, it cannot show the relevancy with this case. Wan Shi Hong Company held that the evidence has nothing to do with the case.

Ningbo Arts and Crafts Import & Export Co., Ltd. v. …

817

Evidence 4, the freight forwarding invoice to prove Jinling Company charged the customs agency fees and bonded warehouse godown changes of the above four consignment of goods. Arts and Crafts Company raised no objection to the authenticity, but thought that it cannot be seen the relevancy with the case from the content. Wan Shi Hong Company held that the evidence has nothing to do with the case. Evidence 5, the inquiry transcripts of the operator WANG Mengsheng of Arts & Crafts Company on November 1, 2005 to prove the custom brokers company and warehouse of the goods in question were both appointed by LI Moumou. Arts & Crafts Company has ever issued bill of lading to You Bei Company to pick up 600 tons of goods in question which deposited in the warehouse of Wan Shi Hong Company. Arts and Crafts Company raised no objection to the authenticity, but the Plaintiff commissioned Jinling Company to declare for the four consignment of goods and sent the relevant materials. According to the agent import contract between Arts and Crafts Company and You Bei Company and warehousing agreement signed by Arts and Crafts Company, You Bei Company and Wan Shi Hong Company agreed that import declaration was designated by the Plaintiff, so Arts and Crafts Company was impossible to permit You Bei Company to arrange the customs clearance of the goods and transportation. Wan Shi Hong Company confirmed the authenticity of the evidence, which thought that the date of the godown entry can earlier than the date of the declaration, it can prove WANG Mengsheng knew YAO Moumou forged the godown entry. Evidence 6, the court record of the operator ZHANG Jihang of Jinling Company who appeared in court to accept inquiry in Ningbo Intermediate People’s Court (hereinafter referred to as the Ningbo Intermediate People’s Court) on August 7, 2006 to prove Jinling Company has never cooperated with Arts and Crafts Company. Arts and Crafts Company sent the declaration to Jinling Company according to the instructions of You Bei Company; Arts and Crafts Company has never sent instructions to Jinling Company; customs fee shall be born by You Bei Company; Jinling Company issued the letter of presentation to Arts and Crafts Company on January 25, 2005, which proved that Jinling Company and You Bei Company established a principal-agent relationship, and Jinling Company has no principal-agent relationship of the goods in question with Arts and Crafts Company; after the custom declaration of Jinling Company, the delivery of documents was delivered to the fleet according to the instructions of LIN Moumou, Jinling Company did not participate in the transport; the entrusting party who entrusted to declare was not really the operation entity, it may be consignee or the others. Arts and Crafts Company raised no objection to the authenticity, but thought that ZHANG Jihang was the employee of Jinling Company, whose testimony cannot be the evidence of Jinling Company, the purpose of proof shall not be recognized. Wan Shi Hong Company agreed the cross examination opinion of Arts and Crafts Company. Evidence 7, situation explanation issued by Jinling Company on January 25, 2005 (same as the Plaintiff’s evidence 25) to prove that the Plaintiff is not the consigner of the customs affairs in question; Jinling Company issued the situation

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explanation because You Bei Company was in default on the customs declaration fees. Arts and Crafts Company raised no objection to the authenticity, but thought that the evidence can prove that the entrustment relations between Arts and Crafts Company and Jinling Company, otherwise it will not detain documents of Arts and Crafts Company. Wan Shi Hong Company raised no objection to the authenticity and legality, but thought that it has nothing to do with the case. Evidence 8, the trial transcripts of Ningbo Intermediate People’s Court on August 7, 2006 to prove that the Plaintiff did not claim the interest when conducted prosecution in Ningbo. The instruction letter alleged by the Plaintiff is fictitious. The Plaintiff had confirmed to issue 600 tons of delivery note to offset the tariffs and value-added tax which has been paid by You Bei Company. Arts and Crafts Company raised no objection to the authenticity, but think that the interests claimed by Arts and Crafts Company was reasonable and legal, which was the fruits based on the principal; sending the instruction letter was Jinling Company’s statement. The letter was sent by fax to Jinling Company; Arts and Crafts Company does not confirm the view that the 600 tons of goods are put away. Arts and Crafts Company did not know the goods did not enter Wan Shi Hong Company’s warehouse at that time, so Arts and Crafts Company made such a statement. After the investigation it found that the goods did not enter Wan Shi Hong Company’s warehouse, so the premise that 600 tons of goods were lifted does not exist. Wan Shi Hong Company raised no objection to the authenticity and legality, but thought that it has nothing to do with the case. Evidence 9, the inquiry transcripts of ZHANG Jihang who was the employee of Jinling Company on March 2 and 3, 2005, to prove that the declaration of goods in question was LIN Moumou and LI Moumou contacted and commissioned Jinling Company. Arts and Crafts Company crafts has no contact with Jinling Company except sent customs declaration documents. Jinling Company is not responsible for transportation. Arts and Crafts Company recognized the authenticity, but thought that ZHANG Jihang did not deny the instruction is false, it just has no impression. Jinling Company shall make it clear that Arts and Crafts Company is the owner of the goods; ZHANG Jihang confirmed that it was Arts and Crafts Company sent the customs clearance documents to Jinling Company and entrusted Jinling Company to declare. ZHANG Jihang in transcripts of March 3 confirmed the goods shall be stored in warehouse of Wan Shi Hong Company, which can put away the goods only when Arts and Crafts Company delivered permission. Wan Shi Hong Company agreed the cross examination opinion of the Arts & the Crafts Company. Evidence 10, the inquiry transcripts of ZHU Jie on March 2, 2005 to prove the instruction letter called by the Arts & the Crafts Company does not exist. Arts and Crafts Company raised no objection to the authenticity, but thought that ZHU Jie only said that he did not see the instruction letter, it cannot prove the instruction letter is false, which confirmed that the it has business contact of four consignment of goods with Arts and Crafts Company. Wan Shi Hong Company agreed the cross examination opinion of Arts and Crafts Company. Evidence 11, the trial transcript excerpt of Zhejiang High People’s Court (hereinafter referred to as Zhejiang High People’s Court) on June 14, 2007 to prove

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that Arts and Crafts Company has confirmed that it did not sent the instruction letter on November 1, 2004 to Jinling Company, the material was false evidence. Jinling Company only accepted You Bei Company’s commission to be responsible for customs clearance, and it was not responsible for transport. Arts and Crafts Company raised no objection to the authenticity, but thought that the excerpt notes cannot explain the original intention. Wan Shi Hong Company agreed to the cross examination opinion of Arts and Crafts Company. Evidence 12, the inquiry transcripts of YANG Moumou on March 3, 2005 to prove that YANG Moumou followed instructions of LIN Moumou and did not have relationship with Arts and Crafts Company. Delivery of goods was commissioned by LIN Moumou, it was not arranged by Jinling Company. Arts and Crafts Company raised no objection to the authenticity, but thought that Arts and Crafts Company did not know the goods were put away by the outsider YANG Moumou. Arts and Crafts Company would not have permitted the goods to be directly released by Jinling Company. Wan Shi Hong Company agreed to the cross examination opinion of Arts and Crafts Company. The court confirms the effectiveness of evidence 3–5, the competence of evidence 6–12 shall be recognized, the probative force of the evidence will be combined with other valid evidence to recognize. Evidence 13, the Civil Judgment (2004) Hu Hai Fa Shang Chu Zi No.195 of the Shanghai Maritime Court, the Civil Judgment (2005) Hu Gao Min Si (Hai) Zhong Zi No.16 of Shanghai High People’s Court to prove the legal nature of blank customs proxy just was the actual consignor shall provide the customs declaration documents in accordance with the requirements of customs declaration for performing shipping agency contract, it is not civil legal sense of carte blanche or blank authorization, it cannot prove that foreign trade companies and freight forwarding companies established customs declaration entrustment relationship. Arts & Crafts Company and Wan Shi Hong Company thought that it has nothing to do with the case. The court holds that the two judgments were not evidence of the facts of the case, and the effectiveness of the evidence shall not be confirmed. Evidence 14, three copies of the godown entry to prove that Wan Shi Hong Company’s warehouse confirmed receipt of 2,991 tons of goods in question; evidence 15, statistic form about inventory prove that Wan Shi Hong’s warehouse confirmed to the Plaintiff that it has custodial responsibility of 2,991 tons of goods in question on December 31, 2004. Arts & Crafts Company raised no objection to the above two evidence, but thought that Wan Shi Hong Company denied the goods were put in storage. The investigation of public security unit also confirmed that the goods did not enter Wan Shi Hong Company’s warehouse. Wan Shi Hong Company held that godown entry and cash statement were forged by YAO Moumou, the relevancy, the authenticity and legality shall not be recognized. The court holds that the above evidence are original. According to the verification document issued by Shanghai Public Security Bureau, the cash statement and storage agreement which were signed by Arts & Crafts Company, You Bei Company, Wan Shi Hong Company on October 30, 2004, the impression of seals “Shanghai Wan Shi Hong Warehousing Logistics Co., Ltd.” was formed by the

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same seal. Wan Shi Hong Company confirmed that the authenticity of the seal of Wan Shi Hong Company of warehousing agreement, and other valid evidence of this case also can confirm Wan Shi Hong Company knew that YAO Moumou contracted to do a job in the name of Wan Shi Hong Company. To sum up, the court confirms the effectiveness of the two evidence. Evidence 16, check and letter of commitment to prove that Wan Shi Hong Company accepted Zizhuo Company’s cheque and letter of commitment, which issued the certificate of the goods in question to Arts & Crafts Company under the circumstance of the goods not put in storage. Arts and Crafts Company thought that the evidence has nothing to do with it, and it cannot produce a cross examination opinion. Wan Shi Hong Company recognized the authenticity, but thought that it has no relevancy with the loss of the Plaintiff. The court confirms the effectiveness of the evidence. Evidence 17, the Criminal Judgment (2011) Hu Er Zhong Xing Chu Zi No.147 to prove LI Moumou fraud the goods of the Plaintiff in the name of You Bei Company; LI Moumou put away the Plaintiff’s chemical raw materials in case of unpaid payment for goods and let Wan Shi Hong Company issued the godown entry. Wan Shi Hong Company received the 990 tons of goods of the Plaintiff. Arts and Crafts Company raised no objection to the authenticity, but the situation that Wan Shi Hong Company received 990 tons of goods of the Plaintiff shall not be recognized. Wan Shi Hong Company recognized the authenticity, the first and second points of the object of proof, the third agreed to the views of Arts and Crafts Company. The court holds that the evidence was legally effective criminal judgment, although Wan Shi Hong Company, Arts and Crafts Company denied the identification of some facts, it failed to provide sufficient evidence to overturn, the court confirms the effectiveness of the evidence. Evidence 18, trial transcripts of the case (2008) Hu Hai Fa Shang Chu Zi No.434 (August 25, 2009) to prove Arts and Crafts Company and Wan Shi Hong Company confirmed that it is no need for ZHANG Jihang to appear in court as a witness and raised no objection to the opinion of serving as a witness at court of Ningbo Intermediate People’s Court; the Plaintiff received 15% of the deposit. Arts and Crafts Company raised no objection to the authenticity, but thought that although it confirmed that it was no longer ZHANG Jihang to appear in court as a witness at that time, it has objection to ZHANG Jihang’s testimony at the time, it does not mean that Arts and Crafts Company confirmed the effectiveness of ZHANG Jihang’s evidence. The Plaintiff confirmed receipt of RMB3.1 million, it does not deduct in appeal. Wan Shi Hong Company agreed to cross examination opinion of Arts and Crafts Company. The court confirms the effectiveness of the evidence, and recognizes the opinion of Arts and Crafts Company and Wan Shi Hong Company on the part of the ZHANG Jihang’s testimony. Evidence 19, the detailed financial voucher of four consignment of businesses No.HDSJXXXXXXX, HDSJXXXXXXX, HDSJXXXXXXX, HDSJXXXXXXX to prove the basis of the four freight forwarding invoices and the relevancy of the case. Arts and Crafts Company raised no objection to the authenticity, but thought that it is issued by Jinling Company on its own. The situation explanation of Jinling

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Company indicates that because it did not receive the money, Jinling Company did not deliver the declaration to Arts and Crafts Company, the principal-agent relationship is formed between Jinling Company and Arts and Crafts Company. Wan Shi Hong Company raised no objection to the authenticity, but it cannot prove that invoices were issued to You Bei Company, it existed entrustment relations with You Bei Company. Actually, Jinling Company did not receive the agent fees paid by You Bei Company. The court holds that Jinling Company provided the original financial documents of the evidence, the effectiveness of its evidence shall be recognized. You Bei Company did not submit evidence, nor did it raise cross-examination opinions on the evidence submitted by the other parties. After the comprehension of the Plaintiff, the Defendant’s evidence, crossexamination and the court’s investigation, the court finds out the facts of the case as follows: 1. Regarding to the content and performance of the sales contract and the import agent contract involved In October 2004, the outsider LI Moumou (who was sentence to life imprisonment for the crime of contract fraud) and the employee WANG Mengsheng of Arts and Crafts Company contacted the matters of agent for importing PTA. On October 15, 2004, Arts and Crafts Company and Sinochem Trading (Singapore) Pte Ltd. signed one copy of the sales contract No.SCSGPTA241011JY and No.SCSGPTA241013JY, which agreed that Arts and Crafts Company bought PTA 1,001 tons, 990 tons from the company, the unit price was USD815 per ton, the total price was USD815,815, USD806,850 respectively. The goods were delivered in Shanghai bonded warehouse, the payment was irrevocable letter of credit 90 days from date of delivery. On the same day, Arts and Crafts Company and LG International (HK) Limited signed a sales contract No.CH-04-167B, which agreed that Arts and Crafts Company bought PTA 1,000 tons from the company agreed to buy 1,000 tons of crafts company PTA to the company, the unit price was USD870 per ton, the total price was USD870,000. On October 18, 2004, LI Moumou in the name of You Bei Company signed a copy of agent import agreement No.GYAC01031-137, GYAC01031-138, GYAC01031-140 with Arts & Crafts Company, which agreed that You Bei Company commissioned Arts and Crafts Company to import PTA 1,001 tons, 990 tons, 1,000 tons, the unit price was USD815 per ton, USD815 per ton, USD870 per ton, the total price was USD815,815, USD806,850, USD870,000 respectively. Payment was irrevocable letter of credit 90 days from date of delivery. The goods were delivered in Shanghai bonded warehouse. Import declaration was handled by the custom brokers company designated by Arts & Crafts Company, but the tariff and value-added tax was paid by themselves You Bei Company; You Bei Company undertakes all the expenses, including issuing, acceptance, insurance fees and customs fees of the goods, freight fees, transit shipment, and storage and other import fees; You Bei Company paid issuing bonds 15% of the imported goods amount to Arts & Crafts Company before issuing. Arts & Crafts Company issued

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letter of credit in three working days after You Bei Company paid the bail; agency fees were 0.8% of the amount of the actual delivery of goods; after the implementation of customs clearance, take delivery of goods with cash. But in three days before the negotiation, You Bei Company need to paid off the balance payment to Arts & Crafts Company, otherwise it deemed as You Bei Company default. Issuing bonds and goods owed to Arts & Crafts Company. Arts & Crafts Company still retains the right of recourse to You Bei Company. In the trial, Arts & Crafts Company confirmed receipt of payment of You Bei Company RMB3.1 million issuing bonds of goods in question. On October 18, 2004, Shanghai Pudong Development Bank issued irrevocable letter of credit No.LCXXXXXXXXXXXX, LCXXXXXXXXXXXX, LCXXXXXXXXXXXX according to the application of Arts & Crafts Company, beneficiary were respectively in Sinochem Trading (Singapore) Pte Ltd., Sinochem Trading (Singapore) Pte Ltd., LG Commercial (Hong Kong) Co., Ltd., the amount was respectively USD815,815, USD806,850, USD870,000, which issued draft within 90 days from the date of issuance of the bill of lading by 100% invoice price. On October 18, 2004, Arts and Crafts Company paid opening commission of the above three letters of credit RMB7100.32, RMB7022.29, RMB7571.91, post and telecommunications fees for each was RMB200. On October 28, 2004, Arts and Crafts Company paid the acceptance fee of the above three letters of credit RMB10143.31, RMB10031.85, RMB10817.01. On January 14, 2005, Arts and Crafts Company paid USD815,815, USD806,850, USD870,000 under the above three letters of credit, totaling USD2,492,665. 2. Regarding to the customs declaration and picking up of goods involved After the above import agent agreement was signed, LI Moumou appointed LIN Moumou (detention at large) to arrange the declaration of goods in question. LIN Moumou telephoned ZHANG Jihang who was the clerk of Jinling Company, and said that there has more than 3,000 tons of goods that need Jinling Company to declare, and will mail the document. On October 25, 2004, Arts and Crafts Company expressed the delivery order of the three consignment of goods in question, commercial invoice, packing list, import and export goods customs declaration agency proxy (commissioned unit is blank) and other import documents to the clerk ZHANG Jihang of Jinling Company. Jinling Company received the import documents of the three consignment of goods, 1,001 tons, 990 tons of PTA were delivered to Shanghai Tong Yuan Customs Declaration Co., Ltd. (hereinafter referred to as Tong Yuan Company) to declare, 1,000 tons of PTA were delivered to Shanghai Ji Hua International Freight Forwarding Co., Ltd. (hereinafter referred to as Ji Hua Company) to declare. The unit in operation noted by declaration of the three consignment of goods was Arts and Crafts Company, the receiving unit was You Bei Company. The total price was USD815,815, USD806,850, USD870,000, the date of import declaration was October 27, October 27, October 28, 2004. The tariff and value-added tax of the three consignment of goods were RMB1,701,268.62 (1,001 tons), RMB1,682,785.94 (990 tons), RMB1,813,863.64 (1,000 tons), a total of

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RMB5,197,918.20. The special covering warrant of three customs duties and value-added tax noted the payment units are Arts and Crafts Company and You Bei Company, the dates of issuance were October 28, October 28 and October 29, 2004 respectively. You Bei Company paid in full the above customs duties and value-added tax to Jinling Company on November 3, November 3, November 1, 2004 respectively. After 1,001 tons, 990 tons of PTA arrived in Shanghai port, which were stored in the bonded warehouse of Sinotrans East China Co., Ltd. Storage and Transportation Branch (hereinafter referred to as Storage and Transportation Company). After Tong Yuan finished the declaration, customs clearance of the bill of lading of Storage and Transportation Company (store requisition) shall be delivered to Jinling Company, Jinling Company delivered to the outsider YANG Moumou’s fleet. YANG Moumou claimed that when accepting the inquiry of Ningbo Public Security Bureau, fleet was LIN Moumou’s instruction, and pick up 1,001 tons, 990 tons of PTA from the bonded warehouse of Storage and Transportation Company on October 28 and 29. And according to the instruction of LIN Moumou, the goods were delivered to Sanmao Wharf and Linjiang Wharf. And it claimed that under the impression has delivered 45 boxes of PTA from the port of Shanghai to Wan Shi Hong Company’s warehouse. After 1,000 tons of PTA arrived at the port of Shanghai, which were stored in the bonded warehouse of Shanghai Gao Hang Industrial Co., Ltd. (hereinafter referred to as Gao Hang Company) located in Shanghai Waigaoqiao Free Trade Zone by Shanghai Ocean Logistics Co., Ltd. (hereinafter referred to as Shi Yang Logistics). After Ji Hua finished the declaration, Waigaoqiao bonded area storage of goods out of the district (warehouse) bill of lading storage and verification of the original shall be delivered to Gao Hang Company in accordance with the instruction of Jinling Company. After that, Gao Hang Company delivered the goods to the outsider who came to pick up goods Shanghai Si Jia Container Transport Co., Ltd. (hereinafter referred to as Si Jia Company). The legal representative of Si Jia Company CAI Jinling claimed that when accepting the inquiry of Ningbo Public Security Bureau it was the commission of LI Moumou of Zizhuo Company (the company is also controlled by LI Moumou), and the goods were picked up from Gao Hang Company on November 2, 2004, according to the instructions of LI Moumou, the goods shall be delivered to Xinhua Paper Mill Wharf to directly transship the goods. On December 2, 2004, Jinling Company issued three copies of special invoice for international freight forwarding agency No.XXXXXXX, XXXXXXX, XXXXXXX, invoice noted the payer was You Bei Company, including lump sum charge and godown changes. The fees were respectively RMB146,500, RMB75,753, RMB116,704. Jinling Company said that the above invoices have been delivered to You Bei Company but none has yet to pay fees. On January 25, 2005, Jinling Company issued a description of the situation to Arts and Crafts Company. The content was “the import fee of the four consignment of goods No.XXXXXXXXXXXXXXXXXX, XXXXXXXXXXXX, XXXXXXXXX, XXXXXXXXXXXXXXXXXX has not been paid off, so customs

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declaration of the four consignment of goods were detained in our company”. ZHANG Jihang claimed when appeared in court as a witness in the Ningbo Intermediate People’s Court, description of the situation was Arts and Crafts Company required to issue because customs declaration did not return, it is need to verify in Administration of Exchange Control. 3. Regarding to the signing process of warehousing agreement, the content of the agreement and the performance On October 30, 2004, Wan Shi Hong Company commissioned YAO Moumou (who was sentenced to nine years imprisonment due to contract fraud) to sign an agreement with Arts & Crafts Company and You Bei Company, which agreed Arts & Crafts Company and You Bei Company to borrow Wan Shi Hong Company’s warehouse for storage of chemical plastic products; Wan Shi Hong Company delivered the original warehouse receipt to Arts & Crafts Company when goods into the warehouse within 2 days. Wan Shi Hong Company delivered the goods shall with the original seal of bill of lading of Arts and Crafts Company. Although there has the draft of delivery unit or other payment, Arts and Crafts Company has not issued bill of lading, Wan Shi Hong Company shall not delivery for any reason. The loss which was caused by shipping error shall be born by Wan Shi Hong Company; storage fees shall be charged by Wan Shi Hong Company from You Bei Company, it has nothing to do with Arts and Crafts Company; the goods of Arts and Crafts Company stored in Wan Shi Hong Company, the ownership of the goods belonged to Arts and Crafts Company. The general manager NI Moumou of Wan Shi Hong Company when accepting the inquiry of the Ningbo Public Security Bureau on March 24, 2005 said: the warehousing business of case in question was introduced by YAO Moumou; then YAO took the sealed tripartite agreement of You Bei Company to let NI Moumou sign, NI sealed the agreement and delivered it to YAO; on November 2, it received an express which was written “to YAO Moumou” from Ningbo, but the guard returned the express because there was no such person called YAO in the company; YAO asked NI whether received the tripartite agreement next day, NI said no, YAO let Arts and Crafts Company sent the express again, Wan Shi Hong Company received the express on November 4; After the goods were delivered from the bonded warehouse, YAO Moumou issued three copies of godown entry to Arts and Crafts Company. Date of entry recorded was October 29, October 29, November 5, 2004, the total weight was 1,001 tons, 990 tons, 1,000 tons, the name of the goods was PTA, the consignee was YAO Moumou, and they were stamped with Wan Shi Hong Company’s business dedicated seal. The three copies of godown entry were issued by YAO Moumou and/or Wan Shi Hong Company when the goods in question were not all entered the warehouse of Wan Shi Hong Company and accepted Zizhuo Company’s cheque RMB16 million and the commitment letter provided by LI Moumou. Subsequently, Wan Shi Hong Company received the warehouse notice issued by Arts and Crafts Company that 600 tons of PTA were given to You Bei Company.

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On December 31, 2004, Wan Shi Hong Company issued a cash statement to Arts and Crafts Company, named Arts and Crafts Company still has the following goods on December 31, 2004 in Wan Shi Hong Company’s warehouse: No.10–990, 10– 1001, 10–1000, the trade name was PTA, the number of packages were 390, 1,001, 1,000, the total balance was 2,391 (ton), and stamped with the official seal of Wan Shi Hong Company. By the identification of Shanghai Public Security Bureau Physical Evidence Identification Center, the seal of the cash statement and the seal of the warehousing agreement “Shanghai Wan Shi Hong Logistics Warehousing Co. Ltd.” were the same seal. NI Moumou claimed when accepting the inquiry of the Shanghai Public Security Bureau on September 13, 2005, YAO Moumou pretended to be the employee of Wan Shi Hong Company, forged godown entry and seal of Wan Shi Hong Company; on November 7, 2004, Wan Shi Hong Company received 990 tons of PTA, the owner was Arts and Crafts Company, You Bei Company paid the cost of warehousing; Wan Shi Hong Company only received 990 tons of PTA of Arts and Crafts Company. Because YAO Moumou provided RMB16 million and the letter of commitment to Zi Zhuo Company, and added 399.625 tons of PVC as collateral, then You Bei Company put away 990 tons of PTA; 990 tons of PTA was put away by YANG Moumou with the fax of the delivery note of You Bei Company, YAO delivered three copies of hard copy of delivery note of 200 tons. Arts and Crafts Company confirmed in the trial that it had issued the delivery note of 600 tons of PTA to You Bei Company, but it was based on Arts and Crafts Company thought that 2,991 tons of goods in question were in the custody of Wan Shi Hong Company’s warehouse, considering You Bei Company has paid the issuing deposit and the tariff and value-added tax of the goods in question and other expenses, it agreed to release part of the goods. 4. The other situations related to the disputes involved On February 6, 2005, the holding company of Arts and Crafts Company Shanshan Investment Holding Co., Ltd. reported to the Shanghai Public Security Bureau You Bei Company and Shanghai Shan Jin Chemical Co. Ltd. made use of the import agent, by means of forging seal and delivery note, without payment of the goods, withdraw all the goods (including the three consignment of PTA). On March 2 and 3, 2005, Jinling Company’s clerk ZHANG Jihang when accepting the inquiry of the Ningbo Public Security Bureau said: LIN Moumou telephoned me and he need our company to declare, then Arts and Crafts Company called and asked Jinling Company’s address, then Arts and Crafts Company sent a set of customs declaration documents; Jinling Company and Arts and Crafts Company had no written agreement; both sides have errors in the work, because the declaration was commissioned, so the two parties did not sign the agreement; when the declaration was finished, LIN Moumou instructed the delivery note shall be delivered to YANG Moumou’s fleet, and let the fleet to down to Wan Shi Hong Company’s warehouse; Arts and Crafts Company had no contact with Jinling Company when sent the customs declaration documents, You Bei Company kept in touch with Jinling Company; freight invoice was issued to You Bei Company, the

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express sent to LI Moumou, the time was December 2004; WANG Mengsheng had told that the goods shall be stored in Wanshihong’s warehouse and Arts and Crafts Company protected goods; it is not the responsibility of Jinling Company to deliver the goods to Wanshihong’s warehouse, because Jinling Company and the consignee You Bei Company only settled the clearing customs fees, storage fees, freight fees was settled by transportation Company and You Bei Company. On November 1, 2005, Arts and Crafts Company’s clerk WANG Mengsheng said when accepting the inquiry of Shanghai Public Security Bureau: the custom brokers company of the three consignment of goods in question was Jinling Company appointed by LI Moumou, tariff and value-added tax were paid by You Bei Company; Wan Shi Hong Company’s warehouse was appointed by LI; Arts and Crafts Company mailed import documents to Jinling Company according to Jinling Company’s requirements and did not go to the warehouse on-site to check the goods, because Arts and Crafts Company trusted the warehouse; Arts and Crafts Company has ever issued three delivery notes that a total of 600 tons of PTA to You Bei Company for pick up the goods from the warehouse of Wan Shi Hong Company. On June 22, 2005, Wan Shi Hong Company reported to the Shanghai Public Security Bureau: it received 990 tons of PTA on November 7, 2004, the delivery fleet paid storage costs on behalf of You Bei Company, then it did not receive any goods. YAO Moumou was suspected of posing as employees of the Company, forging godown entry and seal, intercepting the goods. 5. Regarding to criminal judgment of LI Moumou’s contract fraud crime including the goods involved On February 22, 2012, the Shanghai Second Intermediate People’s Court made the Criminal Judgment of (2011) Hu Er Zhong Xing Chu Zi No.147. The criminal judgment confirmed that: You Bei Company is a company of LI Moumou on commission; since October 2014, LI Moumou in the name of You Bei Company to conceal the truth of unpaid the payment. Under the conditions of the victim Arts and Crafts Company knowing nothing, which picking up low-pressure polyethylene, glycol and PTA of Arts and Crafts Company that total value of RMB39.81 million stored in Wan Shi Hong Company’s warehouse, Shanghai Jinming Composite Paper Cans Factory’s warehouse, Zhangjiagang Tariff-free Zone Kaiteng Chemical Storage Co. Ltd.’s warehouse or not be actual put in storage. The witness YAO Moumou’s testimony confirmed LI Moumou picked up the chemical raw materials of Arts and Crafts Company stored in Wan Shi Hong Company in the case of unpaid the payment and let Yao issued the godown entry of Wan Shi Hong Company; the witness NI Moumou’s testimony confirmed Wan Shi Hong Company only received 900 tons of PTA of Arts and Crafts Company. The other godown entries were forged; Shanghai Shan Jin Chemical Co., Ltd. and Zizhuo Company were actually controlled by LI Moumou, the authorized to operate Shanghai Xin Zi Mao Industry and Trade Co., Ltd. of LI Moumou, You Bei Company for the purpose of illegal possession, in the process of signing and conducting the contract to defraud money (including the goods in question) totaling

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RMB130 million. The public prosecutor accused LI Moumou guilty of contract fraud was convicted, sentenced to life imprisonment and the confiscation of RMB400 thousand, all articles of property illegally obtained shall be recovered and returned to each victim unit, the insufficient part shall be ordered to pay compensation. The judgment has come into force. On April 13 of the same year, Arts and Crafts Company received follow-up payment RMB183,337.06 allocated by the Shanghai Second Intermediate People’s Court. 6. Regarding to the litigation of Arts and Crafts Company in terms of losses in question before the lawsuit of the case On January 24, 2005, Arts and Crafts Company filed an action against You Bei Company and Wan Shi Hong Company to the court of Ningbo on the grounds of import agent contract dispute. On February 22, 2006, Arts and Crafts Company additionally applied for Jinling Company as the third party. On March 2 of the same year, the Ningbo Intermediate People’s Court notified Jinling Company to participate in litigation. On December 7 of the same year, the Ningbo Intermediate People’s Court of first instance verdict on the case. After that, Arts and Crafts Company, Jinling Company respectively filed an appeal. Zhejiang High People’s Court made a ruling to revoke the judgment on July 24, 2007 and remand the case. Arts and Crafts Company withdrawed the application of Jinling Company as the third party on August 16 of the same year, and on August 20 applied for Jinling Company as the Defendant. Ningbo Intermediate People’s Court on August 30 of the same year accepted the case and made the retrial. On October 11 of the same year, the Ningbo Intermediate People’s Court notified Jinling Company as a co-Defendant to participate in litigation. On October 23 of the same year, Jinling Company raised objection to the jurisdiction, requesting to transfer the case to the court. Ningbo Intermediate People’s Court dismissed the application on November 22 of the same year. Jinling Company lodged an appeal. Zhejiang High People’s Court ruled to revoke the ruling of Ningbo Intermediate People’s Court on January 31, 2008 and transferred the case to the court for hearing. On March 3 of the same year, the Ningbo Intermediate People’s Court transferred the case to the court. The court accepted the case on June 11, 2008, the case number (2008) Hu Hai Fa Shang Chu Zi No.434. Because in the process of trial, Wan Shi Hong Company and You Bei Company were suspected of economic crimes, and the public security organs have investigated suspected fraud suspect LI Moumou, the court transferred the case to the Public Security Bureau of Economic Investigation Corps of Shanghai on June 17, 2010. In addition, the court finds out that on February 16, 2009, Arts and Crafts Company in the first trial of (2008) Hu Hai Fa Shang Chu Zi No.434 formally put forward the request of the loss of interest to the three Defendants. The court holds that the Plaintiff confirmed that it sued the three Defendants on the basis of joint tort, so the case is a dispute arising from tort liability over agency for import of the goods. The Plaintiff as the buyer of the foreign trade contract, it applied to issue the letter of credit, and paid the payment by letter of credit negotiation. According to the agreement of the Plaintiff and You Bei Company, the

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ownership of the goods belonged to the Plaintiff before You Bei Company paid off the payment, so it can be confirmed that the Plaintiff was the owner of the goods. The issues of the case are: (1) whether the three Defendants have committed the infringement on the Plaintiff and whether they should bear joint and several liability; and (2) the scope of the compensation obtained by the Plaintiff for infringement. (1) Regarding to whether the three Defendants have committed infringement on the Plaintiff and whether they should bear joint and several liability 1. Regarding to the disputes between Arts and Crafts Company and You Bei Company. According to the ascertained facts, LI Moumou in the name of You Bei Company signed the import agency agreement and warehousing agreement with Arts and Crafts Company, and handled the goods in question under the circumstance of Arts and Crafts Company without knowing that. They directed others to issue the fictitious godown entry, create a facade the goods have all entered the warehouse of Wan Shi Hong Company to achieve the purpose of illegal possession of goods. Its behavior has been identified as a contract fraud in criminal cases. The above behavior seriously infringed the legal right of Arts and Crafts Company to the goods in question. Because LI Moumou is the authorized operator and the actual controller of You Bei Company, in accordance with the provisions of Article 3 of the Provisions of the Supreme People’s Court on Several Issues concerning Economic Crimes Suspected in the Trial of Economic Disputes, the persons directly in charge and other directly responsibility personnel of the company in the name of the company to sign economic contracts, all or part of the property that has been obtained to constitute a crime, in addition to the doer’s criminal responsibility shall be investigated, the company shall bear civil liability for the doer signed and conducted the economic contract, You Bei Company shall bear civil liability for the loss of property suffered by Arts and Crafts Company in this case. Arts and Crafts Company requires You Bei Company to bear the civil liability of infringement, which shall be supported in accordance with law. 2. Regarding to the disputes between Arts and Crafts Company and Wan Shi Hong Company. Although Wan Shi Hong Company denied to make the godown entry and cash statement, according to the seal identification conclusion of the appraisal organization, the seal of cash statement was same as the seal of storage agreement on Wan Shi Hong Company, and Wan Shi Hong Company raised no objection to the authenticity of seal of the warehousing agreement; although Wan Shi Hong Company reported that YAO Moumou forged seal of Wan Shi Hong Company, it was not identified by the judicial department; according to the statement of NI Moumou, who delivered storage agreement stamped with the seal of Wan Shi Hong Company to YAO Moumou for consulting with Arts and Crafts Company and provided the godown entry to YAO for facilitating YAO to conduct business, and confirmed 990 tons of PTA of Arts and Crafts Company have entered Wan Shi Hong Company’s warehouse; Wan Shi Hong Company has received the

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blank check and the commitment letter of Zizhuo Company provided by LI Moumou provided and other goods as the goods in question of the mortgage; the criminal judgment of the second Intermediate People’s Court has confirmed that more than 900 tons of PTA in question has entered Wan Shi Hong Company’s warehouse. According to the above series of facts, the court holds that YAO Moumou on behalf of Wan Shi Hong Company signed the warehousing agreement with Arts and Crafts Company. Under the conditions that the goods are not actually entered the warehouse of Wan Shi Hong Company, YAO Moumou and/or Wan Shi Hong Company in the name of Wan Shi Hong Company to issue the godown entry and cash statement. To say the least, even if it is as the statement of Wan Shi Hong Company, it is YAO Moumou that issued the godown entry and cash statement, Wan Shi Hong in the dark. According to Article 49 of the Contract Law of the People’s Republic of China, the consequences shall be born by Wan Shi Hong Company. Under the conditions that the goods agreed in the warehousing agreement are not entered its warehouse, it issued the false godown entry and cash statement according to the requirements of LI Moumou of You Bei Company to cheat Arts and Crafts Company, which caused Arts and Crafts Company mistook the goods has entered into the warehouse and relaxed vigilance, then Arts and Crafts Company still sent an instruction that the part of the goods delivered to You Bei Company, it provided convenience and saved the time for You Bei Company to defraud and transfer the goods. The subjective fault of Wan Shi Hong Company in this case is obvious, and it provides a convenient conditions for the implementation of the infringement behavior of You Bei Company, it has causal relationship for the loss of property suffered by Arts and Crafts Company. According to Article 148 of the Opinions of the Supreme People’s Court on Several Issues concerning the Implementation of the General Principles of the Civil Law of the People’s Republic of China (for Trial Implementation), “those who instigate or assist others in carrying out acts of tort shall be jointly and severally liable for joint torts”, the court holds that Wan Shi Hong Company shall bear joint civil liability as the joint tortfeasors in terms of the losses suffered by Arts and Crafts Company in the case. 3. Regarding to the disputes between Arts and Crafts Company and Jinling Company. Arts and Crafts Company claimed it commissioned Jinling Company to declare and commissioned Jinling Company to deliver the goods to Wan Shi Hong Company’s warehouse. But Jinling Company ignored the fact that the document of title noted the owner was Arts and Crafts Company and still delivered the document of title to the outsider, resulting in Arts and Crafts Company losing the possession of the goods in question, so Jinling Company shall bear tort liability for compensation to Arts and Crafts Company. The court holds that Arts and Crafts Company raised a claim against Jinling Company on the basis of infringement rather than the contract. According to the provisions of the Tort Liability Law of the People’s Republic of China, the condition for Jinling Company to bear the tort liability is that it has the subjective fault, and there is the causal relationship between behavior and damage results. The main behavior of Jinling Company which triggered the controversy was delivering the document of title to the fleet appointed by You Bei Company (LI Moumou, LIN

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Moumou) instead of Arts and Crafts Company. Whether there is a fault for Jinling Company’s subjective behavior, and whether there is a causal relationship with the loss of Arts and Crafts Company, is the key to determine whether Jinling Company shall bear the tort liability in this case: (1) Regarding to whether Jinling Company has the subjective fault to deliver the document of title to You Bei Company. In the practice of freight forwarding, customs being entrusted layer upon layer is quite common, the final custom brokers company to declare is often not the commission noted on the commissioned unit (import operator) which accepted the customs declaration. There may exist one or more of the freight forwarding company between the custom brokers company and the import operator. Chinese laws and administrative regulations have no police force that the custom brokers company or other freight forwarding companies must deliver the documents directly to import operator, so the company which accepts the commission of declaration has no legal obligation to deliver the customs declaration documents directly to import operator noted on the documents. In the absence of special agreement, the custom brokers company and other freight companies will deliver the documents including the document of title to the person who entrusted it after the declaration was finished rather than directly deliver it to the owner of the document of title (import operator). This is in line with the principle of relativity of the contract and the trading habit of customs declaration, and it does not disobey the law. Arts and Crafts Company claimed that Jinling Company should deliver the documents to the owner noted on the document of title, which is lack of legal basis. In this case, to whom Jinling Company shall deliver the documents of title depends on whether Jinling Company actually accepted the commission of whom. Arts and Crafts Company claimed that it commissioned Jinling Company to declare, the main basis is the documents required for customs declaration including blank declaration proxy (the mandatory at the blank) sent to Jinling Company, and Jinling Company had to issue the description of detaining the customs declaration documents. The court holds that on the legal effectiveness of the blank customs declaration entrustment letter, customs declaration entrustment letter is an essential document for customs clearance, which shall be issued by import operator. As mentioned above, customs declaration being entrusted layer upon layer is quite common, people who get the customs proxy are not commissioned by the import operator of the customs proxy but entrusted by other people, this person may be the consignee and may be also other freight forwarding companies. Therefore, in judicial practice, the “blank customs declaration proxy” is deemed as the documents submitted by the consignor to the customs at the request of the customs, and it is not regarded as the “blank proxy” in the sense of civil law or “blank authorization”. Therefore, in terms of the act of sending customs declaration documents for Arts and Crafts Company, it is only a factual behavior, which cannot be identified as that there is the legal relationship of entrusted customs declaration between the sender and the recipient. The trade in question has its particularity. It is the import trade of goods under the mode of foreign trade agency, which has the nominal import operator (Arts and Crafts Company) and the actual importer (You Bei Company), Arts and Crafts Company actually is the foreign

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trade agent of You Bei Company. On the basis of the existing evidence to ascertain, the first to issue a commissioned offer to Jinling Company is LIN Moumou on behalf of You Bei Company, which in the name of You Bei Company to request Jinling Company to declare for the goods in question. This fact can be proved in the transcripts of WANG Mengsheng of Arts and Crafts Company, WANG Mengsheng confirmed when accepting the inquiry of the public security organs that the custom brokers company (Jinling Company) was appointed by LI Moumou (You Bei Company) instead of Arts and Crafts Company. Although Arts and Crafts Company and You Bei Company in the import agency agreement agreed that custom brokers company is designated by Arts and Crafts Company, but in the actual implementation process it has changed the agreement. Thus, the first contact Jinling Company for commission the customs clearance is You Bei Company not Arts and Crafts Company, the first company commissioned customs clearance and Jinling is You Bei Company not Arts and Crafts Company. In addition to sending the customs clearance documents, Arts and Crafts Company had no even more clear meaning in the name of its own to commission Jinling Company for customs declaration. Jinling Company has reason to believe that it accepted the commission of You Bei Company. Arts and Crafts Company sending the declaration documents is just fulfilling the obligation of the foreign trade agent according to the requirement of You Bei Company. In addition, commissioned customs declaration is a dual contract, the two sides shall reach an agreement not only about the commission matters but also the import tariffs, VAT, warehousing fees and customs agency fees and other expenses of customs declaration shall be prearranged. However, in this case, there is no evidence that Arts and Crafts Company have any agreement with Jinling Company on the relevant costs and expenses. The company explained that the above cost shall be born by You Bei Company according to the agreement of import agent contract, so it did not talk with Jinling Company. The fact is that You Bei remitted more than RMB5 million of the customs value added tax to the account of Jinling Company, Jinling Company also issued customs agent invoice that the latter as the payer to You Bei Company. Accordingly, the customs fees and the amount of remuneration is agreed between Jinling Company and You Bei Company. The court holds that because Arts and Crafts Company and Jinling Company did not conclude a declaration contract, You Bei Company is the actual import agent of goods in question, which issued an offer to entrust customs clearance to Jinling Company, and settled the customs fees with Jinling Company. In contrast, Arts and Crafts Company did not have any express to commission Jinling Company for customs declaration except for sending the documents of customs declaration, and did not claim to Jinling Company that delivered in the entire process of customs declaration. The description issued by Jinling Company is also after the case, Jinling Company issued the description according to the requirement of Arts and Crafts Company for the purpose of import verification, the content of the description cannot reflect the existence of the legal relationship of entrusted customs declaration between Jinling Company and Arts and Crafts Company. In summary, the court holds that according to the existing evidence, there is no necessary legal basis for the existence of the legal relationship of

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entrusted customs declaration between Jinling Company and Arts and Crafts Company, which cannot make the court shape the moral certainty of the facts of their claims. Jinling Company has reason to hold that it accepted the commission of You Bei Company to declare, it has no legal fault in accordance with the instructions of You Bei Company to delivered the document of title in question to the designated fleet. (2) Regarding to whether there is a causal relationship between Jinling Company delivering the document of title to Jinling Company and Arts and Crafts Company losing control of goods. According to the facts, Arts and Crafts Company signed tripartite warehousing agreement with You Bei Company and Wan Shi Hong Company after the declaration of goods, which agreed the goods in question shall be stored in warehouse of Wan Shi Hong Company when the declaration of the goods is finished. In fact, after finishing the declaration of goods, You Bei Company send the fleet to bonded warehouse for picking up goods. Arts and Crafts Company cannot prove the original is how to arrange the goods deliver from the bonded warehouse to warehouse of Wan Shi Hong Company. Although Arts and Crafts Company in the trial claimed that it commissioned Jinling Company to deliver the goods to the warehouse of Wan Shi Hong Company after the declaration of goods, the company denied this. The court holds that although Arts and Crafts Company claims it commissioned Jinling Company to arrange the transport of goods, it failed to provide the evidence of two sides to reach an agreement on the transportation and related transportation costs. The above claim of Arts and Crafts Company lacks evidence to support, it is not admissible evidence. On the basis of the existing evidence, which cannot be seen Arts and Crafts Company has the purpose and arrangement to give the link to the company except You Bei Company to handle on the link of delivering the goods from bonded warehouse to warehouse of Wan Shi Hong Company. Jinling Company delivered the document of title to the fleet appointed by You Bei Company, which conformed to the import agent contract of Arts and Crafts Company and You Bei Company and the tripartite warehousing agreement of Arts and Crafts Company, You Bei Company and Wan Shi Hong Company. In case of Jinling Company had delivered the document of title to Arts and Crafts Company rather than You Bei Company, under the condition of having signed tripartite warehousing agreement, how would Arts and crafts Company deal with the document of title ? It is nothing more than 1. arrange for the fleet to Wan Shi Hong Company’s warehouse; and 2. give to You Bei Company to arrange for the fleet to deliver to Wan Shi Hong Company’s warehouse. The final destination is Wan Shi Hong Company’s warehouse. The fact shows that the goods in question were in total of 2,991 tons, of which 2,001 tons of goods were resold by You Bei Company, the remaining 990 tons entered Wan Shi Hong Company’s warehouse, but eventually Wan Shi Hong Company delivered the goods to You Bei Company for disposal. Therefore, the fundamental reason of the losing control of goods of Arts and Crafts Company in this case, LI Moumou made use of You Bei Company and under the help of Wan Shi Hong Company to the implementation of fraud on Arts and Crafts Company, illegal occupation of the goods in question and Arts and Crafts Company itself as import agent failed to fulfill the precaution duty, it had no causal relationship with the behavior of Jinling Company delivering the

Ningbo Arts and Crafts Import & Export Co., Ltd. v. …

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document of title to You Bei Company. In summary, the court holds that Arts and Crafts Company has never signed a written customs declaration agreement with Jinling Company. According to the current record of effective evidence and facts, the court cannot shape the moral certainty of the claims of Arts and Crafts Company that “the declaration of goods in question is the entrustment towards Jinling Company by Arts and Crafts Company”. On the contrary, Jinling Company has the reason to hold that the declaration of the goods is commissioned by You Bei Company, Jinling Company delivered the document of title to the fleet appointed by the client, there is no fault. No evidence can prove that Jinling Company also has the obligation of delivering the goods to the warehouse of Wan Shi Hong Company after the completion of customs declaration. According to the instructions of You Bei Company, it has no causal relationship between Jinling Company delivering the document of title to the fleet appointed by the latter and the loss suffered by Arts and Crafts Company, so the claim of Arts and Crafts Company requesting Jinling Company to bear the tort liability shall not be supported. (2) Regarding to the scope of the compensation that the Plaintiff can obtain for infringement The court holds that: 1. regarding to loss of goods claimed by the Plaintiff RMB20,661,450.92 is the payment of the Plaintiff’s acceptance of cargo payment outwards of USD2,492,665, calculated by USD1 amount to RMB8.2889. The Plaintiff claimed the RMB as the compensation currency did not violate the law, which can be converted at the earliest date of the request to the Defendant to the USD against the RMB. The Plaintiff filed an action before the Ningbo Intermediate People’s Court on January 24, 2005 and claimed compensated in RMB, the spot exchange selling rate of USD against the RMB of that day is USD1 amount to RMB8.2889, so the Plaintiff’s claim shall be supported. 2. Regrading to the import agent fees, bank charges, issuing fees, post and telecommunications charges, the above fees are the direct losses suffered by the Plaintiff for the Defendants’ infringement (including the interests of the period), which shall be supported. 3. Regarding to the loss of interest, Jinling Company held that the Plaintiff in 2008 put forward the claim of loss after the court accepted the transfer, which has passed the statute of limitations. Therefore, the court holds that the loss of interest belongs to the yield loss of the Plaintiff due to the infringement. When the Plaintiff filed an action before the Ningbo Intermediate People’s Court on January 24, 2005, the Plaintiff’s right to claim for the loss of the dispute has been suspended, the effect of interruption not only reached for direct losses also included the yield loss. Whether or not the claim has been affirmed, as long as the proceedings has not exceeded the statue limitation of action, which shall be supported. In addition, the Plaintiff argued that it is more reasonable to calculate according to the People’s Bank of China RMB one-year benchmark lending rate, which may be granted. However, the Plaintiff claimed to calculate from January 14, 2005, which lacks legal basis. It may be appropriate for the Defendant to claim compensation for infringement from the date of January 24, 2005. 4. Regarding to the criminal pressing payment, deposit and the Plaintiff issued a notice of discharge of 600 tons of PTA. Civil litigation

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compensation is based on the principle of making up for the loss, so the criminal pressing payment obtained by the Plaintiff and advanced deposit RMB3.1 million shall be deducted from the Plaintiff’s compensation amount. As for the 600 tons of PTA release notice issued by the Plaintiff, the Plaintiff explained that the Plaintiff mistook 2,991 tons of goods have entered Wan Shi Hong Company’s warehouse. Because You Bei Company has paid the customs value added tax more than RMB5 million of the goods in question, plus the bail RMB3.1 million that was previously paid to the Plaintiff, the remaining 2,391 tons of goods are enough to ensure the interests of the Plaintiff, so it issued a release notice of 600 tons of goods. The instruction is not the true meaning of the Plaintiff, which was issued by the jointly deceive of You Bei Company and Wan Shi Hong Company. The court holds that the Plaintiff’s interpretation is consistent with common sense, which can be adopted, the 600 tons of PTA shall not be deducted from the Plaintiff’s claim. In summary, the loss suffered by the Plaintiff due to the joint infringement of Wan Shi Hong Company and You Bei Company was RMB17,596,692.16 and corresponding loss of interest, and Wan Shi Hong Company and You Bei Company shall bear joint and several compensation liability for this. In summary, according to Article 106 Paragraph 2, Article 117 Paragraph 1 and 3 of the General Principles of the Civil Law of the People’s Republic of China, Article 148 Paragraph 1 of the Opinions of the Supreme People’s Court on Several Issues concerning the Implementation of the General Principles of the Civil Law of the People’s Republic of China (for Trial Implementation), Article 64 Paragraph 1 and Article 144 of the Civil Procedure Law of the People’s Republic of China, the judgment is rendered as follows: 1. The Defendant Shanghai You Bei Trading Co., Ltd. shall compensate RMB17,596,692.16 and the loss of interest for the Plaintiff Ningbo Arts and Crafts Import & Export Co., Ltd. within ten days from the date when this judgment comes into effect (the interest shall be calculated on the basis of the deposit interest rate over the same period RMB promulgated by of the People’s Bank of China from January 24, 2005 to the date of effectiveness of the judgment); 2. The Defendant Shanghai Wan Shi Hong Logistics Warehousing Co., Ltd. shall bear joint and several liability for the above first item; and 3. Not support the other claims of the Plaintiff Ningbo Arts and Crafts Import & Export Co., Ltd. If the Defendant Shanghai You Bei Trading Co., Ltd., the Defendant Shanghai Wan Shi Hong Logistics Warehousing Co., Ltd. fail to perform the obligation of paying the money in the period specified in the judgment, the interest of debt during the delay in performance shall be double paid in accordance with the provisions of Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB145,283.46, the Plaintiff Ningbo Arts and Crafts Import & Export Co., Ltd. shall bear RMB21,760.90, the Defendant Shanghai You Bei Trading Co., Ltd. and Shanghai Wan Shi Hong Logistics Warehousing Co., Ltd. shall jointly bear RMB123,522.56.

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In case of dissatisfaction with the judgment, the Plaintiff and the Defendants may submit a statement of appeal to the court within 15 days upon service of the judgment, and submit the copies according to the number of the opposite party and appeal to the Shanghai High People’s Court. Presiding Judge: QIAN Xu Acting Judge: JIANG Yun Acting Judge: ZHU Xialing February 26, 2015 Clerk: FEI Xiaojun

Appendix: Relevant Laws 1. General Principles of the Civil Law of the People’s Republic of China Article 106. Citizens and legal persons who through their fault encroach upon state or collective property or the property or person of other people shall bear civil liability. …… Article 117 Anyone who encroaches on the property of the state, a collective or another person shall return the property; failing that, he shall reimburse its estimated price. …… If the victim suffers other great losses therefrom, the infringer shall compensate for those losses as well. 2. Opinions of the Supreme People’s Court on Several Issues concerning the Implementation of the General Principles of the Civil Law of the People’s Republic of China (for Trial Implementation) Article 148 Those who instigate or assist others in carrying out acts of tort shall be jointly and severally liable for joint torts. 3. Civil Procedure Law of the People’s Republic of China Article 64 It is the duty of a party to an action to provide evidence in support of his allegations. Article 144 If a Defendant, having been served with a summons, refuses to appear in court without justified reasons, or if he withdraws during a court session without the permission of the court, the court may make a judgment by default. Article 253 If the person subjected to execution fails to fulfil his obligations with respect to pecuniary payment within the period specified by a judgment or written order or any other legal document, he shall pay double interest on the debt for the belated payment. If the person subjected to execution fails to fulfil his other obligations within the period specified in the judgment or written order or any other legal document, he shall pay a charge for the dilatory fulfillment.

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Shanghai High People’s Court Civil Judgment Ningbo Arts and Crafts Import & Export Co., Ltd. v. Shanghai Wan Shi Hong Logistics Warehousing Co., Ltd. et al. (2015) Hu Gao Min Si (Hai) Zhong Zi No.98 Related Case(s) This is the judgment of second instance and the judgment of first instance is on page 805. Cause(s) of Action 221. Dispute over contract on custody of cargo in port. Headnote Affirming lower court decision holding import agent and warehouse manager complicit in fraud that enabled a third party to steal part of the Plaintiff cargo importer’s cargo stored in warehouse but holding the Plaintiff’s customs broker not liable. Summary The Plaintiff imported several thousand tons of the chemical PTA into the port of Shanghai. The Plaintiff sued its customs broker, import agent, and warehouse manager, accusing them of complicity in a fraud that enabled a third party to make off with a portion of the import. The court held that the case was proved as to the import agent and warehouse manager, but the customs broker was not found liable as there was no specific duty found in relation to the customs broker. The Plaintiff appealed, on the grounds that the trial court had made errors of procedure, errors of fact (in not finding a direct contractual relationship between the customs broker and the Plaintiff), and errors of law (in not finding customs broker jointly and severally liable for its breach of contract and infringement). The appeal was dismissed, and the judgment of first instance was affirmed.

Judgment The Appellant (the Plaintiff of First Instance): Ningbo Arts and Crafts Import & Export Co., Ltd. Domicile: Ningbo, Ƶhejiang Province. Legal representative: HU Moumou. Agent ad litem: LIU Yan, lawyer of Shanghai Liuyan Law Firm.

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The Respondent (the Defendant of First Instance): Sinotrans East China Co., Ltd. Jinling Branch. Legal representative: XIONG Zhenghua, general Manager. Agent ad litem: ZHANG Chen, legal counsel of Sinotrans East China Co., Ltd. Agent ad litem: CHEN Jianhua, legal counsel of Sinotrans East China Co., Ltd. The Defendant of First Instance: Shanghai Wan Shi Hong Logistics Warehousing Co., Ltd. Domicile: Room 4-410, No.1 5300 Lane, Wenchuan Road, Baoshan District, Shanghai City. Legal representative: YV Xizhong, chairman. Agent ad litem: ZHAI Deping, lawyer of Shanghai Dahwa Law Firm. The Defendant of First Instance: Shanghai You Bei Trading Co., Ltd. Domicile: Room 210, No.589 Liannong Road, Xinzhuang Industrial Park, Minhang District, Shanghai City. Legal representative: LIU Tao. With respect to the case arising from dispute over tort liability by the Appellant, Ningbo Arts and Crafts Import & Export Co., Ltd. (hereinafter referred to as Arts and Crafts Company) against the Respondent, Sinotrans East China Co., Ltd. Jinling Branch (hereinafter referred to as Jinling Company), the Defendant in the first instance Shanghai You Bei Trading Co., Ltd. (hereinafter referred to as Shanghai You Bei Company), the Defendant in the first instance, Shanghai Wan Shi Hong Logistics Warehousing Co., Ltd. (the company changed name to Shanghai Wan Shi Hong Logistics Warehousing Co., Ltd. on October 22, 2008, hereinafter referred to as Wan Shi Hong Company), the Appellant was not satisfied with the Civil Judgment of (2014) Hu Hai Fa Shang Chu Zi No.57, and made an appeal to the court. The court entertained the case on August 8, 2015, organized the trial bench and held a hearing in public on December 2, 2015. Agent ad litem of Arts and Crafts Company, LIU Yan, agents ad litem of Jinling Company, ZHANG Moumou, CHEN Moumou, agent ad litem of Wan Shi Hong Company, ZHAI Deping appeared in court to attend the trial. Summoned by the court according to law, Shanghai You Bei Company did not appear in court without justified reasons. After trial, the court has concluded the case. Arts and Crafts Company alleged that in the first instance: Arts and Crafts Company signed three copies of agent import agreements with Shanghai You Bei Company in October 2004, agreed that Arts and Crafts Company acted as the agent of Shanghai You Bei Company to import pure terephthalic acid (hereinafter referred to as PTA), Arts and Crafts Company appointed the declaration company to handle the import customs. But after the customs clearance, it shall take delivery of goods with money. If the goods were not paid off, the ownership of goods would belong to Arts and Crafts Company. At the same time, Arts and Crafts Company signed the warehousing agreement with Shanghai You Bei Company and Wan Shi Hong Company, agreed that the goods imported by the agent (Arts and Crafts Company) stored in the warehouse of Wan Shi Hong Company, placing goods according to the

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instructions of Arts and Crafts Company. Arts and Crafts Company commissioned Jinling Company to handle the import declaration of the goods, and clearly informed that the goods were stored in the warehouse of Wan Shi Hong Company, controlled by Arts and Crafts Company. After Jinling Company completed the customs clearance, they did not deliver the goods to the warehouse of Wan Shi Hong Company for storage according to the requirements of Arts and Crafts Company under the conditions of knowing that the said agent import agreement noted goods reserved clause, and deliver the stamped with the customs release chapter to the outsider, leading to the goods taken away illegally. Under the condition that the goods are not in storage, Wan Shi Hong Company has issued a godown entry to fraud Arts and Crafts Company. You Bei Company took delivery of the good, but did not make payments and the agency fees to Arts and Crafts Company. The fault of Jinling Company, You Bei Company and Wan Shi Hong Company commonly infringed the ownership of goods of Arts and Crafts Company, which caused Arts and Crafts Company not only have not received the payment and the agency cost but also lost the rights of the goods. The three Defendants should assume the several and joint liability for losses suffered by Arts and Crafts Company. Therefore, it requested the court to sentence Jinling Company, You Bei Company and Wan Shi Hong Company to compensate Arts and Crafts Company RMB20,661,450.92 (USD2,492,665, calculated according to USD1 amount to RMB8.2889), import agent fee RMB165,291.60, bank charges RMB30,992.17, issuing fee RMB21,694.52, postage RMB600, deducting the pressing payment of criminal cases RMB183,337.06, a total of RMB20,696,692.16 and the corresponding interest (the interest should be calculated on the basis of the one year loan prime interest rate over the same period RMB promulgated by of the People’s Bank of China from January 14, 2015 to the date of effectiveness of the judgment), and Jinling Company, You Bei Company and Wan Shi Hong Company should be jointly and severally liable for bearing the court acceptance fee, property preservation application fee, service by publication fee and so on. You Bei Company did not defend in the first instance. Wan Shi Hong Company defended that in the first instance: the goods in question was not stored in the warehouse of Wan Shi Hong Company. 2. 990 tons of PTA stored in the warehouse of Wan Shi Hong Company belonged to the outsider (Zhongji Ningbo Foreign Trade Co., Ltd.). Wan Shi Hong Company had obligations of supervising only when the goods were stored in the warehouse of Wan Shi Hong Company, so Wan Shi Hong Company has no need to bear the responsibility of the goods in question. The goods were declared by Jinling Company, Jinling Company shall quote where the goods in question has gone; the loss of goods was because the employees of Jinling Company delivered the delivery note to the outsider LIN Moumou, and LIN Moumou was not the employee of You Bei Company. Jinling Company defended that in the first instance: there has no shipping agent contractual relationship between Arts and Crafts Company and Jinling Company. You Bei Company entrusted Jinling Company to clear the customs, the behavior of submitting documents after customs clearance was based on the instructions of You

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Bei Company, Jinling Company had no fault and did not participate in any arrangements after customs clearance. The direct reason that caused Arts and Crafts Company out of control of the goods in question was deliberate fraud and nonperformance of Wan Shi Hong Company and You Bei Company. There is no joint tort with Jinling Company, Wan Shi Hong Company and You Bei Company. The amount of compensation for Arts & Crafts Company has no basis. Arts and Crafts Company has confirmed to receive the advanced payment RMB3.1 million paid by You Bei Company, the amount shall be deducted from the amount of loss of Arts and Crafts Company; Arts and Crafts Company has confirmed that the company had issued a delivery note of 600 tons of PTA to Wan Shi Hong Company, the value of 600 tons of PTA shall be deducted from the amount of the loss of Arts and Crafts Company. 990 tons of PTA has been stored in warehouse of Wan Shi Hong Company, the value shall be deducted from the claim of Arts and Crafts Company against Jinling Company; the loss of interest claimed by Arts & Crafts Company has expired the limitation of action, the bank loans voucher has no relevancy with the case; in summary, Jinling Company requested to reject the claims of Arts & Crafts Company against Jinling Company. After investigation, the court of first instance found out that: 1. Regarding to the contents and performance of the sales contract and the import agency contract involved in the case In October 2004, the outsider LI Moumou (who was sentence to life imprisonment for the crime of contract fraud) and the employee WANG Mengsheng of Arts and Crafts Company contacted the matters of agent for importing PTA. On October 15, 2004, Arts and Crafts Company and Sinochem Trading (Singapore) Pte Ltd. signed one copy of the sales contract No.SCSGPTA241011JY and No.SCSGPTA241013JY, which agreed that Arts and Crafts Company bought PTA 1,001 tons, 990 tons from the company, the unit price was USD815 per ton, the total price was USD815,815, USD806,850 respectively. The goods were delivered in Shanghai bonded warehouse, the payment was irrevocable letter of credit 90 days from date of delivery. On the same day, Arts and Crafts Company and LG International (HK) Limited signed a sales contract No.CH-04-167B, which agreed that Arts and Crafts Company bought PTA 1,000 tons from the company agreed to buy 1,000 tons of crafts company PTA to the company, the unit price was USD870 per ton, the total price was USD870,000. On October 18, 2004, LI Moumou in the name of You Bei Company signed a copy of agent import agreement No. GYAC01031-137, GYAC01031-138, GYAC01031-140 with Arts & Crafts Company, which agreed that You Bei Company commissioned Arts and Crafts Company to import PTA 1,001 tons, 990 tons, 1,000 tons, the unit price was USD815 per ton, USD815 per ton, USD870 per ton, the total price was USD815,815, USD806,850, USD870,000 respectively. Payment was irrevocable letter of credit 90 days from date of delivery. The goods were delivered in Shanghai bonded warehouse. Import declaration was handled by the custom brokers Company designated by Arts & Crafts Company, but the tariff and value-added tax was paid by themselves You Bei Company; You Bei Company undertakes the all

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the expenses, including issuing, acceptance, insurance fees and customs fees of the goods, freight fees, transit shipment, and storage and other import fees; You Bei Company paid issuing bonds 15% of the imported goods amount to Arts & Crafts Company before issuing. Arts & Crafts Company issued letter of credit in three working days after You Bei Company paid the bail; agency fees were 0.8% of the amount of the actual delivery of goods; after the implementation of customs clearance, take delivery of goods with cash. But in three days before the negotiation, You Bei Company need to paid off the balance payment to Arts & Crafts Company, otherwise it deemed as You Bei Company default. Issuing bonds and goods owed to Arts & Crafts Company. Arts & Crafts Company still retains the right of recourse to You Bei Company. In the trial, Arts & Crafts Company confirmed receipt of payment of You Bei Company RMB3.1 million issuing bonds of goods in question. On October 18, 2004, Shanghai Pudong Development Bank issued irrevocable letter of credit No.LCXXXXXXXXXXXX, LCXXXXXXXXXXXX, LCXXX XXXXXXXXX according to the application of Arts & Crafts Company, beneficiary were respectively in Sinochem Trading (Singapore) Pte Ltd., Sinochem Trading (Singapore) Pte Ltd., LG Commercial (Hong Kong) Co., Ltd., the amount was respectively USD815,815, USD806,850, USD870,000, which issued draft within 90 days from the date of issuance of the bill of lading by 100% invoice price. On October 18, 2004, Arts and Crafts Company paid opening commission of the above three letters of credit RMB7100.32, RMB7022.29, RMB7571.91, post and telecommunications fees for each was RMB200. On October 28, 2004, Arts and Crafts Company paid the acceptance fee of the above three letters of credit RMB10143.31, RMB10031.85, RMB10817.01. On January 14, 2005, Arts and Crafts Company paid USD815,815, USD806,850, USD870,000 under the above three letters of credit, totaling USD2,492,665. 2. Regarding to the customs declaration and picking up of goods involved After the above import agent agreement was signed, LI Moumou appointed LIN Moumou (detention at large) to arrange the declaration of goods in question. LIN Moumou telephoned Zhang xx who was the clerk of Jinling Company, and said that there has more than 3,000 tons of goods that need Jinling Company to declare, and will mail the document. On October 25, 2004, Arts and Crafts Company expressed the delivery order of the three consignment of goods in question, commercial invoice, packing list, import and export goods customs declaration agency proxy (commissioned unit is blank) and other import documents to the clerk ZHANG Moumou of Jinling Company. Jinling Company received the import documents of the three consignment of goods, 1,001 tons, 990 tons of PTA were delivered to Shanghai Tong Yuan Customs Declaration Co., Ltd. (hereinafter referred to as Tong Yuan Company) to declare, 1,000 tons of PTA were delivered to Shanghai Ji Hua International Freight Forwarding Co., Ltd. (hereinafter referred to as Ji Hua Company) to declare. The unit in operation noted by declaration of the three consignment of goods was Arts and Crafts Company, the receiving unit was You Bei Company. The total

Ningbo Arts and Crafts Import & Export Co., Ltd. v. …

841

price was USD815,815, USD806,850, USD870,000, the date of import declaration was October 27, October 27, October 28, 2004. The tariff and value-added tax of the three consignment of goods were RMB1,701,268.62 (1,001 tons), RMB1,682,785.94 (990 tons), RMB1,813,863.64 (1,000 tons), a total of RMB5,197,918.20. The special covering warrant of three customs duties and value-added tax noted the payment units are Arts and Crafts Company and You Bei Company, the dates of issuance were October 28, October 28 and October 29, 2004 respectively. You Bei Company paid in full the above customs duties and value-added tax to Jinling Company on November 3, November 3, November 1, 2004 respectively. After 1,001 tons, 990 tons of PTA arrived in Shanghai port, which were stored in the bonded warehouse of Sinotrans East China Co., Ltd. Storage and Transportation Branch (hereinafter referred to as Storage and Transportation Company). After Tong Yuan finished the declaration, customs clearance of the bill of lading of Storage and Transportation Company (store requisition) shall be delivered to Jinling Company, Jinling Company delivered to the outsider YANG Moumou’s fleet. YANG Moumou claimed that when accepting the inquiry of Ningbo Public Security Bureau, fleet was LIN Moumou’s instruction, and pick up 1,001 tons, 990 tons of PTA from the bonded warehouse of Storage and Transportation Company on October 28 and 29. And according to the instruction of LIN Moumou, the goods were delivered to Sanmao Wharf and Linjiang Wharf. And it claimed that under the impression has delivered 45 boxes of PTA from the port of Shanghai to Wan Shi Hong Company’s warehouse. After 1,000 tons of PTA arrived at the port of Shanghai, which were stored in the bonded warehouse of Shanghai Gao Hang Industrial Co., Ltd. (hereinafter referred to as Gao Hang Company) located in Shanghai Waigaoqiao Free Trade Zone by Shanghai Ocean Logistics Co., Ltd. (hereinafter referred to as Shi Yang Logistics). After Ji Hua finished the declaration, Waigaoqiao bonded area storage of goods out of the district (warehouse) bill of lading storage and verification of the original shall be delivered to Gao Hang Company in accordance with the instruction of Jinling Company. After that, Gao Hang Company delivered the goods to the outsider who came to pick up goods Shanghai Si Jia Container Transport Co., Ltd. (hereinafter referred to as Si Jia Company). The legal representative of Si Jia Company CAI Jinling claimed that when accepting the inquiry of Ningbo Public Security Bureau it was the commission of LI Moumou of Zizhuo Company (the company is also controlled by LI Moumou), and the goods were pick up from Gao Hang Company on November 2, 2004, according to the instructions of LI Moumou, the goods shall be delivered to Xinhua Paper Mill Wharf to directly transship the goods. On December 2, 2004, Jinling Company issued three copies of special invoice for international freight forwarding agency No.XXXXXXX, XXXXXXX, XXXXXXX, invoice noted the payer was You Bei Company, including lump sum charge and godown changes. The fees were respectively RMB146,500, RMB75,753, RMB116,704. Jinling Company said that the above invoices have been delivered to You Bei Company but none has yet to pay fees.

842

M. Davies and J. Lin

On January 25, 2005, Jinling Company issued a description of the situation to Arts and Crafts Company. The content was “the import fee of the four consignment of goods No.XXXXXXXXXXXXXXXXXX, XXXXXXXXXXXX, XXXXX XXXX, XXXXXXXXXXXXXXXXXX has not been paid off, so customs declaration of the four consignment of goods were detained in our company”. ZHANG Jihang claimed when appeared in Court as a witness in the Ningbo Intermediate People’s Court, the description of the situation was Arts and Crafts Company required to issue because customs declaration did not return, it is need to verify in Administration of Exchange Control. 3. Regarding to the signing process of warehousing agreement, the content of the agreement and the performance On October 30, 2004, Wan Shi Hong Company commissioned YAO Moumou (who was sentenced to nine years imprisonment due to contract fraud) to sign an agreement with Arts & Crafts Company and You Bei Company, which agreed Arts & Crafts Company and You Bei Company to borrow Wan Shi Hong Company’s warehouse for storage of chemical plastic products; Wan Shi Hong Company delivered the original warehouse receipt to Arts & Crafts Company when goods into the warehouse within 2 days. Wan Shi Hong Company delivered the goods shall with the original seal of bill of lading of Arts and Crafts Company. Although there has the draft of delivery unit or other payment, Arts and Crafts Company has not issued bill of lading, Wan Shi Hong Company shall not delivery for any reason. The loss which was caused by shipping error shall be born by Wan Shi Hong Company; storage fees shall be charged by Wan Shi Hong Company from You Bei Company, it has nothing to do with Arts and Crafts Company; the goods of Arts and Crafts Company stored in Wan Shi Hong Company, the ownership of the goods belonged to Arts and Crafts Company. The general manager NI Moumou of Wan Shi Hong Company when accepting the inquiry of the Ningbo Public Security Bureau on March 24, 2005 said: the warehousing business of case in question was introduced by YAO Moumou; then YAO took the sealed tripartite agreement of You Bei Company to let NI Moumou sign, NI sealed the agreement and delivered it to YAO; on November 2, it received an express which was written “to YAO Moumou” from Ningbo, but the guard returned the express because there was no such person called YAO in the company; YAO asked NI whether received the tripartite agreement next day, NI said no, YAO let Arts and Crafts Company sent the express again, Wan Shi Hong Company received the express on November 4; After the goods were delivered from the bonded warehouse, YAO Moumou issued three copies of godown entry to Arts and Crafts Company. Date of entry recorded was October 29, October 29, November 5, 2004, the total weight was 1,001 tons, 990 tons, 1,000 tons, the name of the goods was PTA, the consignee was YAO Moumou, and they were stamped with Wan Shi Hong Company’s business dedicated seal. The three copies of godown entry were issued by YAO Moumou and/or Wan Shi Hong Company when the goods in question were not all entered the warehouse of Wan Shi Hong Company and accepted Zizhuo

Ningbo Arts and Crafts Import & Export Co., Ltd. v. …

843

Company’s cheque RMB16 million and the commitment letter provided by LI Moumou. Subsequently, Wan Shi Hong Company received the warehouse notice issued by Arts and Crafts Company that 600 tons of PTA were given to You Bei Company. On December 31, 2004, Wan Shi Hong Company issued a cash statement to Arts and Crafts Company, named Arts and Crafts Company still has the following goods on December 31, 2004 in Wan Shi Hong Company’s warehouse: No.10–990, 10–1001, 10–1000, the trade name was PTA, the number of packages were 390, 1,001, 1,000, the total balance was 2,391(ton), and stamped with the official seal of Wan Shi Hong Company. By the identification of Shanghai Public Security Bureau Physical Evidence Identification Center, the seal of the cash statement and the seal of the warehousing agreement “Shanghai Wan Shi Hong Logistics Warehousing Co. Ltd.” were the same seal. NI Moumou claimed when accepting the inquiry of the Shanghai Municipal Public Security Bureau on September 13, 2005, YAO Moumou pretended to be the employee of Wan Shi Hong Company, forged godown entry and seal of Wan Shi Hong Company; on November 7, 2004, Wan Shi Hong Company received 990 tons of PTA, the owner was Arts and Crafts Company, You Bei Company paid the cost of warehousing; Wan Shi Hong Company only received 990 tons of PTA of Arts and Crafts Company. Because YAO Moumou provided RMB16 million and the letter of commitment to Zi Zhuo Company, and added 399.625 tons of PVC as collateral, then You Bei Company put away 990 tons of PTA; 990 tons of PTA was put away by YANG Moumou with the fax of the delivery note of You Bei Company, YAO delivered three copies of hard copy of delivery note of 200 tons. Arts and Crafts Company confirmed in the trial that it had issued the delivery note of 600 tons of PTA to You Bei Company, but it was based on Arts and Crafts Company thought that 2,991 tons of goods in question were in the custody of Wan Shi Hong Company’s warehouse, considering You Bei Company has paid the issuing deposit and the tariff and value-added tax of the goods in question and other expenses, it agreed to release part of the goods. 4. The other situations related to the disputes involved On February 6, 2005, the holding company of Arts and Crafts Company Shanshan Investment Holding Co., Ltd. reported to the Shanghai Public Security Bureau You Bei Company and Shanghai Shan Jin Chemical Co. Ltd. made use of the import agent, by means of forging seal and delivery note, without payment of the goods, withdraw all the goods (including the three consignment of PTA). On March 2 and 3, 2005, Jinling Company’s clerk ZHANG Jihang when accepting the inquiry of the Ningbo Public Security Bureau said: LIN Moumou telephoned me and he need our company to declare, then Arts and Crafts Company called and asked Jinling Company’s address, then Arts and Crafts Company sent a set of customs declaration documents; Jinling Company and Arts and Crafts Company had no written agreement; both sides have errors in the work, because the declaration was commissioned, so the two parties did not sign the agreement; when the declaration was finished, LIN Moumou instructed the delivery note shall be

844

M. Davies and J. Lin

delivered to YANG Moumou’s fleet, and let the fleet to down to Wan Shi Hong Company’s warehouse; Arts and Crafts Company had no contact with Jinling Company when sent the customs declaration documents, You Bei Company kept in touch with Jinling Company; freight invoice was issued to You Bei Company, the express sent to LI Moumou, the time was December 2004; WANG Mengsheng had told that the goods shall be stored in Wanshihong’s warehouse and Arts and Crafts Company protected goods; it is not the responsibility of Jinling Company to deliver the goods to Wanshihong’s warehouse, because Jinling Company and the consignee You Bei Company only settled clearing customs fees, storage fees, freight fees was settled by transportation Company and You Bei Company. On November 1, 2005, Arts and Crafts Company’s clerk WANG Mengsheng said when accepting the inquiry of Shanghai Public Security Bureau: the custom brokers company of the three consignment of goods in question was Jinling Company appointed by LI Moumou, tariff and value-added tax were paid by You Bei Company; Wan Shi Hong Company’s warehouse was appointed by LI; Arts and Crafts Company mailed import documents to Jinling Company according to Jinling Company’s requirements and did not go to the warehouse on-site to check the goods, because Arts and Crafts Company trusted the warehouse; Arts and Crafts Company has ever issued three delivery notes that a total of 600 tons of PTA to You Bei Company for pick up the goods from the warehouse of Wan Shi Hong Company. On June 22, 2005, Wan Shi Hong Company reported to the Shanghai Public Security Bureau: it received 990 tons of PTA on November 7, 2004, the delivery fleet paid storage costs on behalf of You Bei Company, then it did not receive any goods. YAO Moumou was suspected of posing as employees of the Company, forging godown entry and seal, intercepting the goods. 5. Regarding to criminal judgment of LI Moumou’s contract fraud crime including the goods involved On February 22, 2012, the Shanghai Second Intermediate People’s Court made the Criminal Judgment of (2011) Hu Er Zhong Xing Chu Zi No.147. The criminal judgment confirmed that: You Bei Company is a company of LI Moumou on commission; Since October 2014, LI Moumou in the name of You Bei Company to conceal the truth of unpaid the payment. Under the conditions of the victim Arts and Crafts Company knowing nothing, which picking up low-pressure polyethylene, glycol and PTA of Arts and Crafts Company that total value of RMB39.81 million stored in Wan Shi Hong Company’s warehouse, Shanghai Jinming Composite Paper Cans Factory’s warehouse, Zhangjiagang Tariff-free Zone Kaiteng Chemical Storage Co. Ltd.’s warehouse or not be actual put in storage. The witness YAO Moumou’s testimony confirmed LI Moumou picked up the chemical raw materials of Arts and Crafts Company stored in Wan Shi Hong Company in the case of unpaid the payment and let Yao issued the godown entry of Wan Shi Hong Company; the witness NI Moumou’s testimony confirmed Wan Shi Hong Company only received 900 tons of PTA of Arts and Crafts Company. The other godown entries were forged; Shanghai Shan Jin Chemical Co., Ltd. and

Ningbo Arts and Crafts Import & Export Co., Ltd. v. …

845

Zizhuo Company were actually controlled by LI Moumou, the authorized to operate Shanghai Xin Zi Mao Industry and Trade Co., Ltd. of LI Moumou, You Bei Company for the purpose of illegal possession, in the process of signing and conducting the contract to defraud money (including the goods in question) totaling RMB130 million. The public prosecutor accused LI Moumou guilty of contract fraud was convicted, sentenced to life imprisonment and the confiscation of RMB400 thousand, all articles of property illegally obtained shall be recovered and returned to each victim unit, the insufficient part shall be ordered to pay compensation. The judgment has come into force. On April 13 of the same year, Arts and Crafts Company received follow-up payment RMB183,337.06 allocated by the Shanghai Second Intermediate People’s Court. 6. Regarding to the litigation of Arts and Crafts Company in terms of losses in question before the lawsuit of the case On January 24, 2005, Arts and Crafts Company filed an action against You Bei Company and Wan Shi Hong Company to the Court of Ningbo on the grounds of import agent contract dispute. On February 22, 2006, Arts and Crafts Company additionally applied for Jinling Company as the third party. On March 2 of the same year, the Ningbo Intermediate People’s Court notified Jinling Company to participate in litigation. On December 7 of the same year, the Ningbo Intermediate People’s Court of first instance verdict on the case. After that, Arts and Crafts Company, Jinling Company respectively filed an appeal. Zhejiang High People’s Court made a ruling to revoke the judgment on July 24, 2007 and remand the case. Arts and Crafts Company withdrawed the application of Jinling Company as the third party on August 16 of the same year, and on August 20, applied for Jinling Company as the Defendant. Ningbo Intermediate People’s Court on August 30 of the same year accepted the case and made the retrial. On October 11 of the same year, the Ningbo Intermediate People’s Court notified Jinling Company as a co-Defendant to participate in litigation. On October 23 of the same year, Jinling Company raised objection to the jurisdiction, requesting to transfer the case to the court. Ningbo Intermediate People’s Court dismissed the application on November 22 of the same year. Jinling Company lodged an appeal. Zhejiang High People’s Court ruled to revoke the ruling of Ningbo Intermediate People’s Court on January 31, 2008 and transferred the case to the court for hearing. On March 3 of the same year, the Ningbo Intermediate People’s Court transferred the case to the court. The court accepted the case on June 11, 2008, the case number (2008) Hu Hai Fa Shang Chu Zi No.434. Because in the process of trial, Wan Shi Hong Company and You Bei Company were suspected of economic crimes, and the public security organs have investigated suspected fraud suspect LI Moumou, the court transferred the case to the Public Security Bureau of Economic Investigation Corps of Shanghai on June 17, 2010. In addition, the court found that on February 16, 2009, Arts and Crafts Company in the first hearing of (2008) Hu Hai Fa Shang Chu Zi No.434 formally put forward the request of the loss of interest to the three Defendants.

846

M. Davies and J. Lin

The court of first instance held that Arts and Crafts Company confirmed that it sued Jinling Company, You Bei Company and Wan Shi Hong Company on the basis of joint tort, so the case was a dispute arising from tort liability over agency for importing the goods. Arts and Crafts Company as the buyer of the foreign trade contract, it applied to issue the letter of credit, and paid the payment by letter of credit negotiation. According to the agreement of Arts and Crafts Company and You Bei Company, the ownership of the goods belonged to Arts and Crafts Company before You Bei Company paid off the payment, so it can be confirmed that Arts and Crafts Company was the owner of the goods. The issues of the case were: (1) whether Jinling Company, You Bei Company and Wan Shi Hong Company have committed the infringement on Arts and Crafts Company and whether they should bear joint and several liability; and (2) the scope of the compensation obtained by Arts and Crafts Company for infringement. (1) Regarding to whether Jinling Company, You Bei Company and Wan Shi Hong Company have committed infringement on Arts and Crafts Company and whether they should bear joint and several liability 1. Regarding to the disputes between Arts and Crafts Company and You Bei Company. According to the facts, LI Moumou in the name of You Bei Company signed the import agency agreement and warehousing agreement with Arts and Crafts Company, and handled the goods in question under the circumstance of Arts and Crafts Company without knowing that. They directed others to issue the fictitious godown entry, create a facade the goods have all entered the warehouse of Wan Shi Hong Company to achieve the purpose of illegal possession of goods. Its behavior has been identified as a contract fraud in criminal cases. The above behavior seriously infringed the legal right of Arts and Crafts Company to the goods in question. Because LI Moumou is the authorized operator and the actual controller of You Bei Company, in accordance with the provisions of Article 3 of the Provisions of the Supreme People’s Court on Several Issues concerning Economic Crimes Suspected in the Trial of Economic Disputes, the persons directly in charge and other directly responsibility personnel of the company in the name of the company to sign economic contracts, all or part of the property that has been obtained to constitute a crime, in addition to the doer’s criminal responsibility shall be investigated, the company shall bear civil liability for the doer signed and conducted the economic contract, You Bei Company shall bear civil liability for the loss of property suffered by Arts and Crafts Company in this case. Arts and Crafts Company required You Bei Company to bear the civil liability of infringement, which should be supported in accordance with law. 2. Regarding to the disputes between Arts and Crafts Company and Wan Shi Hong Company. Although Wan Shi Hong Company denied to make the godown entry and cash statement, according to the seal identification conclusion of the appraisal organization, the seal of cash statement was same as the seal of storage agreement on Wan Shi Hong Company, and Wan Shi Hong Company raised no objection to the authenticity of seal of the warehousing agreement; although Wan Shi Hong Company reported that YAO Moumou forged seal of Wan Shi Hong

Ningbo Arts and Crafts Import & Export Co., Ltd. v. …

847

Company, it was not identified by the judicial department; according to the statement of NI Moumou, who delivered storage agreement stamped with the seal of Wan Shi Hong Company to YAO Moumou for consulting with Arts and Crafts Company and provided the godown entry to YAO for facilitating YAO to conduct business, and confirmed 990 tons of PTA of Arts and Crafts Company have entered Wan Shi Hong Company’s warehouse; Wan Shi Hong Company has received the blank check and the commitment letter of Zizhuo Company provided by LI Moumou provided and other goods as the goods in question of the mortgage; the criminal judgment of the Second Intermediate People’s Court has confirmed that more than 900 tons of PTA in question has entered Wan Shi Hong Company’s warehouse. According to the above series of facts, the court of first instance held that YAO Moumou on behalf of Wan Shi Hong Company signed the warehousing agreement with Arts and Crafts Company. Under the conditions that the goods were not actually entered the warehouse of Wan Shi Hong Company, YAO Moumou and/or Wan Shi Hong Company in the name of Wan Shi Hong Company to issue the godown entry and cash statement. To say the least, even if it is as the statement of Wan Shi Hong Company, it is YAO Moumou that issued the godown entry and cash statement, Wan Shi Hong in the dark. According to Article 49 of the Contract Law of the People’s Republic of China, the consequences shall be born by Wan Shi Hong Company. Under the conditions that the goods agreed in the warehousing agreement are not entered its warehouse, it issued the false godown entry and cash statement according to the requirements of LI Moumou of You Bei Company to cheat Arts and Crafts Company, which caused Arts and Crafts Company mistook the goods has entered into the warehouse and relaxed vigilance, then Arts and Crafts Company still sent an instruction that the part of the goods delivered to You Bei Company, it provided convenience and saved the time for You Bei Company to defraud and transfer the goods. The subjective fault of Wan Shi Hong Company in this case is obvious, and it provides a convenient conditions for the implementation of the infringement behavior of You Bei Company, it has causal relationship for the loss of property suffered by Arts and Crafts Company. According to Article 148 of the Opinions of the Supreme People’s Court on Several Issues concerning the Implementation of the General Principles of the Civil Law of the People’s Republic of China (for Trial Implementation), “those who instigate or assist others in carrying out acts of tort shall be jointly and severally liable for joint torts”, the court of first instance held that Wan Shi Hong Company should bear joint civil liability as the joint tortfeasors in terms of the losses suffered by Arts and Crafts Company in the case. 3. Regarding to the disputes between Arts and Crafts Company and Jinling Company. Arts and Crafts Company claimed it commissioned Jinling Company to declare and commissioned Jinling Company to deliver the goods to Wan Shi Hong Company’s warehouse. But Jinling Company ignored the fact that the document of title noted the owner was Arts and Crafts Company and still delivered the document of title to the outsider, resulting in Arts and Crafts Company losing the possession of the goods in question, so Jinling Company shall bear tort liability for compensation to Arts and Crafts Company.

848

M. Davies and J. Lin

The court of first instance held that Arts and Crafts Company raised a claim against Jinling Company on the basis of infringement rather than the contract. According to the provisions of the Tort Liability Law, the condition for Jinling Company to bear the tort liability is that it had the subjective fault, and there was the causal relationship between behavior and damage results. The main behavior of Jinling Company which triggered the controversy was delivering the document of title to the fleet appointed by You Bei Company (LI Moumou, LIN Moumou) instead of Arts and Crafts Company. Whether there was a fault for Jinling Company’s subjective behavior, and whether there was a causal relationship with the loss of Arts and Crafts Company, was the key to determine whether Jinling Company should bear the tort liability in this case: (1) Regarding to whether Jinling Company had the subjective fault to deliver the document of title to You Bei Company. In the practice of freight forwarding, customs being entrusted layer upon layer is quite common, the final custom brokers company to declare is often not the commission noted on the commissioned unit (import operator) which accepted the customs declaration. There may exist one or more of the freight forwarding company between the custom brokers company and the import operator. Chinese laws and administrative regulations have no police force that the custom brokers company or other freight forwarding companies must deliver the documents directly to import operator, so the company which accepts the commission of declaration has no legal obligation to deliver the customs declaration documents agreement directly to import operator noted on the documents. In the absence of special agreement, the custom brokers company and other freight companies will deliver the documents including the document of title to the person who entrusted it after the declaration was finished rather than directly deliver it to the owner of the document of title (import operator). This is in line with the principle of relativity of the contract and the trading habit of customs declaration, and it does not disobey the law. Arts and Crafts Company claimed that Jinling Company should deliver the documents to the owner noted on the document of title, which is lack of legal basis. In this case, to whom Jinling Company should deliver the documents of title depends on whether Jinling Company actually accepted the commission of whom. Arts and Crafts Company claimed that it commissioned Jinling Company to declare, the main basis is the documents required for customs declaration including blank declaration proxy (the mandatory at the blank) sent to Jinling Company, and Jinling Company had to issue the description of detaining the customs declaration documents. The court of first instance held that on the legal effectiveness of the blank customs declaration, customs declaration entrustment letter is an essential document for customs clearance, which shall be issued by import operator. As mentioned above, customs declaration being entrusted layer upon layer is quite common, people who get the customs proxy are not commissioned by the import operator of the customs proxy but entrusted by other people, this person may be the consignee and may be also other freight forwarding companies. Therefore, in judicial practice, the “blank customs declaration proxy” is deemed as the documents submitted by the consignor to the customs at the request of the customs, and it is not regarded as the “blank proxy” in the sense of civil law

Ningbo Arts and Crafts Import & Export Co., Ltd. v. …

849

or “blank authorization”. Therefore, in terms of the act of sending customs declaration documents for Arts and Crafts Company, it is only a factual behavior, which cannot be identified as that there was the legal relationship of entrusted customs declaration between the sender and the recipient. The trade in question has its particularity. It is the import trade of goods under the mode of foreign trade agency, which has the nominal import operator (Arts and Crafts Company) and the actual importer (You Bei Company), Arts and Crafts Company in actually is the foreign trade agent of You Bei Company. On the basis of the existing evidence to ascertain, the first to issued a commissioned offer to Jinling Company is LIN Moumou on behalf of You Bei Company, which in the name of You Bei Company to request Jinling Company to declare for the goods in question. This fact can be proved in the transcripts of WANG Mengsheng of Arts and Crafts Company, WANG Mengsheng confirmed when accepting the inquiry of the public security organs that the custom brokers company (Jinling Company) was appointed by LI Moumou (You Bei Company) instead of Arts and Crafts Company. Although Arts and Crafts Company and You Bei Company in the import agency agreement agreed that custom brokers company is designated by Arts and Crafts Company, but in the actual implementation process it has changed the agreement. Thus, the first contact Jinling Company for commission the customs clearance is You Bei Company not Arts and Crafts Company, the first company commissioned customs clearance and Jinling is You Bei Company not Arts and Crafts Company. In addition to sending the customs clearance documents, Arts and Crafts Company had no even more clear meaning in the name of its own to commission Jinling Company for customs declaration. Jinling Company has reason to believe that it accepted the commission of You Bei Company. Arts and Crafts Company sending the declaration documents is just fulfilling the obligation of the foreign trade agent according to the requirement of You Bei Company. In addition, commissioned customs declaration is a dual contract, the two sides shall reach an agreement not only about the commission matters but also the import tariffs, VAT, warehousing fees and customs agency fees and other expenses of customs declaration shall be prearranged. However, in this case, there is no evidence that Arts and Crafts Company have any agreement with Jinling Company on the relevant costs and expenses. The company explained that the above cost shall be born by You Bei Company according to the agreement of import agent contract, so it did not talk with Jinling Company. The fact is that You Bei remitted more than RMB5 million of the customs value added tax to the account of Jinling Company, Jinling Company also issued customs agent invoice that the latter as the payer to You Bei Company. Accordingly, the customs fees and the amount of remuneration was agreed between Jinling Company and You Bei Company. The court of first instance held that because Arts and Crafts Company and Jinling Company did not conclude a declaration contract, You Bei Company is the actual import agent of goods in question, which issued an offer to entrust customs clearance to Jinling Company, and settled the customs fees with Jinling Company. In contrast, Arts and Crafts Company did not have any express to commission Jinling Company for customs declaration except for sending the documents of customs declaration, and did not claim to Jinling Company that

850

M. Davies and J. Lin

delivered in the entire process of customs declaration. The description issued by Jinling Company is also after the case, Jinling Company issued the description according to the requirement of Arts and Crafts Company for the purpose of import verification, the content of the description cannot reflect the existence of the legal relationship of entrusted customs declaration between Jinling Company and Arts and Crafts Company. In summary, the court of first instance held that according to the existing evidence, there is no necessary legal basis for the existence of the legal relationship of entrusted customs declaration between Jinling Company and Arts and Crafts Company, which cannot make the Court to shape the moral certainty of the facts of their claims. Jinling Company has reason to hold that it accepted the commission of You Bei Company to declare, it has no legal fault in accordance with the instructions of You Bei Company to delivered the document of title in question to the designated fleet. (2) Regarding to whether there is a causal relationship between Jinling Company delivering the document of title to Jinling Company and Arts and Crafts Company losing control of goods According to the facts, Arts and Crafts Company signed tripartite warehousing agreement with You Bei Company and Wan Shi Hong Company after the declaration of goods, which agreed the goods in question shall be stored in warehouse of Wan Shi Hong Company when the declaration of the goods is finished. In fact, after finishing the declaration of goods, You Bei Company send the fleet to bonded warehouse for picking up goods. Arts and Crafts Company cannot prove the original is how to arrange the goods deliver from the bonded warehouse to warehouse of Wan Shi Hong Company. Although Arts and Crafts Company in the trial claimed that it commissioned Jinling Company to deliver the goods to the warehouse of Wan Shi Hong Company after the declaration of goods, the company denied this. The court of first instance held that although Arts and Crafts Company claims it commissioned Jinling Company to arrange the transport of goods, it failed to provide the evidence of two sides to reach an agreement on the transportation and related transportation costs. The above claim of Arts and Crafts Company lacked evidence to support, it is not admissible evidence. On the basis of the existing evidence, which cannot be seen Arts and Crafts Company has the purpose and arrangement to give the link to the company except You Bei Company to handle on the link of delivering the goods from bonded warehouse to warehouse of Wan Shi Hong Company. Jinling Company delivered the document of title to the fleet appointed by You Bei Company, which conformed to the import agent contract of Arts and Crafts Company and You Bei Company and the tripartite warehousing agreement of Arts and Crafts Company, You Bei Company and Wan Shi Hong Company. In case of Jinling Company had delivered the document of title to Arts and Crafts Company rather than You Bei Company, under the condition of having signed tripartite warehousing agreement, how would Arts and crafts Company deal with the document of title? It is nothing more than 1. arrange for the fleet to Wan Shi Hong Company’s warehouse; 2. give to You Bei Company to arrange for the fleet to deliver to Wan Shi Hong Company’s warehouse. The final destination is

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Wan Shi Hong Company’s warehouse. The fact shows that the goods in question were in total of 2,991 tons, of which 2,001 tons of goods were resold by You Bei Company, the remaining 990 tons entered Wan Shi Hong Company’s warehouse, but eventually Wan Shi Hong Company delivered the goods to You Bei Company for disposal. Therefore, the fundamental reason of the losing control of goods of Arts and Crafts Company in this case, LI Moumou made use of You Bei Company and under the help of Wan Shi Hong Company to the implementation of fraud on Arts and Crafts Company, illegal occupation of the goods in question and Arts and Crafts Company itself as import agent failed to fulfill the precaution duty, it had no causal relationship with the behavior of Jinling Company delivering the document of the title to You Bei Company. In summary, the court of first instance held that Arts and Crafts Company has never signed a written customs declaration agreement with Jinling Company. According to the current record of effective evidence and facts, the court of first instance could not shape the moral certainty of the claims of Arts and Crafts Company that “the declaration of goods in question is the entrustment towards Jinling Company by Arts and Crafts Company”. On the contrary, Jinling Company has the reason to hold that the declaration of the goods is commissioned by You Bei Company, Jinling Company delivered the document of title to the fleet appointed by the client, there is no fault. No evidence can prove that Jinling Company also has the obligation of delivering the goods to the warehouse of Wan Shi Hong Company after the completion of customs declaration. According to the instructions of You Bei Company, it has no causal relationship between Jinling Company delivering the document of title to the fleet appointed by the latter and the loss suffered by Arts and Crafts Company, so the claim that Arts and Crafts Company requesting Jinling Company to bear the tort liability should not be supported by the court of first instance. (3) Regarding to the scope of the compensation that Arts and Crafts Company can obtain for infringement The court of first instance held that: 1. regarding to loss of goods claimed by Arts and Crafts Company RMB20,661,450.92 is the payment of Arts and Crafts Company’s acceptance of cargo payment outwards of USD2,492,665, calculated by USD1 amount to RMB8.2889. Arts and Crafts Company claimed the RMB as the compensation currency did not violate the law, which can be converted at the earliest date of the request to the Defendant to the USD against the RMB. Arts and Crafts Company filed an action before the Ningbo Intermediate People’s Court on January 24, 2005 and claimed compensated in RMB, the spot exchange selling rate of USD against the RMB of that day is USD1 amount to RMB8.2889, so Arts and Crafts Company’s claim should be supported. 2. Regarding to the import agent fees, bank charges, issuing fees, post and telecommunications charges, the above fees are the direct losses suffered by Arts and Crafts Company for the You Bei Company and Wan Shi Hong Company’s infringement (including the interests of the period), which should be supported. 3. Regarding to the loss of interest, Jinling Company held that Arts and Crafts Company in 2008 put forward the claim of loss after the court accepted the transfer, which has passed the statute of limitations. Therefore,

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the court of first instance held that the loss of interest belonged to the yield loss of Arts and Crafts Company due to the infringement. When Arts and Crafts Company filed an action before the Ningbo Intermediate People’s Court on January 24, 2005, Arts and Crafts Company’s right to claim for the loss of the dispute has been suspended, the effect of interruption not only reached for direct losses also included the yield loss. Whether or not the claim has been affirmed, as long as the proceedings has not exceeded the statue limitation of action, which should be supported. In addition, Arts and Crafts Company argued that it is more reasonable to calculate according to the People’s Bank of China RMB one-year benchmark lending rate, which may be granted. However, Arts and Crafts Company claimed to calculate from January 14, 2005, which lacked legal basis. It may be appropriate for the Defendant to claim compensation for infringement from the date of January 24, 2005. 4. Regarding to the criminal pressing payment, deposit and Arts and Crafts Company issued a notice of discharge of 600 tons of PTA. Civil litigation compensation is based on the principle of making up for the loss, so the criminal pressing payment obtained by Arts and Crafts Company and advanced deposit RMB3.1 million shall be deducted from Arts and Crafts Company’s compensation amount. As for the 600 tons of PTA release notice issued by Arts and Crafts Company, Arts and Crafts Company explained that Arts and Crafts Company mistook 2,991 tons of goods have entered Wan Shi Hong Company’s warehouse. Because You Bei Company has paid the customs value added tax more than RMB5 million of the goods in question, plus the bail RMB3.1 million that was previously paid to Arts and Crafts Company, the remaining 2,391 tons of goods are enough to ensure the interests of Arts and Crafts Company, so it issued a release notice of 600 tons of goods. The instruction is not the true meaning of Arts and Crafts Company, which was issued by the jointly deceive of You Bei Company and Wan Shi Hong Company. The court of first instance held that Arts and Crafts Company’s interpretation was consistent with common sense, which could be adopted, the 600 tons of PTA should not be deducted from Arts and Crafts Company’s claim. In summary, the loss suffered by Arts and Crafts Company due to the joint infringement of Wan Shi Hong Company and You Bei Company was RMB17,596,692.16 and corresponding loss of interest, and Wan Shi Hong Company and You Bei Company should bear joint and several compensation liability for this. In summary, according to Article 106 Paragraph 2, Article 117 Paragraph 1 and 3 of the General Principles of the Civil Law of the People’s Republic of China, Article 148 Paragraph 1 of the Opinions of the Supreme People’s Court on Several Issues concerning the Implementation of the General Principles of the Civil Law of the People’s Republic of China (for Trial Implementation), Article 64 Paragraph 1 and Article 144 of the Civil Procedure Law of the People’s Republic of China, the court of first instance judged: 1. Shanghai You Bei Trade Co. Ltd. should compensate RMB17,596,692.16 and the loss of interests for Ningbo Arts & Crafts Import & Export Co., Ltd. within ten days from the date when this judgment came into effect (the interest should be calculated on the basis of the deposit interest rate over the same period RMB promulgated by of the People’s Bank of China from

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January 24, 2005 to the date of effectiveness of the judgment); 2. Shanghai Wan Shi Hong Logistics Warehousing Co. Ltd. should bear jointly and severally liability for the above first item; and 3. not support the other claims of Ningbo Arts & Crafts Import & Export Co., Ltd. Arts and Crafts Company refused to accept the judgment of first instance, and appealed that the judgment of first instance did not find the fact clearly, applied the law wrongly and the judgment was wrong, existing false negatives. 1. The judgment of first instance had the errors in confirmation on the legal relationship between Arts and Crafts Company and Jinling Company. According to the fact that Arts and Crafts Company sent a full set of documents and customs proxy to Jinling Company, Jinling Company detained the documents of Arts and Crafts Company, and the inquiry of Jinling Company operator ZHANG Moumou when accepting the investigation of Ningbo Public Security Bureau. Arts and Crafts Company commissioned Jinling Company to declare of importation for the goods in question shall be recognized, but the court of first instance denied all the facts and evidence concerned with the entrustment, on the contrary, the court of first instance adopted the illegal transcripts made by the prisoner LI Moumou of Jinling Company’s agent; 2. there is a contractual relationship between Arts and Crafts Company and Jinling Company. Jinling Company acted the breach of contract and infringement of Arts and Crafts Company. Jinling Company shall deliver the documents to the entrusted Arts and Crafts Company after completing the customs declaration, however, Jinling Company breached the contract and erroneously delivered the document to the third party, which caused Arts and Crafts Company lost control of the goods without receiving the payment. So the court shall confirm Jinling Company, You Bei Company and Wan Shi Hong Company constituted a joint tort of Arts and Crafts Company and shall be jointly and severally liable for the loss of Arts and Crafts Company; and 3. in terms of disputes in question. The Civil Judgment of (2008) Hu Hai Fa Shang Chu Zi No.434. mentioned by Arts and Crafts Company has been closed automatically by the court of first instance and has been transferred to public security for handling. After that Arts and Crafts Company requested to register again, and the court missed to handle the property preservation of Wan Shi Hong Company for Arts and Crafts Company. (Arts and Crafts Company had applied to the Ningbo Intermediate People’s Court for property preservation of Wan Shi Hong Company. After that, due to the case was transferred to Shanghai Maritime Court, the related property preservation materials have also been transferred to (2008) Hu Hai Fa Shang Chu Zi No.434). All the foregoing indicates that the trial procedure of the first instance of this case is unfair. Accordingly, Arts and Crafts Company requested the court to change the judgment in accordance with law, adjudging that Jinling Company, You Bei Company and Wan Shi Hong Company should jointly and severally be liable for the losses suffered by Arts and Crafts Company, and handle the matters of property preservation of Wan Shi Hong Company for Arts and Crafts Company. Jinling Company defended that: the judgment of first instance ascertained the facts clearly and applied the law correctly. 1. The judgment of first instance is correct about confirming that Arts and Crafts Company and Jinling Company does

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not have the relationship of customs declaration. Arts and Crafts Company sent the documents and blank customs declaration documents to Jinling Company in accordance with the instructions of LI Moumou of You Bei Company, which does not have the expression directly in the name of the principle to commission Jinling Company to declare. The reply made by the director of ZHANG Moumou of Jinling Company when he received the inquiry from the Ningbo Public Security Bureau was misled by Public Security, the effectiveness of the testimony in the Ningbo Intermediate People’s Court is higher than of the inquiry transcripts. Even though in the inquiry transcripts of Public Security, ZHANG said clearly that direct contact with Jinling Company is You Bei Company. Jinling Company sent the freight invoice that issued to You Bei Company to LI Moumou and dunned declaration charges to LI Moumou. Although LI Moumou was a prisoner, he acted as the agent for You Bei Company and Arts and Crafts Company signed the import agent agreement, he knew the case, Jinling Company obtained the evidence from him, which did not violate the provisions of the law, and LI Moumou’s statement has other evidence available on the record to prove. 2. Jinling Company accepted the commission of You Bei Company to declare, and gave the documents after customs clearance to the fleet appointed by You Bei Company according to the instruction of You Bei Company. The act of surrendering documents has no fault, which has no causal relationship with the loss of Arts and Crafts Company and is neither breach of contract nor infringement. Accordingly, Jinling Company requested the court of second instance to dismiss the appeal and affirm the original judgment. You Bei Company did not submit any written comments. Wan Shi Hong Company held that: Wan Shi Hong Company and You Bei Company never met, and had no joint intention of joint tort. The loss and damage of goods in question has no relation with YAO Moumou’s issuing outbound order. There is no evidence that YAO and other criminal gangs conspired for illegal profits. So Wan Shi Hong Company does not agree with the appeal of Arts and Crafts Company that Wan Shi Hong Company, Jinling Company and You Bei Company should bear joint responsibilities. Wan Shi Hong Company has no opinions to other appeals and requests towards Arts and Crafts Company. Arts and Crafts Company has objection to the fact ascertained in the first instance that there is no relationship of declaration commission between Arts and Crafts Company and Jinling Company. Arts and Crafts Company submitted two new evidence in the second instance: the first group is the 2 “tax transfer list” (copy), which is from the evidence 19 submitted by Jinling Company in the first instance, there are two import settlement under the “business unit” column records as the “Ningbo Arts and Crafts”, another two “business unit” column records as “Hua Yuan”, indicating that Jinling Company knows the object of business contact is Arts and Crafts Company and Shanghai Huayuan Enterprise Development Co., Ltd. (hereinafter referred to as Huayuan Company); the second group is china securities journal of April 28, 2007 via the internet. The newspaper published the lawsuit of Huayuan Company and the Bank of Shanghai, which referred to the disputes of Huayuan Company and Jinling Company. Arts and Crafts Company

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held that Huayuan Company is also the object of contract fraud of LI Moumou. Jinling Company paid the compromise fund to Huayuan Company in the case of (2005) Hu Hai Fa Shang Chu Zi No.528, it can be inferred that Jinling Company should also bear the responsibility of releasing goods to LI Moumou in the case. The cross examination of Jinling Company to the materials of the evidence submitted by Arts and Crafts Company: it has no objection to the pro forma authenticity of the first group of 2 “tax delivery list”, but the purpose of proof of Arts and Crafts Company shall not be recognized. The handover list is a handover list of the original customs declaration form handed over by the financial department of Jinling Company. The units in operation of the handover list was registered according to the customs declaration form, which not only cannot prove that Arts and Crafts Company is the settle accounts of the customs declaration fees of the goods in question, but cannot prove Arts and Crafts Company is the principal of customs declaration. The other evidence of evidence 19 submitted by Jinling Company in the first trial can prove that it is You Bei Company that conducted the settlement with Jinling Company, tariffs, value-added tax of the goods in question were paid by You Bei Company; the relevancy of the second newspapers shall not be recognized. Arts and Crafts Company wants to prove the contents are judgment without evidence. In the case of (2005) Hu Hai Fa Shang Chu Zi No.528, Jinling Company as the freight forwarder of import commodity business unit Huayuan company, which accepted the letter of guarantee of import receiving unit Wujiang Shoushi Silk Trading Co., Ltd. and delivery of goods without production of bill of lading. The object of delivery is not LI Moumou, so the material has no relevancy with this case. Wan Shi Hong Company held that the authenticity, legality and relevancy of the evidence submitted by Arts and Crafts Company in the second instance shall be recognized. The court confirms the evidence materials submitted by Arts and Crafts Company that: the pro forma authenticity of the first set of material shall be confirmed. The handover list is the document used within the finance department of Jinling Company. The explanation of Jinling Company on the “business unit” column records as the “Ningbo Arts & Crafts” is consistent with the customs declaration form records is reasonable. Therefore, it is not enough to prove the fact that Arts and Crafts Company entrusts Jinling Company to declare only on the basis of the surface record of the handover list. Jinling Company’s cross examination opinion was established. The court does not confirm the effectiveness of evidence of the first set of evidence materials. The second group of materials are downloaded from the newspapers and periodicals online, which published the lawsuit between Huayuan Company and the Bank of Shanghai mentioned the dispute between Huayuan Company and Jinling Company. Jinling Company and Arts and Crafts Company both confirmed the dispute was handled with (2005) Hu Hai Fa Shang Chu Zi No.528. The subject and the merits of the case are stated in the opinion of Jinling Company, which has no relevancy or resemblance to the dispute in this case and does not involve LI Moumou’s contract fraud plot, so the cross-examination

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opinion of Jinling Company shall be established, and the court does not confirm the effectiveness of evidence of the second group of evidence. To sum up, although Arts and Crafts Company raised an objection to the fact that the court of first instance found there was no customs commission relationship between Arts and Crafts Company and Jinling Company, Arts and Crafts Company failed to provide sufficient evidence to prove that, so the objection is not established, and the court does not support it. As for the fact found in the first instance that there was no commission of customs declaration between Arts and Crafts Company and Jinling Company, and the court confirms it. The other parties failed to submit new evidence in the second instance. Other facts found by the court of first instance are supported by relevant evidence, which shall be confirmed by the court. The court holds that: Arts and Crafts Company is the buyer of the import contract of foreign trade in question. According to the import agent agreement between Arts and Crafts Company and You Bei Company, until the suit, Arts and Crafts Company is still the owner of the goods in question. Arts and Crafts Company held that Jinling Company, You Bei Company and Wan Shi Hong Company jointly implemented infringement, which caused that Arts and Crafts company not only did not receive the payment, but also lost the right to goods. Arts and Crafts Company requested to the court that Jinling Company, You Bei Company and Wan Shi Hong Company should bear joint responsibilities, so the case is the dispute over tort liability. Regarding to whether You Bei Company should undertake the tort liability to Arts and Crafts Company, the court of first instance held that the authorized operator and the actual controller LI Moumou of You Bei Company in the name of You Bei Company to sign import agency agreement and warehousing agreement with Arts and Crafts Company, after that LI Moumou by means of instigating others to create fictitious storage orders, making false impression of goods storage, and handling goods without authorization to achieve the purpose of illegal possession of all the goods in question of Arts and Crafts Company, so due to LI Moumou’s contract fraud crime, You Bei Company shall assume tort civil liability for the losses suffered by Arts and Crafts Company (deduction of pre-paid margin and subsequent criminal payment) in accordance with law. The parties concerned have no objection to the aforesaid recognition of the court of first instance. Regarding to whether Wan Shi Hong Company should undertake the tort liability to Arts and Crafts Company, the court of first instance held that Wan Shi Hong Company issued false godown entry and cash statement according to the requirements of LI Moumou to deceive Arts and Crafts Company, the subjective fault is obvious, the act provides a convenient conditions objectively for infringement act implemented by You Bei Company, which has a causal link with the property damage suffered by Arts and Crafts Company, so Wan Shi Hong Company and You Bei Company are tortfeasors, which shall bear joint liability in accordance with law in terms of the losses of Arts and Crafts Company (deduction of pre-paid margin and subsequent criminal payment). Although Wan Shi Hong Company raised an objection to the aforesaid recognition of the court of first

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instance, Wan Shi Hong Company fails to pay the acceptance fee of the case, its appeal was dealt with as withdrawal in accordance with law and in the second instance Wan Shi Hong Company also did not submit any evidence to support its objection, so according to the current evidence, the objection is not established. All other parties raise no objection to the aforesaid recognition of the court of first instance. Accordingly, the issue of the case in the second instance is: whether Jinling Company should bear the tort liability to Arts and Crafts Company and assume joint liability with You Bei Company and Wan Shi Hong Company. Arts and Crafts Company appealed that the establishment of the legal relationship of commission of the customs between Arts and Crafts Company and Jinling Company, Jinling Company delivered the document to be completed after customs declaration improperly to a third party except Arts & Crafts Company. The nonperformance simultaneously infringed upon the rights and interests of Arts and Crafts Company. Jinling Company held that the recognition of the judgment of first instance that there is no relationship of commission of customs declaration between Arts and Crafts Company and Jinling Company, and that Jinling Company has no infringement committed to Arts and Crafts Company is correct. The court holds that the court of first instance on the basis of a comprehensive consideration of the existing evidence, according to the actual performance process of import agent agreement between Arts and Crafts Company and You Bei Company, namely the actual import goods declaration and extraction matters was in charge of You Bei Company, with the process of signing and performing process of the tripartite warehousing agreement among Arts & Crafts Company, You Bei Company and the Wan Shi Hong Company, namely the warehouse of Wan Shi Hong Company is responsible for the storage of the goods in question and deliver the warehouse receipt to Arts and Crafts Company, and according to operating practices in the freight forwarding industry, namely the import operator or the owner of the goods is not necessarily the direct trustee of the customs declaration, the forwarding agent shall deliver the documents to the direct client after completing the customs declaration, made the recognition that it was You Bei Company rather than Arts and Crafts Company that commissioned Jinling Company to declare for goods in question, which was not improper. Arts and Crafts Company failed to submit effective evidence in the second instance, which cannot support the view of establishing the relation of entrustment between Arts and Crafts Company and Jinling Company only according to the fact that Arts and Crafts Company sent the customs declaration document to Jinling Company and Jinling Company had seized the relevant documents. In view of the fact that there is customs commission relationship between You Bei Company and Jinling Company, Jinling Company delivered the documents that have completed declaration to You Bei Company, which conforms to the principle of relativity of contract and there is no need to assume the liabilities for breach of contract to Arts and Crafts Company. According to the facts found by the court of first instance, Jinling Company has no intentional violation of the rights and interests of Arts and Crafts Company collusion with You Bei Company. The act of

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surrendering documents in accordance with the agreement has also no direct causal relationship with Arts and Crafts Company’s losses due to LI Moumou’s contract fraud. Therefore, the recognition of the court of first instance that Jinling Company should assume tort liability for Arts and Crafts Company is not wrong. The grounds of appeal of Arts and Crafts Company that Jinling Company, You Bei Company and Wan Shi Hong Company constituted a joint infringement is lack of factual and legal basis, which is difficult for the court to adopt. Regarding to the question that Arts and Crafts Company appealed that the trial procedure of the first instance was unfair, the court holds that Shanghai Maritime Court transferred the case of (2008) Hu Hai Fa Shang Chu Zi No.434 to the public security was done in accordance with the law. Arts and Crafts Company has ever applied to the Ningbo Intermediate People’s Court for property preservation of Wan Shi Hong Company, which is not within the scope of the trial of the first instance of the case. It is not improper for the court of first instance to have not handled it. To sum up, You Bei Company and Wan Shi Hong Company due to the act of joint infringement, shall be jointly and severally liable for losses suffered by Arts and Crafts Company. Jinling Company has no infringement on Arts and Crafts Company, and shall not be responsible for the loss of Arts and Crafts Company. The reasons for the appeal of Arts and Crafts Company cannot be established, and the court does not support its appeal. The judgment of the court of first instance is correct and shall be affirmed. Accordingly, in accordance with the provisions of Article 170 Paragraph 1 Sub-paragraph 1 and Article 175 of the Civil Procedure Law of the People’s Republic of China, the judgment is rendered as follows: Dismiss the appeal and affirm the original judgment. Court acceptance fee of first instance in amount of RMB145,283.46 shall be born in accordance with the judgment of first instance; court acceptance fee of second instance in amount of RMB123,522.56 shall be born by the Appellant, Ningbo Arts and Crafts Import & Export Co., Ltd. The judgment is final. Presiding Judge: DONG Min Acting Judge: HU Hailong Acting Judge: XU Yijin February 2, 2016 Clerk: CHEN Xi

Appendix: Relevant Laws Civil Procedure Law of the People’s Republic of China Article 170 After trial, the people’s court of second instance shall handle appeal cases according to the following different circumstances:

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(1) Dismissing on appeal and sustaining the original judgment or ruling in the form of a judgment or ruling, if the original judgment or ruling is clear in fact finding and correct in application of law. (2) Reversing, revoking or modifying the original judgment or ruling in accordance with law in the form of a judgment or ruling, if the original judgment or ruling is erroneous in fact finding or application of law. (3) Issuing a ruling to revoke the original judgment and remand the case to the original trial people’s court for retrial or reversing the original judgment after ascertaining facts, if the original judgment is unclear in finding the basic facts. (4) Issuing a ruling to revoke the original judgment and remand the case to the original trial people’s court, if the original judgment seriously violates statutory procedures, such as omitting a party or illegally entering a default judgment. Where, after the original trial people’s court enters a judgment for a case remanded for retrial, a party appeals the judgment, the people’s court of second instance shall not remand the case again for retrial. Article 175 The judgment and rulings of a people’s court of second instance shall be final.

Ningbo Maritime Court Civil Judgment Ningbo Zhenhai Ming Ding Metal Materials Co., Ltd. v. Feng Yuan Shipping Co., Ltd. et al. (2014) Yong Hai Fa Shang Chu Zi No.436 Related Case(s) None. Cause(s) of Action 201. Dispute over illegal lien on ship, cargoes carried by ship, bunkers and stores of ship. Headnote The Defendant ship operators held not to be entitled to exercise a lien over the Plaintiff’s cargo for damage allegedly caused to the Defendants’ ship by previous shipment of the Plaintiff’s cargo. Summary The Plaintiff sued the Defendants, Feng Yuan Shipping (Feng) and Dalian Rui Hai Shipping Management (Dalian), alleging that they were jointly liable for illegally detaining a batch of scrap bulk hardware & electrical appliances which the Plaintiff had contracted to receive. The Defendants detained the cargo in question after a previous shipment of goods caught fire and damaged the carrying vessel on that voyage, M.V. “Yong Shun”. The Defendants refused to compensate the Plaintiff for the goods lost on the previous voyage, alleging that they had spontaneously caught fire, and argued that the Plaintiff was liable for damage to M. V. “Yong Shun”. Feng was the owner of the M.V. “Yong Shun” and Dalian was the vessel’s operator. At trial, the court held that both of the Defendants, taking part in the detention of the goods and failing to support their assertion of the previous cargo’s spontaneous combustion, illegally detained the goods. Accordingly, the court judged that the Defendants should bear joint and several liability to the Plaintiff for damages caused by the cargo’s detention.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_30

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Judgment The Plaintiff: Ningbo Zhenhai Ming Ding Metal Materials Co., Ltd. Domicile: No.99 Dinghai Road, Zhenhai Renewable Resources Processing Park, Ningbo City, Zhejiang Province, the People’s Republic of China. Legal representative: ZHU Hongyv, manager. Agent ad litem: YV Miaohong, lawyer of Zhejiang Capital Equity (Ningbo) Legal Group Law Firm. Agent ad litem: SHEN Yan, lawyer of Zhejiang Capital Equity (Ningbo) Legal Group Law Firm. The Defendant: Feng Yuan Shipping Co., Ltd. Domicile: Trust Company Building, Ajtek Road, Ajtek Island, Majuro, the Republic of the Marshall Islands (P. O. BOX1405, Majuro Marshall Islands). The Defendant: Dalian Rui Hai Shipping Management Co., Ltd. Domicile: Room 1907, Shengshi Building, No.35 Luxun Road, Zhongshan District, Dalian City, Liaoning Province, the People’s Republic of China. Legal representative: DING Ayuan, executive director. Agent ad litem: DING Zhibao, general manager. Agent ad litem: YV Yang, staff of the company. With respect to the case arising from dispute over liability for damage caused by illegal lien on goods on board, the Plaintiff Ningbo Zhenhai Ming Ding Metal Materials Co., Ltd. (hereinafter referred to as “Ming Ding Company”) filed an action against the Defendant Feng Yuan Shipping Co., Ltd. (hereinafter referred to as “Feng Yuan Company”) and Dalian Rui Hai Shipping Management Co., Ltd. (hereinafter referred to as “Rui Hai Company”) on July 10, 2014. The court, after accepting this case, formed a collegiate panel in accordance with the law to hear this case. The Plaintiff applied to the court for a maritime injunction to order the two Defendants to deliver the goods under the B/L involved in the case. After organizing the hearing procedure, the court, on July 2, 2014, made the civil ruling paper and maritime injunction which would be implemented the next day. The court held hearings in public on July 10 and July 11, 2014. ZHU Hongyv, legal representative of the Plaintiff Ming Ding Company, agent ad litem of the Plaintiff, YV Miaohong and agents ad litem of the Defendant Rui Hai Company, DING Zhibao and YV Yang appeared in court to attend the trial. The Defendant Feng Yuan Company which having been served with a summon, refused to appear in court without justified reasons, so the court made a judgment by default in accordance with the law. Now this case has been concluded. The Plaintiff Ming Ding Company alleged: on February 28, 2014, the Plaintiff signed a sales contract of goods with TOSEICOL, LTD (hereinafter referred to as “Dong Sheng Company”). The Plaintiff, for the purpose of recycling steel, imported a batch of scrap hardware & electrical appliance from Japan. On March 13 of the same year, Feng Yuan Company issued the B/L No.YSON1, specifying the shipper

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is Dong Sheng Company. Both of the consignee and notify party were the Plaintiff. Osaka in Japan is the port of loading while Ningbo Port is the port of destination. The weight of goods is 948.25 tons. This vessel should arrive at Ningbo Zhenhai Port on March 17, 2014 in the normal voyage. On March 31, 2014, Rui Hai Company sent letters to the Plaintiff, saying the goods involved in the case got on fire at outer anchorage of Ningbo Port. On April 18, under repeated negotiations presented by the Plaintiff, the vessel involved in the case berthed at Zhenhai Dock and the discharge was completed the next day. Since then, the two Defendants refused to deliver the goods due to the loss of vessel caused by the fire on goods. The court also failed to conciliate them. Because the Defendant had detained the goods for two months, the total economic loss including the rent of space, outsourcing labor cost, staff salary, CY charges, fee for delayed declaration and so on was 1,100,958 yuan. Feng Yuan Company was the carrier in this case and Rui Hai Company was the shipper manager. The illegal lien on goods involved in the case by the two Defendants constituted the joint tort. They should compensate for the loss suffered by the Plaintiff jointly. So the Plaintiff filed an action to the court, and requested the court to order the two Defendants to deliver the goods under B/L No. YSON1, if failing in delivery, the Defendants should compensate the Plaintiff the losses 1,100,958 yuan. Because the Plaintiff had picked up the goods later, a deduction to the claims had been made to request the court to order the two Defendants compensate the Plaintiff the losses 475,825 yuan. The Defendant Rui Hai Company defended: 1. the contract of goods by sea involved in the case was issued between Feng Yuan Company and Heng Xing Shipping Co. Ltd. (hereinafter referred to as “Heng Xing Company”), and there was no contractual relationship between the two Defendants and the Plaintiff. The Plaintiff had no right to prosecute Rui Hai Company. 2. When the goods involved got on fire, the owner of goods still was Dong Sheng Company. It was unreasonable that the Plaintiff bought the goods through Heng Xing Company. So it constituted a fraud. 3. In the case that Heng Xing Company and Dong Sheng Company made no compensation for the losses caused by the fire involved suffered by the ship, the ship could only detain the goods involved. To sum up, the Defendant requested the court to make the judgment in accordance with the law. The Plaintiff provided the following evidence to the court during the evidence producing term to support its claim: Evidence 1, B/L, letter of guarantee for telex release and release notice issued by Dong Sheng Company, to prove that there was a B/L transport contract relationship between the Plaintiff and the Defendant and the Plaintiff was the consignee. Evidence 2, a sales contract, packing list, P/I, the certificate for pre-shipment inspection of scrap raw material, customs declarations for import & export, detail lists for tax and fee, applications for overseas remittance and the bank payment voucher, to prove that as the consignee, the Plaintiff had finished the full payment. Evidence 3, the notice of vessel’s arrival, letters between both parties and e-mails between the Plaintiff and the Defendant, to prove the negotiation process for matters concerned delivery and guarantee between the Plaintiff and Defendant.

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Evidence 4, the lease contract and the supplementary contract, invoices for the site rent and CY charges, the bank payment voucher, the consignment agreement of loading and unloading operation at port for imported scrap metal, the final statement of storage charge and the wage schedule, to prove the losses suffered by the Plaintiff caused by the lien on goods by the two Defendants. Evidence 5, the special payment form of customs import VAT, to prove the rationality of the rental losses alleged by the Plaintiff. Evidence 6, the permanent vessel registration certificate, to prove the basic information of M.V. “Yong Shun”. The Defendant Feng Yuan Company made no defense and provided no evidence materials to the court. The Defendant Rui Hai Company provided the following evidence to the court to support its defense: 1. E-mails between both parties, to prove that the goods yard was selected by the attorney of Rui Hai Company. 2. The voyage charter party, to prove that the charter party was signed between Feng Yuan Company and Heng Xing Company. 3. The inspection report, the statement for jettison, the statement for auto-ignition of goods and the notification, to prove the process of the accident and the loss suffered by the ship. Through the cross-examination in court, against the evidence submitted by the Plaintiff, the Defendant presented its opinions as follows: aiming at evidence 1, the B/L was the telex-release straight bill of lading issued by the shipping agent in Japan and there was no original bill of lading. The agent of the Defendant never received the letter of guarantee for telex release and was not clear whether any seaman had received it. The Defendant disagreed with the authenticity of the release notice. Aiming at evidence 2, there was no objection to the authenticity of the certificate for pre-shipment inspection, customs declaration for import, applications for overseas remittance and the bank payment voucher. Other evidence were not the original, so the Defendant disagreed with the authenticity of them. The Plaintiff was not the consignee of the goods involved in the case. The date when the B/L being issued was March 2014 while the date stated in the sales contract was February 2014. Obviously there was difference between them. Aiming at evidence 3, the Defendant affirmed its authenticity, but holding that on March 31, 2014, the letter sent to the Plaintiff by Rui Hai Company was to investigate for the liability of compensation of Heng Xing Company, not to claim to the Plaintiff for the compensation. And the Defendant should not negotiate with the owner of goods about matters concerned compensation and guarantee. Aiming at evidence 4, there was no objection to the authenticity of the payment voucher for the site rent, but the Defendant disagreed with the authenticity of other evidence. Aiming at evidence 5, there was no objection. But the Defendant held that the usual practice of one shipment once a month could not reflect the market fluctuation accurately. There was no objection to evidence 6.

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The Plaintiff cross-examined the evidence submitted by the Defendant as follows: there was no objection to the authenticity of evidence 1, but holding that the goods yard was selected by the Plaintiff. Evidence 2 was the English copy with no original and Chinese translation. The Plaintiff disagreed with the authenticity of them and the Plaintiff never contacted with Heng Xing Company. Evidence 3 was not the original. The Plaintiff did not recognize the cause stated in the inspection report and held it should be subjected to the accident investigation report made by the maritime department finally. Losses alleged by the Defendant were not reasonable. The statement for jettison and the statement for auto-ignition of goods were presented by the seaman of M.V. “Yong Shun”. And the seaman was the interested party with the ship, they would attribute the cause of fire to goods itself to exempt their obligation to manage the goods. So the Plaintiff did not recognize these evidence. There was no objection to the authenticity of the notification. The ascertainment opinions of the court to the Plaintiff’s evidence are as follows: the release notice in evidence 1 was original and had been notarized. Though the B/ L and the letter of guarantee for release telex were the copy, Rui Hai Company had confirmed that the B/L was issued by the agent of M.V. “Yong Shun” and the means for releasing the goods was the letter of guarantee for telex release. The letter of guarantee for telex release and the original bank payment voucher could corroborate with each other. So the court confirms these evidence. In evidence 2, the customs declaration, application for overseas remittance and the bank payment voucher were originals. And the sales contract, packing list, P/I and the detail list for tax fee were copies or printed pieces, but names of both sides of the trade, the commodity name and quantity, the contract number could corroborate with the evidence and the court trial. And the explanation alleged by the Plaintiff that it was a clerical error to write the date 2014 into 2013 was basically reasonable. So the court confirms that the Plaintiff was the consignee of goods involved and all the payment for goods had been paid. This set of evidence shall be confirmed. Rui Hai Company had no objection to evidence 3, 5 and 6. And evidence 4 was original. So the court confirms the authenticity of these evidence aforesaid. The reasonability of losses alleged by the Plaintiff should be confirmed synthetically combining with all the evidence and the hearing. The Plaintiff had no objection to the notification in evidence 1 and evidence 3 submitted by the Defendant Rui Hai Company. The court confirms its authenticity, but it could not prove that the goods yard was selected by the Defendant. The cross-examination opinions to evidence 2 from the Plaintiff was reasonable, so the court does not recognize it. Evidence 3 was not original except the notification. And the inspection report was only a printout with no seal of the insurance assessment company. The Plaintiff did not confirm its authenticity, therefore the court does not confirm it. In accordance with the aforesaid confirmation of the evidence and the court investigation, the court finds out the facts as follows: on February 28, 2014, the Plaintiff signed Sales Contract with Dong Sheng Company. They agreed that the Plaintiff purchased a batch of scrap bulk hardware & electrical appliance, 900 tons (allowing a tolerance of plus or minus 10%), in bulk. On March 13, 2014, the agent of the ship issued the B/L No.YSON1 on behalf of the carrier Feng Yuan Company

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and stated that the shipper was Dong Sheng Company. Both of the consignee and notify party were the Plaintiff. The vessel’s name is M.V. “Yong Shun”. Osaka in Japan is the port of loading while Ningbo Port is the port of destination. The goods were 948.25 tons of scrap hardware & electrical appliance with the freight prepaid. The ship had received all freight. The estimated time to arrive at port of destination was March 17, 2014 when the ship departed from the port. On the morning of March 16, 2014, on the way to Ningbo Port, the hold of M.V. “Yong Shun” got on fire and seamen adopted measures accordingly to put out the fire. On the morning of March 17, in the same year, M.V. “Yong Shun” dropped anchor at outer anchorage of Ningbo Port. The tug arranged by the maritime department arrived at site to assist to extinguish the fire. In the afternoon, the fire had been put out. On March 31, 2014, Rui Hai Company failed to claim to the Plaintiff for the compensation relying on the fire was caused by the auto-ignition of goods. On April 13 in the same year, a letter was sent to the Defendant by the Plaintiff, requesting the ship to deliver the goods immediately and make compensation for the losses caused by the delay in delivery. The next day, the Plaintiff paid the price of goods involved 4,204,836 yuan to Dong Sheng Company. On April 18, 2014, M.V. “Yong Shun” berthed at the dock of Ningbo Port and was started to unload. The goods involved were stored in the scrap metal No.2 yard in Zhen Hai Port Branch of Ningbo Port Co. Ltd. (hereinafter referred to as “Zhen Hai Port Branch”). The goods’ release should ask for the ship’s permission. The next day, the unloading was finished. Until May 21, 2014, such a negotiation about matters of releasing goods and the guarantee failed between the Plaintiff and the Defendant, so the Plaintiff brought a lawsuit to the court. It is also found out that: the registered owner of M.V. “Yong Shun” was Feng Yuan Company and the operator was Rui Hai Company. The customs value of imported goods was 4,421,950 yuan. On January 1, 2013, the Plaintiff issued a lease contract with Ningbo Zhen Hai Qi Xiong Storage Service Co., Ltd. (hereinafter referred to as “Qi Xiong Company”). Both parties agreed that the Plaintiff rented the C17 district of Zhen Hai Metal Park to implement the processing and utilization of imported scrap metal and the Plaintiff promised to pay the rent no less than 2,251,900 yuan annually. And the insufficient part should be complemented. This charging standard would be executed until December 31, 2013 and then there would be an adjustment to this standard. The comprehensive service charge should be paid monthly. On the first day of each month, this month’s comprehensive service charge should be paid. It should be prepaid according to the monthly average. The fee would be settled per contract year. When any excess occurs, a supplementary payment will be made. Qi Xiong Company configured the devices disproportionately, the Plaintiff paid extra facility rental fee 6,480 yuan per month. On December 12, 2014, both parties signed the complementary contract, agreeing to adjust the rent to 249,338 yuan per year. On April 10, 2014, the Plaintiff paid the rent 249,338 yuan to Qi Xiong Company. In addition, the Plaintiff signed the consignment agreement for loading and unloading operation at port of imported scrap metal with Zhen Hai Port Branch, agreeing that the port branch provided the loading and unloading service and the storage service. The storage fee would be

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free within 4 days since the goods unloaded. The storage fee charged by 0.20 yuan per ton per day from the fifth day, 1.00 yuan per ton per day from the tenth day, 2.00 yuan per ton per day from the sixteenth day. On July 5, 2014, the Plaintiff picked up the goods involved and paid the storage fee until this day 128,014 yuan. The court holds that this case is a maritime dispute over lien on goods. The Plaintiff held that the illegal lien on goods by the two Defendants constituted the joint tort. The cause of action in this case was the dispute over liability for damage caused by illegal lien on goods on board. The place in which the goods were detained was Ningbo City, Zhejiang Province, within the jurisdiction of the court’s region. The court has jurisdiction on this case. The place where the tort occurred is Ningbo City, Zhejiang Province. According to the provision of Article 44 of the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China, the laws at the place of tort shall apply to liabilities for tort, so this case shall be governed by the law in the mainland area of China. According to the plea of both parties and the court hearing, the issues of this case and the analyses are as follows: 1. Whether the lien on goods executed by the two Defendants was legal The Plaintiff held that the two Defendants executed the lien on goods illegally and they should indemnify the Plaintiff for the losses caused by the delay in delivery. Rui Hai Company defended that the Plaintiff was not the owner and the consignee of the goods involved. There was no contractual relationship between them. As Dong Sheng Company and Heng Xing Company did not indemnify for the losses suffered by the ship caused by the fire, the two Defendants had the right to execute the lien on goods. Through the investigation, the court holds that the Plaintiff was the consignee stated in the B/L involved and had actually paid the goods and obtained the B/L involved. Rui Hai Company had claimed to the Plaintiff for the losses suffered by the ship caused by the fire and negotiated with the Plaintiff for the matters concerned compensation and guarantee. So as the consignee and the owner, the Plaintiff had the right to require the two Defendants to delivery the goods involved. Rui Hai Company alleged that the losses suffered by the ship were caused by the auto-ignition of goods, but so far it did not provide any valid evidence to prove the losses were caused by the goods itself and the specific losses suffered by the ship. The Plaintiff did not recognize it. So this evidence for the defense was insufficient and the court shall not adopt it. Feng Yuan Company was the carrier of the goods involved and Rui Hai Company was the operator of M.V. “Yong Shun”. They concretely participated in detaining the goods involved and matters concerned the guarantee and compensation for releasing the goods. So the illegal lien on goods under the B/L involved by the two Defendants constituted the joint tort, they should indemnify the Plaintiff for the reasonable losses. 2. The reasonability of each loss claimed by the Plaintiff In accordance with the Plaintiff’s claim, the court confirms each loss caused by illegal lien on the goods involved one by one as follows:

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(1) The site rent and CY charges. The Plaintiff alleged that because of the illegal lien on goods by the two Defendants, the site leased from Qi Xiong Company to dismantle the goods had been standing idle for three months. Considering that the Plaintiff actively arranged other goods into the site to be dismantled, it claimed one month’s loss for the site rent 128,014 yuan as appropriate. The above charge should be undertaken by the two Defendants. The court holds that, the Plaintiff leased the site to dismantle the imported scrap hardware & electrical appliance involved, and then arranged other goods into the site to avoid aggravation of loss. Referring to the frequency of importing goods by the Plaintiff and the proportion of the goods involved to the whole year’s imported goods to be dismantled, the court decides the loss of site rent was 80,000 yuan. The CY charge was caused by the illegal lien and the amount was reasonable, and the court confirms it. (2) The fund occupation cost, administrative staff salaries and loss of travel expenses. The Plaintiff alleged that because of the delay in picking up the goods involved for operation, it suffered the loss for loan interest 31,922 yuan, the loss for salary 61,550 yuan and the travel expenses to deal with the matters concerned releasing goods 5,000 yuan. The court holds that, after the Plaintiff paid for the goods, until July 5, 2014, it just picked up the goods. The loss on payment was objective. So the Plaintiff had the right to claim the interest from the date of payment to the date of delivery calculated in accordance with the loan interest rate of the People’s Bank of China in the same period. As the amount the Plaintiff claimed was less than it above, which shall be deemed as a waiver, and the court confirms it. The Plaintiff provided no evidence to prove the loss for travel expenses and there was no other evidence to support the detail list for salary. So this loss could not be proved to be caused by the illegal lien on goods by the two Defendants, therefore the court does not protect this loss. Pulling the threads together, as for the reasonable parts of the claims of the Plaintiff, the court supports them. According to Article 6 and Article 8 of the Tort Liability Law of the People’s Republic of China, Article 28, Paragraph 1 of Article 64, Article 144 and Article 259 of the Civil Procedure Law of the People’s Republic of China and Article 44 of the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China, the judgment is rendered as follows: 1. The Defendants Feng Yuan Shipping Co., Ltd. and Dalian Rui Hai Shipping Management Co., Ltd. shall jointly pay 239,936 yuan to the Plaintiff Ningbo Zhenhai Ming Ding Metal Materials Co., Ltd. for losses within 15 days after this judgment takes into effect; 2. Reject the other claims of the Plaintiff Ningbo Zhenhai Ming Ding Metal Materials Co., Ltd. For failure to fulfill the obligation of payment within the period designated by this judgment, interest on the debt for the delayed period shall be doubled according to Article 253 of the Civil Procedure Law of the People’s Republic of China.

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Court acceptance fee in amount of 14,710 yuan, the injunction application fee in amount of 5,000 yuan, in aggregate amount of 19,710 yuan, the Plaintiff Ningbo Zhenhai Ming Ding Metal Materials Co., Ltd. shall bear 7,293 yuan, the Defendant Feng Yuan Shipping Co., Ltd. and the Defendant Dalian Rui Hai Shipping Management Co., Ltd. shall jointly bear 12,417 yuan. In case of dissatisfaction with this judgment, the Plaintiff Ningbo Zhenhai Ming Ding Metal Materials Co., Ltd. and the Defendant Dalian Rui Hai Shipping Management Co., Ltd. may within 15 days upon the service of this judgment while the Defendant Feng Yuan Shipping Co., Ltd. may within 30 days upon the service of this judgment, submit a statement of appear to the court, together with copies in the number of the opposite party before Zhejiang High People’s Court. [The appeal fee shall be 14,710 yuan (the exact amount is determined by the Zhejiang High People’s Court, the excess part will be refunded in the future) and shall be paid within 7 days upon submission of the statement of appeal. Otherwise, the appeal will be deemed to be withdrawn automatically. Bank of deposit: non-tax revenue settlement account of Zhejiang Province Finance Department. Account name: Agricultural Bank of China Hangzhou Xihu Branch. Number of account: 19000101040006575401001]. Presiding Judge: ZHANG Jilin Judge: ZHANG Jiansheng Acting Judge: WANG Liansheng March 9, 2016 Acting Clerk: ZHENG Jing

Appendix: Relevant Laws 1. Tort Liability Law of the People’s Republic of China Article 6 If any person, through his own fault, infringes on other people’s civil rights and interests, he shall assume the tort liability. Article 8 If two or more persons jointly commit a tort and cause damages to other people, they shall bear joint and several liability. 2. Civil Procedure Law of the People’s Republic of China Article 28 A lawsuit brought on a tortuous act shall be under the jurisdiction of the people’s court of the place where the tort is committed or where the defendant has his domicile. Article 144 If a defendant, having been serviced with a summons, refuses to appear in court without justified reasons, or if he withdraws during a court session without the permission of the court, the court may make a judgment by default.

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Article 64 Paragraph 1 It is the duty of a party to an action to provide evidence in support of his allegations. Article 259 The provisions of this Part shall be applicable to civil proceedings within the territory of the People’s Republic of China in regard to cases involving foreign element. Where it is not covered by the provisions of this Part, other relevant provisions of this Law shall apply. 3. Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China Article 44 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.

Beihai Maritime Court Civil Judgment PICC Property and Casualty Company Limited Tianjin Branch v. Guangxi Hong Chen Investment Co., Ltd. et al. (2015) Hai Shang Chu Zi No.216 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 885. Cause(s) of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote Rejecting the Plaintiff’s claim for water damage to cargo because the Plaintiff failed to show that water damage occurred during carrier’s period of responsibility. Summary The Plaintiff insurance company, subrogated to the rights of its insured, consignee Beidahuang Potato Group Heilongjiang Trading Co., Ltd., sued charterer Guangxi Hong Chen Investment Co. and carrier SHL Maritime Co. over a contract for the carriage of cassava flour from Bangkok, Thailand to Qinzhou, China. The Plaintiff claimed that the cargo of 8,590 bags of cassava flour suffered water damage during shipment, which caused the consignee to suffer a loss of USD 157,119.70. The court found that the charterer was not liable for the damage because it was under no contractual relationship with the consignee. Further, the court also found the carrier to be free from liability on two main grounds. First, since the bags of flour were not containerized, the carrier was only responsible for them until the time of discharge, and upon inspection at the time of discharge, the flour was found to be free from water damage. Secondly, during the time the flour was stored at port and while it was in transit to the consignee, Qinzhou experienced significant periods of rainy weather, which could have been the cause of the damage to the flour. In short, the Plaintiff was unable to provide evidence that the water damage occurred during the carrier’s period of responsibility for the goods, and, therefore, its suit must fail. The claim was rejected, and the Plaintiff was ordered to pay court costs.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_31

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Judgment The Plaintiff: PICC Property and Casualty Company Limited Tianjin Branch Domicile: No.61 Shiyijing Road, Hedong District, Tianjin City, the People’s Republic of China. Representative: GAO Jian, general manager. Agent ad litem: YANG Rui, lawyer of Beijing Dentons (Tianjin) Law Firm. Agent ad litem: JIA Ming, lawyer of Beijing Dentons (Tianjin) Law Firm. The Defendant: Guangxi Hong Chen Investment Co., Ltd. Domicile: Room 21, Floor 1, Unit 1, Building Lihai Asia International, ASEAN Business District, Nanning City, Guangxi Zhuang Autonomous Region, the People’s Republic of China. Legal representative: MAO Bahuai, chairman. Agent ad litem: YUAN Xiaohu, general manager. The Defendant: SHL Maritime Co., Ltd. Domicile: Floor 9, Hai Yang Ling Xiu Block, No. 193, Zhong Yang Da Dao, East District, Basan, Republic of Korea. Legal representative: LI Donghe, representative director. Agent ad litem: LIU Yun, lawyer of Shanghai Wintell & Co (Guangzhou) Law Firm. Agent ad litem: TAN Chuanjun, lawyer of Shanghai Wintell & Co (Guangzhou) Law Firm. With respect to the case arising from dispute over contract of carriage of goods by sea, the Plaintiff, PICC Property and Casualty Company Limited Tianjin Branch (hereinafter referred to as “PICC Tianjin”) brought a lawsuit against the Defendants Guangxi Hong Chen Investment Co., Ltd. (hereinafter referred to as “Hongchen”) and SHL Maritime Co., Ltd. (hereinafter referred to as “SHL”) before the court on July 15, 2015. After entertaining this case on the same day, the court organized a collegiate panel to try this case in accordance with law. The court organized the two parties to exchange evidence on January 30, 2014 and held a hearing in public on November 17, 2015. JIA Ming, agent ad litem of the Plaintiff, YUAN Xiaohu, agent ad litem of the Defendant Guangxi Hongchen and LIU Yun, agent ad litem of the Defendant SHL, appeared in court to attend the trial. After trial, this case has been concluded. The Plaintiff alleged as follows: in July 2014, 8,590 bags of cassava flour underwritten by the Plaintiff (insurance policy number: PYII201412009623E00655) was transported on M.V. “PRINCESS” from Bangkok port, Thailand to Qinzhou port, China. Hongchen signed a charter party in terms of the cargo with the shipper, a party not involved. Meanwhile, Hongchen signed Import Cargo Service Contract with the consignee, namely the assured under the policy, agreeing Hongchen to provide unloading service at the destination port and charge relevant fees. After the cargo arrived at the port of destination and underwent customs clearance, the consignee found the cargo were wet. Upon inspection by surveyor, it was confirmed that

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the cargo in question suffered water wet during the period of the sea transportation or discharge. Accordingly, the Plaintiff as the insurer paid the insurance indemnity in sum of USD157,119.70 to the consignee in terms of the cargo in question, and obtained subrogation right according to law. In addition, the Defendant SHL was the registered owner of the ship in question. To protect the legitimate rights and interests of the Plaintiff, the Plaintiff requested the court to order the two defendants: 1. compensate the Plaintiff USD157,119.70 (approximately CNY966,678.97) and the interest thereon; and 2. undertake the court acceptance fee. The Defendant Hongchen argued as follows: firstly, the cargo involved had been stored in the yard for a long period of time after discharge, the consignee did not report any wet damage to the cargo, so Hongchen held during this time there was no wet damage as alleged by the Plaintiff’s claim, so it should not assume liability to compensate. Secondly, it was clearly provided in paragraph 1 of article 7 of Import cargo Service Contract signed by Hongchen (Party B) and Beidahuang Potato Group Heilongjiang Trading Co., Ltd. (Party A, hereinafter referred to as BDH), any claim shall be raised by Party A against Party B, within 3 days after finding any damage that must be known or should be known, otherwise Party B did not constitute a breach and infringement, over this period Party A shall not be entitled to lodge a claim against Party A or file a lawsuit and the exemptions of liability of article 6 in the contract: Party B shall not assume legal liability for loss, shortfall, perishable, contamination, damage due to the following reasons: (1) force majeure; (2) nature of the cargo; (3) fair wear and tear of the cargo; (4) fault of Party A or the consignee; (5) the loss was not caused by Party B, BDH did not promptly notify Hongchen the wet cargo loss but in six months after the occurrence, it was not in conformity with the contract. In addition, BDH due to unpunctual payment of port fees, customs, etc., the cargo was stranded in port for a long time, influenced by the weather, the cargo wet damage was caused by its own reason. Thirdly, during the unloading to ship and loading and unloading operation at dock, the cargo encountered typhoon repeatedly, which belonged to force majeure, resulted in wet damage, so Hongchen should not assume responsibility resulted therefrom. In conclusion, Hongchen should not assume any liability for wet damage to the cargo. The Defendant SHL argued as follows: First, the Plaintiff was not a capable party. According to Article 60 of the Insurance Law of the People’s Republic of China, the right of subrogation was the right of the insurer to exercise the right of the insured to claim against third party, which should be based on the basic legal relationship between the insured and the third party. In this case, the Plaintiff was the insurer of the cargo, and the insured was BDH. Whether the Plaintiff was the proper Plaintiff in this case depended on whether BDH has legal right of claim right or not. According to the bill of lading (number: PRC1408-01), the bill of lading was a to order B/L, BDH was only the notify party. At present, the Plaintiff did not provide evidence to prove that BDH was the ultimate holder of bill of lading, so BDH had no right to sue SHL based on the bill of lading, and the Plaintiff had no right to sue SHL after such subrogation. Secondly, this case was not a necessary joint action. PICC Tianjin had no right to sue Hongchen and SHL at the same time in the one case. PICC Tianjin should sue Hongchen and SHL

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separately in two cases according to law. As was shown in the complaint of PICC Tianjin, the legal relationship for the prosecution of PICC Tianjin to Hongchen was the import goods service contract entered into between BDH and Hongchen. However, what for the prosecution of PICC Tianjin to SHL was that SHL was the actual carrier of the goods in question, which was the relationship of the contract of carriage of goods by sea. Thus it could be seen that the legal relationship for the prosecution of PICC Tianjin to two Defendants and basis for claims were totally distinct. According to the Civil Procedure Law of the People’s Republic of China and the principle of relativity of contract, PICC Tianjin had no right to sue the two Defendants in the same case at the same time, and the one case ought to be separated into two different cases to hear. Third, PICC Tianjin could not prove that the occurrence of loss of or damage to the goods was within the period of responsibility of SHL. It was proved that the goods were not wet damage when SHL delivered the goods within the termination of the period of responsibility. Because, as was recorded on the tallying statement at the port of destination, there were not any records about wet damage to the goods when the goods were accepted. In addition, the consignee had not claimed for indemnity against SHL on wet damage to the goods within a reasonable period of time. So, it could be affirmed that SHL had already delivered the goods in question in good condition at the port of discharge according to law. Forth, the proofs that PICC Tianjin claimed for indemnity were insufficient. PICC Tianjin did not inform Hongchen or SHL to inspect or tally the goods damaged after wet damage to the goods in question. There were not any physical and chemical inspection indexes that were submitted by PICC Tianjin. As a result, whether the loss of the goods happened or not and what was the magnitude of the losses were without any factual basis. In addition, PICC Tianjin was lack of scientific evidence to affirm the amount of loss of the goods. There was no ratio analysis on different loss levels based on incomplete sampling. There was also no evidence to prove that the standard of sampling calculation was up to the specification. It was obviously inappropriate that the total amount of loss was calculated according to the approaches mentioned above. The goods in this case had been dealt with actually. The amount of loss claimed by PICC Tianjin, however, was based on theoretical calculation, not based on actual loss. PICC Tianjin had not calculated the powder rate of actual processing, and it was insufficient to prove the actual loss of the goods. In a word, SHL requested the court to reject the PICC Tianjin’s claims. The Plaintiff submitted the following evidence to the court in support of its claims: Evidence 1, bill of lading and Chinese translation version (B/L number: PRC1408-01); Evidence 2, charter party; Evidence 3, pro forma invoice in DEBIT NOTE; Evidence 4, payment voucher issued by the Bank of China; Evidence 1–4 proved that Hongchen signed a charter party with the shipper, and collected freight, the cargo in question was carried by Hongchen, and Hongchen was the contracting carrier of the cargo in question;

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Evidence 5, import cargo service contract; Evidence 6, quotation sheet; Evidence 5–6 proved that Hongchen was responsible for unloading the cargo in question at the port of destination; Evidence 7, ship information and Chinese translation version, to prove that the Defendant SHL was the registered owner of the carrying ship; Evidence 8, commercial invoice (invoice number: AAF-B-1–2014), to prove the value of the cargo in question; Evidence 9, cargo transportation insurance policy (number: PYII201412009623E00655), to prove that the cargo was covered by the Plaintiff; Evidence 10, survey report, to prove that the cargo in question suffered damage and the loss amount of the cargo due to water wet during transportation or unloading; Evidence 11, slip issued by Bank of China; Evidence 12, receipt and letter of subrogation; Evidence 11–12 proved that the Plaintiff had paid insurance indemnity and obtained the right of subrogation according to law; Evidence 13, import cargo sales contract (number: BDHMS14-4S), to prove the value and the actual consignee of the cargo in question; and. Evidence 14, customs duty receipts and entry-exit inspection and quarantine fees receipt, to prove that the payer of tariff as well as the consignee under the bill of lading was the insured BDH. The Defendant Hongchen, after examination, had no objection to the authenticity of evidence 1–14. The Defendant SHL, after examination, held the pro forma authenticity of evidence 1 can be accepted, but this copy of the bill of lading should be effective with the shipper’s endorsement, but there was not any endorsement on this bill of lading. It was not established that the Plaintiff to prove that the insured BDH was the ultimate holder of bill of lading; SHL raised no objection to the authenticity of evidence 2–4, but SHL held it was irrelevant to the Plaintiff, the insured was unable to prove that BDH participated in the chartering process; SHL raised no objection to the authenticity, legality or relevancy of evidence 5–8; SHL raised no objection to the authenticity, legality or relevancy of evidence 9, but did not confirm the value of the insured cargo. According to practice, the insurance process had a certain addition, the evidence could only prove the insurance contract relationship between the Plaintiff and the insured, and authenticity, legality and relevancy of evidence 10 was not recognized since the original the Plaintiff submitted was scattered, no paging seal, signature was only affixed on the last page, it could not be ascertained that was the original issued by the surveyor, the last page of the report had no substantive opinions or conclusions on cargo damage, the report lacked scientific and factual basis, in addition, the Plaintiff did not submit a complete report, many parts of the report mentioned attachments, but the report submitted by the Plaintiff had no attachment; SHL raised no objection to the authenticity, legality or relevancy of evidence 11–12; evidence 13 had no original and so it objected to its authenticity. SHL raised no objection to the authenticity of evidence 14, but

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because the payer and the holder of the bill of lading was not in the same legal relationship, SHL did not confirm the evidence. The evidence also proved that the cargo had no problem when being discharged from the ship, the reason why the cargo stayed at the port so long was it should be inspected. The Defendant Hongchen submitted the following evidence to the court in support of its defenses: Evidence 1, import cargo service contract, to prove a freight forwarding contract relationship was established between Hongchen with BDH, and there was no contractual relationship with the Plaintiff; and. Evidence 2, charter party, to prove that the charter party relationship between Hongchen and the seller of the cargo Agriculture of Asia Futures Co., Ltd., and there was no contractual relationship with the Plaintiff. The Plaintiff raised no objection to the authenticity, legality or relevancy of evidence 1–2 after examination. The Defendant SHL raised no objection to the authenticity, legality and relevancy of evidence 1–2 after examination. The Defendant SHL submitted the following evidence to the court in support of its defenses: Evidence 1, certificate of ship nationality; Evidence 2, cargo ship safety construction certificate; Evidence 3, cargo ship safety equipment certificate; Evidence 4, international load line certificate; Evidence 5, international tonnage certificate; Evidence 6, minimum safe manning certificate; Evidence 7, classification certificate; Evidence 8, cargo ship safety radio certificate; Evidence 9, international oil pollution prevention certificate; Evidence 10, document of compliance; Evidence 11, safety management certificate; Evidence 1–11 is to prove that the seaworthiness of the ship and the cargo worthiness of cargo, the Plaintiff alleged that the damage was not occurring during the Defendant SHL’s carriage. Evidence 12, tally sheet, to prove that the cargoes involved did not have water wet when discharged from the ship, the cargo wet loss claimed by the Plaintiff has nothing to do with the Defendant SHL; and Evidence 13, weather condition of Qinzhou Port in August and September 2014, to prove that the cargoes were discharged from the ship, piled up in the dock during repeatedly encountered heavy rain weather, the rain was long, so the cargo even if any of the wet damage could also occur in the yard during storage. After cross-examination, the Plaintiff raised no objection to the authenticity of evidence 1–11, as well as evidence 12, but the document is on the surface condition of the cargo for inspection of cargo, whether the cassava flour wet could not be found in time; PICC Tianjin raised no objection to the authenticity of evidence 13, according to the photos and description of the survey report, the cargoes were scattered by the water loss, because if it was damaged by the rain soaked at the

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bottom of the stack in the storage period, then the whole bottom should be damaged; if because of lax cover leaking, should be columnar, rather than scattered shape. The Defendant Hongchen raised no objection to the authenticity, legality or relevancy of evidence 1–13 upon cross-examination. The court obtained the following evidence in accordance with the Defendant SHL’s application before the hearing: Evidence 1, three tally papers of the cargo carried by the M.V. “PRINCESS” at the Port of Qinzhou; Evidence 2, the investigative records made by the court on November 12, 2015 inquiring HUANG Feng, the chief of operations of Guangxi Beibu Gulf Ocean Shipping Tally Co., Ltd. Qinzhou Branch (former name: China Ocean Shipping Tally Co., Ltd. of Qinzhou Branch); Evidence 1–2 is to prove that the cargo in question was in good condition at the end of discharging from the ship namely till the period of the carrier’s liability ended. The Plaintiff after cross-examination confirmed the authenticity of evidence 1–2, but the 3 documents in evidence 1 were only an inspection on the surface of the cargo, the wet damage to the cassava flour could not be found in time. The Defendant Hongchen raised no objection to the authenticity, legality or relevancy of evidence 1–2 after examination, the company had the nature of notarization, so the documents issued thereby should be authentic. The court obtained the following evidence in accordance with the Defendant Hongchen’s application before the hearing: Evidence 1, delivery order and bill of lading obtained from Qinzhou Port (Group) Co., Ltd.; and. Evidence 2, investigation records made by the court on November 19, 2015 on NIE Xiaoxing, the clerk of Fangchenggang Haimeng Freight Forwarding Co., Ltd. Evidence 1–2 is to prove the capability of the Plaintiff. The Plaintiff submitted written cross-examination opinions after the hearing holding that it had no objection to the authenticity, legality or relevancy of evidence 1–2. The Defendant SHL submitted the written cross-examination opinions after the hearing holding that it raised no objection to the authenticity, legality or relevancy of evidence 1–2. The court holds that evidence 1, 5–9, 11–12, 14 submitted by the Plaintiff, evidence 1 submitted by Hongchen, evidence 1–13 submitted by SHL, evidence 1– 2 obtained by the court according to the Defendant Hongchen’s application, evidence 1–2 obtained by the court according to the Defendant SHL’s application shall be adopted as the basis of the fact-finding in this case since all the parties recognized the authenticity, thereof, as for the evidence of which the contents to prove shall be comprehensively ascertained in combination with the facts and all the evidence in this case. Evidence 2–4 submitted by the Plaintiff, evidence 2 submitted by the Defendant, was signed by the Defendant Hongchen and a party not involved, which had nothing to do with this case, it shall not be admitted as the basis of facts

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in this case. Evidence 10 submitted by the Plaintiff and evidence 11–12 submitted by the Plaintiff corroborate each other, it could be the basis of the fact-finding in this case, as for the evidence of which the contents to prove shall be comprehensively ascertained in combination with the facts and all the evidence in this case. Evidence 13 submitted by the Plaintiff and evidence 1 and 8 submitted by the Plaintiff corroborate each other, it could be the basis of the fact-finding in this case. The court finds out that: On June 18, 2014, BDH as the buying party entered into a business contract of cassava starch with Agriculture of Asia Futures Co., Ltd. as the seller. As were recorded in the contract: the name of the goods was 2013 season cassava starch, starch content  85%, water  13%, PH was 4.5–7.0, viscosity  650BU, sulfur dioxide  30PPM, unit price was 438 dollars per ton, total price was 4.38 million dollars, order quantity was 10,000 tons (error of delivery quantity could not exceed 5%), to inspection quantity as the standard. CFR terms was used. The buyer and the seller affirmed the shipment schedule after entering into the contract. All the goods, however, had to be laded before July 30, 2014, and could be partial shipment. The seller should present the following documents to the buyer to negotiate the payment of goods: signed commercial invoice in 3 originals, load plan that labeled quantity, gross weight, net weight in 3 originals. On June 23, 2014, Agriculture of Asia Futures Co., Ltd. issued a piece of invoice (No.AAF-B-1– 2014), which recorded that the quantity of goods was 7,301.5 tons, unit price was 438 dollars per ton, total price was 3,198,057 dollars, the payer was BDH. On July 3, 2014, 8,590 bags of cassava starch (850 kg per bag) insured by PICC Tianjin was carried by M.V. “PRINCESS” owned by SHL from Thailand Bangkok. The gross weight of the goods was 7,327,270 kg, and the net weight of the goods was 7,301,500 kg. After loading, Sealite Shipping Co., Ltd. authorized by SHL represented the Master of M.V. “PRINCESS” to issue a clean bill of lading (number of the B/L: PRC1408-01) on the same day in this batch of goods. The shipper recorded on the bill of lading was Agriculture of Asia Futures Co., Ltd. The consignee was to order. The address of notify party was BDH. The port of discharge was Qinzhou Port, China. The number of letter of credit was LC0564514000733. The freight was paid according to the charter party. The goods mentioned that the appearance was in good condition had been loaded on the vessel and was to be carried to the port of discharge or the port nearby that the vessel could safely arrive at. On the same day, PICC Tianjin and BDH signed a carriage of goods insurance policy (number of policy: PYII201412009623E00655) about the goods recorded on the bill of lading. As was recorded: the assured was BDH and the amount insured was USD3,198,057. On July 13, 2014, import tally certification and the list of cargo damaged were issued by China Ocean Shipping Tally Company Qinzhou Branch. As was recorded: the tally of the 8,590 bags of cassava starch carried by M.V. “PRINCESS” (voyage: PR1401) started on July 13, 2014. The date of the certification and the list issued (the time of completion of cargo) was July 28, 2014. The packages of 153 bags of cassava starch were broken. On the same day, the over and short cargo list

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issued by this company recorded that there were no over or short bags and packages of cargo. HUANG Feng, the business director of the company, declared in the investigative record in the court of first instance on November 12, 2015: according to the tally certification, no wet damage existed in the proceeding of tally of the goods in question. There were a negligible 153 bags broken and the consignee did not rise any challenges to the tally certification. The goods in question were carried by platform trailer (without tarpaulin) from alongside to container yard of the port. On August 21, 2014, BDH paid CNY3,349,455.43 import VAT for the goods in question. On September 4, 2014, BDH paid CNY16,079 entry inspection and quarantine fee. On September 1, 2014, Fangcheng Port Haimeng Shipping Agency Co., Ltd. Qinzhou Branch issued a delivery order to Qinzhou City Port (Group) Ltd. Business Department according to the bill of lading mentioned. As was recorded on the delivery order: the time of arrival of the goods was July 12, 2014. It is also found that BDH (Party A) entered into an import cargo service contract with Hongchen (Party B) on July 12, 2014. As was recorded on the contract: article 1: scope of entrusted agent: 1. Party A entrusted Party B to handle customs clearance; 2. Party A entrusted Party B to handle inspection procedures; 3. Party A entrusted Party B to handle the service of the goods from the port and CFS to door; 4. Party A entrusted Party B to handle storage service; and 5. Party A entrusted Party B to handle carriage of goods by sea service. Article 2: expense payment method and settlement: 1. except customs duties and taxes, CNY150 per ton of lump sum price would be paid to Party B (the expense from Qinzhou Port to Ming Yang Factory). On September 24, 2014, Qingdao Dahua Insurance Survey Co., Ltd., entrusted by PICC Tianjin, issued a survey report (number of the report: DHP-14010252) about the wet damage to the goods in question on April 24, 2015. As was recorded: the date of suffering a loss was September 18, 2014. The place of accident was CY Qinzhou Bonded Port Area Guangxi Zhuang Autonomous Region. The amount of loss affirmed and claim settlement was CNY966,678.97, equally USD157,119.70. The dates of investigation at the scene were from September 25 to 30, 2014. The members of joint investigation were BDH assistant president SU Ning, Guangxi Nong Ken Ming Yang Biochemistry Co., Ltd. business department manager XU Yongxiong and surveyor XIE Zongle of Qingdao Dahua Insurance Survey Co., Ltd. It was extremely probable that the damage to the goods in this accident was caused by fresh and water rain wetting. According to the analysis of all possible stages, the possibilities that the damage was caused by the shipper and the storage at Qinzhou Port CY and at loading time were excepted, but the possibilities that the damage was caused by fresh and water rain wetting during the proceeding of carriage or at discharging time were not excepted. On July 3, 2015, PICC Tianjin paid USD157,119.70 to BDH by transfer services of the Bank of China. On July 6, BDH issued a receipt and a subrogation receipt to PICC Tianjin in order to make sure that the right of wet damage to the goods in question and the right of claim against responsible party within the limitation of USD157,119.70 were transferred to PICC Tianjin.

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The registered owner of M.V. “PRINCESS” was SHL, the nationality of the vessel was Republic of Korea, the port of registry was Jeju, length was 104.01 m, width was 19.20 m, depth was 13.50 m, total tonnage was 7,433 tons. From August to September 2014, the weather in the port of discharge Qinzhou was dominated by rain. Heavy rain and rainstorm happened in August. In trial, PICC Tianjin held that the case was dispute over contract of multimodal transport. Then, it was investigated clearly by the court that there was no relationship of contract of multimodal transport. PICC Tianjin chose to change lawsuit request into the relationship of contract of carriage of goods by sea before the end of court debate, and claimed that Hongchen as the carrier in the contract of carriage of goods by sea and SHL as the actual carrier had to bear joint and several liability for compensation on the damage to the goods in question that happened during the period of sea carriage or the period of discharging. The court holds that according to Article 8 of the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China “lex fori shall apply to the determination on the nature of foreign-related civil relations”, PICC Tianjin claimed for wet damage to cargo according to the B/L. This case was a case of dispute over contract of carriage of goods by sea. The parties to this case during the hearing all agreed with application of Chinese law. According to Article 269 of the Maritime Code of the People’s Republic of China “the parties to a contract may choose the law applicable to such contract, unless the law provides otherwise. Where the parties to a contract have not made a choice, the law of the country having the closest connection with the contract shall apply”, Chinese law shall be the applicable law to settle the disputes in this case. Taking the plea opinions of the Plaintiff and the Defendant into consideration, the issues of the case are: 1. whether PICC Tianjin was qualified for the subject; and 2. whether Hongchen and SHL should indemnify for wet damage to the goods of PICC Tianjin. 1. With the respect to the issue whether PICC Tianjin was qualified for the subject. The court holds that, according to Article 42 Sub-paragraph 4 of the Maritime Code of the People’s Republic of China “‘consignee’ means the person who is entitled to take delivery of the goods”, BDH could be deemed as the consignee of goods under the B/L involved, and PICC Tianjin obtained the right of subrogation to wet damage to the goods in accordance with law. PICC Tianjin was qualified for the subject, and the reasons are as follows: (1) Fangcheng Port Haimeng Shipping Agency Co., Ltd. Qinzhou Branch issued a delivery order to Qinzhou Port (Group) Company Ltd. commerce department according to the B/L involved (number: PRC1408-01), and the orders were clearly recorded: deliver 8,590 bags of cassava starch of No.PRC1408-01 B/L (voyage: PR1401) to BDH, and Qinzhou Port (Group) Company Ltd. permitted BDH to take delivery of the goods in accordance with the delivery order. This fact was the direct evidence that BDH was the consignee. (2) On June 23, 2014, Agriculture of Asia Futures Co., Ltd. issued an invoice (invoice number: AAF-B-1-2014) that stated that the payer was BDH, and BDH had paid for import value-added tax and entry inspection quarantine fee of the goods under the B/L involved. These facts formed a complete chain of evidence and

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indirect evidence that BDH was the consignee. (3) According to Paragraph 1 of Article 60 of the Insurance Law of the People’s Republic of China “where an insured incident occurs for any loss caused by a third party to the subject matter insured, the insurer shall, from the day when it pays insurance money to the insurant, subrogate the insurant’s claim for indemnity against the third party within the extent of the indemnity amount”, right of subrogation in the insurance was the right that an insurer was entitled to have a right of subrogation that a insured claimed for indemnity against the third party, and the right and basis of claim against the third party came from the basic legal relationship between insured and third party. In this case, PICC Tianjin paid USD157,119.70 to the consignee BDH, and on the basis of that, BDH issued a receipt and a subrogation form, and affirmed that the right of wet damage to the goods in question and the claim against the responsible party within the indemnity limit USD157,119.70 were transferred to PICC Tianjin, which meant that PICC Tianjin was entitled to the right of subrogation of the consignee BDH. According to Article 78 Paragraph 1 of the Maritime Code of the People’s Republic of China “the relationship between the carrier and the holder of the bill of lading with respect to their rights and obligations shall be defined by the clauses of the bill of lading”, a consignee was able to claim for rights against a carrier according to the B/L held, including the right to claim for the loss against a carrier during the period of responsibility of the carrier which also meant that PICC Tianjin was entitled to the right of the consignee to claim for wet damage to the goods in question. Pulling the threads together, PICC Tianjin was qualified for the subject and had right to sue for this case. The court rejects the claim held by SHL that BDH was not the consignee of the goods in question and PICC Tianjin was not qualified for the subject. 2. With respect to the issue whether Hongchen and SHL should indemnify for damage to the goods of PICC Tianjin. This case concerned about the relationship of contract of carriage of goods by sea under the B/L. There was no relationship of contract of carriage of goods by sea between BDH who was the insured of PICC Tianjin and Hongchen. The carrier should be SHL in this case. The main reasons are as follows: (1) according to article 1 in the import cargo service contract signed by BDH (Party A) and Hongchen (Party B) on July 12, 2014: Party A entrusted Party B to handle customs clearance; Party A entrusted Party B to handle inspection procedures; Party A entrusted Party B to handle the service of the goods from the port and CFS to door; Party A entrusted Party B to handle storage service; Party A entrusted Party B to handle carriage of goods by sea service. There was the relationship of contract of agency of goods by sea but not the relationship of contract of carriage of goods by sea which was the other legal relationship and should be set up prosecution otherwise. Meanwhile, according to the principle of relativity of contract, the charter party between the shipper outside the case, Asia Futures and Hongchen could not restrain BDH, and BDH could not claim for the rights on the basis of this contract. Therefore, the court rejects the claim offered by PICC Tianjin that there was the relationship of contractual of carriage of goods by sea between BDH and Hongchen

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and Hongchen was the contract carrier of goods in question. (2) According to Article 71 of the Maritime Code of the People’s Republic of China “a bill of lading is a document which serves as an evidence of the contract of carriage of goods by sea and the taking over or loading of the goods by the carrier, and based on which the carrier undertakes to deliver the goods against surrendering the same. A provision in the document stating that the goods are to be delivered to the order of a named person, or to order, or to bearer, constitutes such an undertaking” and Article 72 Paragraph 2 “the bill of lading may be signed by a person authorized by the carrier. A bill of lading signed by the Master of the ship carrying the goods is deemed to have been signed on behalf of the carrier”, when the B/L was transferred to BDH as the consignee, BDH only could identify the carrier according to the B/L because BDH was not the shipper who signed the contract of carriage under CFR terms. In this case, on behalf of the Master of M.V. “PRINCESS”, Sealite Shipping Co., Ltd. issued the B/L involved. During the hearing, SHL clearly confirmed that Sealite Shipping Co., Ltd. that was authorized by the shipowner issued the B/L on behalf of the Master. It should be deemed as the fact that the B/L was issued on behalf of the shipowner SHL. Therefore, SHL was the carrier of the goods in question. According to Paragraph 1 of Article 46 of the Maritime Code of the People’s Republic of China “the responsibilities of the carrier with regard to the goods carried in containers covers the entire period during which the carrier is in charge of the goods, starting from the time the carrier has taken over the goods at the port of loading, until the goods have been delivered at the port of discharge. The responsibility of the carrier with respect to non-containerized goods covers the period during which the carrier is in charge of the goods, starting from the time of loading of the goods onto the ship until the time the goods are discharged therefrom. During the period the carrier is in charge of the goods, the carrier shall be liable for the loss of or damage to the goods, except as otherwise provided for in this section”, SHL, the carrier, shall not bear liability for compensation on wet damage to the goods in question, and the main reasons are as follows: (1) the goods in this case were not carried in containers. The responsibility of the carrier started from the time of loading of the goods onto the ship until the time the goods are discharged from the ship. According to the import tally certification, the list of cargo damaged and the over and short cargo list issued by China Ocean Shipping Tally Company Qinzhou Branch, the packages of 153 bags of cassava starch carried by M.V. “PRINCESS” were broken, and there were no over or short bags and packages of goods, and the above situation was further confirmed by HUANG Feng who was the business executive of the company. Therefore, the goods in question were not wet damaged when they were discharged from the ship. According to Article 81 of the Maritime Code of the People’s Republic of China “unless notice of loss or damage is given in written by the consignee to the carrier at the time of delivery of the goods by the carrier to the consignee, such delivery shall be deemed to be prima facie evidence of the delivery of the goods by the carrier as described in the transport documents and of the apparent good order and condition of such goods. Where the loss of or damage to the goods is not apparent, the provisions of

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the preceding paragraph shall apply if the consignee has not given the notice in written within seven consecutive days from the next day of the delivery of the goods, or, in the case of containerized goods, within 15 days from the next day of the delivery thereof. The notice in written regarding the loss or damage need not be given if the state of the goods has, at the time of delivery, been the subject of a joint survey or inspection by the carrier and the consignee”, the goods in question had been completely delivered on July 28, 2014. But the consignee BDH and PICC Tianjin had never issued a written notice to SHL or Hongchen about wet damage to the goods in question until the case began, and this fact should be deemed as the prima facie evidence that the goods had been delivered by the carrier according to transport documents and the cargoes were in good condition. (2) On September 24, 2014, Qingdao Dahua Insurance Survey Co., Ltd. entrusted by PICC Tianjin and BDH, issued an insurance survey report on carriage of goods by sea. As was recorded in the report: the date of suffering a loss was September 18, 2014. The dates of investigation at the scene were from September 25 to 30, 2014. The members of joint investigation were BDH assistant president SU Ning, Guangxi Nong Ken Ming Yang Biochemistry Co. Ltd. business department manager XU Yongxiong and Qingdao Dahua Insurance Survey Co. Ltd. insurance surveyor XIE Zongle. It was extremely probable that the damage to the goods in this accident was caused by fresh and water rain wetting. According to the analysis of all possible stages, the possibilities that the damage was caused by the shipper and the storage at Qinzhou Port CY and at loading time were excepted, but the possibilities that the damage was caused by fresh and water rain wetting during the proceeding of carriage or at discharging time were not excepted. When Qingdao Dahua Insurance Survey Co. Ltd. investigated on the spot, more than 2 months had gone by away from delivery time of the goods—July 28, 2014. During the period of time, the goods had gone through land transport from alongside to Qinzhou Port CY and from Port CY to Guangxi Nong Ken Ming Yang Biochemistry Co. Ltd., and Qinzhou was dominated by rain. According to the record of HUANG Feng, the business director of China Ocean Shipping Tally Company Qinzhou Branch, the goods in question were carried from alongside to Port CY by platform trailer (without tarpaulin). Therefore, PICC Tianjin was unable to give evidence to prove the possibility that wet damage to the goods was caused by land transport from alongside to Qinzhou Port CY and from Port CY to Guangxi Nong Ken Ming Yang Biochemistry Co. Ltd., and the insurance survey report on carriage of goods by sea submitted by PICC Tianjin also showed that “the possibility that the wet damage was caused by rain in transit and during discharging time could not be excepted”, and “in transit” did not rule out land transport. Pulling the threads together, PICC Tianjin was unable to give evidence to prove that wet damage to the goods in question was caused during responsibility period of carrier, and shall bear adverse legal consequences of evidence. In accordance with the provisions of Sub-Paragraph 4 of Article 42, Paragraph 1 of Article 46, Article 81 of the Maritime Code of the People’s Republic of China, Paragraph 1 of Article 60 of the Insurance Law of the People’s Republic of China and Article 90 of the Interpretation of the Supreme People’s Court concerning

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Application of the Civil Procedure Law of the People’s Republic of China, “the parties shall adduce evidence to support the facts basing on which his claim is submitted or his defense towards the other party’s claim is raised, except as otherwise provided by law. Before making the judgment, the parties fail to adduce evidence or the evidence is insufficient to support the fact he alleged, the party bearing the burden of proof shall take the adverse legal consequences for adducing evidence”, the court hereby renders the judgment as follows: Reject the claims of the Plaintiff PICC Property and Casualty Company Limited Tianjin Branch. Court acceptance fee in amount of CNY13,767 shall be born by the Plaintiff PICC Property and Casualty Company Limited Tianjin Branch. In case of dissatisfaction with this judgment, the Plaintiff may within 15 days upon the service of this Judgment, submit statements of appeal to the court, together with duplicates in accordance with the number of the opposite parties, to lodge an appeal with Guangxi Zhuang Autonomous Region High People’s Court, and pay appeal entertainment fee as per the dissatisfied amount as determined by the judgment of first instance in advance within seven days before the period of appeal expires (name of account: Guangxi Zhuang Autonomous Region High People’s Court, account number: 20–017,301,040,003,777, deposit bank: Agricultural Bank Nanning District Wanxiang Branch). In case of failure to pay on time and without application for defer, the appeal will be deemed to be automatically withdrawn. Presiding Judge: HUANG Siqi Judge: YANG Ding People’s Juror: HUANG Xiuxing November 30, 2015 Clerk: YANG Qian

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Guangxi Zhuang Autonomous Region High People’s Court Civil Judgment PICC Property and Casualty Company Limited Tianjin Branch v. Guangxi Hong Chen Investment Co., Ltd. et al. (2016) Gui Min Zhong No.69 Related Case(s) This is the judgment of second instance and the judgment of first instance is on page 871. Cause(s) of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote Affirming lower court decision that rejected the Plaintiff’s claim for water damage to cargo because the Plaintiff failed to show that water damage occurred during carrier’s period of responsibility. Summary This appeal arises from a civil judgment issued by the Beihai Maritime Court concerning a contract for the carriage by sea of a shipment of 8,590 bags of cassava flour, which was found upon delivery to have suffered water damage. In the original suit, PICC Property and Casualty Company Limited Tianjin Branch (PICC Tianjin), subrogated to the rights of the consignee, sought indemnification from Guangxi Hongchen Investment Co. (Hongchen), which was engaged to offload the cargo, and SHL Maritime Co. (SHL), the shipowner for the damage to the flour. This suit failed because the trial court found that 1) Hongchen was not the carrier of the goods and was, therefore, not liable for water damage sustained during carriage at sea and 2) that the un-containerized flour was most likely damaged by rain water after discharge, which also relieved SHL from responsibility. The Plaintiff appealed, and the appellate court affirmed, finding that Hongchen was neither a carrier of the goods by sea nor part of a multimodal contract of carriage and, thus, was not liable for the damage to the flour on board the ship. The decision, however, left open the question whether Hongchen might be held liable for damage that might have occurred during its period of responsibility for the cargo. Additionally, the court affirmed the judgment that SHL was not liable because PICC Tianjin provided no evidence to refute the finding that the flour was in good condition upon

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discharge from the ship and was most likely damaged by rainfall during storage and land transport, which was outside of SHL’s period of responsibility.

Judgment The Appellant (the Plaintiff of first instance): PICC Property and Casualty Company Limited Tianjin Branch Domicile: No.61, Shiyijing Road, Hedong District, Tianjin City, the People’s Republic of China. Representative: GAO Jian, general manager. Agent ad litem: YANG Rui, lawyer of Beijing Dentons (Tianjin) Law Firm. Agent ad litem: JIA Ming, lawyer of Beijing Dentons (Tianjin) Law Firm. The Respondent (the Defendant of first instance): Guangxi Hong Chen Investment Co., Ltd. Domicile: Room 21, Floor 1, Unit 1, Building Lihai Asia International, ASEAN Business District, Nanning City, Guangxi Zhuang Autonomous Region, the People’s Republic of China. Legal representative: MAO Bahuai, chairman. Agent ad litem: YUAN Xiaohu, male, born on December 21, 1969, Han Chinese, living in Room 701, Block 2, No.18, Youyi Rd, Gangkou District, Fangcheng City, Guangxi Zhuang Autonomous Region, the People’s Republic of China, ID No.30101196912214477, general manager. The Respondent (the Defendant of first instance): SHL Maritime Co., Ltd. Domicile: Floor 9, Hai Yang Ling Xiu Block, No.193, Zhong Yang Da Dao, East. District, Busan, Republic of Korea. Legal representative: LI Donghe, representative director. Agent ad litem: LIU Yun, lawyer of Shanghai Wintell & Co (Guangzhou) Law Firm. Agent ad litem: TAN Chuanjun, lawyer of Shanghai Wintell & Co (Guangzhou) Law Firm. Dissatisfied with the Civil Judgment (2015) Hai Shang Chu Zi No.216 rendered by Beihai Maritime Court in respect of the case of dispute over contract of carriage of goods by sea in which the Appellant PICC Property and Casualty Company Limited Tianjin Branch (hereinafter referred to as “PICC Tianjin”) and the Respondents Guangxi Hong Chen Investment Co., Ltd. (hereinafter referred to as “Hongchen”) and SHL Maritime Co., Ltd. (hereinafter referred to as “SHL”) were involved, PICC Tianjin filed an appeal before the court. After accepting the appeal on February 24, 2016, the court constituted a collegiate panel and held a hearing in public on May 5, 2016. JIA Ming, agent ad litem of the Appellant PICC Tianjin, MAO Bahuai, the legal representative of Hongchen and YUAN Xiaohu, agent ad litem of Hongchen, LIU Yun, agent ad litem of SHL appeared in court to attend the hearing. Now, this case has been concluded.

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PICC Tianjin alleged in the first instance: In July 2014, 8,590 bags of cassava flour underwritten by PICC Tianjin (insurance policy number: PYII201412009623E00655) was transported on M.V. “PRINCESS” from Bangkok port, Thailand to Qinzhou port, China. Hongchen signed a charter party in terms of the cargo with the shipper, a party not involved. Meanwhile, Hongchen signed Import Cargo Service Contract with the consignee, namely, the assured under the policy, agreeing Hongchen to provide unloading service at the destination port and charge relevant fees. After the cargo arrived at the port of destination and underwent customs clearance, the consignee found the cargo were wet. Upon inspection by surveyor, it was confirmed that the cargo in question suffered water wet during the period of the sea transportation or discharge. Accordingly, PICC Tianjin as the insurer paid the insurance indemnity in sum of USD157,119.70 to the consignee in terms of the cargo in question, and obtained subrogation right according to law. In addition, SHL was the registered owner of the ship in question. To protect the legitimate rights and interests of its own, PICC Tianjin requested the court to order Hongchen and SHL: 1. compensate PICC Tianjin USD157,119.70 (approximately CNY966,678.97) and the interest thereon; and 2. undertake the court acceptance fee. Hongchen argued in the first instance: Firstly, the cargo involved had been stored in the yard for a long period of time after discharge, the consignee did not report any wet damage to the cargo, so Hongchen held during this time there was no wet damage as alleged by PICC Tianjin’s claim, so it should not assume liability to compensate. Secondly, it was clearly provided in paragraph 1 of article 7 of Import cargo Service Contract signed by Hongchen (Party B) and Beidahuang Potato Group Heilongjiang Trading Co., Ltd. (Party A, hereinafter referred to as BDH), any claim shall be raised by Party A against Party B, within 3 days after finding any damage that must be known or should be known, otherwise Party B did not constitute a breach and infringement, over this period Party A shall not be entitled to lodge a claim against Party A or file a lawsuit and the exemptions of liability of article 6 in the contract: Party B shall not assume legal liability for loss, shortfall, perishable, contamination, damage due to the following reasons: (1) force majeure; (2) nature of the cargo; (3) fair wear and tear of the cargo; (4) fault of Party A or the consignee; and (5) the loss was not caused by Party B, BDH did not promptly notify Hongchen the wet cargo loss but in six months after the occurrence, it was not in conformity with the contract. In addition, BDH due to unpunctual payment of port fees, customs, etc., the cargo was stranded in port for a long time, influenced by the weather, the cargo wet damage was caused by its own reason. Thirdly, during the unloading to ship and loading and unloading operation at dock, the cargo encountered typhoon repeatedly, which belonged to force majeure, resulted in wet damage, so that Hongchen should not assume responsibility resulted therefrom. In conclusion, Hongchen should not assume any liability for wet damage to the cargo.

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SHL alleged in the first instance: First, PICC Tianjin was not a capable party. According to Article 60 of the Insurance Law of the People’s Republic of China, the right of subrogation was the right of the insurer to exercise the right of the insured to claim against third party, which should be based on the basic legal relationship between the insured and the third party. In this case, PICC Tianjin was the insurer of the cargo, and the insured was BDH. Whether PICC Tianjin was the proper plaintiff in this case depended on whether BDH has legal right of claim right or not. According to the bill of lading (number: PRC1408-01), the bill of lading was a to order B/L, BDH was only the notify party. At present, PICC Tianjin did not provide evidence to prove that BDH was the ultimate holder of bill of lading, so BDH had no right to sue SHL based on the bill of lading, and PICC Tianjin had no right to sue SHL after such subrogation. Second, this case was not a necessary joint action. PICC Tianjin had no right to sue Hongchen and SHL at the same time in the one case. PICC Tianjin should sue Hongchen and SHL separately in two cases according to law. As was shown in the complaint of PICC Tianjin, the legal relationship for the prosecution of PICC Tianjin to Hongchen was the import goods service contract entered into between BDH and Hongchen. However, what for the prosecution of PICC Tianjin to SHL was that SHL was the actual carrier of the goods in question, which was the relationship of the contract of carriage of goods by sea. Thus it could be seen that the legal relationship for the prosecution of PICC Tianjin to two Defendants and basis for claims were totally distinct. According to the Civil Procedure Law of the People’s Republic of China and the principle of relativity of contract, PICC Tianjin had no right to sue the two Defendants in the same case at the same time, and the one case ought to be separated into two different cases to hear. Third, PICC Tianjin could not prove that the occurrence of loss of or damage to the goods was within the period of responsibility of SHL. It was proved that the goods were not wet damage when SHL delivered the goods within the termination of the period of responsibility. Because, as was recorded on the tallying statement at the port of destination, there were not any records about wet damage to the goods when the goods were accepted. In addition, the consignee had not claimed for indemnity against SHL on wet damage to the goods within a reasonable period of time. So, it could be affirmed that SHL had already delivered the goods in question in good condition at the port of discharge according to law. Forth, the proofs that PICC Tianjin claimed for indemnity were insufficient. PICC Tianjin did not inform Hongchen or SHL to inspect or tally the goods damaged after wet damage to the goods in question. There were not any physical and chemical inspection indexes that were submitted by PICC Tianjin. As a result, whether the loss of the goods happened or not and what was the magnitude of the losses were without any factual basis. In addition, PICC Tianjin was lack of scientific evidence to affirm the amount of loss of the goods. There was no ratio analysis on different loss levels based on incomplete sampling. There was also no evidence to prove that the standard of sampling calculation was up to the specification. It was obviously inappropriate that the total amount of loss was calculated according to the approaches mentioned above. The goods in this case had been

PICC Property and Casualty Company Limited Tianjin Branch v. …

889

dealt with actually. The amount of loss claimed by PICC Tianjin, however, was based on theoretical calculation, not based on actual loss. PICC Tianjin had not calculated the powder rate of actual processing, and it was insufficient to prove the actual loss of the goods. In a word, SHL requested the court to reject the PICC Tianjin’s claims. The court of first instance found the facts of the subject case as follows: On June 18, 2014, BDH as the buying party entered into a business contract of cassava starch with Agriculture of Asia Futures Co., Ltd. as the seller. As were recorded in the contract: the name of the goods was 2013 season cassava starch, starch content  85%, water  13%, PH was 4.5–7.0, viscosity  650BU, sulfur dioxide  30PPM, unit price was 438 US dollars per ton, total price was 4.38 million US dollars, order quantity was 10,000 tons (error of delivery quantity could not exceed 5%), to inspection quantity as the standard. CFR terms was used. The buyer and the seller affirmed the shipment schedule after entering into the contract. All the goods, however, had to be laded before July 30, 2014, and could be partial shipment. The seller should present the following documents to the buyer to negotiate the payment of goods: signed commercial invoice in 3 originals, load plan that labeled quantity, gross weight, net weight in 3 originals. On June 23, 2014, Agriculture of Asia Futures Co., Ltd. issued a piece of invoice (No. AAF-B-1–2014), which recorded that the quantity of goods was 7,301.5 tons, unit price was 438 dollars per ton, total price was 3,198,057 dollars, the payer was BDH. On July 3, 2014, 8,590 bags of cassava starch (850 kg per bag) insured by PICC Tianjin was carried by M.V. “PRINCESS” owned by SHL from Thailand Bangkok. The gross weight of the goods was 7,327,270 kg, and the net weight of the goods was 7,301,500 kg. After loading, Sealite Shipping Co., Ltd. authorized by SHL represented the Master of M.V. “PRINCESS” to issue a clean bill of lading (number of the B/L: PRC1408-01) on the same day in this batch of goods. The shipper recorded on the bill of lading was Agriculture of Asia Futures Co., Ltd. The consignee was to order. The address of notify party was BDH. The port of discharge was Qinzhou Port, China. The number of letter of credit was LC0564514000733. The freight was paid according to the charter party. The goods mentioned that the appearance was in good condition had been loaded on the vessel and was to be carried to the port of discharge or the port nearby that the vessel could safely arrive at. On the same day, PICC Tianjin and BDH signed a carriage of goods insurance policy (number of policy: PYII201412009623E00655) about the goods recorded on the bill of lading. As was recorded: the assured was BDH and the amount insured was USD3,198,057. On July 13, 2014, import tally certification and the list of cargo damaged were issued by China Ocean Shipping Tally Company Qinzhou Branch. As was recorded: the tally of the 8590 bags of cassava starch carried by M.V. “PRINCESS” (voyage: PR1401) started on July 13, 2014. The date of the certification and the list issued (the time of completion of cargo) was July 28, 2014. The packages of 153 bags of cassava starch were broken. On the same day, the over and short cargo list issued by this company recorded that there were no over or short bags and packages

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M. Davies and J. Lin

of cargo. HUANG Feng, the business director of the company, declared in the investigative record in the court of first instance on November 12, 2015: according to the tally certification, no wet damage existed in the proceeding of tally of the goods in question. There were a negligible 153 bags broken and the consignee did not rise any challenges to the tally certification. The goods in question were carried by platform trailer (without tarpaulin) from alongside to container yard of the port. On August 21, 2014, BDH paid CNY3,349,455.43 import VAT for the goods in question. On September 4, 2014, BDH paid CNY16,079 entry inspection and quarantine fee. On September 1, 2014, Fangcheng Port Haimeng Shipping Agency Co., Ltd. Qinzhou Branch issued a delivery order to Qinzhou City Port (Group) Ltd. Business Department according to the bill of lading mentioned. As was recorded on the delivery order: the time of arrival of the goods was July 12, 2014. It was also found that BDH (Party A) entered into an import cargo service contract with Hongchen (Party B) on July 12, 2014. As was recorded on the contract: article 1: scope of entrusted agent: 1. Party A entrusted Party B to handle customs clearance; 2. Party A entrusted Party B to handle inspection procedures; 3. Party A entrusted Party B to handle the service of the goods from the port and CFS to door; 4. Party A entrusted Party B to handle storage service; and 5. Party A entrusted Party B to handle carriage of goods by sea service. Article 2: expense payment method and settlement: 1. except customs duties and taxes, CNY150 per ton of lump sum price would be paid to Party B (the expense from Qinzhou Port to Ming Yang Factory). On September 24, 2014, Qingdao Dahua Insurance Survey Co., Ltd., entrusted by PICC Tianjin, issued a survey report (number of the report: DHP-14010252) about the wet damage to the goods in question on April 24, 2015. As was recorded: the date of suffering a loss was September 18, 2014. The place of accident was CY Qinzhou Bonded Port Area Guangxi Zhuang Autonomous Region. The amount of loss affirmed and claim settlement was CNY966,678.97, equally USD157,119.70. The dates of investigation at the scene were from September 25 to 30, 2014. The members of joint investigation were BDH assistant president SU Ning, Guangxi Nong Ken Ming Yang Biochemistry Co., Ltd. business department manager XU Yongxiong and surveyor XIE Zongle of Qingdao Dahua Insurance Survey Co., Ltd. It was extremely probable that the damage to the goods in this accident was caused by fresh and water rain wetting. According to the analysis of all possible stages, the possibilities that the damage was caused by the shipper and the storage at Qinzhou Port CY and at loading time were excepted, but the possibilities that the damage was caused by fresh and water rain wetting during the proceeding of carriage or at discharging time were not excepted. On July 3, 2015, PICC Tianjin paid USD157,119.70 to BDH by transfer services of the Bank of China. On July 6, BDH issued a receipt and a subrogation receipt to PICC Tianjin in order to make sure that the right of wet damage to the goods in question and the right of claim against responsible party within the limitation of USD157,119.70 were transferred to PICC Tianjin.

PICC Property and Casualty Company Limited Tianjin Branch v. …

891

The registered owner of M.V. “PRINCESS” was SHL, the nationality of the vessel was Republic of Korea, the port of registry was Jeju, length was 104.01 m, width was 19.20 m, depth was 13.50 m, total tonnage was 7,433 tons. From August to September 2014, the weather in the port of discharge Qinzhou was dominated by rain. Heavy rain and rainstorm happened in August. In trial, PICC Tianjin held that the case was dispute over contract of multimodal transport. Then, it was investigated clearly by the court that there was no relationship of contract of multimodal transport. PICC Tianjin chose to change lawsuit request into the relationship of contract of carriage of goods by sea before the end of court debate, and claimed that Hongchen as the carrier in the contract of carriage of goods by sea and SHL as the actual carrier had to bear joint and several liability for compensation on the damage to the goods in question that happened during the period of sea carriage or the period of discharging. The court of first instance held: According to Article 8 of the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China “lex fori shall apply to the determination on the nature of foreign-related civil relations”, PICC Tianjin claimed for wet damage to cargo according to the B/L. This case was a case of dispute over contract of carriage of goods by sea. The parties to this case during the hearing all agreed with application of Chinese law. According to Article 269 of the Maritime Code of the People’s Republic of China “the parties to a contract may choose the law applicable to such contract, unless the law provides otherwise. Where the parties to a contract have not made a choice, the law of the country having the closest connection with the contract shall apply”, Chinese law should be the applicable law to settle the disputes in this case. Taking the plea opinions of the Plaintiff and the Defendant into consideration, the issues of the case were: 1. whether PICC Tianjin was qualified for the subject; and 2. whether Hongchen and SHL should indemnify for wet damage to the goods of PICC Tianjin. 1. With the respect to the issue whether PICC Tianjin was qualified for the subject. According to Article 42 Sub-paragraph 4 of the Maritime Code of the People’s Republic of China “‘consignee’ means the person who is entitled to take delivery of the goods”, BDH could be deemed as the consignee of goods under the B/L involved, and PICC Tianjin obtained the right of subrogation to wet damage to the goods in accordance with law. PICC Tianjin was qualified for the subject, and the reasons were as follows: (1) Fangcheng Port Haimeng Shipping Agency Co., Ltd. Qinzhou Branch issued a delivery order to Qinzhou Port (Group) Company Ltd. commerce department according to the B/L involved (number: PRC1408-01), and the orders were clearly recorded: deliver 8,590 bags of cassava starch of No. PRC1408-01 B/L (voyage: PR1401) to BDH, and Qinzhou Port (Group) Company Ltd. permitted BDH to take delivery of the goods in accordance with the delivery order. This fact was the direct evidence that BDH was the consignee. (2) On June 23, 2014, Agriculture of Asia Futures Co., Ltd. issued an invoice (invoice number: AAF-B-1-2014) that stated that the payer was BDH, and BDH had paid for import value-added tax and entry inspection quarantine fee of the goods under the B/L

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M. Davies and J. Lin

involved. These facts formed a complete chain of evidence and indirect evidence that BDH was the consignee. (3) According to Paragraph 1 of Article 60 of the Insurance Law of the People’s Republic of China “where an insured incident occurs for any loss caused by a third party to the subject matter insured, the insurer shall, from the day when it pays insurance money to the insurant, subrogate the insurant’s claim for indemnity against the third party within the extent of the indemnity amount”, right of subrogation in the insurance was the right that a insurer was entitled to have a right of subrogation that a insured claimed for indemnity against the third party, and the right and basis of claim against the third party came from the basic legal relationship between insured and third party. In this case, PICC Tianjin paid USD157,119.70 to the consignee BDH, and on the basis of that, BDH issued a receipt and a subrogation form, and affirmed that the right of wet damage to the goods in question and the claim against the responsible party within the indemnity limit USD157,119.70 were transferred to PICC Tianjin, which meant that PICC Tianjin was entitled to the right of subrogation of the consignee BDH. According to Article 78 Paragraph 1 of the Maritime Code of the People’s Republic of China “the relationship between the carrier and the holder of the bill of lading with respect to their rights and obligations shall be defined by the clauses of the bill of lading”, a consignee was able to claim for rights against a carrier according to the B/L held, including the right to claim for the loss against a carrier during the period of responsibility of the carrier which also meant that PICC Tianjin was entitled to the right of the consignee to claim for wet damage to the goods in question. Pulling the threads together, PICC Tianjin was qualified for the subject and had right to sue for this case. The court of first instance rejected the claim held by SHL that BDH was not the consignee of the goods in question and PICC Tianjin was not qualified for the subject. 2. With respect to the issue whether Hongchen and SHL should indemnify for damage to the goods of PICC Tianjin. This case concerned about the relationship of contract of carriage of goods by sea under the B/L. There was no relationship of contract of carriage of goods by sea between BDH who was the insured of PICC Tianjin and Hongchen. The carrier should be SHL in this case. The main reasons were as follows: (1) according to article 1 in the import cargo service contract signed by BDH (Party A) and Hongchen (Party B) on July 12, 2014: Party A entrusted Party B to handle customs clearance; Party A entrusted Party B to handle inspection procedures; Party A entrusted Party B to handle the service of the goods from the port and CFS to door; Party A entrusted Party B to handle storage service; Party A entrusted Party B to handle carriage of goods by sea service. There was the relationship of contract of agency of goods by sea but not the relationship of contract of carriage of goods by sea which was the other legal relationship and should be set up prosecution otherwise. Meanwhile, according to the principle of relativity of contract, the charter party between the shipper outside the case, Asia Futures and Hongchen could not restrain BDH, and BDH could not claim for the rights on the basis of this contract. Therefore, the court of first instance rejected the claim offered by PICC

PICC Property and Casualty Company Limited Tianjin Branch v. …

893

Tianjin that there was the relationship of contractual of carriage of goods by sea between BDH and Hongchen and Hongchen was the contract carrier of goods in question. (2) According to Article 71 of the Maritime Code of the People’s Republic of China “a bill of lading is a document which serves as an evidence of the contract of carriage of goods by sea and the taking over or loading of the goods by the carrier, and based on which the carrier undertakes to deliver the goods against surrendering the same. A provision in the document stating that the goods are to be delivered to the order of a named person, or to order, or to bearer, constitutes such an undertaking” and Article 72 Paragraph 2 “the bill of lading may be signed by a person authorized by the carrier. A bill of lading signed by the Master of the ship carrying the goods is deemed to have been signed on behalf of the carrier.”, when the B/L was transferred to BDH as the consignee, BDH only could identify the carrier according to the B/L because BDH was not the shipper who signed the contract of carriage under CFR terms. In this case, on behalf of the Master of M.V. “PRINCESS”, Sealite Shipping Co., Ltd. issued the B/L involved. During the hearing, SHL clearly confirmed that Sealite Shipping Co., Ltd. that was authorized by the shipowner issued the B/L on behalf of the Master. It should be deemed as the fact that the B/L was issued on behalf of the shipowner SHL. Therefore, SHL was the carrier of the goods in question. According to Article 46 Paragraph 1 of the Maritime Code of the People’s Republic of China “the responsibilities of the carrier with regard to the goods carried in containers covers the entire period during which the carrier is in charge of the goods, starting from the time the carrier has taken over the goods at the port of loading, until the goods have been delivered at the port of discharge. The responsibility of the carrier with respect to non-containerized goods covers the period during which the carrier is in charge of the goods, starting from the time of loading of the goods onto the ship until the time the goods are discharged therefrom. During the period the carrier is in charge of the goods, the carrier shall be liable for the loss of or damage to the goods, except as otherwise provided for in this section”, SHL, the carrier, should not bear liability for compensation on wet damage to the goods in question. And the main reasons were as follows: (1) the goods in this case were not carried in containers. The responsibility of the carrier started from the time of loading of the goods onto the ships until the time the goods are discharged from the ship. According to the import tally certification, the list of cargo damaged and the over and short cargo list issued by China Ocean Shipping Tally Company Qinzhou Branch, the packages of 153 bags of cassava starch carried by M.V. “PRINCESS” were broken, and there were no over or short bags and packages of goods, and the above situation was further confirmed by HUANG Feng who was the business executive of the company. Therefore, the goods in question were not wet damaged when they were discharged from the ship. According to Article 81 of the Maritime Code of the People’s Republic of China “unless notice of loss or damage is given in written by the consignee to the carrier at the time of delivery of the goods by the carrier to the consignee, such delivery shall be deemed to be prima facie evidence of the delivery of the goods by the carrier as described in the transport documents and of the apparent good order and condition of such

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goods. Where the loss of or damage to the goods is not apparent, the provisions of the preceding paragraph shall apply if the consignee has not given the notice in written within seven consecutive days from the next day of the delivery of the goods, or, in the case of containerized goods, within 15 days from the next day of the delivery thereof. The notice in written regarding the loss or damage need not be given if the state of the goods has, at the time of delivery, been the subject of a joint survey or inspection by the carrier and the consignee”, the goods in question had been completely delivered on July 28, 2014. But the consignee BDH and PICC Tianjin had never issued a written notice to SHL or Hongchen about wet damage to the goods in question until the case began, and this fact should be deemed as the prima facie evidence that the goods had been delivered by the carrier according to transport documents and the cargoes were in good condition. (2) On September 24, 2014, Qingdao Dahua Insurance Survey Co., Ltd. entrusted by PICC Tianjin and BDH, issued an insurance survey report on carriage of goods by sea. As was recorded in the report: the date of suffering a loss was September 18, 2014. The dates of investigation at the scene were from September 25 to 30, 2014. The members of joint investigation were BDH assistant president SU Ning, Guangxi Nong Ken Ming Yang Biochemistry Co. Ltd. business department manager XU Yongxiong and Qingdao Dahua Insurance Survey Co. Ltd. insurance surveyor XIE Zongle. It was extremely probable that the damage to the goods in this accident was caused by fresh and water rain wetting. According to the analysis of all possible stages, the possibilities that the damage was caused by the shipper and the storage at Qinzhou Port CY and at loading time were excepted, but the possibilities that the damage was caused by fresh and water rain wetting during the proceeding of carriage or at discharging time were not excepted. When Qingdao Dahua Insurance Survey Co. Ltd. investigated on the spot, more than 2 months had gone by away from delivery time of the goods—July 28, 2014. During the period of time, the goods had gone through land transport from alongside to Qinzhou Port CY and from Port CY to Guangxi Nong Ken Ming Yang Biochemistry Co. Ltd, and Qinzhou was dominated by rain. According to the record of HUANG Feng, the Business Director of China Ocean Shipping Tally Company Qinzhou Branch, the goods in question were carried from alongside to Port CY by platform trailer (without tarpaulin). Therefore, PICC Tianjin was unable to give evidence to prove the possibility that wet damage to the goods was caused by land transport from alongside to Qinzhou Port CY and from Port CY to Guangxi Nong Ken Ming Yang Biochemistry Co. Ltd, and the Insurance Survey report on carriage of goods by sea submitted by PICC Tianjin also showed that “The possibility that the wet damage was caused by rain in transit and during discharging time could not be excepted”, and “in transit” did not rule out land transport. Pulling the threads together, PICC Tianjin was unable to give evidence to prove that wet damage to the goods in question was caused during responsibility period of carrier, and should bear adverse legal consequences of evidence. According to Sub-Paragraph 4 of Article 42, Paragraph 1 of Article 46, Article 81 of the Maritime Code of the People’s Republic of China, Paragraph 1 of Article 60 of the Insurance Law of the People’s Republic of China and Article 90 of the

PICC Property and Casualty Company Limited Tianjin Branch v. …

895

Interpretation of the Supreme People’s Court concerning Application of the Civil Procedure Law of the People’s Republic of China, “the party should provide with evidence to prove facts that support your own claims or dispute the other party’s claims, but except as otherwise provided by law. Before the sentence, if the party cannot provide with evidence or the evidence is not sufficient to prove its claims, the party with the burden of evidence bears adverse consequences”, the judgment of first instance was rendered as follows: reject the claims of PICC Tianjin. Court acceptance fee in amount of CNY13,767 shall be born by PICC Tianjin. PICC Tianjin was not satisfied with the judgment of first instance and appealed: this case was a case of dispute over the atypical multimodal transport contract. Hongchen was the carrier of the multimodal transport contract, and should bear the obligation and responsibility to manage the goods from loading onto the ship by sea to delivering at the destination. 1. In this case, Hongchen and the shipper entered into a voyage charter party which was a kind of contract of carriage of goods by sea. Meanwhile, the B/L involved was CONGENBILL, and it said that the charter party was incorporated into the B/L on the front of the B/L, hence the B/L was only a cargo receipt not the proof of contract of carriage of goods by sea, and the identification with carrier of carriage of goods by sea should be based on charter party. Since Hongchen was the owner in the voyage charter party, it should be the carrier of goods by sea. 2. The Maritime Code of the People’s Republic of China distinguished carrier from actual carrier with reference to the Hamburg Rules. The provision of Article 72 Paragraph 2 of it actually made it clear that that the Master issuing the B/L meant the behavior on behalf of the carrier. In this case, the carrier was Hongchen, and SHL just was the actual carrier, then the signature of the Master involved on the bill of lading should be signed on behalf of Hongchen. The court of first instance held that the Master involved issued the B/L on behalf of the shipowner SHL, then identified that SHL was the carrier of carriage of goods by sea. Actually, the court confused the concepts of carrier and actual carrier. 3. A contract of carriage of goods by sea was a tripartite contract including a shipper, a carrier and a consignee. Since a voyage charter party belonged to a contract of carriage of goods by sea, the consignee who specified by the B/L signed under the charter party and incorporated into the charter party also was one party in the voyage charter party. However, The court of first instance denied the contractual right of BDH, the consignee in the contract of carriage involved with the contract relativity, then denied that Hongchen was the carrier in the contract of carriage of goods by sea in this case, which wrongly applied the law. 4. Hongchen entered into a voyage charter party with the shipper, while it entered into an import service contract with the consignee to specify obligation of discharge at the port of destination, import custody, storage and land transport. Throughout the two contracts, Hongchen was the carrier actually in the multimodal transport contract of liability to carriage by sea, land transport and discharge in the middle of discharging time, and should bear liability of management of goods from loading onto the ship to delivering at the final destination. Although the way to enter into two contracts was distinguished from the way to enter into a typical multimodal transport contract, but the characteristic of multimodal transport contract was that there were more than two ways

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for the carrier to bear the obligation of carriage, and the actual situation in this case also reflected this characteristic. The court of first instance separated two contracts and wrongly affirmed that Hongchen only was the freight forwarder of carriage of the goods in question, so rejected claim of PICC Tianjin against Hongchen, which had not legal basis. In a word, it requested the court of second instance to change the original sentence to indemnify for property loss of PICC Tianjin by Hongchen or remand for retrial and pay for the litigation fees of first instance and second instance. Hongchen defended: first of all, the judgment of first instance was correct and should be affirmed. Secondly, Hongchen and BDH entered into the import goods service contract. The content of article 5 paragraph 2 of the contract had fully demonstrated that Hongchen was the freight forwarder, while article 7 of the contract had clearly agreed that if there was compensation for damage to the goods, the claim should be made within three days after the damage was found which meant that there was no right to claim for damage to the goods beyond the period any longer. The time of the claim of the other party exceeded the time agreed in the contract, Hongchen should not take responsibility. In addition, there was no direct contractual relationship between Hongchen and PICC Tianjin. SHL defended: SHL had fulfilled all the obligations of carrier in carriage of goods in question by sea, and had delivered the goods in good condition to the consignee under the bill of lading. But PICC Tianjin claimed that the damage to goods did not occur during the responsibility of SHL. The company had not been able to prove that the damage to goods occurred in responsibility of SHL. Therefore, whether from the view of the advantage of evidence or from the view of the probability of evidence, PICC Tianjin did not have evidence to prove that SHL should bear the liability of compensation to the damage to goods that it claimed for. The legal relationship and legal facts affirmed by the judgment of first instance were correct, and the appeal of PICC Tianjin should be dismissed and the original judgment should be affirmed. No new evidence was submitted by the parties in the second instance. At the same time, all parties had not any objection or supplement to the facts founded out in the first trial. Pulling the threads together, the facts founded out by the court of first instance were clear and the evidence was sufficient, and the court confirms them. It is also found out that on June 19, 2014, Hongchen (shipowner) entered into a charter party with the seller of the cassava starch, Agriculture of Asia Futures Co., Ltd. (charterer), which agreed that the carriage of 7,000 tons (850 kg) of bagged cassava starch (plus or minus 10% was selected by the shipowner, and if the vessel could not hold 7,000 tons of starch in the end, the charterer / shipper would fill the cabin and the freight would be calculated according to the actual loading quantity) from the loading port Bangkok, Thailand to the discharging port Fang Cheng Port China. During the hearing of the second instance, Hongchen and SHL recognized that Hongchen entered into a charter party with another shipping company while the shipping company entered into a voyage charter party with SHL, and SHL finally carried the goods in question.

PICC Property and Casualty Company Limited Tianjin Branch v. …

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The court holds that this case is dispute over contract of carriage of goods by sea. SHL was a company registered in Korea, so this case has foreign factors. According to Article 3 of the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China “the parties may explicitly choose the laws applicable to foreign-related civil relations in accordance with the provisions of law”, the parties to this case all agreed with application of the law of the People’s Republic of China to hear the case in the first trial. Therefore, this case shall be handled by the law of the People’s Republic of China. In view of the fact that PICC Tianjin clearly confirmed during the hearing that it had no objection to the judgment of the first trial that SHL was not liable for the compensation of the loss involved and that there was indeed no evidence to prove that SHL was responsible for the loss, so the judgment of first instance that rejected the claim of PICC Tianjin against SHL was not improper, and the court affirmed it. PICC Tianjin only appealed to the judgment of the first trial that Hongchen was a freight forwarder in this case and did not take responsibility for the loss of goods, the court will only examine it. Taking cross-examination opinion of the parties into consideration, the issues of this case are concluded as follows: what kind of legal relationship was between PICC Tianjin and Hongchen? Should Hongchen be liable for compensation? If Hongchen should bear the responsibility, how much was the compensation? Firstly, with respect to the issue of what kind of legal relationship was between PICC Tianjin and Hongchen. During the hearing, PICC Tianjin clearly confirmed to sue for this case on the basis of the B/L involved. Under this circumstance, the court holds that Hongchen was not the carrier in the contract of carriage by sea involved and the carrier should be SHL. The reasons are as follows: 1. PICC Tianjin brought the lawsuit to this case on the basis that BDH was the consignee of the goods in question. The court of first instance found out after the hearing and also confirmed that BDH was the consignee of the goods in question, and there was no objection among the parties in the second instance about this and no evidence to overturn this finding. So the court confirms the identification of BDH with the consignee of the goods in question. The transaction of cassava starch involved was carried on in the way of CFR. In the CFR trading terms, the goods were carried by the seller Agriculture of Asia Futures Co., Ltd. Then Agriculture of Asia Futures Co., Ltd. entered into the charter party with Hongchen. In the charter party, BDH was not the contractual party, and the charter party could not restrain BDH and BDH could not claim for the rights on the basis of this charter party. PICC Tianjin held that the voyage charter party was a kind of contract of carriage by sea and the B/L involved was a bill of lading incorporated into a charter party. Then the consignee stated in the B/L which was issued under the charter party and incorporated into the charter party is also the party to the charter party, so BDH and Hongchen has actually formed the relationship of contract of carriage of goods by sea. As for this, the court holds that the reason could not be established. First of all, the voyage charter party was a special kind of contract of carriage of goods by sea, but

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different from the contract of carriage of goods by sea. According to Article 92 of the Maritime Code of the People’s Republic of China “voyage charter party is a charter party under which the shipowner charters out and the charterer charters in the whole or part of the ship’s space for the carriage by sea of the intended goods from one port to another and the charterer pays the agreed amount of freight”, the voyage charter party was essentially the legal relationship between parties to the charter party by renting a ship or part of shipping space to transport goods. The parties to the contract, namely the owner and charterer, only had the rights and obligations equivalent to the contractual carrier and the shipper. Secondly, Article 95 of the Maritime Code of the People’s Republic of China stipulates: “where the holder of the bill of lading is not the charterer in the case of a bill of lading issued under a voyage charter, the rights and obligations of the carrier and the holder of the bill of lading shall be governed by the clauses of the bill of lading. However, if the clauses of the voyage charter party are incorporated into the bill of lading, the relevant clauses of the voyage charter party shall apply.” Although the B/L involved clearly stated that “used in conjunction with the charter party” on the front but did not specify what charter party was incorporated. PICC Tianjin held that the B/L was incorporated into the charter party between Agriculture of Asia Futures Co., Ltd. and Hongchen, however Hongchen and SHL denied it and recognized that there were three charter parties in the case in which the cassava starch was involved. The burden of proof should be born by PICC Tianjin on which contract to be incorporated into the B/L, or else PICC Tianjin should bear the consequences that it could not give the evidence. As a result, although the B/L involved on the front stated that the charter party was incorporated, the B/L did not state the date on which the charter party was specifically entered into, and the charter party involved was not specific, and the charter party involved could not be incorporated into the B/ L. Under such circumstance, the rights and obligations of the holder of the B/L, namely the consignee could only be determined on the basis of the B/L rather than voyage charter party. Therefore, the claim held by PICC Tianjin could not be established that Hongchen and BDH had formed the legal relationship of the contract of carriage of goods by sea by the B/L incorporated into the charter party. The court does not support it. 2. Article 71 of the Maritime Code of the People’s Republic of China stipulates: “a bill of lading is a document which serves as an evidence of the contract of carriage of goods by sea and the taking over or loading of the goods by the carrier, and based on which the carrier undertakes to deliver the goods against surrendering the same.” That meant the bill of lading was only the proof of contract of carriage of goods by sea, not the contract of carriage of goods by sea itself. The parties to the contract would determine their own rights and obligations in accordance with the contract of carriage entered into by them. However, as mentioned above, BDH as the consignee was not a party to the voyage charter party, and was not a shipper of carriage of goods in CFR terms as well, and it could only identify the carrier based on the bill of lading rather than voyage charter party. However, the bill of lading involved did not state who was

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the carrier of the B/L, but showed that the goods were shipped on the M.V. “PRINCESS” and the signature of issuing the bill of lading is “Sealite Shipping Co. Ltd. on behalf of the Master of M.V. ‘PRINCESS’ HWANG CHEI SEONG”. According to Article 72 of the Maritime Code of the People’s Republic of China “the bill of lading may be signed by a person authorized by the carrier. A bill of lading signed by the Master of the ship carrying the goods is deemed to have been signed on behalf of the carrier”, the Master was authorized to issue the B/L involved, and it can be regarded that the carrier issued the B/L. According to Article 7 of the Maritime Code of the People’s Republic of China “the ownership of a ship means the shipowner’s rights to lawfully possess, utilize, profit from and dispose of the ship in his ownership”, it was not improper to identify that SHL, as the owner of M.V. “PRINCESS”, was the carrier of the bill of lading involved. PICC Tianjin held that the Master of M.V. “PRINCESS” had issued the bill of lading on behalf of Hongchen. However, the bill of lading was not issued in the name of Hongchen and PICC Tianjin had no evidence to prove that Hongchen had chartered on bareboat for M.V. “PRINCESS” to transport goods in question. So PICC Tianjin held that Hongchen was the carrier and the reason for the claim that SHL was only the actual carrier could not be established. The court does not support it. 3. According to the contents of the import cargo service contract entered into by Hongchen and BDH on July 12, 2014, the actual relationship formed between the two companies was the relationship of contract of agency of goods by sea but not the relationship of contract of carriage of goods by sea. The two relationships above were different kinds of legal relationships. In this case, PICC Tianjin held that Hongchen was actually the carrier in the multimodal transport contract and should bear the responsibility for the period from loading onto the ship to delivering at the final destination of goods including shipping, land transport and discharging. So the reasons could not be established. According to Article 102 of the Maritime Code of the People’s Republic of China “a multimodal transport contract as referred to in this code means a contract under which the multimodal transport operator undertakes to transport the goods, against the payment of freight for the entire transport, from the place where the goods were received in his charge to the destination and to deliver them to the consignee by two or more different modes of transport, one of which being sea carriage. The multimodal transport operator as referred to in the preceding paragraph means the person who has entered into a multimodal transport contract with the shipper either by himself or by another person acting on his behalf”, this provision showed that the person who had entered into a multimodal transport contract which contained two or more different modes of transportation one of which being sea carriage, with the shipper by himself became the operator of the multimodal transport and was responsible for the entire carriage of the goods. In this case, first of all, Hongchen entered into a charter party with Agriculture of Asia Futures Co., Ltd. Agriculture of Asia Futures Co., Ltd. chartered a ship from Hongchen to ship the goods in question. Agriculture of Asia Futures Co., Ltd. was equivalent to the shipper and BDH was not the party to the contract.

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Secondly, Hongchen and BDH entered into an import cargo service contract. In the two contracts, Hongchen entered into two contracts over different service with different subjects, and Hongchen was not the operator of the multimodal transport and the two contracts did not form the multimodal transport contract. Therefore, the reasons for appealing to claim that PICC Tianjin held that Hongchen was the carrier of multimodal transport could not be established. The court does not support it. Secondly, with respect to the issue whether Hongchen should be liable for compensation and if so, what was the amount of compensation. Although PICC Tianjin affirmed that the wet damage to the goods occurred in the period of carriage of goods by sea with the assessment report, SHL had also submitted the import tally certification, the list of cargo damaged and the over and short cargo list issued by China Ocean Shipping Tally Company Qinzhou Branch when the goods were discharged from the ship, and these indicated that only the packages of 153 bags of classed cassava starch within the cassava starch involved were broken when discharging and tallying and there were no over or short. The parties all recognized the import tally certification was a notarized document issued by the notarization department. Therefore, the goods in question were not wet damaged when they were discharged from the ship. PICC Tianjin proved that the wet damage to the goods occurred in the period of carriage of goods by sea on the basis of the assessment report, and this report was issued by Qingdao Dahua Insurance Survey Company entrusted by PICC Tianjin and BDH after BDH discharged the goods from the ship and stored the goods at the Port CY and then carried the goods from the CY to the destination and found the existence of wet damage. It was presumed that the wet damage was caused by the fresh and water rain wetting, and it was presumed by the segment exclusion method which meant that PICC Tianjin presumed the possibility that the cargo suffered from water wetting in three stages which were the period before loading on the ship of goods, the period of the goods on board (including the period of loading at the loading port, the period of the voyage and the period of discharging at the port of destination) and the period of storage at the CY of the port of destination. Finally, it could not be excluded the possibility of damage to the goods caused by rain during transportation and discharging and presumed that the damage to the goods should occur during the period of the goods on board. However, on the one hand, the assessment report was issued by the survey company unilaterally entrusted by the consignee and there was no evidence to prove that the carrier was informed at the time of the inspection. SHL also did not recognize the assessment report. On the other hand, the tally company carried out tallying during the period of unloading discharging, if wet damage to the goods indeed occurred during the goods were on board, the company should found something during tallying, but the tally certification did not contain any records of wet damage to the goods, and the tally certification was more objective compared to the assessment report, because the conclusion was made at the time of discharging under the timely inspection to goods, however the assessment report was a conclusion presumed afterwards. In

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addition, the goods in question were carried from alongside to Port CY by platform trailer (without tarpaulin), and the assessment report had not made any analysis and judgment whether the goods were likely to be exposed to the rain during this period. PICC Tianjin could not give evidence to prove that the possibility that wet damage to goods occurred during this period could be ruled out. Therefore, the assessment report was not enough to prove that the damage to goods in question occurred during the period of responsibility of the carrier. During the hearing of the second instance, PICC Tianjin confirmed that there was no evidence to prove that SHL was responsible for the carriage of goods by sea. Therefore, even if PICC Tianjin said that Hongchen was the carrier and SHL was the actual carrier, Hongchen should not bear the responsibility of the period of carriage of goods in question by sea. Pulling the threads together, in this case, Hongchen was not the carrier of contract of carriage of goods by sea, and not the operator of multimodal transport, and there was the relationship of contract of agency of goods by sea between Hongchen and BDH, and they shall determine their own rights and obligations in accordance with the contract of import cargo service entered into by both parties, and this legal relationship was different from the dispute over contract of carriage of goods by sea in this case and should be solved separately. In addition, PICC Tianjin had no enough evidence to prove that the damage to goods indeed occurred during the period of goods on board, that was, during the period of the responsibility of carrier. As for the question whether the damage to the goods may occur during the agency of Hongchen and whether the damage was the responsibility of Hongchen, this question was outside the scope of the present case. Therefore, The court of first instance found out the facts clearly, and the evidence was sufficient, the application of law was correct and the substantial disposal was correct, therefore the judgment of first instance shall be affirmed. According to Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is rendered as follows: Dismiss the appeal and affirm the original judgment. Court acceptance fee of second instance in amount of CNY13,767 (prepaid by PICC Property and Casualty Company Limited Tianjin Branch) shall be born by PICC Property and Casualty Company Limited Tianjin Branch. This judgment is final. Presiding Judge: LUO Xiuwen Judge: TAN Qinghua Acting Judge: LI Pingping June 12, 2016 Clerk: LI Lei

Wuhan Maritime Court Civil Judgment PICC Property and Casualty Company Limited Xingshan Branch v. Ping An Property & Casualty Insurance Company of China Ltd. Anqing Center Branch (2014) Wu Hai Fa Shang Zi No.00112 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 919. Cause(s) of Action 231. Dispute over contract for protection and indemnity insurance on the sea or sea-connected waters. Headnote The Plaintiff cargo insurer that had successfully sued bareboat charterer of carrying ship for loss of goods held to be entitled to recover indemnity from bareboat charterer’s liability insurer, exercising rights of subrogation to charterer’s contractual rights against its insurer. Summary The Plaintiff PICC Property and Casualty Company Limited Xingshan Branch sued the Defendant Ping An Property & Casualty Insurance Company of China Ltd. Anqing Center Branch seeking an insurance indemnity for the loss of goods resulting from a ship collision. In 2011, a ship carrying goods insured by the Plaintiff collided with another vessel, resulting in the loss of the goods. After paying an insurance indemnity to the owner of the goods, the Plaintiff sued the bareboat charterer of the ship, Anqing Fengshun Shipping Co., Ltd. to recover for the loss, and the court held for the Plaintiff. However, Fengshun Company had not received an insurance indemnity from its insurer and thus was unable to satisfy its debt to the Plaintiff. Therefore, the Plaintiff brought this lawsuit against the Defendant, the insurer of the ship. The Plaintiff alleged that it had a creditor’s right to exercise subrogation of Fengshun Company’s right against the Defendant in order to recover the insurance indemnity. The court agreed with the Plaintiff, holding that the Defendant was responsible for paying an insurance indemnity of 1,456,594.02 yuan to the Plaintiff. The court reasoned that the insurance contract between Fengshun Company and the Defendant was valid, and because Fengshun Company failed to pay its debts to the Plaintiff, the Plaintiff had the right to exercise subrogation of the company in order to recover from the Defendant. Additionally, the court rejected © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_32

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the independent claim of Anqing Duxiu Rural Commercial Bank Co., Ltd. Shilipu Branch, which argued that it had a priority claim to the insurance indemnity because it had issued loans to the owner of the ship, LV Xiaoyan, using the ship as a guarantee. The court found no legal basis for this claim.

Judgment The Plaintiff: PICC Property and Casualty Company Limited Xingshan Branch. Domicile: Gaoyang Avenue No.52, Gufu County, Yichang City in Hubei Province. Representative: LI Ying, manager. Agent ad litem: ZHAO Dinghui, director of law department of the company. Agent ad litem: CHEN Liang, lawyer of Hubei Dahan Law Firm. The Defendant: Ping An Property & Casualty Insurance Company of China Ltd. Anqing Center Branch. Domicile: South Linghu Road No.189, Floor 1 in Dongan Building, Yingjiang District, Anqing City in Anhui Province. Representative: WANG Yuehua, general manager of the company. Agent ad litem: CHENG Shuaishuai, staff of the company. Agent ad litem: ZHOU Rongsheng, lawyer of Anhui Yurun Law Firm. The Third Party: Anqing Duxiu Rural Commercial Bank Co., Ltd. Shilipu Branch. Domicile: Room 1, Jixian Beiyuan No.5 in the first floor, North Jixian Road, Anqing City in Anhui Province. Representative: FO Jiali, chairman of the bank. Agent ad litem: ZU Tongyin, lawyer of Anhui Changjiangren Law Firm. The Third Party: Anqing Fengshun Shipping Co., Ltd. Domicile: Bottom Floor 3, No.12 of the first construction, Daguanting Community, Anqing City in Anhui Province. Legal representative: LV Fengxia, executive director. Agent ad litem: LI Xiaohui, lawyer of Anhui Changjiangren Law Firm. With respect to the case arising from dispute over creditor’s subrogation, the Plaintiff, PICC Property and Casualty Company Limited Xingshan Branch (hereinafter referred to as PICC Xingshan Branch), filed an action against the Defendants, Ping An Property & Casualty Insurance Company of China Ltd. Anqing Center Branch (hereinafter referred to as Ping An Insurance Anqing Branch) and the Third Party Anqing Fengshun Shipping Co., Ltd. (hereinafter referred to as Fengshun Company) to the court on January 9, 2014. The court entertained the case on the same day, and Judge ZHANG Yv heard the case according to the applicable summary procedure. When filing the answer, the Defendant, Ping An Insurance Anqing Branch raised an objection to the jurisdiction

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to the court so that the case was transformed into the applicable ordinary procedure. A collegiate panel composed of Presiding Judge ZHANG Yv, Judge YI Lu and Judge XIONG Wenbo was formed by the court according to the law to try the case. The court made (2014) Wu Hai Fa Shang Zi No.00112-2 Civil Ruling on February 20, 2014, to dismiss the objection of jurisdiction raised by the Defendant, Ping An Insurance Anqing Branch, according to the law. The company did not agree with the ruling, and appealed to Hubei High People’s Court. Hubei High People’s Court made (2014) E Min Si Zhong Zi No.00136 Civil Ruling on August 13, 2014, which dismissed the appeal of the Defendant Ping An Insurance Anqing Branch according to the law. On September 16 of the same year, Anqing Duxiu Rural Commercial Bank Co., Ltd. Shilipu Branch (hereinafter referred to as Duxiu Bank) applied to the court and required to participate in proceeding as the Third Party with independent claim. After examination, the court allowed its application and the case was tried in public on October 10, 2014. Agents ad litem of the Plaintiff PICC Xingshan Branch, ZHAO Dinghui and CHEN Liang, agent ad litem of the Defendant Ping An Insurance Anqing Branch, ZHOU Rongsheng, agent ad litem of the Third Party Duxiu Bank, ZU Tongyin, agent ad litem of the Third Party Fengshun Company, LI Xiaohui, appeared in court to attend the trial. Now the case has been concluded. The Plaintiff PICC Xingshan Branch alleged: on October 25, 2011, M.V. “Feng Shun 09” carried the covered goods of the Plaintiff PICC Xingshan Branch and had a collision with M.V. “Shun Dao” on the way of Hubei Narrows to Shanghai, which caused the covered goods sinking with the ship and the loss of 16,855,000 yuan. Therefore, the Plaintiff PICC Xingshan Branch brought a suit to the Wuhan Maritime Court and requested that the manager of M.V. “Feng Shun 09” Fengshun Company and the owner of M.V. “Shun Dao”, Jiangsu Shuntian Shipping Group Nanjing Shundao Shipping Co., Ltd., (hereinafter referred to as Shundao Company) compensated for the above losses. Wuhan Maritime Court made (2011) Wu Hai Fa Shi Zi No.00082 Civil Judgment, determining Fengshun Company to compensate the Plaintiff PICC Xingshan Branch 4,012,900 yuan. But the company refused to fulfill the court decision so that the Plaintiff PICC Xingshan Branch applied for compulsory enforcement to the court. Fengshun Company had insured coastal and inland water hull insurance for M.V. “Feng Shun 09” in the Defendant PICC Xingshan Branch with the insurance amount of 2,800,000 yuan. The accident occurred during the insurance period and belonged to insurance coverage, so the Plaintiff PICC Xingshan Branch applied for preservation before litigation to freeze the insurance indemnity. As for the vessel’s losses caused by this accident, (2012) Wu Hai Fa Shi Zi No.00046 Civil Judgment affirmed that ship repair fee was 1,500,000 yuan, salvage fee was 793,000 yuan, assessment fee was 40,000 yuan etc., totally amounting to 2,333,000 yuan. But Fengshun Company neither took active actions to claim the Defendant for insurance indemnities throughout, nor made compensations for the accident according to the court notification. Its negligent action to exercise insurance claims to the Defendant Ping An Insurance Anqing Branch would directly damage the Plaintiff’s rights and interests. Therefore the Plaintiff PICC Xingshan Branch sued to the court, requesting that: 1. the Defendant Ping An Insurance Anqing Branch should compensate the losses

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of 2,099,700 yuan and the interests of the Plaintiff PICC Xingshan Branch; and 2. the Defendant Ping An Insurance Anqing Branch should bear the costs of litigation and preservation and other fees. The Third Party Duxiu Bank defended: on December 23, 2010, the shipowner of M.V. “Feng Shun 09”, LV Xiaoyan made a five-year bareboat charter with Fengshun Company. On December 29 in the same year, Fengshun Company, as the insured, issued all risks and additional risks of coastal and inland water hull insurance in Ping An Insurance Anqing Branch. The insurance policy recorded: the insurance coverage of M.V. “Feng Shun 09” was 2,800,000 yuan and the insurance period was from 1200 on January 2, 2011 to 1200 on January 2, 2012. On January 14, 2011, Duxiu Bank and the shipowner of M.V. “Feng Shun 09” LV Xiaoyan signed Loan Contract and Maximum Amount Mortgage Contract, appointing that LV Xiaoyan voluntarily used M.V. “Feng Shun 09” to provide a guaranty to RMB loan claim formed from January 14, 2011 to January 14, 2014 between Duxiu Bank and LV Xiaoyan, and maximum amount of secured claim was 2,800,000 yuan. Two parties registered the mortgage of the ship in Anqing Maritime Safety Administration. After signing the mortgage contract, in order to avoid mortgaged ship of sea perils in the proceed of management that affected the realization of the bank’s claim, by application of Fengshun Company, Ping An Insurance Anqing Branch added a special agreement on the previous policy, which said “the first beneficiary of this policy was Anqing Duxiu Rural Commercial Bank Co., Ltd. Shilipu Branch”. Then Duxiu Bank offered loans to LV Xiaoyan by appointment. By September 16, 2014, LV Xiaoyan still had owed the bank loan principal of 2,643,000 yuan, interest of 67,547.03 yuan in a total of 2,710,547.03 yuan. On October 25, 2011, M.V. “Feng Shun 09” had a collision accident with M.V. “Shun Dao” and its relevant losses were recognized 2,333,000 yuan in accordance with the judge of Wuhan Maritime Court. According to provision of law and agreement of insurance contract, Ping An Insurance Anqing Branch shall pay insurance compensation of 2,099,700 yuan for M.V. “Feng Shun 09”. The Third Party Duxiu Bank, as the first beneficiary of policy, had rights of claim and priority of compensation of the ship’s insurance indemnity. Therefore, Duxiu Bank could participate in proceeding as a third party with independent claim and requested the court to judge: 1. affirm that the Third Party Duxiu Bank had priority of compensation of the insurance indemnity of the M.V. “Feng Shun 09” disputed by both the Plaintiff PICC Xingshan Branch and the Defendant Ping An Insurance Anqing Branch; 2. the Defendant Ping An Insurance Anqing Branch should pay insurance indemnity of 2,099,700 yuan for the Third Party Duxiu Bank; and 3. court acceptance fee paid by Duxiu Bank should be born by the Defendant Ping An Insurance Anqing Branch. The Defendant Ping An Insurance Anqing Branch alleged: 1. the insurance contract in this case agreed Duxiu Bank to be the first beneficiary, then the mortgagee of M.V. “Feng Shun 09”, who had the right of priority of compensation to receive the insurance indemnity according to the law. The Plaintiff PICC Xingshan Branch had no right to get compensation. 2. Upon the disputes in this case, including ship repair fee, salvage fee, and assessment fee in a total of 2,333,000

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yuan, had been determined in another case that Shundao Company had to pay 75%, which was 1,749,750 yuan. LV Xiaoyan had been actually compensated from the limitation fund for maritime established by Shundao Company, so the Defendant only bored 25% compensation liability. As for the creditor’s right of Fengshun Company, the Plaintiff PICC Xingshan Branch had filed an application for enforcement to the court. Without conclusive evidence to prove it was unable to implement the decision, the Plaintiff PICC Xingshan Branch had no right to bring a suit of subrogation to subordinate debtor Ping An Insurance Anqing Branch. 3. M. V. “Feng Shun 09” in this case was under-insurance, because the vessel valued 5,800,000 yuan while the insurance amount was only 2,800,000 yuan with a 48.28% coverage ratio. So the insurance benefit of M.V. “Feng Shun 09” should be 253,433.79 yuan. [2,333,000 yuan * 48.28% (coverage ratio) * 25% (liability ratio) * 90% (deductible ratio)]. The Third Party Fengshun Company stated: 1. Duxiu Bank had the right of claim and priority of compensation to receive insurance indemnity of M.V. “Feng Shun 09”, but Fengshun Company did not have creditor’s right to insurance indemnity. 2. According to relevant provision of law, the exercise of the right of subrogation should be based on the matured claim of debtor. Fengshun Company was not the first beneficiary of the policy that it did not have creditor’s right to receive insurance indemnity of M.V. “Feng Shun 09”. The Plaintiff PICC Xingshan Branch exercised the right of subrogation, which did not conform to the legal conditions that could not establish. 3. After the marine casualty in the case happened, the court froze insurance indemnity of M.V. “Feng Shun 09” according to the appeal of the Plaintiff PICC Xingshan Branch, which caused the Defendant Ping An Insurance Anqing Branch to be unable to pay the first beneficiary Duxiu Bank for insurance indemnity. The court’s action damaged the legitimate rights of the first beneficiary and shall be lifted to the above freezing actions immediately. Thus, the claims of the Plaintiff PICC Xingshan Branch could not be established and should be rejected according to the law. The Plaintiff PICC Xingshan Branch against the claim of the Third Party Duxiu Bank argued: 1. the establishment of the first beneficiary in insurance on hull had no legal basis so that the relevant records in policy related to case were invalid. 2. The insured Fengshun Company had no legal relation with the Third Party Duxiu Bank and their agreement about beneficiary was lack of the fact and the law that could not be established. 3. Loan creditor’s right that Duxiu Bank alleged, was lack of evidence and against common sense and convention that should not be affirmed by the court. 4. When insurance accident happened in this case, main creditor’s right with loans that Duxiu Bank claimed did not exist. Insurance indemnity did not belong to mortgaged property, so Duxiu Bank had no right to the fund including any rights of so-called priority of compensation. Thus, the claims of the Third Party Duxiu Bank were lack of the facts and the laws, which shall be rejected.

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The evidence submitted by the Plaintiff PICC Xingshan Branch in the period of proof was as follows: 1. Coastal and inland water hull insurance policy (hereinafter referred to as policy) No.PCB040002092500001278. That could prove the establishment of insurance contract between Ping An Insurance Anqing Branch and Fengshun Company. 2. (2011) Wu Hai Fa Shi Zi No.00082 Civil Judgment. That could prove PICC Xingshan Branch had matured claim of 4,012,900 yuan to Fengshun Company. 3. (2012) Wu Hai Fa Shi Zi No.00046 Civil Judgment. That could prove M.V. “Feng Shun 09” suffered the loss of 2,333,000 yuan involved in the insurance contract and Ping An Insurance Anqing Branch had to perform the obligation of insurance contract according to the law. 4. (2011) Wu Hai Fa Bao Zi No.318 Civil Ruling. That could prove that insurance indemnity in this case had been frozen by Wuhan Maritime Court according to the law. 5. (2011) Wu Hai Fa Bao Zi No.82-1 Civil Ruling. That could prove that the right of shipper Hubei Xingfa Chemical Group Co., Ltd. (hereinafter referred to as Xingfa Company) could be subrogationed by the Plaintiff according to the law. 6. The notice of execution of Wuhan Maritime Court. That could prove that PICC Xingshan Branch had applied for the enforcement to the Wuhan Maritime Court according to (2011) Wu Hai Fa Shi Zi No.00082 Civil Judgment. Fengshun Company delayed in exercising the claim of ship’s insurance contract, so PICC Xingshan Branch could exercise the right of subrogation according to the law. 7. Certificates of bareboat charter registration of M.V. “Feng Shun 09”. That could prove that the outsider LV Xiaoyan was the shipowner, and Fengshun Company, as an manager, insured the M.V. “Feng Shun 09” in Ping An Insurance Anqing Branch, which caused LV Xiaoyan who had no right to establish the first beneficiary on ship policy. The cross-examination opinions of the Defendant Ping An Insurance Anqing Branch, the Third Party Fengshun Company, and the Third Party Duxiu Bank on the Plaintiff’s evidence were: they had no objection to the authenticity, legality, and relevancy of evidence offered by the Plaintiff PICC Xingshan Branch, but they were objectionable on purposes of proof of evidence 3, 6, 7. They held that salvage fee and assessment fee in evidence 3, affirmed by (2012) Wu Hai Fa Shi Zi No.00046 Civil Judgment, were not covered in the insurance contract and connected to the case. Judgment determined that the outsider Jiangsu Shuntian Shipping Group Co., Ltd. (hereinafter referred to as Shuntian Company) bored 75% compensation liability to accident loss of M.V. “Feng Shun 09”, and that part of loss shall not be born by Ping An Insurance Anqing Branch. The rest 25% loss corresponded to insurance indemnity shall be paid in priority by the mortgagee of M.V. “Feng Shun 09” Duxiu Bank. Evidence 6 could not prove PICC Xingshan Branch had right to exercise the right of subrogation after it applied for enforcement to court, then filed a suit of subrogation to subordinate debtor, which was lawless. Evidence 7 could not prove that special agreement about the first beneficiary in policy was invalid.

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The ascertainment opinions of the court to the Plaintiff’s evidence are: the evidence submitted by the Plaintiff PICC Xingshan Branch had no objection after being cross-examined in court by other parties, which shall be confirmed. The Defendant Ping An Insurance Anqing Branch submitted the following evidence in the period of proof: 1. Policy and endorsement. That could prove Ping An Insurance Anqing Branch and Fengshun Company had ship insurance contract, which clearly regarded Duxiu Bank as the first beneficiary of the policy. 2. (2012) Wu Hai Fa Shi Zi No.00046 Civil Judgment. That could prove that the M.V. “Feng Shun 09” accident repair fee, salvage fee, and assessment fee in a total of 2,333,000 yuan should be paid by Shundao Company. The cross-examination opinions of the Plaintiff PICC Xingshan Branch, the Third Party Fengshun Company and the Third Party Duxiu Bank on the Plaintiff’s evidence were: they had no objection to the authenticity of above evidence, but they all held that the Defendant Ping An Insurance Anqing Branch should prove actual compensation situation of repair fee, salvage fee, and assessment fee. Meanwhile, the Plaintiff PICC Xingshan Branch had objection on the legality of the policy in evidence 1. The ascertainment opinions of the court to the Defendant’s evidence: except policy in evidence 1, the court confirms the other evidence submitted by the Defendant Ping An Insurance Anqing Branch after being cross-examined in court by other parties with no objection. The policy in evidence 1, recording Duxiu Bank as the first beneficiary in the article, was lawless, which shall not be confirmed by the court. The Third Party Fengshun Company submitted the following evidence in the period of proof: 1. The maximum amount mortgage contract with the number of Du Xiu Yin Hang (Bu) Gao Di Zi No.196320111300002 (hereinafter referred to as maximum amount mortgage contract). 2. Certificates of ownership of M.V. “Feng Shun 09”. 3. Policy and endorsement. 4. Demonstration by Duxiu Bank. The above evidence could prove that the shipowner of M.V. “Feng Shun 09”, LV Xiaoyan, mortgaged the ship in Duxiu Bank to get the loans and insured the ship with all risks and additional risks of coastal and inland water hull insurance and confirmed Duxiu Bank to be the first beneficiary, which all the ship insurance indemnity connected to the case should belong to Duxiu Bank. The cross-examination opinions of the Plaintiff PICC Xingshan Branch on the Third Party’s evidence were: having objection to the authenticity of evidence 1 and having no objection to the authenticity of evidence 2, but having objection to legality of evidence 2 according to the regulation that ship could not be mortgaged during its bareboat charter period; having no objection to the policy in evidence 3, but having objection to the legality of the endorsement; having objection to evidence 4.

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Both the Defendant Ping An Insurance Anqing Branch and the Third Party Duxiu Bank had no objection to the above evidence. The ascertainment opinions of the court to the Third Party’s are: except evidence 1 and 4, evidence submitted by the Third Party Fengshun Company was the same as the Plaintiff’s evidence, upon which the court will not repeat ascertained opinions. Evidence 1 and 4 were submitted by the Third Party Duxiu Bank with independent claim in this case, combined them with other valid evidence, could prove the authenticity of the ship mortgage contract between Duxiu Bank and LV Xiaoyan, which shall be confirmed by the court. The Third Party Duxiu Bank submitted the following evidence in the period of proof: 1. Maximum amount mortgage contract, certificates of ship ownership, loan contracts (respectively signed on December 14, 2012, and April 24, 2013), loan receipt, notice of collection. These could prove that borrower LV Xiaoyan established the mortgage of M.V. “Feng Shun 09” to guarantee the maximum loan of 2,800,000 yuan in Duxiu Bank, who fulfilled its obligation of offering loans as appointed. LV Xiaoyan still had owed Duxiu Bank 2,643,000 yuan of principal and interest by September 16, 2014. 2. Policy and endorsement of M.V. “Feng Shun 09”. These could prove that M.V. “Feng Shun 09” was insured by all risks and additional risks of coastal and inland water hull insurance with 2,800,000 yuan insurance coverage. Period of insurance was from 1200 on January 2, 2011 to 1200 on January 2, 2012, and the first beneficiary of policy was Duxiu Bank. 3. (2012) Wu Hai Fa Shi Zi No.00046 Civil Judgment. That could prove that M.V. “Feng Shun 09” had a collision accident with M.V. “Shun Dao” and its relevant losses were confirmed 2,333,000 yuan by Wuhan Maritime Court. This accident was insurance accident so Ping An Insurance Anqing Branch should bear its obligation to pay insurance compensation for the first beneficiary within insured amount. The cross-examination opinions of the Plaintiff on the Third Party’s evidence were: having the same cross-examination opinions to evidence 2 and 3, and having no objection to the authenticity and legality while having objection to the relevancy. The Plaintiff held that maximum amount mortgage contract and two contracts for loan in this case were signed by Duxiu Bank and LV Xiaoyan, and had no other evidence to prove the authenticity of loan relationship; loan receipt and collection notice were unilateral materials made by Duxiu Bank that did not have the effectiveness of evidence; these group of evidence could not demonstrate the fact that Duxiu Bank claimed. The Defendant Ping An Insurance Anqing Branch, the Third Party Fengshun Company had no objection to the above evidence. The ascertainment opinions of the court to the Third Party’s evidence: evidence 2 and 3 submitted by the Third Party Duxiu Bank were same as the authenticated evidence, which the court will not repeat the ascertainment opinions. Evidence 1

PICC Property and Casualty Company Limited Xingshan Branch …

911

was an original that all parties had no objection to its authenticity and it had relevancy with the case and could be verified reciprocally of the evidence submitted by Duxiu Bank after the hearing, which could prove the authenticity of ship mortgage relationship between the bank and LV Xiaoyan, thus the court confirms it. At the end of the first hearing, Duxiu Bank, in order to prove the authenticity of ship mortgage relationship between it and LV Xiaoyan, supplemented following evidence materials to the court: three personal loan contracts (respectively signed on January 17, 2011, January 12, 2012, April 24, 2012), loan receipts corresponded to the three loan contracts, three loan received receipts and three lender account title vouchers, which were used to prove the authenticity and legality of ship mortgage relationship between it and LV Xiaoyan. The cross-examination opinions of the Plaintiff PICC Xingshan Branch to the above evidence: having no objection to the authenticity and legality of this group of evidence while having objection to their relevancy, and thinking these could not confirm the facts that Duxiu Bank claimed. The Defendant Ping An Insurance Anqing Branch and the Third Party Fengshun Company had no objection to the above evidence. The ascertainment opinions of the court to the evidence: this group of evidence, supplemented by Duxiu Bank after the hearing, were copied by the court and these copies were sent to the other parties after being permitted. The parties needed to submit the written cross-examination opinions rather than in court. All parties submitted the written cross-examination opinions to the court that they had no objection to the authenticity of these evidence and their relevancy with the case, which could prove that Duxiu Bank offered the loans continuously to LV Xiaoyan, which shall be confirmed by the court. The court finds out the following facts through the trial: On December 23, 2010, the owner of M.V. “Feng Shun 09”, LV Xiaoyan, rented bareboat charter to Fengshun Company with a five-year period (from December 23, 2010 to December 22, 2015). Then Fengshun Company insured all risks and additional risks of coastal and inland water hull insurance for M.V. “Feng Shun 09”. On December 29, 2012, Ping An Insurance Anqing Branch issued the policy No.PCB040002092500001278, which was written about the object of insurance was M.V. “Feng Shun 09” and its insured period was from 1200 on January 2, 2011 to 1200 on January 2, 2012. Specific conditions in the policy meanwhile wrote: as for the policy of under-insurance, it would compensate in proportion when accident happened; the deductible franchise of the accident was 8000 yuan or 10% of the loss, which the higher was subject to the final confirmation. On January 14, 2011, the outsider LV Xiaoyan signed maximum mortgage contract with Duxiu Bank, which appointed that LV Xiaoyan voluntarily used M.V. “Feng Shun 09” to provide a guaranty to the loans offered by Duxiu Bank and the insured period was from January 14, 2011 to January 14, 2014 and the maximum amount of secured debt was 2,800,000 yuan. LV Xiaoyan insured relevant insurance according to the request of Duxiu Bank, and made Duxiu Bank as the first beneficiary of the insurance. At the same, they agreed that although M.V.“Feng Shun 09” was estimated 5,800,000 yuan, its final value was subject to the actual

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value when realized the mortgage. On January 17 in the same year, Ping An Insurance Anqing Branch signed endorsement, adding “the first beneficiary of the above policy was Anqing Duxiu Rural Commercial Bank Shilipu Branch” on the specific conditions in the policy from January 17, 2011. In October 2011, M.V. “Feng Shun 09”, loaded with 2,249 tons goods that were consigned by Xingfa Company and insured by PICC Xingshan Branch, from Xiakou harbor in Hubei Xingshan county to Shanghai harbor, had a collision with M.V. “Shun Dao” owned by Shundao Company on the way of Yangtze River Jiangyin water, which caused the sinking of M.V. “Feng Shun 09” and the loss of its part of loaded goods. After the accident, Xingfa Company applied for pre-litigation property preservation to the court, and requested to freeze the ownership and insurance indemnity of M.V. “Feng Shun 09”, owned by LV Xiaoyan and bareboat chartered by Fengshun Company. On November 29, 2011, the court made (2012) Wu Hai Fa Shi Zi No.318 Civil Ruling to permit Xingfa Company’s application of pre-litigation property preservation and sealed and froze the ownership and insurance indemnity of M.V. “Feng Shun 09” according to the law. Later, Xingfa Company brought a suit of dispute over damage of waterway cargo transportation, and requested shipowner of M.V. “Shun Dao” Shundao Company, manager Shuntian Company, bareboat charterer of M.V. “Feng Shun 09” Fengshun Company, to compensate the goods and relevant expense losses [case number: (2011) Wu Hai Fa Shi Zi No.00082]. During the course of litigation, PICC Xingshan Branch required the court to change the party and exercised the right of subrogation of Xingfa Company, who claimed of compensation, for it had paid all insurance indemnity 16,051,602.04 yuan for the loss of Xingfa Company’s cargo and other fees and gained insurance subrogation. On June 24, 2012, the court judged Xingfa Company to drop out and changed PICC Xingshan Branch as the Plaintiff. At the trial, Shundao Company applied to constitute a limitation fund for maritime claims of non-casualties maritime claim caused by collision accident of M.V. “Feng Shun 09”. The court made (2012) Wu Hai Fa Shi Zi No.1 Civil Ruling on April 10, 2012, permitting the application of constituting limitation fund for maritime claims of non-casualties. And its fund amount was 526,511 yuan translated from SDR and its interest was calculated according to financial institution’s one-year lending rate carried out by the People’s Bank of China, began on October 25, 2011 and ended on the establishment of the fund. The court’s ruling would take effect on April 26, 2012 and relevant insurance institutions had constituted limitation fund for maritime claims for Shundao Company in the form of guarantee. On November 5, 2012, the court made (2011) Wu Hai Fa Shi Zi No.00082 Civil Judgment, affirming that collision accident between M.V. “Shun Dao” and M.V. “Feng Shun 09” had caused the loss of 15,996,756.3 yuan of loaded goods of M.V. “Feng Shun 09”. M.V. “Shun Dao” was mostly responsible for the above accident, and shall take 75% negligent liability; M.V. “Feng Shun 09” shall take minor liabilities with 25% of negligent liability. Therefore, the court determined Shundao Company to compensate PICC Xingshan Branch’s the loss of cargo value and relevant expenses of 12,038,701.53 yuan, and Fengshun Company to compensate

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4,012,900.51 yuan, and to reject the claim of PICC Xingshan Branch against Shuntian Company and LV Xiaoyan. On July 31, 2012, shipowner of M.V. “Feng Shun 09”, LV Xiaoyan, brought a lawsuit for collision damage against Shundao Company and Shuntian Company, requesting two companies to compensate the losses of ship repair fee, supplies of fuel materials for ship fee, salvage fee and the interest in a total of 4,429,373.8 yuan. On October 30, 2012, the court made (2012) Wu Hai Fa Shi Zi No.00046 Civil Judgment to determine the amount of LV Xiaoyan’s losses caused by the accident, which included ship repair fee of 1,500,000 yuan, salvage fee of 793,000 yuan, assessment fee of surveying loss of 40,000 yuan, accident dealing fee of 30,000 yuan; the amount of Fengshun Company’s losses caused by the accident, which included fuel loss of 150,000 yuan, supplies of materials for ship and crews’ personal items loss of 510,000 yuan, repatriation expenses of 30,000 yuan, transportation loss of 150,000 yuan, detention loss of 400,000 yuan. The judgment determined: in the period of bareboat charter, lessee had right to possess, use and operate the bareboat chartered ship, but the ownership of the ship shall be lessor. LV Xiaoyan rented her owned M.V. “Feng Shun 09” to Fengshun Company, but LV Xiaoyan remained the ownership and relevant rights of the ship. So LV Xiaoyan could exercise compensation of claim right of the losses caused by collision accident during the bareboat charter of M.V. “Feng Shun 09” including ship repair fee, salvage fee, accident dealing fee, assessment fee of surveying loss etc. That was to claim Shundao Company to compensate in accordance with 75% negligent liability proportion. The losses of M.V. “Feng Shun 09” suffered, such as the loss of fuel, supplies of materials for ship, personal things of crew, repatriate of crew, detention and freight and so on, were the creditor’s right of bareboat charterer Fengshun Company. Fengshun Company announced that its creditor’s right in collision accident transferred to LV Xiaoyan after the collision accident; but after the trial, LV Xiaoyan announced the abandonment of creditor’s right that Fengshun Company had transferred to her in this case, which was permitted by the court. Therefore, the court judged Shundao Company to compensate LV Xiaoyan ship repair fee of 1,125,000 yuan and its interest, salvage fee of 594.750 yuan and its interest, assessment fee of surveying of 30,000 yuan and its interest, accident handling fee of 22,500 yuan and its interest, which accounted to 1,772,250 yuan and its interest; meanwhile the court rejected the claim of LV Xiaoyan against Shuntian Company and her other claims. After the judgment went into effect, LV Xiaoyan filed an application of being paid from the above indemnity and requested to be paid in the procedure for distributing limitation fund for maritime claims established by Shundao Company. On December 14, 2012, the court made (2012) Wu Hai Fa Shi Zi No.00001 Civil Ruling to determine LV Xiaoyan could get 714.562.2 yuan from the fund. After being paid actually, LV Xiaoyan had to repair the M.V. “Feng Shun 09” and made it in operation again. It is found at the same time that PICC Xingshan Branch applied to the court to carry out enforcement of Fengshun Company after (2012) Wu Hai Fa Shi Zi No.00082 Civil Judgment got into effect. In the process of execution, for Fengshun Company had no property to be executed actually, the court made (2013) Wu Hai

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Fa Shi Zi No.00267 Civil Ruling on December 15, 2014 to decide to end the executive program according to the law. After happening collision accident between M.V. “Feng Shun 09” and M.V. “Shun Dao”, Fengshun Company had reported to Ping An Insurance Anqing Branch and made a claim, but they could not make an agreement on insurance indemnity. At the trial of the case, Ping An Insurance Anqing Branch had no objection to the court’s effective judgment that determined the repair fee of M.V. “Feng Shun 09” to be 1,500,000 yuan, salvage fee 793,000 yuan, assessment fee of survey 40,000 yuan, in sum of 2,333,000 yuan. It is also found that after signing maximum mortgage contract, Duxiu Bank and LV Xiaoyan signed three personal loan contracts respectively on January 17, 2011, January 12, 2012, and April 24, 2012, and Duxiu Bank successively offered LV Xiaoyan the loan of 2,800,000 yuan, 1,300,000 yuan, and 1,500,000 yuan that all had been paid off on time. Duxiu Bank continued to sign two personal loan contracts with LV Xiaoyan on December 14, 2012 and April 24, 2013 and offered the loan of 1,300,000 yuan and 1,500,000 yuan with a 12-month loan period, which was respectively from December 14, 2012 to December 14, 2013, and from April 24, 2013 to October 24, 2013; the mode of repayment was to calculate interest period and pay back the capital on due date; the way of guarantee the loan was to mortgage. After signing the contracts, Duxiu Bank successively offered LV Xiaoyan the loan of 2,800,000 yuan, 1,300,000 yuan as agreed, but LV Xiaoyan still had not paid off the capital of 1,300,000 yuan and 1,343,000 yuan of two loan contracts yet. The court holds that: the case is the dispute of creditor’s subrogation. PICC Xingshan Branch was creditor, Fengshun Company was debtor, Ping An Insurance Anqing Branch was subordinate debtor, and Duxiu Bank was mortgagee of M.V. “Feng Shun 09”. The right-duty relation of parties was involved in the Contract Law of the People’s Republic of China and the Insurance Law of the People’s Republic of China, so the aforesaid laws shall the substantial law to deal with the disputes of the case. In this case, debtor-creditor relationship between PICC Xingshan Branch and Fengshun Company had been determined by the effective Civil Judgment (2011) Wu Hai Fa Shi Zi No.00082, which PICC Xingshan Branch had matured claim of 4,012,900.51 yuan to Fengshun Company. Although PICC Xingshan Branch filed an application for legal enforcement as Fengshun Company did not perform its debt actively, Fengshun Company had no property to be executed in fact that caused the creditor’s right of PICC Xingshan Branch could not be achieved. Therefore, Fengshun Company delayed in exercising its matured claim caused the damage of PICC Xingshan Branch, so PICC Xingshan Branch had right to exercise subrogation right of Fengshun Company in its own name, but that right was limited with the amount of debt of Fengshun Company to PICC Xingshan Branch. Ping An Insurance Anqing Branch and Duxiu Bank defensed that PICC Xingshan Branch had no right to exercise subrogation right after it filed an application for legal enforcement, which had no legal basis and the court does not confirm it.

PICC Property and Casualty Company Limited Xingshan Branch …

915

According to the facts found out in the hearing, ship insurance contract between Fengshun Company and Ping An Insurance Anqing Branch was legal and effective that both parties shall adhere to contract. The collision accident between M.V. “Feng Shun 09” and other vessels was involved in all risks of coastal and inland water hull insurance in the insurance contract, so the repair fee, salvage fee, assessment fee of the ship shall be within the compensation scope of the insurance, which Ping An Insurance Anqing Branch shall compensate Fengshun Company for the above losses of M.V. “Feng Shun 09”. Therefore, Fengshun Company had the creditor’s right of insurance indemnity to Ping An Insurance Anqing Branch, which included ship repair fee 1,500,000 yuan, salvage fee 793,000 yuan, assessment fee 40,000 yuan in sum of 2,333,000 yuan. But after the insurance accident happened, Fengshun Company neither paid off its debts due for PICC Xingshan Branch, nor used the method of litigation or arbitration to claim insurance indemnity to its debtor Ping An Insurance Anqing Branch on the condition that it could not make an agreement with Ping An Insurance Anqing Branch on insurance indemnity, which caused debt due of PICC Xingshan Branch could not be realized. At this moment, the subrogation of PICC Xingshan Branch established and PICC Xingshan Branch had right to exercise the creditor’s right of Fengshun Company to Ping An Insurance Anqing Branch with its own name, and request Ping An Insurance Anqing Branch to pay for insurance indemnity of M.V. “Feng Shun 09” that shall be compensated to Fengshun Company. Although the total fee of 2,333,000 yuan of ship repair fee, salvage fee, assessment fee of M.V. “Feng Shun 09” was involved in the insurance coverage, LV Xiaoyan had been compensated for the above loss of 714,562.2 yuan from limitation fund for maritime claim established by Shundao Company according to the effective judgment, so Ping An Insurance Anqing Branch did not need to compensate again according to compensation principle of the Insurance Law. Insurance contract related to case made an agreement that deductible franchise of the accident was 8,000 yuan or 10% loss, in which the higher one should prevail. Accordingly, deductible franchise of the accident was 161,843.78 yuan [(2,333,000–714,562.2) * 10%]. Therefore, Ping An Insurance Anqing Branch shall pay Fengshun Company insurance indemnity of 1,456,594.02 yuan (2,333,000 yuan - 714,562.2 yuan - 161,843.78 yuan) due to the insurance accident. Based on the establishment of subrogation right of PICC Xingshan Branch, the claim that requested Ping An Insurance Anqing Branch to pay for insurance indemnity of M. V. “Feng Shun 09” of 1,456,594 yuan had legal basis and shall be supported by the court; but other claims were lack of factual and legal basis and the court does not support them. Regarding to the issue whether Ping An Insurance Anqing Branch needed to bear 25% compensation liability. Ping An Insurance Anqing Branch held that Shundao Company should bear 75% negligent liability and Fengshun Company should bear 25% negligent liability for the collision accident in this case according to the effective judgment. Therefore, Ping An Insurance Anqing Branch, as insurer of Fengshun Company, should only bear 25% compensation liability to the amount of 2,333,000 yuan of ship repair fee, salvage fee, and assessment fee of M.V. “Feng

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Shun 09”. The court holds that the compensation liability of Ping An Insurance Anqing Branch to the insurance accident of M.V. “Feng Shun 09” was based on the insurance contract between it and Fengshun Company. The collision accident of M. V. “Feng Shun 09” was involved in insurance coverage agreed by two parties, so Ping An Insurance Anqing Branch shall compensate Fengshun Company’s loss within insurance coverage according to the contract. The judgment in another case, division of negligent liability of Shundao Company and Fengshun Company in the collision accident, was to make sure the proper share of liability for damage that two parties shall bear in the disputed ship-collision damage compensation. But that could not limit insurance coverage of Ping An Insurance Anqing Branch to Fengshun Company in the insurance contract, nor reduce compensation liability of Ping An Insurance Anqing Branch. Ping An Insurance Anqing Branch defensed that it should only bear 25% compensation liability of M.V. “Feng Shun 09” according to the judgment in another case, which had no legal basis and the court does not adopt it. Regarding to the issue whether M.V. “Feng Shun 09” was fully-insured. Maximum mortgage contract related to the case stated that M.V. “Feng Shun 09 was estimated 5,800,000 yuan, but that was only an agreement between LV Xiaoyan and Duxiu Bank, which could not be used as legal basis to determine ship’s valuation without assessing authority’s formal assessment. Ping An Insurance Anqing Branch defensed that M.V. “Feng Shun 09” was not under full-insurance accordingly, which had no factual or legal basis and the court does not adopt it. Regarding to the issue whether Duxiu Bank had priority claim to receive the insurance indemnity of M.V. “Feng Shun 09”. Duxiu Bank thought, according to Article 174 of the Property Law of the People’s Republic of China, “in the warranty period, when warranty of property is damaged, lost or levied, security interest holder can have priority claim to receive insurance indemnity, compensation or indemnity. If the term of performance of the secured claim has not expired, such insurance indemnity, compensation or indemnity may be placed in escrow”; in this case, the relevant loss of M.V. “Feng Shun 09” was involved in the scope of compensation that secured property partly damaged and Duxiu Bank, as mortgagee and first beneficiary of M.V. “Feng Shun 09”, had a priority claim to receive insurance indemnity. The court holds that mortgage right had the characteristic of subrogation as a kind of security right, namely when entity of guaranty was damaged, lost, and levied (entity shape of guaranty changed), security right would still exist if there would be equivalent valued substitute of guaranty or substitute (like insurance indemnity, compensation or indemnity). According to legislative spirit and theory of real rights for security, the damage of guaranty did not refer to the part damage of guaranty but guaranty suffered serious damage that it lost its value to use. In this case, the damage of M.V. “Feng Shun 09” was only damaged partly and it began to go into operation after being repaired, and its entity shape did not change nor lose its value to use, which did not belong to the damage determined in Article 174 of the Property Law of the People’s Republic of China. So Duxiu Bank did not have a priority claim to receive insurance indemnity of the accident.

PICC Property and Casualty Company Limited Xingshan Branch …

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The article about the first beneficiary, added on policy and endorsement of M.V. “Feng Shun 09”, was just an agreement which was made by the parties, which did not meet legal requirements, and it could not be served as the basis of priority right to be paid claimed by Duxiu Bank. Therefore, Duxiu Bank defensed that it had a priority right to receive insurance indemnity of M.V. “Feng Shun 09”, which had no factual or legal basis and shall not be protected by the court. In view of above, according to Article 73 of the Contract Law of the People’s Republic of China, Article 16 Paragraph 3 of the Insurance Law of the People’s Republic of China, and Article 142 of the Civil Procedure Law of the People’s Republic of China, the court hereby renders the judgment as follows: 1. The Defendant, Ping An Property & Casualty Insurance Company of China Ltd. Anqing Center Branch, shall pay the Plaintiff, PICC Property and Casualty Company Limited Xingshan Branch, for the insurance indemnity of 1,456,594.02 yuan and its interest (according to the loan interest rate stipulated by the People’s Bank of China for the corresponding period and from date when the judgment comes into effect to when it is paid out actually), which shall be paid in full at once within 10 days after the judgment comes into effect. 2. Reject the other claims of the Plaintiff PICC Property and Casualty Company Limited Xingshan Branch. 3. Reject the claims of the Third Party Anqing Duxiu Rural Commercial Bank Co., Ltd. Shilipu Branch. Court acceptance fee in amount of 23,598 yuan paid in advance by the Plaintiff, PICC Property and Casualty Company Limited Xingshan Branch, the Plaintiff PICC Property and Casualty Company Limited Xingshan Branch shall bear 7,315 yuan, the Defendant Ping An Property & Casualty Insurance Company of China Ltd. Anqing Center Branch shall bear 16,283 yuan. The Third Party Anqing Duxiu Rural Commercial Bank Co., Ltd. Shilipu Branch shall bear by itself the litigation fees of 23,598 yuan which were prepaid by it. If the Defendant fails to perform the obligations of the payment of money in the specified period, it shall pay double interest on debt in the period of delayed performance according to the provisions of Article 253 of the Civil Procedure Law of the People’s Republic of China. In case of dissatisfaction with this judgment, both party shall submit a statement of appeal to the court within 15 days from the date of service of the judgment, and make an appeal before Hubei High People’s Court with duplicates in the number of the counter-parties. When submitting the statement of appeal, the Appellant shall, according to the amount of the request of appeal of dissatisfaction with the judgment and Article 13 Paragraph 1 of the Measures on the Payment of Litigation Costs, pay the court acceptance fee of the appeal in advance before filing an appeal and remit it to Hubei High People’s Court (receiver: non-tax revenue account of Hubei Finance Department, account number: 05XXX69-1, deposit bank: Agricultural Bank of China Donghu Branch in Wuhan. Payer via bank remittance and bank transfer shall

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note “Hubei High People’s Court” or unit code of “103,001” of Hubei High People’s Court on bank credential column). If the Appellant fails to prepay legal fees within 7 days after the expiry of the appeal period, the appeal shall be deemed as being withdrawn automatically. Presiding Judge: ZHANG Yv Judge: YI Lu Judge: XIONG Wenbo December 25, 2014 Clerk: WANG Peilin

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Hubei High People’s Court Civil Judgment PICC Property and Casualty Company Limited Xingshan Branch v. Ping An Property & Casualty Insurance Company of China Ltd. Anqing Center Branch (2015) E Min Si Zhong Zi No.00084 Related Case(s) This is the judgment of second instance and the judgment of first instance is on page 903. Cause(s) of Action 231. Dispute over contract for protection and indemnity insurance on the sea or sea-connected waters. Headnote Affirming lower court decision holding that the Plaintiff cargo insurer, which had successfully sued bareboat charterer of carrying ship for loss of goods, was entitled to recover indemnity from bareboat charterer’s liability insurer, exercising rights of subrogation to charterer’s contractual rights against its insurer. Summary The Plaintiff PICC Property and Casualty Company Limited Xingshan Branch sued the Defendant Ping An Property & Casualty Insurance Company of China Ltd. Anqing Center Branch seeking an insurance indemnity for the loss of goods resulting from a ship collision. In 2011, a ship carrying goods insured by Plaintiff collided with another vessel, resulting in the loss of the goods. After paying an insurance indemnity to the owner of the goods, the Plaintiff sued the bareboat charterer of the ship, Anqing Fengshun Shipping Co., Ltd. to recover for the loss, and the court of first instance held for the Plaintiff. However, Fengshun Company had not received an insurance indemnity from its insurer and thus was unable to satisfy its debt to Plaintiff. Therefore, the Plaintiff brought this lawsuit against the Defendant, the insurer of the ship. The Plaintiff alleged that it had a creditor’s right to exercise subrogation of Fengshun Company’s right against the Defendant in order to recover the insurance indemnity. The court of first instance agreed with the Plaintiff, and held that the Defendant was liable to pay an insurance indemnity of 1,456,594.02 yuan to the Plaintiff. The court of first instance reasoned that the insurance contract between Fengshun Company and the Defendant was valid, and

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because Fengshun Company failed to pay its debts to the Plaintiff, the Plaintiff had the right to exercise subrogation of the company’s rights in order to recover from the Defendant. Additionally, the court of first instance rejected the independent claim of Anqing Duxiu Rural Commercial Bank Co., Ltd. Shilipu Branch, which argued that it had a priority claim to the insurance indemnity because it had issued loans to the owner of the ship, LV Xiaoyan, using the ship as a guarantee. The court of first instance found no legal basis for this claim. The Defendant-Appellant Ping An Insurance Company Anqing Branch and Anqing Duxiu Rural Commercial Bank appealed the judgment of first instance. The appeal court affirmed the judgment of the court of first instance after addressing the four main issues raised by the Appellants. First, the court concluded that the subrogation lawsuit filed by the Respondent did not violate legal procedure. Second, the court invalidated the provision of the insurance policy appointing Duxiu Rural Commercial Bank as the first beneficiary. Third, the court found that Duxiu Rural Commercial Bank did not have a priority claim on the insurance indemnity based on the ship mortgage agreement. Fourth, the court ruled that the Defendant could not decrease the amount for which it was liable.

Judgment The Appellant (the Defendant of first instance): Ping An Property & Casualty Insurance Company of China Ltd. Anqing Center Branch. Domicile: South Linghu Road No.189, Floor 1 in Dongan Building, Yingjiang District, Anqing City in Anhui Province. Representative: WANG Yuehua, general manager of the company. Agent ad litem: CHENG Shuaishuai, staff of the company. Agent ad litem: ZHOU Rongsheng, lawyer of Anhui Yurun Law Firm. The Appellant (the Third Party of first instance): Anqing Duxiu Rural Commercial Bank Co., Ltd. Shilipu Branch. Domicile: Room 1, Jixian Beiyuan No.5 in the first floor, North Jixian Road, Anqing City in Anhui Province. Representative: FO Jiali, chairman of the bank. Agent ad litem: ZU Tongyin, lawyer of Anhui Changjiangren Law Firm. The Respondent (the Plaintiff of first instance): PICC Property and Casualty Company Limited Xingshan Branch. Domicile: Gaoyang Avenue No.52, Gufu County, Yichang City in Hubei Province. Representative: LI Ying, manager. Agent ad litem: ZHAO Dinghui, director of law department of the company. Agent ad litem: CHEN Liang, lawyer of Hubei Dahan Law Firm.

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The Third Party of first instance: Anqing Fengshun Shipping Co., Ltd. Domicile: Bottom Floor 3, No.12 of the first construction, Daguanting Community, Anqing City in Anhui Province. Legal representative: LV Fengxia, executive director of the company. With respect to the case arising from the dispute over creditor’s subrogation, between the Appellant Ping An Property & Casualty Insurance Company of China Ltd. Anqing Center Branch (hereinafter referred to as “Ping An Insurance Company Anqing Branch”), the Appellant Anqing Duxiu Rural Commercial Bank Co., Ltd. Shilipu Branch (hereinafter referred to as “Duxiu Rural Commercial Bank”) and the Respondent PICC Property and Casualty Company Limited Xingshan Branch (hereinafter referred to as “Xingshan Property Insurance Company”), the Third Party of first instance Anqing Fengshun Shipping Co., Ltd. (hereinafter referred to as “Fengshun Company”), the Appellant refused to accept the (2014) Wu Hai Fa Shang Zi No.00112 Civil Judgment made by Wuhan Maritime Court, and filed an appeal before the court. After accepting the appeal on May 21, 2015, the court constituted a collegiate panel and held a hearing in public on June 18, 2015. Agents ad litem of the Appellant Ping An Insurance Company Anqing Branch, CHENG Shuaishuai and ZHOU Rongsheng, agent ad litem of the Appellant Duxiu Rural Commercial Bank, ZU Tongyin, and agents ad litem of the Respondent Xingshan Property Insurance Company, ZHAO Dinghui and CHEN Liang, appeared in court and attended the hearing. The Third Party of first instance, by legal summon of the court, without justifiable reasons, did not appear in court and attend the hearing, and the court judged the case by default. Now, this case has been concluded. The Respondent Xingshan Property Insurance Company alleged in the first instance: on October 25, 2011, M.V. “Feng Shun 09” carried the insured goods of Xingshan Property Insurance Company and collided with M.V. “Shun Dao” on the way from Xiakou, Hubei to Shanghai, which caused the insured goods to sink with the ship resulting in the loss of 16,855,000 yuan. Consequently, Xingshan Property Insurance Company brought a lawsuit with the Wuhan Maritime Court requesting that the court order the operator of M.V. “Feng Shun 09”, Fengshun Company, and the owners of M.V. “Shun Dao”, Jiangsu Shuntian Shipping Group Nanjing Shundao Shipping Co. Ltd. (hereinafter referred to as “Shundao Company”), to compensate for the aforementioned losses. Wuhan Maritime Court rendered Civil Judgment (2011) Wu Hai Fa Shi Zi No.00082, ordering Fengshun Company to compensate Xingshan Property Insurance Company for 4,012,900 yuan. However, the company refused to comply with the judgment of first instance, so Xingshan Property Insurance Company applied to the court for compulsory enforcement. Fengshun Company had coastal and inland water hull insurance for M.V. “Feng Shun 09” from Ping An Insurance Company Anqing Branch with an insured amount of 2,800,000 yuan. The accident occurred during the insured period and was within the scope of the insurance coverage, so Xingshan Property Insurance Company applied for pre-litigation preservation to freeze the insurance indemnity. With regard to the vessel’s losses caused by this accident, Civil Judgment (2012) Wu Hai Fa Shi Zi No.00046 concluded that the losses totaled 2,333,000 yuan,

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including a ship repair fee of 1,500,000 yuan, a salvage fee of 793,000 yuan, and an assessment fee of 40,000 yuan. Fengshun Company failed to take active measures to claim insurance indemnity from Ping An Insurance Company Anqing Branch who in turn failed to compensate Xingshan Property Insurance Company according to the court notification of the first instance. Fengshun Company was negligent in exercising its insurance claims against Ping An Insurance Company Anqing Branch which directly harmed Xingshan Property Insurance Company’s rights and interests. Therefore, in the first instance, Xingshan Property Insurance Company requested the court to order: 1. Ping An Insurance Company Anqing Branch should compensate for Xingshan Property Insurance Company’s losses of 2,099,700 yuan plus interest; 2. Ping An Insurance Company Anqing Company should bear the costs of litigation, preservation, and other expenses. Duxiu Rural Commercial Bank alleged in the first instance: on December 23, 2010, the owner of M.V. “Feng Shun 09”, LV Xiaoyan, executed a five-year bareboat charter with Fengshun Company. On December 29 of the same year, Fengshun Company, as the insured, purchased coastal and inland water hull insurance for all risks and additional liability insurance from Ping An Insurance Company Anqing Branch. The insurance policy stated: the insured amount of M.V. “Feng Shun 09” was 2,800,000 yuan and the insurance period was from 1200 on January 2, 2011 to 1200 on January 2, 2012. On January 14, 2011, Duxiu Rural Commercial Bank and the owner of M.V. “Feng Shun 09”, LV Xiaoyan, executed Loan Contract and maximum amount mortgage contract, which stipulated that LV Xiaoyan voluntarily provided M.V. “Feng Shun 09” as a guarantee for the loan from January 14, 2011 to January 14, 2014 and that the maximum amount of the secured claim was 2,800,000 yuan. The two parties registered the mortgage of the ship with Anqing Maritime Safety Administration. After signing the mortgage contract, in an effort to ensure the realization of the bank’s claim on the mortgaged ship in the event the ship was lost at sea, Fengshun Company added a special agreement on its previous insurance policy with Ping An Insurance Company Anqing Branch, which said, “the first beneficiary of this policy shall be Anqing Duxiu Rural Commercial Bank Co., Ltd. Shilipu Branch”. Afterwards, Duxiu Rural Commercial Bank granted loans to LV Xiaoyan as agreed. As of September 16, 2014, LV Xiaoyan owed the bank 2,643,000 yuan on the principal loan and 67,547.03 yuan in interest, for a total of 2,710,547.03 yuan. On October 25, 2011, the collision between M.V. “Feng Shun 09” and M.V. “Shun Dao” occurred and the relevant losses of M.V. “Feng Shun 09” were found to be 2,333,000 yuan according to the judgment of Wuhan Maritime Court. According to the legal provisions and insurance contract, Ping An Insurance Company Anqing Branch should pay 2,099,700 yuan of insurance compensation for M.V. “Feng Shun 09”. The Third Party Duxiu Rural Commercial Bank, as the first beneficiary of the insurance policy, had the right to claim and receive priority compensation from the ship’s insurance indemnity. Therefore, Duxiu Rural Commercial Bank participated in the proceedings as a third party with an independent claim and requested the court TO order in the first instance: 1. the Third Party Duxiu Rural Commercial Bank had priority of compensation from the insurance indemnity of the M.V. “Feng Shun 09”

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disputed by Xingshan Property Insurance Company and Ping An Insurance Company Anqing Branch. 2. Ping An Insurance Company Anqing Branch should pay insurance indemnity of 2,099,700 yuan to Duxiu Rural Commercial Bank. 3. Court acceptance fee paid by Duxiu Rural Commercial Bank should be born by Ping An Insurance Company Anqing Branch. The court of first instance found out that: On December 23, 2010, the owner of M.V. “Feng Shun 09”, LV Xiaoyan, leased the bareboat charter to Fengshun Company for a term of five years (from December 23, 2010 to December 22, 2015). Subsequently, Fengshun Company purchased coastal and inland water hull insurance for all risks and additional liability insurance for M.V. “Feng Shun 09” from Ping An Insurance Company Anqing Branch. On December 29, 2012, Ping An Insurance Company Anqing Branch issued the insurance policy No. PCB040002092500001278, which stated that the M.V. “Feng Shun 09” was insured for the period from 1200 on January 2, 2011 to 1200 on January 2, 2012. Specific conditions in the policy stipulated that: for insurance policies with insufficient insurance coverage, compensation would be made proportionally at the time the accident occurred; the absolute amount of indemnity for each accident was 8,000 yuan or 10% of the loss amount, in which the higher one should prevail. On January 14, 2011, the outsider LV Xiaoyan entered into a maximum mortgage contract with Duxiu Rural Commercial Bank, which stipulated that LV Xiaoyan voluntarily provided M.V. “Feng Shun 09” as a guarantee for the loans offered by Duxiu Rural Commercial Bank for the period from January 14, 2011 to January 14, 2014, with the maximum amount of the secured debt being 2,800,000 yuan. At the request of Duxiu Rural Commercial Bank, LV Xiaoyan designated Duxiu Rural Commercial Bank as the first beneficiary of the insurance policy. At the same time, they agreed that although the value of M.V. “Feng Shun 09” was estimated to be 5,800,000 yuan, its final value was based on the actual proceeds from the realization of the mortgage. On January 17 of the same year, Ping An Insurance Company Anqing Branch signed an endorsement, adding that “the first beneficiary of the above policy is Anqing Duxiu Rural Commercial Bank Co., Ltd. Shilipu Branch” to the specific conditions of the previous policy from January 17, 2011. In October of 2011, M.V. “Feng Shun 09” was carrying 2,249 tons of goods that were consigned by Hubei Xingfa Chemicals Group Co., Ltd. (hereinafter referred to as “Xingfa Company”) and insured by Xingshan Property Insurance Company, from Xiakou Harbor in Hubei to Shanghai Harbor, when it collided with M.V. “Shun Dao”, owned by Shundao Company, on the way through the Yangtze River, which caused the sinking of M.V. “Feng Shun 09” and the loss of the goods. After the accident, Xingfa Company applied to the court for pre-litigation property preservation, requesting to freeze the ownership and insurance indemnity of M.V. “Feng Shun 09”, owned by LV Xiaoyan and bareboat chartered by Fengshun Company. On November 29, 2011, the court made Civil Ruling (2011) Wu Hai Fa Bao Zi No.318 granting Xingfa Company’s application of pre-litigation property preservation and sealed and froze the ownership and insurance indemnity of M.V. “Feng Shun 09” according to law.

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Subsequently, Xingfa Company brought a lawsuit for compensation for damages of waterway transportation goods, requesting that the shipowner of M.V. “Shun Dao”, Shundao Company, manager of M.V. “Shun Dao” Jiangsu Shuntian Shipping Group Co., Ltd. (hereinafter referred to as “Shuntian Company”), and bareboat charterer of M.V. “Feng Shun 09”, Fengshun Company, compensate for the loss of goods and other relevant expenses [case number: (2011) Wu Hai Fa Shi Zi No.00082]. During the course of litigation, Xingshan Property Insurance Company requested the court of first instance to allow it to exercise the right of subrogation of Xingfa Company, on the grounds that it had paid the insurance indemnity of 16,051,602.04 yuan for the loss of Xingfa Company’s cargo and other fees and had thus obtained the right of insurance subrogation. On June 24, 2012, the court of first instance ruled that Xingfa Company should withdraw from the lawsuit and Xingshan Property Insurance Company should replace it as the Plaintiff. At the trial, Shundao Company applied for the establishment of a limitation fund for maritime claims for non-casualties caused by the collision of M.V. “Feng Shun 09”. The court of first instance made Civil Ruling (2012) Wu Hai Fa Xian Zi No.1 on April 10, 2012, permitting the establishment of a limitation fund for maritime claims involving non-casualties. Its funding amount was 526,511 yuan converted from SDR and its interest was calculated according to the benchmark loan interest rate of financial institutions carried out by the People’s Bank of China, beginning on October 25, 2011 and ending on the date of establishment of the fund. The court’s ruling took effect on April 26, 2012 and the relevant insurance institutions established the maritime liability limitation fund for Shundao Company in the form of a guarantee. On November 5, 2012, the court made Civil Judgment (2011) Wu Hai Fa Shi Zi No.00082, affirming that the collision accident between M.V. “Shun Dao” and M. V. “Feng Shun 09” had resulted in the loss of 15,996,756.30 yuan worth of goods carried by M.V. “Feng Shun 09”. M.V. “Shun Dao” was primarily responsible for the accident and shall take 75% of the liability for negligence; M.V. “Feng Shun 09” shall assume secondary liability for the accident, assuming 25% of negligence liability. Therefore, Wuhan Maritime Court determined Shundao Company shall compensate Xingshan Property Insurance Company 12,038,701.53 yuan for its loss of cargo and relevant expenses and Fengshun Company shall compensate Xingshan Property Insurance Company 4,012,900.51 yuan, and rejected Xingshan Property Insurance Company’s claims against Shuntian Company and LV Xiaoyan. On July 31, 2012, the shipowner of M.V. “Feng Shun 09”, LV Xiaoyan, brought a lawsuit against Shundao Company and Shuntian Company, for compensation for damages caused by the collision including the ship repair fee, fuel and supplies expenses, the salvage fee, and the interest, totaling 4,429,373.80 yuan. On October 30, 2012, Wuhan Maritime Court rendered Civil Judgment (2012) Wu Hai Fa Shi Zi No.00046 determining that LV Xiaoyan’s losses caused by the accident included a ship repair fee of 1,500,000 yuan, a salvage fee of 793,000 yuan, vessel damage inspection and assessment expenses of 40,000 yuan, and accident handling expenses of 30,000 yuan. The judgment also determined the amount of Fengshun Company’s losses caused by the accident, which included fuel loss of 150,000

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yuan, the loss of supplies and personal articles of the crew of 510,000 yuan, repatriation expenses for the crew members of 30,000 yuan, loss of freight of 150,000 yuan, and detention loss of 400,000 yuan. The judgment held that: during the period of bareboat charter, the lessee had the right to possess, use, and operate the bareboat chartered ship, but the ownership of the ship remained with the lessor. LV Xiaoyan leased M.V. “Feng Shun 09” to Fengshun Company, but LV Xiaoyan retained ownership of and relevant rights to the ship. Therefore, LV Xiaoyan could legally exercise a compensation claim for the losses caused by the collision during the bareboat charter period of M.V. “Feng Shun 09”, including the ship repair fee, the salvage fee, the accident handling fee, and the vessel damage inspection and assessment fee against Shundao Company in accordance with the negligence liability proportion of 75%. The losses of M.V. “Feng Shun 09”, including the loss of fuel, supplies and materials, personal items of the crew, repatriation of the crew, detention, freight, and other losses shall be the creditor’s rights of the bareboat charterer, Fengshun Company. Fengshun Company announced after the collision that it would transfer its creditor’s rights to LV Xiaoyan. However, after the trial, LV Xiaoyan gave up Fengshun Company’s assignment of its creditor’s rights related to the case, which was permitted by the court. Therefore, Wuhan Maritime Court decided that Shundao Company should compensate for LV Xiaoyan’s ship repair fee of 1,125,000 yuan and its interest, the salvage fee of 594,750 yuan and its interest, vessel damage inspection and assessment expenses of 30,000 yuan and its interest, and the accident handling fee of 22,500 yuan and its interest, totaling 1,772,250 yuan with interest. Meanwhile, the court of first instance rejected LV Xiaoyan’s claim against Shuntian Company along with its other claims. After the judgment went into effect, LV Xiaoyan applied to the court to be paid the above indemnity and requested to be compensated in the procedure distributing the limitation fund for maritime claims established by Shundao Company. On December 14, 2012, the Wuhan Maritime Court made Civil Ruling (2012) Wu Hai Fa Shou Zi No.00001, determining that LV Xiaoyan could receive 714,562.20 yuan from the fund. After LV Xiaoyan was actually paid, the repair of the M.V. “Feng Shun 09” was completed and the ship was put into operation again. It was also found out that, Xingshan Property Insurance Company had applied to Wuhan Maritime Court for enforcement against Fengshun Company after Civil Judgment (2011) Wu Hai Fa Shi Zi No.00082 came into effect. In the process of implementing enforcement, because Fengshun Company had no actual executable property, the court rendered Civil Ruling (2013) Wu Hai Fa Shi Zi No.00267 on December 15, 2014, terminating the enforcement procedure according to the law. After the collision accident between M.V. “Feng Shun 09” and M.V. “Shun Dao”, Fengshun Company filed a claim with Ping An Insurance Company Anqing Branch for compensation, but the parties failed to reach an insurance indemnity agreement. During the trial of this case, Ping An Insurance Company Anqing Branch had no objection to the Wuhan Maritime Court’s effective judgment determining that the repair fee of M.V. “Feng Shun 09” was 1,500,000 yuan, the salvage fee was 793,000 yuan, and the assessment fee for vessel damage inspection was 40,000 yuan, for a total of 2,333,000 yuan.

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It was also found that after signing the maximum mortgage contract, Duxiu Rural Commercial Bank and LV Xiaoyan signed three personal loan contracts on January 17, 2011, January 12, 2012, and April 24, 2012, respectively, under which Duxiu Rural Commercial Bank successively granted LV Xiaoyan loans of 2,800,000 yuan, 1,300,000 yuan, and 1,500,000 yuan which were subsequently paid off on time by LV Xiaoyan. Duxiu Rural Commercial Bank went on to sign two additional personal loan contracts with LV Xiaoyan on December 14, 2012 and April, 24 2013, for 1,300,000 yuan and 1,500,000 yuan with an average term of 12 months, from December 14, 2012 to December 14, 2013, and from April 24, 2013 to October 24, 2013, respectively; the repayment method was scheduled interest payments and the repayment of the principal loan amount upon maturity; the loan guarantee was in the form of a mortgage. After signing the contracts, Duxiu Rural Commercial Bank successively granted LV Xiaoyan loans of 2,800,000 yuan and 1,300,000 yuan as agreed, but LV Xiaoyan had yet to pay off the principal amounts of 1,300,000 yuan and 1,343,000 yuan on the two loan contracts. The court of first instance held that: this case was a dispute over the creditor’s right of subrogation. Xingshan Property Insurance Company was the creditor, Fengshun Company was the debtor, Ping An Insurance Company Anqing Branch was the subordinate debtor, and Duxiu Rural Commercial Bank was the mortgagee of M.V. “Feng Shun 09”. The rights and obligations of all the parties involved fell within the scope of the Contract Law of the People’s Republic of China and the Insurance Law of the People’s Republic of China, therefore these shall be the substantive laws applicable to the settlement of the disputes in this case. In this case, the creditor-debtor relationship between Xingshan Property Insurance Company and Fengshun Company was determined by the Civil Ruling (2011) Wu Hai Fa Shi Zi No.00082 made by Wuhan Maritime Court, and Xingshan Property Insurance Company had a matured claim of 4,012,900.51 yuan against Fengshun Company. Although Xingshan Property Insurance Company filed an application for legal enforcement due to Fengshun Company’s failure to voluntarily satisfy its debts, Fengshun Company had no property to be executed in fact and thus Xingshan Property Insurance Company’s creditor’s rights could not be realized. Therefore, because Fengshun Company was indolent in exercising its creditor’s rights which caused damage to Xingshan Property Insurance Company, Xingshan Property Insurance Company shall have the right to exercise subrogation of Fengshun Company in its own name and said right shall be limited to the amount of Fengshun Company’s debt to Xingshan Property Insurance Company. Ping An Insurance Company Anqing Branch and Duxiu Rural Commercial Bank argued that Xingshan Property Insurance Company had no right to exercise subrogation after it filed an application for legal enforcement, but this argument had no legal basis and the court of first instance did not adopt it. According to the facts found out at the trial of the first instance, the ship insurance contract between Fengshun Company and Ping An Property Insurance Anqing Branch was legal and valid, and both parties should abide by the contract. The collision accident between M.V. “Feng Shun 09” and other vessels fell within the category of coastal inland water ship accidents as stipulated in the insurance

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contract, so the ship repair fee, salvage fee, and inspection and assessment fee of the ship arising from the accident were within the scope of compensation under this insurance clause, and Ping An Insurance Company Anqing Branch should compensate Fengshun Company for the above losses suffered by M.V. “Feng Shun 09”. Therefore, Fengshun Company had the creditor’s right of the insurance indemnity from Ping An Insurance Company Anqing Branch, including the ship repair fee of 1,500,000 yuan, the salvage fee of 793,000 yuan, and the assessment fee of 40,000 yuan, for a total of 2,333,000 yuan. But after the insured accident happened, Fengshun Company neither paid off its debts to Xingshan Property Insurance Company, nor did the company claim any insurance compensation against its debtor, Ping An Insurance Company Anqing Branch, by way of litigation or arbitration, in the event that it could not reach an agreement on insurance indemnity, which caused the failure of Xingshan Property Insurance Company to realize the debts it was due. At this time, the subrogation right of Xingshan Property Insurance Company was established and the company had the right to exercise creditor’s rights of Fengshun Company against Ping An Insurance Company Anqing Branch in its own name, and Ping An Insurance Company Anqing Branch should pay the insurance indemnity for M.V. “Feng Shun 09” that should have been paid to Fengshun Company. Although the total amount of 2,333,000 yuan for the ship repair fee, the salvage fee, and the assessment fee of M.V. “Feng Shun 09” fell within the scope of insurance coverage, LV Xiaoyan had been compensated for the above loss in the amount of 714,562.20 yuan from the limitation fund for maritime claims established by Shundao Company in accordance with the judgment of first instance, therefore Ping An Insurance Company Anqing Branch did not need to make any repeated compensation according to the compensation principle of the Insurance Law. As agreed upon in the insurance contract involved, the absolute amount of indemnity for each accident was 8,000 yuan or 10% of the loss amount, in which the higher one should prevail. Accordingly, the amount of indemnity for this accident was 161,843.78 yuan [(2,333,000–714,562.20 yuan)*10%]. Therefore, Ping An Insurance Company Anqing Branch should pay Fengshun Company the insurance indemnity of 1,456,594.02 yuan (2,333,000 - 714,562.20 - 161,843.78 yuan) for the insured accident. Based on the establishment of the subrogation right of Xingshan Property Insurance Company, its claim against Ping An Insurance Company Anqing Branch for the insurance indemnity of 1,456,594 yuan for M.V. “Feng Shun 09” was lawful and well-founded and was supported by the court of first instance; but other claims had no factual or legal basis and were not protected by the court of first instance. Regarding to the issue of whether Ping An Insurance Company Anqing Branch only needed to bear 25% of the liability for compensation. Ping An Insurance Company Anqing Branch asserted that the court of first instance determined in an effective judgment that Shundao Company should assume 75% of the liability for negligence and Fengshun Company should assume 25% of the liability for negligence for the collision in this case. Therefore, as the insurer of Fengshun Company, Ping An Insurance Company Anqing Branch only needed to assume liability for

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25% of the compensation amount of 2,333,000 yuan which included the ship repair fee, the salvage fee, and the assessment fee for M.V. “Feng Shun 09”. The court of first instance concluded that Ping An Insurance Company Anqing Branch’s compensation liability for the M.V. “Feng Shun 09” insured accident arose from the insurance contract between itself and Fengshun Company. The collision accident of M.V. “Feng Shun 09” fell within the scope of insurance coverage as agreed upon by both parties, so Ping An Insurance Company Anqing Branch should compensate Fengshun Company for the losses that fell within the scope of insurance coverage according to the contract. The court’s separate judgment on the division of negligence liability between Shundao Company and Fengshun Company for the collision accident was for the purpose of determining the proper proportion of tort liability each of the parties should bear in the dispute over compensation for ship collision damage. However it cannot be used to limit the scope of Ping An Insurance Company Anqing Branch’s insurance liability to Fengshun Company under the insurance contract, nor can Ping An Insurance Company Anqing Branch’s liability for compensation be reduced. Ping An Insurance Company Anqing Branch’s defense that it should only bear 25% of the compensation liability for M.V. “Feng Shun 09” according to the judgment in another case had no legal basis and the court of first instance did not accept it. Regarding to the issue of whether M.V. “Feng Shun 09” was fully insured. Although the maximum mortgage contract related to the case stated that M.V. “Feng Shun 09” had an estimated value of 5,800,000 yuan, this was only an agreement between LV Xiaoyan and Duxiu Rural Commercial Bank and could not be used as a legal basis for determining the value of the ship without a formal evaluation assessment. Therefore, Ping An Insurance Company Anqing Branch’s argument that M.V. “Feng Shun 09” was under-insured had no legal basis and was not accepted by the court of first instance. Regarding to the issue of whether Duxiu Rural Commercial Bank had a priority right to receive the insurance indemnity of M.V. “Feng Shun 09”. Duxiu Rural Commercial Bank believed that in accordance with Article 174 of the Property Law of the People’s Republic of China (hereinafter referred to as “the Property Law”), “during the warranty period, if the property under warranty is damaged, lost, or levied, the security interest holder may enjoy priority in receiving the insurance money, compensation, or indemnity. If the term of performance of the secured creditor’s right has not expired, such insurance money, compensation, or indemnity may be placed in escrow”; in this case, the relevant losses of M.V. “Feng Shun 09” belonged in the scope of compensation for the partial damage of secured property. As the mortgagee and first beneficiary of M.V. “Feng Shun 09”, Duxiu Rural Commercial Bank had a priority claim to receive insurance indemnity. The court of first instance concluded that the mortgage right as a security right had the characteristics of subrogation, namely when the entity of the security was damaged, lost, or levied (namely the physical form of the security changed), the security right would still exist if there were a substitute of equal value for the security (like insurance money, compensation, or indemnity). According to the legislative spirit and theory of real rights for security, the damage of the security did not refer to the

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partial damage of the security, but rather to the serious damage of the security which resulted in the loss of its use value. In this case, the damage of M.V. “Feng Shun 09” was only partial damage, the ship was put into operation after being repaired, and its physical form did not change nor lose its use value. It was not a damage within the meaning of Article 174 of the Property Law. Therefore, Duxiu Rural Commercial Bank did not have a priority claim to receive insurance indemnity for the accident. As for the first beneficiary clause added to the insurance policy and endorsement of M.V. “Feng Shun 09”, it was just an agreement made by the parties, which did not meet legal requirements and could not serve as the basis of Duxiu Rural Commercial Bank’s priority right to compensation. Therefore, Duxiu Rural Commercial Bank’s claim that it had a priority right to receive the insurance indemnity for M.V. “Feng Shun 09” had no factual or legal basis and was not accepted by the court of first instance. In summary, in accordance with Article 73 of the Contract Law of the People’s Republic of China, Article 16 Paragraph 3 of the Insurance Law of the People’s Republic of China, and Article 142 of the Civil Procedure Law of the People’s Republic of China, the judgment of first instance was rendered as follows: 1. Ping An Insurance Company Anqing Branch should compensate Xingshan Property Insurance Company for the insurance indemnity of 1,456,594.02 yuan plus interest (according to the loan interest rate stipulated by the People’s Bank of China for the corresponding period from the date when the judgment came into effect to the date of actual payment), which should be paid in full within 10 days after the judgment became effective. 2. Reject the other claims of Xingshan Property Insurance Company. 3. Reject the claims of Duxiu Rural Commercial Bank. Court acceptance fee in amount of 23,598 yuan paid in advance by Xingshan Property Insurance Company, Xingshan Property Insurance Company should bear 7,315 yuan, Ping An Insurance Company Anqing Branch should bear 16,283 yuan. The Third Party Anqing Duxiu Rural Commercial Bank Co., Ltd. Shilipu Branch should bear by itself the litigation fees of 23,598 yuan which were prepaid by it. If Ping An Insurance Company Anqing Branch failed to perform the obligations of the monetary payment within the specified period, it should pay double interest on the debt for the period of delayed performance in accordance with the provisions of Article 253 of the Civil Procedure Law of the People’s Republic of China. The Appellant Ping An Insurance Company Anqing Branch appealed: First, the judgment of first instance affirming that Xingshan Property Insurance Company could exercise the right of subrogation was an incorrect finding of fact and had no legal basis. (1) It was a mistake in the judgment of first instance to ascertain that Fengshun Company had no property to execute. After the accident occurred, the ship involved, M.V. “Feng Shun 09”, was seized and available for execution. In accordance with Article 23 of the Special Maritime Procedure Law, the ship in question may be seized. Fengshun Company was the bareboat charterer, and the ship leased by the bareboat charterer can be seized and auctioned. (2) The judgment of first instance finding that “Fengshun Company had no property to be executed” was against the provisions of the procedure law and had no legal basis. Whether there is any property available for execution should be resolved in the enforcement

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procedure; because it was a judicial proceeding, the judgment of first instance had no legal basis. (3) The Appellant believes that the provision of Article 15 of the Interpretation of the Supreme People’s Court on Several Issues concerning the Application of the Contract Law of the People’s Republic of China (I) only applied to the litigation stage, and since the creditor’s right of Xingshan Property Insurance Company had already been executed, bringing a suit of subrogation would result in two judgments and two executions of the same creditor’s rights. This would lead to the confusion of legal relations and undermine the solemnity of the law. Second, the insurance policy involved designating Duxiu Rural Commercial Bank as the first beneficiary of the policy was agreed upon by the parties, which is in accordance with Article 26 of the Insurance Law and does not violate the prohibitive provisions of the law. Thus, the policy should be protected. The judgment of first instance made incorrect findings of fact and failed to specify the applicable law, which violated the provision of the law. Third, the judgment of first instance did not determine that the ship involved in the case was under-insured, which was incorrect. According to the mortgage contract signed by LV Xiaoyan, the estimated value of M.V. “Feng Shun 09” was 5,800,000 yuan, and the insured amount was 2,800,000 yuan, so it was under-insured. The judgment of first instance determined that the 5,800,000 yuan valuation was improperly agreed upon by both parties, and the value was derived from an evaluation assessment that was only 9 months and 10 days before the accident happened. During the trial, the court of first instance should clarify whether a judicial appraisal of the ship’s value at the time of the accident is required. However, the court of first instance did not make any clarification and then rendered a judgment, which infringed upon the substantive rights of the parties concerned, violated the substantive justice of the case, and led to erroneous findings of fact. Fourth, the judgment of first instance determining that the Appellant shall pay for the insurance indemnity violated the law. After LV Xiaoyan accepted the creditor’s rights against a third party transferred by Fengshun Company, she announced the abandonment of all transferred rights. In accordance with Paragraph 1 of Article 61 of the Insurance Law, LV Xiaoyan abandoned claims against a third party cannot be exercised in subrogation, and the insurer has the right not to bear the insurance liability. Fifth, the Appellant claims that Fengshun Company’s liability in the accident is 25% and the Appellant can only bear the corresponding insurance compensation liability according to the accident liability ratio. The specific calculation method is 2,333,000 yuan * 280 / 580 * 25% (proportional liability) * 90% (deductible rate) = 253,433.79 yuan. In summary, the judgment of first instance incorrectly ascertained the facts, and was against the provisions of the law. The Appellant requested the court of second instance to revoke the judgment of first instance, reject the claims of the Respondent, remand the case for retrial, and that the litigation costs of the first and second instances shall be born by the Respondent. Xingshan Property Insurance Company argued in the trial against the appeal of Ping An Insurance Company Anqing Branch: first, Fengshun Company had no property to be executed for enforcement, and there was a factual basis for this assertion. (1) In the execution process of the case brought by Xingshan Property

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Insurance Company against Ping An Insurance Company Anqing Branch, Wuhan Maritime Court failed to achieve any result after a year, and it informed Xingshan Property Insurance Company that the amount of the insurance indemnity could only be executed through a subrogation lawsuit. (2) As for M.V. “Feng Shun 09”, although it was seized, it was owned by the outsider LV Xiaoyan and bareboat chartered to Fengshun Company. After Xingshan Property Insurance Company applied for the sale of M.V. “Feng Shun 09”, the court clearly stated that debtor Fengshun Company could not provide the ship as executable property because it was owned by LV Xiaoyan, and Duxiu Rural Commercial Bank had a priority right to the claim after it was sold as mortgaged property; thus it would be impossible to use the ship as executable property under these circumstances. Fengshun Company failed to satisfy the judgment of the court for three years due to the fact that it did not have property to be executed. (3) For the above reasons, Ping An Insurance Company Anqing Branch concluded that this case involved two lawsuits that were not tenable. If our company could have obtained compensation through summary procedure, we would not have needed to bring this complicated subrogation lawsuit. Under the circumstances in which the court’s compulsory execution failed, our company brought a subrogation lawsuit in accordance with the law. Second, the insurance policy related to this case, issued by Ping An Insurance Company Anqing Branch, contained an agreement regarding the first beneficiary that had no legal basis and damaged the interests of a third party, and should therefore be invalidated. (1) The “beneficiary” is only a legal subject in personal insurance and cannot be applied to property insurance. There is no legal basis for the establishment of a first beneficiary in property insurance, and the policy records have no legal effectiveness. (2) Agreements on beneficiaries in property insurance are indeed very common in practice, but as an insurance company, we believe that it is necessary to explain: first, it should not be considered legitimate solely on the basis of its existence, and should not be grounds for defense, especially in the context of litigation. Second, one cannot hide the fact that the beneficiary agreement was a means that the bank and the insurance company used to conspire with each other for profit, and was an unreasonable demand which took advantage of the weak position of the insurer and the insured without a consensus among all parties, which should not be supported. Third, Ping An Insurance Company Anqing Branch’s claim that the ship was under-insured had no legal basis and the company had no right to apply for re-identification in the second instance. The compensation amount calculated by the court of first instance according to the insurance policy was correct. (1) Ping An Insurance Company Anqing Branch’s belief that the ship’s value was 5,800,000 yuan had no legal basis. Although the ship’s mortgage contract recorded that the estimated value of M.V. “Feng Shun 09” was 5,800,000 yuan, no evaluation report was provided. This case was a dispute over an insurance contract, and unless Ping An Insurance Company Anqing Branch can prove otherwise, the insurance contract can only be determined to be full coverage. Fourth, Ping An Insurance Company Anqing Branch’s claim that Fengshun Company waived its right of recourse against a third party, causing it to be unable to exercise the right of subrogation and therefore unable to recover insurance compensation, was a distortion of the facts and law of the case and thus had no legal or factual basis. After Fengshun

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Company transferred all of its external creditor’s rights to LV Xiaoyan, LV Xiaoyan abandoned the creditor’s rights of Fengshun Company, the bareboat charterer, but she did not abandon the claim for compensation for the ship’s repair fee, salvage fee, and assessment fee. Now Xingshan Property Insurance Company claims the aforesaid expenses against Ping An Insurance Company Anqing Branch, which does not damage the right of subrogation of Ping An Insurance Company Anqing Branch. Fifth, as for the issue of the proportion of insurance compensation, Ping An Insurance Company Anqing Branch believed that it only had 25% of the compensation liability for the accident, which obviously had no legal basis. The appeal should be dismissed and the original judgment should be affirmed. The opinion of Duxiu Rural Commercial Bank on Ping An Insurance Company Anqing Branch’s appeal request is: Ping An Insurance Company Anqing Branch should treat the bank as the first beneficiary as agreed upon. M.V. “Feng Shun 09” was not under-insured, and the creditor’s rights that LV Xiaoyan abandoned was not within the scope of compensation involved. The Appellant Duxiu Rural Commercial Bank appealed: first, the agreement between Duxiu Rural Commercial Bank, Ping An Insurance Company Anqing Branch, and Fengshun Company about the first beneficiary of the insurance policy of M.V. “Feng Shun 09” was in full compliance with the spirit of freedom of contract and the principal of autonomy of will, and did not violate the mandatory provisions of law, and the agreement should be valid. Second, the mortgage contract of the ship relevant to this case was lawful and valid. The Appellant, Duxiu Rural Commercial Bank, as the mortgagee, had the right of priority of compensation to receive the ship’s insurance indemnity, which fully complied with Article 174 of the Property Law. The court of first instance determined that the ship related to the case was only partially damaged and its physical form did not change, and therefore it was not “damaged” according to the law. This was obviously a misinterpretation of the law. (1) Under Article 174 of the Property Law, “during the warranty period, if the property under warranty is damaged, lost, or levied, the security interest holder may enjoy priority in receiving the insurance money, compensation, or indemnity. If the term of performance of the secured creditor’s right has not expired, such insurance money, compensation, or indemnity may be placed in escrow”, according to this provision, the relevant losses of M.V. “Feng Shun 09” were partially damaged property under warranty and were within the scope of compensation coverage. The insurance indemnity arising therefrom was within the scope of security for the mortgage, so Duxiu Rural Commercial Bank had the right of priority of compensation to receive the relevant insurance indemnity. (2) The court of first instance had no power to interpret the provisions of the Property Law. (3) The specific meaning of Article 174 of the Property Law is clear and there is no need for interpretation. (4) In the first instance, the court’s limited interpretation of “damage” under Article 174 of the Property Law did not conform with the legislative spirit and theory of security interest. Third, the violation of legal procedure in the first instance was enough to affect the impartial handling of the case. The Respondent Xingshan Property Insurance Company brought a lawsuit for creditor’s rights related to the case and applied to the court of first instance for

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enforcement, and the court ruled to freeze the insurance indemnity of M.V. “Feng Shun 09”. While that case was still in the execution stage, the Respondent brought the lawsuit in this case, which violated the principal that “one case cannot be tried again”. Therefore, the Respondent’s litigation procedures were not in accordance with the law and its lawsuit should be rejected. In summary, the requests were: (1) to revoke the first and third items of the judgment of first instance; (2) to confirm that Duxiu Rural Commercial Bank had the right to claim compensation and priority to receive the insurance indemnity of M.V. “Feng Shun 09”; (3) to order Ping An Insurance Company Anqing Branch to pay Duxiu Rural Commercial Bank the insurance indemnity of 1,456,594.02 yuan; (4) all the litigation costs for this case should be born by the Respondent. With respect to the appeal of Duxiu Rural Commercial Bank, Xingshan Property Insurance Company alleged in court: first, the agreement of a first beneficiary in property insurance had no legal basis and damaged the interests of the third parties and should be invalid. This act was committed by the loan bank, the insured, and the insurer in collusion to damage the interests of others and should not be supported. Second, Duxiu Rural Commercial Bank’s claim of the insurance indemnity in this case could not be supported because it violated the compulsory regulations regarding the right of realization of a mortgage in the Property Law. The dispute over the understanding of “damage” initiated by Duxiu Rural Commercial Bank had no material impact on the case. The understanding of “damage” in the judgment of first instance conformed with the original meaning of the law and the legal theory behind the right of subrogation as well as the essence of the ship mortgage. Thus, the literal interpretation of Duxiu Rural Commercial Bank cannot be supported. Duxiu Rural Commercial Bank has no right to claim the so-called subrogation in respect to the insurance compensation in this case under the circumstances in which the mortgage is still intact and the collateral is in sound condition. Its claim violates the legal provisions on the right of realization of a mortgage and should be rejected. Third, there is no legal basis for Duxiu Rural Commercial Bank’s argument that the violation of legal procedure in the first instance was enough to affect the impartial handling of the case. Duxiu Rural Commercial Bank believes that since Xingshan Property Insurance Company applied for enforcement, it shall not file a subrogation lawsuit, otherwise it would be in violation of the principle that “one case cannot be tried again”. Therefore, Duxiu Rural Commercial Bank concluded that the procedures of the court of first instance were not in accordance with the law. According to Article 73 of the Contract Law of the People’s Republic of China, “where any damage is caused to the creditor due to the debtor’s failure to exercise its due creditor’s right, the creditor may petition the people’s court to exercise the creditor’s right in its own name, except that the creditor’s right belongs to the debtor itself”, it is an indisputable fact that the debtor of this case, Fengshun Company, failed to pay its debts and, after more than one year of enforcement, failed to provide any executable property. The court of first instance’s ruling on the termination of enforcement was not the basis for deciding the case, and did not need to be cross-examined, nor did it violate the law. Fourth, the appeal of Duxiu Rural Commercial Bank is not tenable for the following reasons: (1) when the insured

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accident occurred, the creditor’s right claimed by Duxiu Rural Commercial Bank did not exist, so the insurance indemnity was not the guarantee of the secured property, and therefore there was no so-called priority. (2) Before Duxiu Rural Commercial Bank issued the loans creating its alleged creditor’s right, the insurance indemnity had been frozen by the court and could not be mortgaged according to law nor could it be regarded as the guarantee of a loan; therefore, Duxiu Rural Commercial Bank’s claim of priority of compensation cannot not be established. According to the relevant provisions of the Guaranty Law of the People’s Republic of China, no property legally seized can be mortgaged. (3) The mortgaged M.V. “Feng Shun 09” was still in normal operation and still functioned as Duxiu Rural Commercial Bank’s collateral, and Duxiu Rural Commercial Bank had the right of priority of compensation without legal obstacles. However, on the condition that Duxiu Rural Commercial Bank did not abandon the mortgage on the ship, it had no right to claim so-called priority of compensation for the insurance indemnity of the repair expenses involved in the case. The judgment of first instance rejected the claims of Duxiu Rural Commercial Bank, which did not at all damage the bank’s rights or interests. In conclusion, the Respondent requested the court to dismiss the appeal of Duxiu Rural Commercial Bank and affirm the original judgment. The opinion of Ping An Insurance Company Anqing Branch on the appeal of Duxiu Rural Commercial Bank is as follows: Ping An Insurance Company Anqing Branch should compensate for the accident in accordance with the 25% liability proportion and its other opinions were consistent with the opinions of the appeal petition. None of the parties submitted any new evidence to the court in the second instance. The court finds that the findings of fact made by the court of first instance were correct and the court confirms them. According to the appeal claims of the two Appellants and the opinions of the Respondent, the issues of the case in the second instance are: first, whether the subrogation lawsuit filed by Xingshan Property Insurance Company violated legal procedure; second, whether the provision of the insurance policy involved appointing Duxiu Rural Commercial Bank as the first beneficiary was lawful and valid; third, whether Duxiu Rural Commercial Bank had the right of priority of compensation to receive the insurance indemnity according to the ship’s mortgage agreement; fourth, the specific amount of the insurance indemnity that Ping An Insurance Company Anqing Branch should pay. With regard to the issues disputed by the parties, the court conducted a careful analysis and determined as follows: First, regarding to the issue of whether it violated legal procedure for Xingshan Property Insurance Company to file a subrogation lawsuit. The court holds that: although Xingshan Property Insurance Company had filed a lawsuit against Fengshun Company for creditor’s rights related to the case and had applied to Wuhan Maritime Court for compulsory execution, the court had attempted enforcement for more than a year but did not gain the property of Fengshun Company. Therefore, the court issued a final ruling terminating the enforcement, which clearly stated that Fengshun Company had no property to be executed. Therefore, Xingshan Property Insurance

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Company’s claim that Fengshun Company had no property to be executed has a factual and legal basis. After the occurrence of the insured accident in this case, Fengshun Company could have claimed insurance compensation from Ping An Insurance Company Anqing Branch based on the insurance contract. According to Article 73 of the Contract Law of the People’s Republic of China, “where any damage is caused to the creditor due to the debtor’s failure to exercise its due creditor’s right, the creditor may petition the people’s court to exercise the creditor’s right in its own name, except that the creditor’s right belongs to the debtor itself”. Article 13 of the Interpretation of the Supreme People’s Court on Several Issues concerning the Application of the Contract Law of the People’s Republic of China (I), stipulates that “the provision of Article 73 of the Contract Law stating that ‘where any damage is caused to the creditor due to the debtor’s failure to exercise its due creditor’s right’ means that the debtor fails to satisfy its debts to the creditor and also fails to exercise its due claim by means of litigation or arbitration, resulting in the inability of the creditor to realize its due claims. If the subordinate debtor (namely the debtor’s debtor) does not believe that the debtor is failing to exercise its due claims, it shall bear the burden of proof”. Fengshun Company had a due claim against Ping An Insurance Company Anqing Branch but failed to exercise its creditor’s rights. Before Xingshan Property Insurance Company brought a lawsuit with the court of first instance, its creditor’s rights could not be exercised and its claims against Fengshun Company could not be fulfilled. Fengshun Company’s failure to exercise its claim caused damage to Xingshan Property Insurance Company. The subrogation lawsuit filed by Xingshan Property Insurance Company complies with the aforementioned legal provisions. Xingshan Property Insurance Company sued Fengshun Company to exercise the right of subrogation, based on the legal relationship of the cargo insurance contract and the transportation contract between Xingfa Company and Fengshun Company; Xingshan Property Insurance Company brought suit against Ping An Insurance Company Anqing Branch to exercise subrogation under the Contract Law of the People’s Republic of China, based on the legal relationship of the right of subrogation and the ship insurance contract between Fengshun Company and Ping An Insurance Company Anqing Branch. The two cases were not entirely involving the same matter. After Xingshan Property Insurance Company brought this case, technically two civil judgments were rendered regarding the creditor’s rights of Xingshan Property Insurance Company. However, in Civil Judgment (2011) Wu Hai Fa Shi Zi No.00082, which resulted from the lawsuit brought by Xingshan Property Insurance Company against Fengshun Company, the court terminated the enforcement because Fengshun Company had no property to be executed; at present, this judgment only serves to confirm the creditor’s rights of Xingshan Property Insurance Company and Fengshun Company. Therefore, Xingshan Property Insurance Company had to file the lawsuit in this case. The court of enforcement for both of these two civil judgments was the court of first instance, Wuhan Maritime Court, and the relevant enforcement agency of the court could not simultaneously enforce the two judgments. Therefore, the claims of the Appellants Ping An Insurance Company Anqing Branch and Duxiu Rural Commercial Bank regarding the enforcement of the two judgments as grounds for appeal are unfounded. In conclusion, the argument of

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the two Appellants that the subrogation suit brought by Xingshan Property Insurance Company did not conform to the principle that “one case cannot be treated again” and therefore violated procedural law shall not be established. Second, regarding to the issue of whether the provision of the insurance policy involved appointing Duxiu Rural Commercial Bank as the first beneficiary was lawful and valid. The court holds that: although Ping An Insurance Company Anqing Branch signed an approval note for the insurance policy on January 17, 2011, which stated that the first beneficiary of the policy was Duxiu Rural Commercial Bank, whether Duxiu Rural Commercial Bank may enjoy the right of priority of compensation on the basis of the agreement depends on the following factors: (1) the first factor is whether the agreed beneficiary has legal rights in property insurance. Under Paragraph 3 of Article 18 of the Insurance Law, “a beneficiary is a person designated by the insured or insurance applicant in a personal insurance contract who has the right to claim the insurance indemnity. The insurant or the insured may be beneficiaries”. The term “beneficiary” as it is used in the preceding law means the beneficiary in a personal insurance contract. The Appellant Ping An Insurance Company Anqing Branch asserted that, according to Article 26 of the Insurance Law, “the statute of limitations for the insured or for beneficiaries of insurance other than life insurance to claim compensation or insurance indemnity from the insurer shall be two years”. Therefore, the company argues, it may be determined that there can be beneficiaries of other insurance contracts besides life insurance. However, Ping An Insurance Company Anqing Branch did not have an accurate understanding of this law. The content of this Article clearly states that there can be a beneficiary of an insurance contract other than a life insurance contract. Because personal insurance includes not only life insurance, but also personal accident insurance, health insurance, etc., life insurance is only one type of personal insurance. Therefore, the existence of a beneficiary outside of life insurance is not inconsistent with the provisions of Article 18 Paragraph 3 of the law. “Beneficiary” under Article 26 of the Insurance Law still refers to the beneficiary of personal insurance. Therefore, Duxiu Rural Commercial Bank did not have legal rights as the first beneficiary because the appointment of a beneficiary in a property insurance contract is not valid according to law. (2) The next factor is whether the establishment of the first beneficiary of the property insurance contract as agreed upon by the parties should be protected. Both of the Appellants asserted that the agreement of the parties on the first beneficiary of the insurance policy did not violate the law, conformed with the spirit of freedom of contract, and should be protected by law. Therefore, as the first beneficiary of the policy, Duxiu Rural Commercial Bank had the right of priority of compensation to receive the insurance indemnity. The court holds that: although the Insurance Law does not explicitly prohibit the parties in a property insurance contract from establishing the first beneficiary of the policy, and even though the parties in this case agreed on the appointment of the first beneficiary, Duxiu Rural Commercial Bank did not have the right of priority of compensation to receive the insurance indemnity based on the following points. First, as discussed above, the first beneficiary of a property insurance contract does not have legal rights. Second, because

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the right was created by an agreement, its effectiveness is constrained by the law. In accordance with the relevant provisions of the Contract Law of the People’s Republic of China, whether rights agreed upon by the parties are effective and protected by law depends on a number of considerations, which shall at least include: first, the agreement is only binding on the parties to the contract, and not on the parties outside the contract; second, the rights agreed upon shall be in conformity with the law, shall not violate the prohibitive provisions of the law, and shall not damage the rights of others. In this case, the insured, Fengshun Company, the lender of the ship’s mortgage, Duxiu Rural Commercial Bank, and the insurer, Ping An Insurance Company Anqing Branch, formed an agreement appointing Duxiu Rural Commercial Bank as the first beneficiary of the insurance policy, which was only binding on these three parties since they participated in negotiations. Xingshan Property Insurance Company did not participate in the negotiations concerning this agreement and the company is not bound to it. Therefore, Duxiu Rural Commercial Bank could not enforce this agreement against Xingshan Property Insurance Company. In addition, the three parties mentioned above negotiated and agreed on the appointment of Duxiu Rural Commercial Bank as the first beneficiary, with the intention of excluding other legal rights that may exist for unspecified parties who had valid claims to receive the insurance indemnity. Because the agreement damages the interests of unspecified parties, it shall be invalid against such parties. The cargo of Xingfa Company was damaged in the insured accident related to the case. Fengshun Company bore the liability for compensation but was unable to satisfy the debt. To mitigate risk, Fengshun Company purchased vessel insurance and additional liability insurance from Ping An Insurance Company Anqing Branch, and Ping An Insurance Company Anqing Branch shall assume the insurance compensation liability. After Xingshan Property Insurance Company paid the insurance indemnity for the cargo, it had a legitimate legal claim to the insurance indemnity for the ship. Fengshun Company and Ping An Insurance Company Anqing Branch agreed that Duxiu Rural Commercial Bank was the first beneficiary of the policy, which damaged the legal rights of Xingshan Property Insurance Company and violated the law, so the agreement was not enforceable against Xingshan Property Insurance Company. Although the Appellants alleged that Duxiu Rural Commercial Bank had the right of priority of compensation to receive the insurance indemnity based on the fact that it was designated as the first beneficiary of the policy, there was no legal basis for this assertion and the court shall not support it. Third, regarding to the issue of whether Duxiu Rural Commercial Bank had the right of priority of compensation to receive the insurance indemnity based on the ship mortgage agreement. On appeal, Duxiu Rural Commercial Bank alleged that it had signed a maximum mortgage contract with LV Xiaoyan, the owner of the ship, and that M.V. “Feng Shun 09” had been mortgaged to Duxiu Rural Commercial Bank. In accordance with Article 174 of the Property Law, Duxiu Rural Commercial Bank had the right of priority of compensation to receive the insurance indemnity for the ship. The court holds that: (1) under Article 174 of the Property Law, when collateral for a mortgage is damaged, the security holder may have the right of priority of

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compensation to receive an insurance indemnity. The legal basis of this provision is that since the value of the collateral under mortgage is reduced or lost because of the insured accident, which changes the basis of the collateral under the loan, the risk of debt repayment increases; thus, the security holder should have the right of priority of compensation to receive the insurance indemnity. However, in this case, although the mortgaged ship was damaged in the insured accident, it had been restored to its original state and was in normal operating condition after being repaired. Ping An Insurance Company Anqing Branch did not offer any evidence to prove any decline in the value of M.V. “Feng Shun 09” resulted from the insured accident in this case. There was no evidence to prove that as a result of the insured accident, the value of the collateral at present differs from its value at the time Duxiu Rural Commercial Bank signed the mortgage contract. If the loan cannot be repaid in accordance with the contract, Duxiu Rural Commercial Bank could still apply for the sale of the collateral to realize the mortgage amount, just as it intended when it signed the maximum mortgage contract. (2) Although the maximum mortgage contract had been concluded before the insured accident occurred, Duxiu Rural Commercial Bank proceeded to grant a loan of 1,300,000 yuan on December 14, 2012, and a loan of 1,500,000 yuan on April 24, 2013, after the first loan had been paid off. The insured accident in this case occurred in October of 2011, and Xingfa Company petitioned the court to seal and freeze the relevant insurance indemnity and M.V. “Feng Shun 09” on November 29, 2011. From the above facts, it can be concluded that at the time Duxiu Rural Commercial Bank issued the loans, the insured accident had happened, and the insurance indemnity had been sealed and frozen by the court; therefore, Duxiu Rural Commercial Bank should have foreseen that other parties could have legal claims on the insurance indemnity involved. Duxiu Rural Commercial Bank issued the loans and, at the same time, claimed to have the right of priority of compensation to receive the insurance indemnity in accordance with the maximum mortgage contract and Article 174 of the Property Law. The actions of Duxiu Rural Commercial Bank damaged the ability of others to realize their right to claim the insurance indemnity. In the case that the collateral for the loans issued by Duxiu Rural Commercial Bank is still in good condition, its claim shall not be supported. Therefore, Duxiu Rural Commercial Bank’s claims that it should have the right of priority of compensation to receive the insurance indemnity based on the mortgage contract and the provisions of the Property Law, were not tenable and shall not be supported by the court. Fourth, regarding to the question of the specific amount of the insurance indemnity that Ping An Insurance Company Anqing Branch shall pay. On appeal, Ping An Insurance Company Anqing Branch made three assertions in regard to its insurance compensation liability: (1) it should not pay the insurance indemnity because LV Xiaoyan abandoned the right of pursuing a compensation claim against a third party, and therefore it should not bear insurance compensation liability in accordance with the Insurance Law. (2) The ship was in fact under-insured and any compensation should be made in proportion with the insured amount. (3) If it should bear liability, it should bear insurance compensation liability in accordance with the liability proportion of Fengshun Company.

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1. Regarding to the issue of whether Ping An Insurance Company Anqing Branch should not be liable for the insurance indemnity because LV Xiaoyan abandoned the right of pursuing a compensation claim against a third party. The court holds that, according to the findings of fact in Civil Judgment (2012) Wu Hai Fa Shi Zi No.00046, shipowner LV Xiaoyan’s losses caused by the accident include the ship repair fee of 1,500,000 yuan, the salvage fee of 793,000 yuan, the vessel damage inspection and assessment fee of 40,000 yuan, and the accident handing fee of 30,000 yuan; Fengshun Company’s losses caused by the accident include fuel losses, the loss of supplies and materials for the ship, and the loss of the personal items of the crew, etc. Fengshun Company transferred its creditor’s rights to LV Xiaoyan, but LV Xiaoyan declared in written the abandonment of the creditor’s rights transferred by Fengshun Company. From the facts above, it can be concluded that LV Xiaoyan only abandoned the creditor’s rights of Fengshun Company and did not give up her creditor’s rights related to the ship. Judgment No.00046 ruled on LV Xiaoyan’s claim in this case and ultimately supported her claim. Therefore, Ping An Insurance Company Anqing Branch’s argument that LV Xiaoyan had abandoned the right of pursuing a compensation claim against a third party was not supported by the facts and thus the court shall not support it. 2. Regarding to the issue of whether Fengshun Company failed to purchase insurance for M.V. “Feng Shun 09” in a sufficient amount. The Appellant Ping An Insurance Company Anqing Branch alleged that M.V. “Feng Shun 09” had an estimated value of 5,800,000 yuan at the time of the loan application, and Fengshun Company agreed on the insured amount of 2,800,000 yuan when purchasing insurance for the ship; thus, the ship was under-insured and any compensation should be made in proportion with the insured amount. The court holds that, although LV Xiaoyan indicated that the estimated value of M.V. “Feng Shun 09” was 5,800,000 yuan when she applied for the maximum mortgage loan, there is no evidence that the two parties actually had an assessment conducted to determine the ship’s value. The amount shall be regarded as the valuation agreed upon between Duxiu Rural Commercial Bank and LV Xiaoyan, but there is no factual or legal basis to use the amount as the standard for the value of the insurance claim. Although Ping An Insurance Company Anqing Branch petitioned the court in the second instance to assess the value of M.V. “Feng Shun 09” at the time of the insured accident, Ping An Insurance Company Anqing Branch claimed that the value of M.V. “Feng Shun 09” at the time of insured accident exceeded 2,800,000 yuan, so it was under-insured when Fengshun Company purchased the insurance. According to the rule of burden of proof, “the burden of proof lies with the person making the claim”, Ping An Insurance Company Anqing Branch was obligated to provide evidence to prove its claim. Ping An Insurance Company Anqing Branch did not assess the ship’s value when it accepted the insurance and it did not provide evidence to prove it had estimated the ship’s value after insured accident happened. Ping An Insurance Company Anqing Branch could not provide evidence to prove the insurance of M.V. “Feng Shun 09” was insufficient, and therefore, it

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did not meet the burden of proof. Ping An Insurance Company Anqing Branch failed to perform its obligation of examining the ship’s insurance valuation in the normal course of business, failed to meet the burden of proof in the proceeding, and did not apply for the assessment of M.V. “Feng Shun 09” in the first instance but applied for the assessment in second instance, which shall not be supported by the court. Ping An Insurance Company Anqing Branch’s claim that the court of first instance had the obligation to issue an explanation on the necessity of assessment had no legal basis. It was the litigation right of the parties to apply for assessment, and the decision of whether to exercise this right shall be made by the parties themselves. The court of first instance did not clarify this, which did not violate the law. In summary, there is no evidence for Ping An Insurance Company Anqing Branch’s claim that M.V. “Feng Shun 09” was under-insured when Fengshun Company purchased the insurance, and the court shall not support it. 3. Regarding to the issue of whether Ping An Insurance Company Anqing Branch could assume insurance compensation liability in accordance with the liability proportion of Fengshun Company. On appeal, Ping An Insurance Company Anqing Branch argued that, in the collision of the ship in this case, the insured Fengshun Company assumed 25% of the liability, so it should only assume 25% of the liability for compensation. The court holds that: according to Paragraph 4 of Article 18 of the Insurance Law, “the insured amount refers to the maximum amount for which the insurer is liable for paying indemnity or insurance benefits”. The insured amount of the policy in this case was 2,800,000 yuan, which is the limit of the liability that Ping An Insurance company Anqing Branch shall bear for this insured accident. Fengshun Company had coastal and inland water hull insurance and additional quarter collision and liability insurance. According to article 2 of Ping An Property & Casualty Insurance Company of China Ltd. Coastal Inland Water Hull Insurance Clauses, “the total loss or partial loss of the insured vessel resulting from one of the six reasons listed in article 1 of this insurance policy lead to the following liabilities and expenses: first, collision liability…”. In accordance with the provisions of the above article, the losses of the insured ship in this collision accident fall within the scope of the insurance coverage and shall be born by insurer Ping An Insurance Company Anqing Branch. Ping An Insurance Company Anqing Branch argued that it should bear liability in accordance with 25% liability proportion of Fengshun Company, but it did not provide any contractual or legal basis for this assertion. Therefore, the grounds for appeal were not established and the appeal cannot be supported by the court. In conclusion, the findings of fact made in the first instance were clear, the application of the law was correct, the judicial procedure was legal, the substantive handling of the case was appropriate, and the judgment of first instance shall be affirmed. In accordance with Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the court hereby renders the judgment as follows:

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Dismiss the appeal and affirm the original judgment. Court acceptance fee of second instance in amount of 41,508 yuan, the Appellant Ping An Property & Casualty Insurance Company of China Ltd. Anqing Center Branch shall bear 23,598 yuan, and the Appellant Anqing Duxiu Rural Commercial Bank Co., Ltd. Shilipu Branch shall bear 17,910 yuan. This judgment is final. Presiding Judge: SU Jiang Acting Judge: HU Zhengwei Acting Judge: ZENG Cheng July 17, 2015 Clerk: CHENG Jianxiao

Shanghai Maritime Court Civil Judgment Ping An Property & Casualty Insurance Company of China Ltd. Shanghai Hongkou Branch v. CLC Shipchartering-VI Co., Ltd. et al. (2012) Hu Hai Fa Shang Chu Zi No.265 Related Case(s) This is the judgment of first instance, and the judgment of second instance and the judgment of retrial are on page 962 and page 982 respectively. Cause(s) of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote The Defendant whose name was stamped on bill of lading signed by master precluded from arguing that it was not the carrier of goods in a claim for short delivery, because it had acknowledged that it was the carrier before arguing, on the day of trial, that the carrier was a different company with a similar name. Summary The Plaintiff cargo insurer was subrogated to the rights of the consignee of a cargo of iron ore carried from Brazil to China. About 4,325 tons of cargo were missing on delivery, so the Plaintiff sued the shipowner and also the company whose name was stamped on the bill of lading, which had been signed by the master. On the day of trial, the company whose name was stamped on the bill of lading stated that it was not the carrier, because the ship had been bareboat chartered to a different company with a similar name. The court rejected that argument, holding that the company was the carrier, and that it was liable for the short delivery. The company and its representatives had always acknowledged that it was the carrier, up until the day of trial, so it would violate the principle of good faith to allow it now to claim otherwise. The shipowner was held not to be liable, as there was not sufficient evidence that it was the actual carrier.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_33

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Judgment The Plaintiff: Ping An Property & Casualty Insurance Company of China Ltd. Shanghai Hongkou Branch Domicile: Shanghai, Hongkou District. Person in charge: LIU Jimin, manager of the company. Agent ad litem: REN Yuwei, lawyer of Shanghai Rolmax Law Office. The Defendant: CLC Shipchartering-VI Co., Ltd. Domicile: Room XXX, XXX, No.XXX, South Pudong Road, Shanghai, Pudong New Area. Agent ad litem: SHU Liang, lawyer of Shanghai Sloma & Co Law Firm. Agent ad litem: WANG Huaijiang, lawyer of Shanghai Sloma & Co Law Firm. The Defendant: Shanghai Da Xin Hua International Ship Management Co., Ltd. Domicile: Shanghai, Pudong New Area. Legal representative: HAN Qing. Agent ad litem: WANG Huaijiang, lawyer of Shanghai Sloma & Co Law Firm. Agent ad litem: SHU Liang, lawyer of Shanghai Sloma & Co Law Firm. With respect to the case arising from the dispute over a contract of carriage of goods by sea, the two Plaintiffs, Jiangsu He Muda Trade Development Co., Ltd. (hereinafter referred to as “Muda Company”), Zhongji Ningbo Group Co., Ltd. (hereinafter referred to as “Zhongji Company”), filed an action against the two Defendants CLC Shipchartering-VI Co., Ltd. (hereinafter referred to as “CLC Company”), Shanghai Da Xin Hua International Ship Management Co., Ltd. (hereinafter referred to as “Da Xinhua Company”), before the court on December 5, 2011. The court entertained the case and constituted a trial bench in light of law. On July 30, 2012, the court ruled to suspend the trial of the case since Muda Company filed an action arising from dispute over marine insurance contract against Ping An Property & Casualty Insurance Company of China Ltd. Shanghai Hongkou Branch (hereinafter referred to as Ping An Insurance Hongkou Company) in another case. On January 15, 2013, Ping An Insurance Hongkou Company requested to exercise the right of subrogation in the compensation scope after paying all claims within the coverage when judgment on another case came into force. The court ruled to admit it, and changed the Plaintiff into Ping An Insurance Hongkou Company according to the law. Proceeding of the case resumed. On February 12, 2013, Shanghai High People’s Court dismissed the Defendant Da Xinhua Company’s appeal before the court for changing the Plaintiff’s judgment with the Civil Ruling (2013) Hu Gao Min Si (Hai) Zhong Zi No.33. On July 2 of the same year, the court held a hearing in public to try the case. Lawyer REN Yuwei, agent ad litem of the Plaintiff, Lawyer WANG Huaijiang and Lawyer SHU Liang, agents ad litem of the Defendant Da Xinhua Company, appeared in court to attend the trial. The Defendant CLC Company did not appear in court after being summoned by the court according to law. After trial, this case has been concluded. The Plaintiff claimed that:

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In 2010, the Plaintiff’s insured Zhongji Company purchased a batch of Brazil sinter iron ore, and covered the goods against transportation insurance with the Plaintiff. The cargoes involved in the case were shipped from Brazil on October 27, 2010 and the carrier issued a bill of lading No.01. On December 8 of the same year, the cargoes arrived at the port of destination and the inspection found that 4,325 tons of goods missed. After the Plaintiff was sentenced to the compensation for the loss of the goods in the court, it paid insurance compensation of RMB4,407,808.16 to the actual consignee Muda Company in accordance with instruction of Zhongji Company on the transfer of rights and the pays and obtained the right of subrogation of all damage. The Plaintiff believed that: as the carrier and the actual carrier, the two Defendants involved in the contract of carriage shall be liable for any loss of goods and loss of interest totaling RMB4,367,093.12, and also bear court acceptance fee that the Plaintiff paid in a dispute over the marine insurance contract. It requested that the two Defendants should jointly and severally compensate the Plaintiff for all losses of RMB4,407,808.16, and that the two Defendants should bear the litigation costs in this case. The Defendant Da Xinhua Company argued that: 1. the Plaintiff’s right of subrogation lacked unambiguous evidence to prove the fact that the payment was made. 2. Whether or not Muda Company and Zhong Ji Ningbo Company had right of action of contract of carriage was obscure, and Da Xinhua Company believed that only Zhongji Company had the right of action. 3. In terms of the main body of the two Defendants, Da Xinhua Company believed that the two Defendants were not qualified Defendants. The ship involved in the case was related to bareboat charter, the charterer shall be responsible for his performance. The ship involved in the case was leased by CLC Company under a bareboat charter to Da Xinhua (Hong Kong) Shipping Company Limited (hereinafter referred to as Da Xinhua Shipping) and was entrusted by Da Xinhua Shipping to Da Xinhua Company for management. All business activities including contracting and issuing bill of lading were all undertaken by the bareboat charterer Da Xinhua Shipping. 4. In terms of the shortage of goods. No.02 bill of lading in the same ship was over unloaded, and Zhongji Company actually received goods two orders more than total amount. So the goods were not short landed by Zhongji Company and it did not adjust the goods between two end users, resulting in losses. 5, There was a certain amount of sewage overflow in the process of transportation of goods involved, which is the defect of the goods, so the shipper should not be responsible for the shortage of goods. In addition, the carrier should bear the responsibility only limited to the contract of carriage, so the Plaintiff should not claim against the carrier for cost arising in the insurance case or interest losses. In conclusion, it requested to reject the Plaintiff’s claim. The Defendant CLC Company did not reply. The evidential materials submitted by the Plaintiff, the opinion of the Defendant’s Da Xinhua Company and the authentication of the court are as follows: First, the evidence of the Plaintiff’s right of subrogation.

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1. (2011) Hu Hai Fa Shang Chu Zi No.881 Civil Ruling was to prove that the Plaintiff performed indemnity liability to the insured Zhongji Company and its designated domestic consignee and Muda Company under the contract of insurance according to the effective civil ruling and obtained the right of subrogation in the light of the law. Da Xinhua Company had no objection to the authenticity and legality of the evidence, but disagreed with the determination of the evidence in the former case. The court confirms the authenticity, legality and relevancy of the evidence. 2. The indemnity receipt and letter of transfer of the rights and interests, letter of authorization of the payment and the payment voucher were used to prove that the Plaintiff had paid the insurance indemnity and obtained the right of subrogation. Da Xinhua Company had no objection to the authenticity, legality of two evidence of payment of HSBC, but did not confirm its relevancy; had objection to the authenticity of the letter of authorization of the payment, indemnity receipt, and letter of transfer of the rights and interests. The reason is that there is objection of relevancy between payee of insurance claims and cases and of difference of file seal. The court holds that the documents above mentioned are all the originals, and He Muda Company has made written explanation of seal problem when the Plaintiff brought lawsuit for obtaining procedures of the right of subrogation. Although Da Xinhua Company raises two objection, but it does not provide evidence to prove its claim, so the court does not admit Da Xinhua Company’s objection and confirms the authenticity, legality and relevancy of the evidence. 3. The letter of transfer of rights and interests issued by Zhongji Company was used to prove that He Muda Company obtained the right of claim under the insurance contract and the payment of insurance indemnity by the Plaintiff to He Muda Company is based on the instructions of Zhongji Company. Da Xinhua Company had no objection to the authenticity, legality and relevancy of the evidence, but believed that the claim should be made by Zhongji Company. The court believes that the Plaintiff has provided the original evidence and confirms its authenticity, legality and relevancy. 4. The insurance policy of cargo transportation was used to prove that the Plaintiff and Zhongji Company had formed the relationship of insurance contract. Da Xinhua Company had no objection to the authenticity and legality of the evidence, but held that the insurant in the insurance policy was Zhongji Company rather than He Muda Company, and that there was no records of the endorsement of the transfer, so the Plaintiff should not pay He Muda Company insurance indemnity. 5. Insurance special invoice was used to prove that the Plaintiff and Zhongji Company had formed relationship of insurance contract. Da Xinhua Company believed that the evidence is a copy, and that it had objection to authenticity, legality and relevancy.

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The court holds that: evidence 4 is the original and although evidence 5 was a copy, it can mutually prove evidence 4. The contents of evidence 4 and 5 can mutually prove the above evidence 1, 2 and 3. The court confirms the authenticity, legality and relevancy of evidence 4 and 5. Second, the evidence that the Plaintiff and the two Defendants established a contract of carriage of goods by sea, and that the two Defendants led to the loss of the Plaintiff by short delivery of goods. 1. The import contract by principal agent was used to prove that He Muda Company was the real buyer, consignee and insurant of the cargo involved. Da Xinhua Company confirmed the authenticity and legality of the principal agent contract, but did not confirm its relevancy. The court holds that: the evidence has been verified in related cases, its contents can verify other evidence, the authenticity, legality, relevancy shall be confirmed. 2. No.01 bill of lading was used to prove the quantity of goods and the fact of carriage. Da Xinhua Company did not confirm the authenticity of the bill of lading. It considered that: the bill of lading was a copy and the ship stamp affixed to it are made by the vessel arbitrarily. The court holds that: the evidence has been verified in related cases, its contents can verify other evidence, and its authenticity, legality, relevancy shall be confirmed. 3–4. Commercial invoice and customs declaration were used to prove the value of the goods involved. Da Xinhua Company held that: as commercial invoices are formed outside the country, it should be notarized and authenticated according to law, and the authenticity, legality and relevancy of the above evidence should not be confirmed. The court holds that the evidence has been verified in related cases, its contents and other evidence can be mutually verified, and its authenticity, legality, relevancy shall be confirmed. 5–6. The quality certificate and analysis certificate of the port of loading were used to prove the weight and quality of the goods involved at the port of loading. Da Xinhua Company believed that: the certificates above were issued by the foreign seller unilaterally without certification by the shipper and any three-party inspection agency, so it lacked objectivity, and the weight and quality of the goods could not be identified, and the evidence was formed overseas, it should be subject to notarization and certification procedures in accordance with the law, the authenticity, legality and relevancy of the evidence should not be confirmed. The court holds that: the evidence above was formed overseas, although it did go through notarization and certification procedures, but the record of the weight of goods and trade contracts, bills of lading, customs declaration and other evidence can be mutually verified. the authenticity, legality and relevancy shall be confirmed. 7–8. The weight certificate and quality certificate of the port of discharge was used to prove the weight and quality of the goods involved at the port of discharge. Da Xinhua Company had no objection to the authenticity, legality

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and relevancy of the above evidence. The court holds that the above evidence is issued by Chinese statutory inspection agency, and its authenticity, legality and relevancy shall be confirmed. Trade contract and certificate of origin were used to prove the value and origin of the goods involved. Da Xinhua Company believed that: the evidence was formed overseas and should be notarized and authenticated in accordance with the law, and the authenticity, legality and relevancy of the above evidence were not confirmed. The court holds that the evidence is formed oversea, although it is not notarized and authenticated, but the records of the value of the goods and the origin as well as customs declaration and other evidence can be mutually verified, the authenticity, legality and relevancy shall be confirmed. A description of the situation issued by Zhongji Company was used to prove that: the ship involved in the voyage carried two kinds of goods, the actual consignees were also different. Da Xinhua Company confirmed the authenticity of the description of the situation, but did not recognize the authenticity of its content. The court confirms its authenticity and legality, and the content of proof of the evidence is subject to the record of evidence. Custody plan was used to prove that two kinds of goods carried by the involved ship was stored in divided holds. Da Xinhua Company confirmed its authenticity and legality, but held it had no relevancy. The court holds that the evidence and other evidence in this case can be mutually verified, and confirms its authenticity, legality, relevancy. Website information was used to illustrate the situation of two different goods. Da Xinhua Company had objection to the form of evidence and did not confirm it. The court holds that the website information is not notarized, the reason for the Defendant’s cross-examination is established and does not confirm its authenticity, legality, relevancy. Vale of Brazil bulk cargo information table was used to prove water content of the cargo involved on loading. Da Xinhua Company had no objection to the authenticity, legality and relevancy of the evidence. The court confirms the authenticity and legality of the evidence, and the content of proof shall be subject to the records of evidence. The description of payment of goods issued by Zhongji Company and proof of payment were used to prove that: the actual owner of the goods involved was He Muda Company, and the payment had been paid. Da Xinhua Company did not confirm the authenticity, legality and relevancy of the evidence. The court holds that the above evidence and facts admitted by the Zhongji Company and other evidence can be mutually verified, confirms its authenticity, legality, and the content of proof shall be subject to on the records of evidence.

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The evidential materials submitted by the Defendant Da Xinhua Company, the Plaintiff’s cross-examination opinions and the authentication of the court are as follows: 1. The evidence that the two Defendants were not the carrier and the actual carrier involved in the contract of carriage. 1) Bareboat charter party concerning the M.V. “BULKPROSPERITY” (M.V. “Prosperty” called by Da Xinhua Company) involved signed by CLC Company and Da Xinhua Company was used to prove that the ship was chartered to Da Xinhua Company under bareboat charter party before transportation involved occurred. Da Xinghua shall bear the transportation responsibility. The Plaintiff held that all parties to the bareboat charter party all belonged to the Hong Kong companies, but the evidence is not notarized and certified, so the authenticity of the contract was not confirmed. The ship involved had no registration information of bareboat charter, so Da Xinhua Company shall not take this as the reason for foreign defense. The court believes that: the reasons for the Plaintiff’s cross examination are established, and the evidence is not notarized and authenticated, and the authenticity, legality and relevancy of the evidence shall not be confirmed. 2) Email extracted from company of agent from the staff of the outsider Hong Kong Asia Jiaxin Co. Ltd. Shanghai Office (extraction process was notarized) by agent ad litem of Da Xinhua Company was used to prove that Da Xinhua Shipping and Companhia Vale do Rio Doce signed the voyage charter party, and that the two Defendants were not responsible for the business operation of M.V. “BULKPROSPERITY”. The Plaintiff believed that although the evidence was notarized, it was not notarized on the notary office computer, and evidence was preserved on the outsider’s computer, the extracted information came from the computer’s document records, these records can be changed at any time and were uncertain. Therefore, even if the e-mail was notarized, its authenticity cannot be confirmed. The court believes that the procedure of obtaining e-mail is legitimate, although the Plaintiff objects, but it does not provide evidence to prove the fact that e-mail is forged or falsified, so the authenticity and legality shall be confirmed. But because Da Xinhua Company claimed that both parties to the voyage charter party are foreign bodies, and the contract is not confirmed by signature, only the outsider’s email cannot independently prove the establishment of the contract, so the evidence has no relevancy to the case. 3) Legal opinion issued by Hong Kong Lawyer XU Guosen was used to prove that bareboat charter party shall not be registered if information concerning ship was registered by ship-owner under the laws of Hong Kong on bareboat charter party, and the ship-owner shall not be liable for compensation for damage during the period of bareboat charter. The Plaintiff had no objection to the authenticity of evidence, but held that the bareboat registration rules of ship in Hong Kong shall be explained by Hong Kong marine department or the relevant registration authority, any lawyer only represented their own

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opinion, and did not have proven and identified effect of Hong Kong law. This case applied to the Chinese law and the registration rules for bareboat charter cannot be interpreted in accordance with the law of Hong Kong. Therefore, the evidence did not have the corresponding probative force, and the authenticity of the attachment cannot be confirmed. The court holds that: the evidence is certified by notary, and confirms its authenticity, legality, but the Hong Kong lawyer, under the request of Da Xinhua Company, proposes corresponding legal opinion on the issue raised by the latter by combining Hong Kong Merchant Shipping Registration Ordinance and Hong Kong Ship Registration Handbook and it has no necessary link with the legal fact advocated by Da Xinhua Company, so their relevancy is not confirmed. 4) The entrusted management agreement signed by Da Xinhua Shipping and Da Xinhua Company and Certification on Still Registration of Corporation to Date of Da Xinhua Shipping to prove that: Da Xinhua Company was only the technical manager of the involved M.V. “BULKPROSPERITY”, and was not responsible for the contract of carriage, and did not issue a bill of lading. The Plaintiff had no objection to the authenticity, but believed that: Da Xinhua Company and Da Xinhua Shipping were associated company under the same group, and ready to sign a similar agreement, this agreement had no relevancy with the case, it shall not prove the facts claimed by Da Xinhua Company. The registration certificate of Da Xinhua Shipping was a photocopy and its authenticity shall not be confirmed. The court believes that the registration certificate of the company was a photocopy, and it was not authenticated by notary office. The authenticity, legality and relevancy of the certificate shall not be confirmed. The entrusted management agreement is the original, its authenticity and legality shall be confirmed, but it cannot prove the fact that Da Xinhua Company did not issue the bill of lading, so it has no relevancy with the case. 5) The business license of the business entity of Da Xinhua Company was used to prove that the business scope of Da Xinhua Company. The Plaintiff had no objection to the authenticity and legality, but believed it had no relevancy. The court confirms the authenticity and legality of the evidence, and the content of proof shall be subject to the records of evidence. 6) The certificate of vessel registration of the Hong Kong Maritime Department of China was used to prove that CLC Company was the shipowner of the M.V. “BULKPROSPERITY”, and it was impossible for the company to register the bareboat charter when it was registered. The Plaintiff had no objection to the authenticity and legality, but believed it cannot prove the fact claimed by Da Xinhua Company. The court adopts opinion on the confirmation of the authenticity and legality of evidence of the Plaintiff, but it can only prove the objective fact that CLC Company was the shipowner of M.V. “BULKPROSPERITY”, and had no probative force of other content claimed by Da Xinhua Company, so it had no relevancy.

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2. The evidence that shortage of goods was not caused by the violation of contract of carriage by the two Defendants. 1) No.01, 02 two copies of bills of lading were used to prove that the information of shipper, and consignee of the other goods shipped on the same board was the same as those of the goods involved, which was a contract of carriage by sea; the consignee in bill of lading was Zhongji Company and not He Muda Company. The Plaintiff confirmed the authenticity, legality and relevancy of the No.01 bill of lading, and did not confirm the relevancy between the bill of lading No.02 and the case. The court confirms authenticity, legality and relevancy of the bill of lading No.01 and the authenticity and legality of the bill of lading No.02, but its contents had no relevancy claimed by the Plaintiff with the case. 2) Two delivery orders issued by Lianyungang ship agency was used to prove that goods were the same kind under bill of lading No.01 and bill of lading No.02; consignee of the bill of lading was Zhongji Company and not He Muda Company. The Plaintiff believed that the delivery order was a copy, and did not confirm its authenticity. The court believes that: the above evidence is a copy, there is no other evidence to support, the authenticity, legality, relevancy of the evidence shall not be confirmed. 3) An inspection report and a set of attachments issued by Lianyungang Alpha Maritime Consulting Service Co., Ltd., were used to prove that there was no shortage of goods involved. The Plaintiff did not confirm the authenticity, legality and relevancy of the evidence, the reason was that the inspection report was unilaterally entrusted by the Defendant; most of the materials on which the report was based were unverified; the subject issuing the report was unqualified; its content was self-contradictory, and was not logical. The court believes that there is the situation claimed by the Plaintiff in the above evidence, the Plaintiff’s reason for cross-examination is justified, the authenticity legality and relevancy of the evidence shall not be confirmed. 4) A set of qualification certificate of inspection bodies and inspection person was used to prove that Lianyungang Alpha Maritime Consulting Service Co., Ltd. was legally set up and registered domestically, signature inspector had the legitimate qualification for examination, and can examine process of unloading the involved cargo and issue inspection reports. The Plaintiff did not confirm the authenticity of the evidence and believed it had nothing to do with the case. The court holds that the evidence is the proof of the legality of the subject that issues the inspection report. Because the authenticity, legality and relevancy of the inspection report was not admitted by the court, this evidence shall not be adopted by the court. 5) Draft survey records, weight certificate, quality certificate of another goods (B/L No.02) on the same board issued by Lianyungang Entry-Exit Inspection and Quarantine Bureau were used to prove that: (1) another shipment on the same boat were over-discharged when being unloaded from the ship, the quantity of unloading was 3,859 tons more than that in bill of

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lading (including moisture of the goods). The quantity of over-discharged goods together with 1,903.22 tons of sewage discharged from number 1, 3, 5, 7, 9 cabin totals 5,762.22 tons, 1,437.22 more than the shortage of 4,325 tons that the Plaintiff alleged. The shortage of combined quantity of delivery of two bills of lading did not occur; and (2) the two shipments had no difference in appearance, composition, and were the same goods. The Plaintiff did not confirm the authenticity and relevancy of the evidence, and believed that if calculated as the Plaintiff’s method, excess landing of the whole ship cargo did not conform to the common sense. The court believes that the above evidence has no direct relevancy with the case, and the calculation method of Da Xinhua Company does not conform to the general operation mode of the cargo subdivision measurement, so the content of the above evidence shall not be confirmed. 6) Two copies of component certificate issued by the consignor of the port of loading Companhia Vale do Rio Doce were used to prove that the goods involved had little difference in components, specifications with another shipment on the same boat. Two shipments were the same goods (iron ore), and the cargo involved itself had 8% of water content. The Plaintiff had no objection to the authenticity, legality and relevancy of component certificate of the goods involved; and did not confirm the relevancy of the component certificate of another shipment. The court confirms the authenticity, legality and relevancy of the component certificate of the goods involved, and another certificate had nothing to do with the case, which shall not be confirmed by the court. 7) A set of ship certificates including certificate of naturalization, international load line certificate, international tonnage certificate, cargo ship safety equipment certificate, cargo ship safety construction certificate, the certificate of safety management, the minimum safe manning document and the crew list was used to prove that the M.V. “BULKPROSPERITY” before, at the beginning of involved voyage was crewed and kept seaworthy; according to the cargo ship equipment safety certificate, cargo ship structure safety certificate, the whole hull and equipment of involved ship were in good condition, and hatch was watertight, so a large number of sewage generated by hold did not come from the outside part of ship or ship itself, but could only be produced by goods. The Plaintiff did not confirm the authenticity, legality and relevancy of the evidence. The court holds that the above evidence were copies, and was sent overseas without notarization. They do not have a direct probative force against the Defendant’s claims. So the authenticity, legality, relevancy of the evidence are not confirmed. 8) Excerpts of Inspection Management of Iron Ore Products published by metallurgical industry press in November 2009 was used to prove that a large number of water in Brazil import iron ore on the voyage was normal phenomenon, and was caused by a natural attribute of goods, and it was necessary that the ship discharge water for navigation safety; in practice, export country statutory institutions shall conduct inspection on the export

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of iron ore stone, including iron ore water content. The Plaintiff believed that the contents of the book cannot be used as evidence to prove the fact of the case. The court holds that the excerpt does not have the direct probative force to the facts claimed by the Defendant. The court does not confirm their relevancy. 9) A set of reports on the analysis of causes of shortage of Brazil imported iron ore on official website of China Entry-Exit Inspection and Quarantine Bureau and other government department, totaling fifteen copies were used to prove that: (1) a large amount of water discharged from Brazil imported iron ore during the voyage was a normal phenomenon, and the discharge water from iron ore was caused by iron ore the stone itself; (2) despite the discharge of large amounts of water, the water content at the port of discharge of ship was usually higher than that of the port of loading of ship. This abnormal phenomenon indicated that figures of the water content at the port of loading of Brazil iron ore were usually unreliable; and (3) Brazil was a rainy country, because most of the export iron ore were piled up in the open air, and tally company usually does not stop operation in the rainy weather, resulting in higher water content of ore loaded on ship. The Plaintiff did not confirm the authenticity, legality and relevancy of the evidence. The court believes that the website coverage does not have direct probative force to the facts advocated by the Defendant, and the court does not confirm its relevancy. 10) Two copies of document, Minutes of the Discussion on Several Problems concerning the Trials of Maritime Cases (I) by the Shanghai High People’s Court and Draft Survey of Measurement Regulation on Import and Export Commodity Weight issued by State Import and Export Commodity Inspection Bureau were used to prove that the carrier can be on deductible if the shortage of bulk cargo weight was within the range of 0.5% measured by draft survey, which had been a practice in the international shipping industry and was recognized by Chinese relevant standards. The Plaintiff believed that the above information was not evidence and had nothing to do with the case. The court holds that the above information was document of national justice and administrative organs and the court confirms its authenticity, legality but it cannot be used as evidence to prove specific facts of the case, the records can only be used as reference for parties to provide legal advice. In addition, Da Xinhua Company also presented written opinions on two orders of Brazil import iron ore issued by Professor FENG Gensheng of University of Beijing Science and Technology and applied for Professor FENNG Gensheng as an expert witness to testify in court to prove that: the use value of the goods under the bill of lading No.02 can replace the goods under the bill of lading No.01, and difficulties and any additional costs would not be increased when in use, so for Zhongji Company, there was no shortage of goods involved in transportation. The Plaintiff confirmed the authenticity and legality of the expert’s testimony, but

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believed that the proof content was the goods under the two bills of lading belonging to different iron ore products. The court believes that: the authenticity and legality of the testimony of the expert witness shall be confirmed, and the content of the evidence is subject to the record of evidence, but it does not have relevancy with the fact claimed by Da Xinhua Company that there is no shortage of the goods involved. According to the effective evidence of this case and the court investigation, the court finds out the facts as follows: On November 11, 2010, He Muda Company and Zhongji Company signed an agent import contract, Zhongji Company acted on behalf of He Muda company to import 100,000 tons (10% or less) of Brazil iron ore, and unit price was (dry tons) USD170 per ton. Time of shipment was before November 5, 2010, the port of loading was Brazil, port of destination was Rizhao port or Lianyungang. The import contract number of the agent import contract was HMI-CB-081010-14-01. Cargo transportation insurance and customs clearance were entrusted by He Muda Company to Zhongji Company. According to the contract, when discovering the quality and quantity problems of the import goods, He Muda Company should entrust Zhongji Company to claim compensation against others or the insurance company according to the commodity inspection report and the relevant international practice. All expenses of claiming compensation against others or the insurance company shall be born by He Muda Company, and the claim proceeds belonged to the company. All the rights and interests involved in the import goods are born by He Muda Company. On the same day, Zhongji Company and Ao Neng Metal International Limited (hereinafter referred to as Aoneng company) signed a CFR contract for the spot sale of Brazil iron ore, the name of the purchased goods was sinter, the quantity was 100,000 tons of wet (10% or less), quality expected water content at the port of loading was 8%, the price of goods was CFR 170 dollars per ton of dry, the port of loading was Brazil port, the port of discharge was Rizhao port or Lianyungang, time of shipment shall be not later than November 5, 2010. At the same time, Zhongji Company insured the goods against goods transportation to the Plaintiff, the amount of insurance was USD16,296,348, condition was marine insurance association (A) on January 1, 1982, the insurance liability started from the departure of the insured goods from the shore of loading place in insurance policy, to discharge of the goods in insurance policy at the shore of destination. The import goods were loaded at Itaguai Brazil on October 27, 2010. According to the involved bill of lading, the shipper was CVRD, the consignee was made to order, the carrying vessel name was M.V. “BULKPROSPERITY”, the port of discharge was the Chinese major port, bill of lading was No.01, description of goods was sinter, totaling 95,618 tons of wet. The bill of lading involved was issued by the captain and was stamped with Da Xinhua Company. The bill of lading was recorded with “charter party incorporated”. Back of bill of lading contained endorsement signature of CVRD and signature of Zhongji Company. On December 8, 2010, the cargo arrived in Lianyungang. According to inspection certificate of weight, draft survey records and quality certificate issued

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by the Lianyungang Entry-Exit Inspection and Quarantine Bureau, the consignee was Zhongji Company, consigner was Aoneng Company, description of goods was sinter, the carrying vessel was M.V. “BULKPROSPERITY”, contract number was HMI-CB-081010-14-01, bill of lading number was No.01, the weight declared of goods was 95,618 tons, actual weight was 91,293 tons, the shortage weight of gods was 4,325 tons, water content was 9.35%, inspection date was on December 13, 2010. Part of contents mentioned above conformed with the relevant information recorded in the import declaration of Lianyungang Customs. In addition, the declaration also recorded that: the net weight of cargo was 87,146.245 tons (net weight of the cargo was calculated based on 8.86% water content recorded in certificate of analysis of goods quality at the port of loading), unit price was USD170, the total value of the goods was USD14,814,861.65. According to the final data that the court verified through the Lianyungang Customs, on March 9, 2011, the final settlement data of the goods was changed into gross weight of 91,293 tons, net weight of 82,757.105 tons (the net weight was calculated based on water content of 9.35% recorded in certificate of quality by Lianyungang Inspection and Quarantine Bureau at the port of discharge), the value of the goods was USD14,068,707.85. After the damage occurred, Zhongji Company signed letter of subrogation, confirmed that He Muda Company was the actual consignee and the owner of the goods, and consented and authorized He Muda Company to claim against the insurer or carrier, bring a lawsuit and collect reparations in their own name for the shortage of goods. On January 15, 2013, the Plaintiff obtained the right of subrogation after paying He Muda Company RMB4,407,808.16 of insurance claims and other expenses according to the court’s effective judgment of (2011) Hu Hai Fa Shang Chu Zi No.881. It is also found out that, according to testimony of Professor FENG Gensheng of University of Science and Technology Beijing, the description of goods under bill of lading No.02 arrived in the same boat with the cargo was pellet and was artificial ore, which can be added directly to iron ore used for blast furnace process; the goods were rich ore powder, which cannot be directly used for blast furnace smelting and can only be used as raw material for blast furnace smelting after agglomerate was produced through sintering technology through which iron ore powder was made into block. The main differences between the goods under bill of lading No.02 and the goods were as follows: 1. different pH of chemical properties; 2. different appearance and shape, the goods were in form of powder, goods under bills of lading No.02 were in form of pellet; 3. different methods, the goods need to be processed through sintering before blast furnace process, the goods under bill of lading No.02 can be directly processed by the blast furnace. In addition, the goods under bill of lading No.02 belonged to an outsider, were loaded in different space with the goods, and their weight was calculated respectively, they were also unloaded separately, Lianyungang Entry-Exit Inspection and Quarantine Bureau issued certificate of weight, draft survey record in respect of the goods. It is also found that CLC Company was the owner of the M.V. “BULKPROSPERITY”, and that Da Xinhua Company is the manager of the M.V. “BULKPROSPERITY”.

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In addition, during the litigation period (on March 9 and April 10, 2012), agent ad litem of Da Xinhua Company confirmed in written that Da Xinhua Company was the carrier in the contract of carriage involved in the court. In the case of the application of the law, the Plaintiff’s request applied to Chinese law, the Defendant Da Xinhua Company requested the application of Chinese Hong Kong law, and insisted that the Hong Kong law was the British law. The court holds that: this case is a dispute over the contract of carriage of goods by sea caused by relationship of bill of lading by the consignee. The port of loading of the goods was Brazil Itaguai. The Defendant CLC Company was registered in China Hong Kong. According to the above foreign-related and Hong Kong-related factors, it can be confirmed that this case was foreign-related civil relations. According to the law, the parties to the contract can choose the law applicable to the contract, except as otherwise stipulated by law. If the parties have not chosen the law, the law applies to the state which has the closest connection with the contract. In this case the parties did not reach consensus on application of law. Based on the specific facts of the case, the Plaintiff and the Defendant Da Xinhua Company’s habitual residence were in the territory of China. Place of delivery of the contract of carriage involved, namely place of contract implementation was at Lianyungang. According to the principle of closest connection, Chinese law shall be applicable. The Defendant Da Xinhua Company claimed to apply the English law, but it failed to provide the law of that country in accordance with law. Therefore, the court applies the law of the People’s Republic of China according to law. According to the law, the bill of lading refers to a document that proves that the contract of carriage of goods by sea and that the goods have been received or shipped by the carrier, and against which the carrier undertakes to perform the delivery of the goods. The bill of lading in this case had a ship stamp of the Defendant Da Xinhua Company, and agent ad litem of Da Xinhua Company had confirmed in written its carrier’s identity in the contract of carriage of goods by sea. Therefore, the relationship of the contract of carriage of goods by sea between the Plaintiff and the Defendant Da Xinhua Company was established according to law. In trial on July 2, 2013, agent ad litem of Da Xinhua Company denied its identity as the carrier in court, and submitted the bareboat charter party and ship management agreement to prove that the carrier in the case was the outsider Da Xinhua Shipping, and that the ship owner CLC Company and Da Xinhua Company were not relative person in the contract of carriage. At the same time, Da Xinhua Company explained that the Plaintiff cannot inquire matters concerning bareboat charter registration at Hong Kong Marine Department on the ground that Hong Kong law did not require the ship owner to record information of bareboat charter when registering the ship status. The court holds that because the evidence submitted by Da Xinhua Company does not conform to the rules of evidence and violates provisions of the law. The court does not adopt it. Even if the bareboat charter party claimed by Da Xinhua Company was true, during a period of year and a half from December 5, 2011 when the party brought a lawsuit to July 2, 2013 of court hearing, agent ad litem of Da Xinhua Company has always not disclosed what it called the bareboat charter party and recognized itself as the carrier, but on the day of trial it put forward relevant defense,

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which violated the principle of good faith. Da Xinhua Company and Da Xinhua Shipping were two legal persons affiliated to the same group with close connection. They used the different provisions of applying for registration by bareboat charter and ship owner in Hong Kong ship registration system, making it impossible for relative person of the contract of carriage to inquire the relevant information on bareboat charter and exercise litigation rights correctly and effectively. After its relative person of the contract of carriage lost statute of limitations against the outsider (its affiliated company Da Xinhua Shipping), the Defendant Da Xinhua Company proposed relevant facts of bareboat charter to defense, if such act of litigation can be effectively established, it violates the most basic principle of fairness and the principle of good faith in the law provisions. CLC Company was the owner of the ship involved, and the Plaintiff on that ground claimed that CLC Company was the actual carrier in the carriage involved. The court holds that although the Plaintiff advocated for its claims in the contract of carriage as consignee, the bill of lading contained the record of “charter party incorporated”. As for the contents of the lease, neither the Plaintiff nor the Defendant had any valid evidence to prove it. The law also stipulates that the actual carrier is a person who is entrusted by the carrier for the carriage of goods or part of the carriage of goods; the prerequisite for the actual carrier and carrier to bear joint responsibility requires the actual carrier to bear the liability. However, the evidence submitted by the Plaintiff cannot prove that the CLC Company was the actual carrier and that it shall bear the liability for compensation. Therefore, the Plaintiff’s claim lacked legal and factual basis, and the court does not adopt it. The shortage of 4,325 tons of cargo involved (wet tons) has been confirmed by Lianyungang Entry-Exit Inspection and Quarantine Bureau. According to the relevant provisions and international practice, the measurement tolerance of bulk cargo throughout transportation and handover process was determined at 0.5%. This case is transportation of a iron ore bulk cargo. Combined with the case, corresponding measurement tolerance can be deducted. The weight declared of goods involved was 95,618 tons, and the measurement tolerance of 0.5% was 478.09 tons. After the measurement tolerance was deducted, the actual shortage of the goods involved was 3,846.91 tons. In this case, it was reasonable to calculate short dry tons according to the cargo moisture content of 9.35% at the port of discharge. Specific calculation method was 3,846.91 tons * (1–0.0935), the result was 3,487.2239 tons of dry. According to the USD170 per dry ton, the shortage of above goods was worth USD592,828.07. The Defendant Da Xinhua Company shall compensate the Plaintiff for the shortage loss of USD592,828.07. it was reasonable for the Plaintiff to request that the loss of the goods shall be converted into RMB3,948,234.95 according to the exchange rate of the USD against the RMB of 1:6.66 on December 13, 2010 (a date when Lianyungang Entry-Exit Inspection and Quarantine Bureau issued the inspection certificate of weight), which shall be supported by the court. According to details of the case, it is reasonable for the Plaintiff to claim that the interest loss shall be calculated as demand deposit interest rate of the People’s Bank of China during the same period from December 13, 2010 to the date of effective judgment. The Plaintiff’s compensation in the previous case

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of marine insurance contract included insurance bonus rate, litigation costs and other expenses. These additional costs were not necessarily related to the case. The above additional expenses claimed by the Plaintiff in the contract of carriage lacked factual and legal basis, and the court does not support it. Da Xinhua Company presumed that there was no shortage of goods involved according to over shipment of goods under the No.02 bill of lading, the basic equivalence of the weight of the cargo of whole ship and that at the port of loading, and a large amount of sewage discharged from the cargo involved. The court holds that: the goods under No.01 bill of lading and ones under No.02 bill of lading were carried with alternate holds, their weight was calculated according to separate holds and they were unloaded respectively, mix-up cannot occur; in addition, Da Xinhua Company claimed that the goods involved discharge a large number of sewage when moisture content was increased. According to the data of the ship, the weight of the sewage was far greater than the weight of shortage of goods of the whole ship, the data was clearly paradoxical. Therefore, the Defendant’s above arguments lacked the factual and legal basis, which shall not be supported by the court. In addition, according to the law, the people’s court that accepts the dispute over the right of subrogation for compensation right by insurer shall hear only the legal relationship between the third party that caused insurance accident and the insured. Da Xinhua Company’s objection concerning the Plaintiff’s right of action lacked factual basis, and it was not in the scope of hearing of the court, which shall not be adopted by the court. To sum up, according to Article 107, Article 113 Paragraph 1 of the Contract Law of the People’s Republic of China, Article 42, Article 46 Paragraph 1, Article 48, Article 71, Article 72 Paragraph 2, Article 252, Article 269 of the Maritime Code of the People’s Republic of China, Article 14 of the Provisions of the Supreme People’s Court on Several Issues concerning the Trial of Marine Insurance Disputes, Article 64 Paragraph 1, Article 144 of the Civil Procedure Law of the People’s Republic of China, the judgment is rendered as follows: 1. The Defendant Shanghai Da Xin Hua International Ship Management Co., Ltd., shall pay the Plaintiff Ping An Property & Casualty Insurance Company of China Ltd. Shanghai Hongkou Branch loss of goods of RMB3,948,234.95 and loss of interest (calculated according to RMB deposit interest rate of the People’s Bank of China of the same period from December 13, 2010 to the date of effectiveness of judgment) within ten days from the date when the judgment comes into effect; 2. Not support the other claims by the Plaintiff Ping An Property & Casualty Insurance Company of China Ltd. Shanghai Hongkou Branch. If the Defendant Shanghai Da Xin Hua International Ship Management Co., Ltd. fails to fulfill the obligation of paying money during the period designated by the judgment, it shall double pay debt interest during the period of delayed performance according to Article 253 of the Civil Procedure Law of the People’s Republic of China.

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Court acceptance fee in amount of RMB42,062.47, the Plaintiff Ping An Property & Casualty Insurance Company of China Ltd. Shanghai Hongkou Branch shall bear RMB4,385.58, the Defendant Shanghai Da Xin Hua International Ship Management Co., Ltd. shall bear RMB37,676.89. In case of dissatisfaction with this judgment, the Plaintiff Ping An Property & Casualty Insurance Company of China Ltd. Shanghai Hongkou Branch, the Defendant Shanghai Da Xin Hua International Ship Management Co., Ltd., shall within 15 days from as of the date of service of a written judgment, the Defendant CLC Shipchartering-VI Co., Ltd. shall within 30 days as of the date of service of a written judgment, file an appeal to the court, present copy according to the number of opposite party, and appeal to Shanghai High People’s Court. Presiding Judge: ZHANG Liang Acting Judge: QIU Hao People’s Juror: HUANG Yong July 22, 2013 Clerk: LIAO Luqi

Appendix: Relevant Laws 1. Contract Law of the People’s Republic of China Article 107 Types of Liabilities for Breach If a party fails to perform its obligations under a contract, or rendered non-conforming performance, it shall bear the liabilities for breach of contract by specific performance, cure of non-conforming performance or payment of damages, etc. Article 113 Calculation of Damages; Damages to Consumer Where a party failed to perform or rendered non-conforming performance, thereby causing loss to the other party, the amount of damages payable shall be equivalent to the other party’s loss resulting from the breach, including any benefit that may be accrued from performance of the contract, provided that the amount shall not exceed the likely loss resulting from the breach which was foreseen or should have been foreseen by the breaching party at the time of conclusion of the contract. 2. Maritime Code of the People’s Republic of China Article 42. (1) “Carrier” means the person by whom or in whose name a contract of carriage of goods by sea has been concluded with a shipper; (2) “Actual carrier” means the person to whom the performance of carriage of goods, or of part of the carriage, has been entrusted by the carrier, and includes any other person to whom such performance has been entrusted under a sub-contract;

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(3) “Shipper” means: a) The person by whom or in whose name or on whose behalf a contract of carriage of goods by sea has been concluded with a carrier; b) The person by whom or in whose name or on whose behalf the goods have been delivered to the carrier involved in the contract of carriage of goods by sea; (4) “Consignee” means the person who is entitled to take delivery of the goods; (5) “Goods” includes live animals and containers, pallets or similar articles of transport supplied by the shipper for consolidating the goods. Article 46 The responsibilities of the carrier with regard to the goods carried in containers covers the entire period during which the carrier is in charge of the goods, starting from the time the carrier has taken over the goods at the port of loading, until the goods have been delivered at the port of discharge. The responsibility of the carrier with respect to non-containerized goods covers the period during which the carrier is in charge of the goods, starting from the time of loading of the goods onto the ship until the time the goods are discharged therefrom. During the period the carrier is in charge of the goods, the carrier shall be liable for the loss of or damage to the goods, except as otherwise provided for in this Section. …… Article 48 The carrier shall properly and carefully load, handle, stow, carry, keep, care for and discharge the goods carried. Article 71 A bill of lading is a document which serves as an evidence of the contract of carriage of goods by sea and the taking over or loading of the goods by the carrier, and based on which the carrier undertakes to deliver the goods against surrendering the same. A provision in the document stating that the goods are to be delivered to the order of a named person, or to order, or to bearer, constitutes such an undertaking. Article 72 …… The bill of lading may be signed by a person authorized by the carrier. A bill of lading signed by the Master of the ship carrying the goods is deemed to have been signed on behalf of the carrier. Article 252 Where the loss of or damage to the subject matter insured within the insurance coverage is caused by a third person, the right of the insured to demand compensation from the third person shall be subrogated to the insurer from the time the indemnity is paid. The insured shall furnish the insurer with necessary documents and information that should come to his knowledge and shall endeavour to assist the insurer in pursuing recovery from the third person. Article 269 The parties to a contract may choose the law applicable to such contract, unless the law provides otherwise. Where the parties to a contract have not made a choice, the law of the country having the closest connection with the contract shall apply.

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3. Provisions of the Supreme People’s Court on Several Issues concerning the Trial of Marine Insurance Disputes Article 14 The court that accept dispute case concerning the insurer exercising the right of subrogation to indemnity claims shall hear only the legal relationship between the third party that caused the insurance accident and the insured. 4. Civil Procedure Law of the People’s Republic of China Article 64 A party shall have the responsibility to provide evidence in support of its own propositions. If the defendant, having been served with a summons, refuses to appear in court without justified reasons, or if he withdraws during a court session without the permission of the court, the court may make a judgment by default.

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Shanghai High People’s Court Civil Judgment Ping An Property & Casualty Insurance Company of China Ltd. Shanghai Hongkou Branch v. CLC Shipchartering-VI Co., Ltd. et al. (2013) Hu Gao Min Si (Hai) Zhong Zi No.105 Related Case(s) This is the judgment of second instance, and the judgment of first instance and the judgment of retrial are on page 943 and page 982 respectively. Cause(s) of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote Ship manager held to be contractual carrier under bill of lading but no liability because insufficient evidence of claimed shortage of cargo. Summary The Plaintiff/Appellant insurer brought a lawsuit against the two Defendants for losses caused by a shortage of cargo. The Plaintiff/Appellant brought the first suit against the owner of the vessel (CLC Shipchartering-VI Co., Limited) and the manager of the vessel (Shanghai Zhijing International Ship Management Co., Ltd.) claiming reimbursement for the amount of shortage above the agreed to amount. The vessel owner (the Respondent in the case of second instance) did not participate in the first action, but the Defendant/Appellant, Zhijing Company, did and claimed that they were not liable because they had entered into a bareboat charter party with the outsider, Daxinhua Shipping Co., Ltd., and therefore they were not the carrier. In the alternative the Defendant also claimed that there was no shortage due to the fact that the bill of lading No.02 was for the same goods and was overfilled. The Shanghai Maritime Court held that the Defendant was the carrier for purposes of the bill of lading No.01, and there was loss due to the shortage of goods; therefore, the Defendant must pay the Plaintiff for the value of the shortage amount totaling RMB3,948,234.95, and additionally the Defendant shall pay the bulk of the court acceptance fee of RMB42,062.47. Both parties appealed. It was held by the Shanghai High People’s Court that the judgment that the Defendant was the carrier for purposes of the bill of lading No.01 was correct; however, the judgment that there was a shortage was incorrect because the goods in bill of lading No.02 were basically the same as the goods in bill of lading No.01. Therefore, the court revoked the Civil Judgment, (2012) Hu Hai Fa Shang Chu Zi No.265, of the court of first instance. Additionally, court acceptance fee of the first and second cases shall be paid by the Appellant/Plaintiff.

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Judgment The Appellant (the Plaintiff of first instance): Ping An Property & Casualty Insurance Company of China Ltd. Shanghai Hongkou Branch Domicile: Shanghai, HongKou District. Person in charge: ZHANG Mou. Agent ad litem: REN Yuwei, lawyer of Shanghai Rolmax Law Office. The Appellant (the Defendant of first instance): Shanghai Zhijing International Ship Management Co., Ltd. (formerly, Shanghai Da Xin Hua International Ship Management Co., Ltd.). Domicile: Shanghai Pudong New Area. Legal representative: ZHANG Moumou. Agent ad litem: WANG Huaijiang, lawyer of Shanghai Sloma & Co Law Firm. Agent ad litem: SHU Liang, lawyer of Shanghai Sloma & Co Law Firm. The Respondent (the Defendant of first instance): CLC Shipchartering-VI Co., Ltd. Domicile: Room XXX, XXX, No. XXX, South Pudong Road, Shanghai Pudong New Area. Legal representative: CHEN Moumou, director of the company. Agent ad litem: WANG Huaijiang, lawyer of Shanghai Sloma & Co Law Firm. Agent ad litem: SHU Liang, lawyer of Shanghai Sloma & Co Law Firm. Dissatisfied with the Civil Judgment (2012) Hu Hai Fa Shang Chu Zi No.265 rendered by Shanghai Maritime Court with respect to dispute over a contract of carriage of goods by sea, the Appellant Ping An Property & Casualty Insurance Company of China Ltd. Shanghai Hongkou Branch (hereinafter referred to as Pingan Hongkou Branch Company) and the Appellant Shanghai Zhijing International Ship Management Co., Ltd. (hereinafter referred to as Zhijing Company) filed an appeal against the Respondent CLC Shipchartering-VI Co., Ltd. (hereinafter referred to as CLC Company) before the court. After accepting the appeal on September 5, 2013, the court organized a collegiate panel and held a hearing in public on May 13, 2014. REN Yuwei, agent ad litem of Pingan Hongkou Branch Company and WANG Huaijaing, SHU Liang, agents ad litem joinly entrusted by Zhijing Company and CLC Company appeared in court to attend the trial. After trial, this case has now been concluded. Pingan Hongkou Branch Company alleged that in the first instance: In 2010, Zhongji Ningbo Group Co., Ltd. (hereinafter referred to as Zhongji Company), the insured of Pingan Hongkou Branch Company bought a batch of Brazilian iron ore of sintered ore and insured them cargo transport insurance in Pingan Hongkou Branch Company. The relevant goods were shipped from Brazil on October 27, 2010 and the carrier issued the No.1 bill of lading. On December 8 of the same year, the relevant goods arrived at the port of destination, the goods were found

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short of 4,325 tonnes by the inspection. After the court judged that Pingan Hongkou Branch Company should compensate for the loss of goods, it, in accordance with the instructions of transferring rights of Zhongji Company, paid insurance compensation RMB4,407,808.16 to Jiangsu Hemuda Trade Development Co., Ltd. (hereinafter referred to Hemuda Company), the actual consignee involved in transport, acquiring subrogation right of all damage of cargoes. Pingan Hongkou Branch Company believed that as the carrier and the actual carrier involved in the contract of carriage, Zhijing Company and CLC Company, should be liable for short losses of goods and interest loss totaling RMB4,367,093.12, and also should bear court acceptance fee RMB40,715.04 of the relevant dispute case of maritime insurance contract paid by Pingan Hongkou Branch Company. It requested the court to judge Zhijing Company and CLC Company jointly compensate Pingan Hongkou Branch Company all the loss of RMB4,407,808.16 and bear the legal fee of the case. Zhijing Company argued in the first instance: 1. the subrogation right of Pingan Hongkou Branch Company lacked evidence to prove the fact of payment of compensation. 2. Whether Hemuda Company and Zhongji Ningbo Company has right of action of the transportation contract was uncertain, Zhijing Company believed that only Zhongji Company has right of action. 3. As for Zhijing Company and CLC Company’s subject issue, Zhijing Company believed that neither of them is a qualified defendant. On the condition that the vessel is bareboat chartered, the lessee should be liable for its performance. The relevant vessel was bareboat chartered for Daxinhua Shipping Co., Ltd. (hereinafter referred to as Daxinhua Shipping) by CLC Company, and was commissioned by the Daxinhua Shipping to Zhijing Company to manage, therefore all business activities, including hire of work and issuing were all liable by the bareboat charterer Daxinhua Shipping. 4. Whether there is shortage of goods. The No.2 bill of lading shipped in the same vessel was over landed by large amount, and Zhongji Company actually took the total amount of goods more than goods of two bills of lading, so there is no short-delivery for Zhongji Company. Zhongji Company did not adjust the goods between the two end users, so it resulted in a loss. 5. The relevant goods spilled a certain amount of sewage in the process of transportation, which is the goods’ own defects, so the transport side was not responsible for shortage. In addition, the responsibility that the carrier should bear is limited to the contract of carriage, so Pingan Hongkou Branch Company could not claim the cost or interest loss arising from the insurance case to the carrier. In summary, Zhijing Company requested the court of first instance to reject Pingan Hongkou Branch Company’s claim. CLC Company failed to respond in the first instance. The court of first instance found that: On November 11, 2010, Hemuda Company signed an authorized representation contract for import with Zhongji Company, and Hemuda Company entrusted Zhongji Company to import 100 tons of (10% more or less) Brazil iron ore, with per ton (dry tons) USD170. Shipment date was before November 5, 2010, the port of loading was Brazil, and the port of destination was Rizhao Port or Lianyun Port. The import contract number of the agent import contract was

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HMI-CB-XXXXXX-XX-XX. Insurance and customs clearance of cargo transport was transacted by Zhongji Company entrusted by Hemuda Company. It was agreed in the contract that if there were quality and quantity issues of the imported goods, Hemuda Company should, in accordance with the commodity inspection report and the relevant international practice, entrust Zhongji Company to claim compensation from the insurance company and the external. All fare from external and compensation should be born by Hemuda Company and the compensation gains should be enjoyed by Hemuda Company. All rights and obligations involved in the import of goods should be born by Hemuda Company. On the same day, Zhongji Company signed the spot trading contract of Brazilian iron ore CFR with Aoneng Metal International Co., Ltd. (hereinafter referred to as Aoneng Company) for the purchase of goods of the sinter, and the number was 100,000 wet tons (10% more or less). The expected moisture content in the port of loading was 8%, and the price of goods was USD170 for each dry ton CFR. The port of loading was Brazil port, the port of discharge was Rizhao Port or Lianyungang, and shipment date should be no later than November 5, 2010. At the same time, Zhongji Company purchased the goods transport insurance for the goods in Pingan Hongkou Branch Company, with the amount of insurance USD16,296,348. The underwriting condition was the association of marine transport cargo insurance (A) of January 1, 1982, and insurance liability was from the time when the insured goods left the shore of loading recorded in the guarantee slip to the place where the goods were unloaded in the shore of destination recorded in the guarantee slip. The bulk of the imported goods was actually shipped on October 27, 2010 in Brazil Itaguai Port. According to the bill of lading, the shipper was Vale S. A., the consignee was instructed, the name of the vessel was M.V. “BULKPROSPERITY”, the port of discharge was Chinese main port, the bill of lading’s number was 01, and the goods’ name was sintered ore, totaling 95,618 wet tons. The relevant bill of lading was issued by the captain, and was stamped with Zhijing Company’s vessel seal. It was recorded “charter party incorporated” in the bill of lading. There was Vale S. A.’s endorsement and Zhongji Company’s signature on the back of the bill of lading. On December 8, 2010, the relevant goods arrived in Lianyungang. According to records of the weight inspection certificate, the record list of draft survey and the quality certificate issued by the Lianyungang Entry-Exit Inspection and Quarantine Bureau, the consignee was Zhongji Company, the consignor was Aoneng Company, the name of goods was the sinter, the carrying vessel was M.V. “BULKPROSPERITY”, the contract number was HMI-CB-XXXXXX-XX-XX, and the bill of lading’s number was 01. The declared weight of the goods was 95,618 tons, the actual weight was 91,293 tons, so the goods were short of 4,325 tons. The moisture content of goods was 9.35%, and inspection date was December 13, 2010. A part of content of the above materials was consistent with the customs import declaration of goods of Lianyungang Customs. In addition, it was also recorded in the declaration that the net weight of the relevant goods was 87,146.245 tons (the net weight is counted based on that the cargo moisture content was 8.86% recorded in the cargo quality analysis certification of the port of loading), the unit

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price was USD170, and the total value of the goods was USD14,814,861.65. The final data checked by the first instance trial to Lianyungang Customs shows that on March 9, 2011, the final settlement of the goods was changed to 91,293 tons of gross weight and 82,757.105 tons of net weight (the net weight is counted on the basis of the cargo moisture content of 9.35% recorded in the cargo quality certificate of Lianyungang Inspection and Quarantine Bureau), and the value of the goods was USD14,068,707.85. After the occurrence of cargo damage, Zhongji Company signed the subrogation form, confirmed Hemuda Company as the actual consignee and the owner of the relevant goods, and agreed and authorized that Hemuda Company could, in their own name, claim for compensation, take legal action and take compensation on the issue of cargo shortage to the carrier or the insurer. On January 15, 2013, Pingan Hongkou Branch Company in accordance with effective judgment of (2011) Hu Hai Fa Shang Chu Zi No.881 case of the court of first instance paid insurance compensation and other expenses RMB4,407,808.16 to Hemuda Company, obtaining subrogation right. It was also found by the court of first instance: according to the Beijing University of Science and Technology’s Professor FENG Gensheng’s expert testimony, the name of the goods in the No.2 bill of lading shipped by the same vessel with the relevant cargoes were pellets, which was artificial rich ore and was iron ore that could be directly added to the blast furnace smelting; the relevant goods were rich ore powder, which could not be directly added to the blast furnace smelting and could only be used as raw materials to produce sintered ore through the iron ore powder block’s sintering process, and then could be added into blast furnace smelting. The major differences between the relevant goods and goods in the No.2 bill of lading lie in: 1. different pH of chemical properties. 2. Different shapes in appearance. The relevant goods were the powder, goods of No.2 bill of lading were the ball-like. 3. Different methods of use. The relevant goods need sintering before processing into the blast furnace smelting, and goods of No.2 bill of lading could be directly added into the blast furnace smelting. In addition, the goods of No.2 bill of lading belonged to outsider of the case, and was shipped and weighed in different cabins with the relevant goods and was discharged respectively. Lianyungang Entry-Exit Inspection and Quarantine Bureau issued a weight inspection certificate and record list of weight singly of the relevant goods. It was also found by the court of first instance: CLC Company was the ship owner of the relevant vessel M.V. “BULKPROSPERITY”, and Zhijing Company was the vessel manager of M.V. “BULKPROSPERITY”. In addition, in the first instance of the case (namely from March 9, 2010 to April 10, 2012), agent ad litem of Zhijing Company confirmed in written in the court of first instance that Zhijing Company was the carrier of the relevant transportation contract. The court of first instance held that the case was dispute over contract of carriage of goods by sea proposed by consignee due to the relationship of the bill of lading. The port of shipment of the relevant cargo was Brazil Itaguai Port and CLC Company was registered in the Hong Kong Special Administrative Region.

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According to the above-mentioned foreign and Hong Kong factors, the case could be determined as foreign civil relations. According to the law, the parties to the contract may choose the law applicable to the contract, except as otherwise provided by law. On the condition that the parties to the contract make no choice, the law of the country which has the closest connection with the contract shall apply. The application of the law was not agreed upon by the parties to the case. According to the specific case of this case, Pingan Hongkou Branch Company and Zhijing Company’s regular residence was in the mainland of China, place of delivery of the relevant contract of carriage, namely the place of the contract performance was in Lianyun Port in China. In accordance with the principle of most significant relationship, it shall apply to the laws of the mainland of China. Although Zhijing Company advocated to apply English law, but did not provide the law in accordance with the law. So the court of first instance heard the case in accordance with the law applicable to the law of the mainland of China. According to the law, the bill of lading is a document which is used to prove that the contract of carriage of goods by sea and the goods have been received by the carrier or laded, and with which the carrier ensure to deliver the goods. There was seal of Zhijing Company on the bill of lading, Zhijing Company’s agent ad litem confirmed in written its identity as the carrier in the contract of carriage of goods by sea in the litigation period. Therefore, the relationship of the contract of carriage of goods by sea between Pingan Hongkou Branch Company and Zhijing Company established according to law. On July 2, 2013 in the first instance, Zhijing Company’s agent ad litem denied its identity of the carrier in the court, and submitted a bareboat charter party and ship management agreement to prove the relevant carrier was Daxinhua Shipping, non-relevant with the case and the owner of the vessel CLC Company and Zhijing Company both are not involved in the transportation contract. At the same time, Zhijing Company regarded the fact that the law of Hong Kong Special Administrative Region did not require the owner of the vessel to record bareboat charter information when registering vessel condition as the reason of the fact that Pingan Hongkou Branch Company could not check bareboat charter registration matters in the Hong Kong Special Administrative Region Marine Department. The court of first instance held that the evidence submitted by Zhijing Company did not comply with the rules of evidence and was contrary to the law, therefore the court of first instance did not accept it. Even if the bareboat charter party of Zhijing Company really existed, the case lasted for a year and a half from December 5, 2011 when the parties took legal action to July 2, 2013, the date of the trial. During that time, Zhijing Company’s agent ad litem had never disclosed what he called the bareboat charter party and admitted it was the carrier, but proposed the relevant defense on the day of the trial, which was contrary to the principle of good faith. Zhijing Company and Daxinhua Shipping are two closely-connected separate legal persons which belong to the same group, and they took advantage of the different stipulations on application and registration of bareboat charterer and the owner of the ship in the Hong Kong Special Administrative Region (HKSAR) vessel registration system, so that the counterpart of the transportation contract could not inquire about the information about the

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bareboat charter and exercise the right of action properly and effectively. Zhijing Company has defended the fact of bareboat charter after the counterpart of the contract of carriage lost limitation of the action to the outsider of the case (its connected company Daxinhua Shipping), and if such action is effectively established, it will violate the most basic principles of fairness and the principle of good faith in the provisions of the law. CLC Company was the owner of the relevant vessel, therefore Pingan Hongkou Branch Company held that CLC Company was the actual carrier of the relevant transportation. The court of first instance held that although Pingan Hongkou Branch Company advocated for its claim in the contract of carriage as the consignee, there was a record of “charter party incorporated” on the bill of lading. With regard to the contents of the lease, the two parties had no effective evidence to prove. The law also stipulates that the actual carrier is the person who accepts the carrier’s entrustment and is engaged in the transportation of goods or part of the transportation. The actual carrier bears joint liability with the carrier on the premise that the actual carrier bears the liability for compensation. And the current evidence submitted by Pingan Hongkou Branch Company could not prove that CLC Company was the actual carrier and need to bear the liability for compensation, so Pingan Hongkou Branch Company’s claim lacked factual and legal basis and the court of first instance did not accept it. The shortage of 4,325 tons (wet tons) of the relevant goods has been confirmed by Lianyungang Entry-Exit Inspection and Quarantine Bureau. According to the relevant provisions, with reference to international practice, measurement allowance of bulk cargo in the process of transportation is determined to be 0.5%. The case belongs to bulk iron ore bulk cargo transport, and in light of the case, can be deducted the corresponding measurement allowance. The weight of the goods in the inspection was 95,618 tons, and the 0.5% of the measurement allowance was 478.09 tons. After deducting the measurement allowance, the actual goods were short of 3,846.91 tons. In this case, it is relatively reasonable to count the short tonnage of goods according to moisture content of 9.35% in the port of discharge. And the specific calculation method was 3846.91 tons * (1–0.0935), which equals to 3,487.2239 tons of the short tonnage. According to USD170 of per dry ton, the shortage of the goods values USD592,828.07. Zhijing Company should compensate Pingan Hongkou Branch Company for goods loss of USD592,828.07. Pingan Hongkou Branch Company requested to convert the loss of goods into RMB3,948,234.95 in accordance with the exchange rate on December 13, 2010 (the day when Lianyungang Entry-Exit Inspection and Quarantine Bureau issued a weight inspection certificate) of 1:6.66 USD against RMB, and the court of first instance supported it. According to this case, it is more reasonable to count Pingan Hongkou Branch Company’s claim for interest loss in accordance with the People’s Bank of China’s RMB current deposit interest rate over the same period from December 13, 2010 to the date when the judgment took effect. Pingan Hongkou Branch Company’s compensation payments include insurance bonus, litigation costs and other expenses in the previous marine insurance contract case, these additional costs did not have a certain connection with the case. The above claim

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for the additional costs of Pingan Hongkou Branch Company in the maritime cargo transportation contract lacked factual and legal basis, and the court of first instance did not support it. Zhijing Company presumed that the goods were not short for the reason that the goods in No.2 bill of lading overflowed, the weight of the whole ship was basically the same with that in the port of loading, and the relevant goods precipitated a large number of sewage and other reasons. The court of first instance held that the goods in the No.1 bill of lading and the goods in the No.2 bill of lading were loaded and weighed in different cabins, and discharged separately, so there was no confusion. In addition, Zhijing Company said the goods precipitated a large number of sewage in the condition of increased moisture content. In accordance with the data recorded by the vessel, the weight precipitated sewage was much larger than the weight of the whole ship shortage of goods, and the data was clearly contradictory. Therefore, the above defense of Zhijing Company lacked factual and legal basis, the court of first instance did not accept it. In addition, according to the law, the people’s court that accepts dispute case of the insurer exercises the subrogation of the right to claim compensation shall only hear the legal relationship between the third person arising the insurance accident and the insured person. Zhijing Company’s objection of right of action of Hongkou Branch Company lacked factual basis, and not belonged to the court hearing, the court of first instance did not accept it. In summary, the court of first instance, in accordance with Article 107, Paragraph 1 of Article 113 of the Contract Law of the People’s Republic of China, Article 42, Paragraph 1 of Article 46, Article 48, Article 71, Paragraph 2 of Article 72, Article 252, Article 269 of the Maritime Code of the People’s Republic of China (hereinafter referred to as Maritime Law), Article 14 of the Provisions of the Supreme People’s Court on Several Issues concerning the Trial of Cases of Marine Insurance Disputes, Paragraph 1 of Article 64, Article 144 of the Civil Procedure Law of the People’s Republic of China, the judgment of first instance was rendered as follows: 1. Zhijing Company should pay compensation for goods loss of RMB3,948,234.95 and interest loss to Pingan Hongkou Branch Company within 10 days from the effective date of the judgment (calculated according to the same period of the deposit interest rate of the People’s Bank of China from the date of December 13, 2010 until the effective date of the judgment). 2. Not support other claims of Pingan Hongkou Branch Company. Court acceptance fee of this case in amount of RMB42,062.47, Pingan Hongkou Branch Company should bear RMB5,385.58 and Zhijing Company should bear RMB37,676.89. Pingan Hongkou Branch Company appealed that the facts were found unclearly in the judgment of first instance, which applied inappropriate laws and failed to correctly identify the legal status of CLC Company in the transportation business: (1) Whether the charter party was incorporated into the bill of lading did not affect the identification of the actual carrier of the case. Although the bill of lading was Kangjin 94 format blank order bill of lading, the printed text “charter party incorporated” only was costumed printing of the format

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bill of lading. If it was not specified number or date of bill of lading, there was no lease incorporation. Even in the case of the incorporation of the lease, it generally refers to the freight and loading and unloading terms of the lease incorporating into the bill of lading, and will not change the legal relationship between the carrier proved by the original bill of lading and the holder of the bill of lading. (2) CLC Company should be identified as the actual carrier of the case Registering person of the relevant ship M.V. “Bulk Prosperity” was CLC Company and it did not make any bareboat charter registration. The relevant goods was delivered to the ship owner of M.V. “Bulk Prosperity” and the goods were received and controlled by the crew assigned by the ship owner, so the holder of bill of lading had enough and rational reason to believe that CLC Company was the actual carrier of the goods. Even if the M.V. “Bulk Prosperity” was indeed bareboat chartered by the CLC Company to other parties, it did not register so it did not have the effect against third parties. In summary, Pingan Hongkou Branch Company requested the court of second instance to affirm the first item of the main text of Civil Judgments (2012) Hu Hai Fa Shang Chu Zi No.265 and revoked the second item of the main text, and changed the judgment that CLC Company should bear joint compensation responsibility with Zhijing Company on the first item of the main text. CLC Company and Zhijing Company argued against the appeal of Pingan Hongkou Branch Company that: 1. the relevant goods transportation was bulk cargo transportation, incorporation of the charter party was recorded in both sides of bill of lading, which was a very simple format bill of lading in that condition, and therefore if cargo handling, quantity, name, quality and other important content were not recorded in the bill of lading, agreement of the charter party should be applied. Pingan Hongkou Branch Company’s request that the charter party cannot be incorporated into the bill of lading violated the basic maritime practices of bulk cargoes and was inconsistent with the provisions of Maritime Law on the incorporation of the charter party into the bill of lading. 2. M.V. “Bulk Prosperity” hung the flag of the Hong Kong Special Administrative Region, according to the relevant laws of the Hong Kong Special Administrative Region, the bareboat charterer rather than the owner of registry should be responsible for the transportation of goods during the bareboat charter period. CLC Company was only the owner of registration of M.V. “Bulk Prosperity”, not the subject of actual employee crew and controlling vessel, and it had not status of the actual carrier. 3. Even if Zhijing Company or CLC Company was confirmed as the actual carrier of the cargo transportation, the cargo damage did not exist, so it is not liable for cargo damage. Zhijing Company appealed that the facts were found unclearly in the judgment of first instance, which applied inappropriate laws and there were many violations of the legal procedures: 1. There is no shortage of delivery of the goods of M.V. “Bulk Prosperity”, and the case resulted from that Zhongji Company made improper distribution of imported goods between the two agent companies. The goods in No.1, No.2

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bills of lading shipped by M.V. “Bulk Prosperity” are both Brazilian iron ore, and the experts said clearly the goods in No.2 bill of lading’s commercial value was more than that in No.1 bill of lading. Therefore taking comprehensive consideration of No.1, 2 bills of lading and voyage lease, the number of loading and unloading of M.V. “Bulk Prosperity” was basically the same in the port of departure and port of destination, so there was not short of unloading and delivery. Even if it could be confirmed shortage of goods of the No.1 bill of lading, the shortage was also due to improper shipment of the shipper, and the relevant legal consequences should not be born by the carrier. At the same time, according to “unknown clause” contained in the bill of lading, and in the bulk cargo shipping the shipper could not check and verify the number of goods when shipping, therefore the shipper should not bear the responsibility for the number of cargo’s records. In addition, after a long period time of delivery, the consignee did not inform the carrier of the shortage of goods, so according to the relevant provisions of the Maritime Law, the carrier should be exempted. 2. Zhijing Company was technical manager of M.V. “Bulk Prosperity” and not involved in the conclusion and the implementation of the contract, and not the carrier of the involved goods. The court of first instance did not accept evidence materials provided by Zhijing Company, and held that it was obviously improper to identify Zhijing Company as the carrier and should be corrected. According to bareboat charter party of CLC Company and Daxinhua Shipping, CLC Company was registered owner of M.V. “Bulk Prosperity” and Daxinhua Shipping was bareboat charterer. Zhijing Company was only responsible for the technical management and crew recruitment, training and other matters of M.V. “Bulk Prosperity” according to Technical Management Agreement signed with Daxinhua Shipping, not involved in the signing of voyage charter party and the bill of lading, and not the carrier of the case. As for the name of Zhijing Company contained in the vessel seal of the bill of lading, it was caused by the unilateral act of the captain or Daxinhua Shipping, and should not be identified as the basis of the identity of carrier of Zhijing Company. Although the agent ad litem of Zhijing Company confirmed that it was the carrier of the goods in the first instance, the statement was clearly contrary to the facts according to evidence materials received later, and Zhijing Company had the right to make corrections. 3. There were multiple violations of legal procedures in the first trial, which should be corrected. The members of the first instance collegiate panel who had attended the associated case have not avoided and the members of the collegiate case have changed frequently. The first instance had no warrant to refuse Zhijing Company’s evidence investigation application, and at the same time adopted a clearly different recognition criterion in the admission of evidence of the charge and defense. In summary, Zhijing Company requested the court of second instance to revoke the judgment in accordance with the law, and commute and reject Pingan Hongkou Branch Company’s all lawsuit request or send the case back for retrial according to law.

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Pingan Hongkou Branch Company argued against the appeal of Zhijing Company that: 1. As for cargo damage facts and the amount, Zhijing Company’s statements misled the court and should be clarified. There were two bills of lading in M.V. “Bulk Prosperity”, two trade contracts and two real trade buyers, two insurance contracts, so there were two payment arrangements. But for the sake of Chinese foreign trade agency system considerations, it completed the entire transaction through the same foreign trade agency, Zhongji Company. However No.1, 2 bills of lading were independent of each other, and should be considered as two separate sea cargo transportation contracts. The goods in the two bills of lading were different in name and appearance, and were loaded and unloaded and weighed in different cabins, so the carrier should be responsible for the weight of the goods recorded in the bill of lading. The consignee Zhongji Company obtained the bill of lading through the endorsement of trade, and in this case, the bill of lading was ocean cargo transportation contract between the consignee and the carrier. Therefore the carrier should also be responsible for the bill of lading. The carrier’s analysis of the cause of the damage was contradictory and the reason should not be adopted. With regard to the issue of “unknown clause”, the court of first instance had also taken it into consideration and made 0.3 percent deduction in calculating of the final amount of damage. 2. As for the legal relationship of the case, the consignee obtained the bill of lading through the endorsement, which was covered with seal of Zhijing Company, so it should be confirmed as the carrier. Zhijing Company had never disclosed that the M.V. “Bulk Prosperity” was being bareboat chartered before. And even if the bareboat charter did exist, the effect of no registration shall not act against a third party. 3. The first instance’s proceedings are legal. With regard to the composition of the collegiate panel, Zhijing Company had made an application requiring the presiding judge to avoid in the last hearing, but the court of first instance had dealt with it according to law. CLC Company stated that it consented to Zhijing Company’s appeal. In the hearing of second instance, Pingan Hongkou Branch submitted a notarized copy of Ship Registration Record Transcripts of M.V. “Bulk Prosperity” to prove that to the deadline date on November 18, 2013, there was no bareboat charter registering in the ship information of M.V. “Bulk Prosperity”. Zhijing Company and CLC Company made common cross-examination and held that they raised no objection to the authenticity of the evidence, but did not agree with the content of the evidence. Pingan Hongkou Branch Company wants to deny the fact that M.V. “Bulk Prosperity” is not bareboat chartered for the fact that there is no bareboat charter registering in the ship information of M.V. “Bulk Prosperity”, it is premised on that registering bareboat charter in accordance with the provisions of the laws of the Hong Kong Special Administrative Region. The fact was that the laws of the Hong Kong Special Administrative Region did not

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require the registration of bareboat charter, so this evidence could not be used to prove it. And it was consistent with the fact that there is a bareboat charter party between Daxinhua Shipping and CLC Company and the shipper did not intent to conceal any document or deceit. The court confirms that, the authenticity of the evidence is recognized by Zhijing Company and CLC Company, therefore the court confirms its effectiveness of evidence. The evidence could demonstrate the fact there is no bareboat charter registering recorded in Ship Registration Record Transcripts of M.V. “Bulk Prosperity”. In the hearing of second instance, Zhijing Company and CLC Company jointly submitted the following evidence: 1. Evidence materials on legal status of Zhijing Company and CLC Company in the case. 1) The notarized Bareboat Charter Party (including translation) signed by CLC Company and Daxinhua Shipping and the notarized subject material of Daxinhua Shipping, which was used to prove that CLC Company had bareboat chartered M.V. “Bulk Prosperity” to non-relevant person of the case Daxinhua Shipping before this transportation. The carrier of the transportation is Daxinhua Shipping, and Zhijing Company and CLC Company are not the carrier of the case. Pingan Hongkou Branch Company made cross-examination and held that it raised no objection to the authenticity of the subject material of Daxinhua Shipping, but raised objection to the contents of the proof. The material could only prove that the existence of Daxinhua Shipping in the Hong Kong Special Administrative Region, and could not come to further information. As for the notarized document of Bareboat Charter Party, Pingan Hongkou Branch Company held that the evidence is only the witness testimony in nature. On the condition that witnesses did not appear in the court to make cross-examination, its authenticity could not be verified, and its notary is limited to prove the consistency of Bareboat Charter Party’s original and translation copy, and could not explain the authenticity of Bareboat Charter Party itself. Therefore Pingan Hongkou Branch Company did not recognize its authenticity, legality and relevancy. The court holds that the above two pieces of evidence has been notarized, therefore it confirms the pro forma authenticity of it and holds that Daxinhua Shipping’s subject material could prove the existence of Daxinhua Shipping in the Hong Kong Special Administrative Region. But CLC Company’s statement from the authorized representative CHEN Zhaoli was unilateral statement of CLC Company in nature, and could not prove the existence of Bareboat Charter Party and its authenticity without other evidence. 2) Mail and translation document on the collection of ocean freight of cargo in the two bills of lading between Daxinhua Shipping and its brokers Clarkson Shipping Broker (Shanghai) Co., Ltd. and China Construction Bank Hong Kong Branch, etc., which was used to prove that Daxinhua Shipping, the bareboat charterer of M.V. “Bulk Prosperity” collected the ocean freight of cargo from

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Vale S. A. through Clarkson Shipping Broker (Shanghai) Co., Ltd. and Zhijing Company did not charge the ocean freight, further proving that it was only technical manager of M.V. “Bulk Prosperity”. Pingan Hongkou Branch Company made cross-examination and held that the evidence did not belong to new evidence of the second instance. Meanwhile the evidence did not meet the requirements in the form so it could not be verified in the authenticity. In content, the addresser and recipient’s information of the e-mail was only the electronic serial number without addresser and recipient’s information so it could not prove its relevancy to the case. Even if these messages are authentic, they were only internal discussion and did not have external probative force and binding. The court holds that this evidence was electronic data without notary therefore its authenticity shall not be confirmed. The court does not adopt its effectiveness of evidence. 2. Evidence materials on whether there was shortage of goods in the transportation. 1) The notarized log excerpts and some of the translation of port of loading and port of discharge. The log of port of loading could prove the goods of No.1 and No.2 bills of lading were loading continuously in the port of loading, during which time the carrier and shipper did not weigh the goods by draft in different cabins. The quantity of goods in two bills of lading was provided by the shipper. The log of port of discharge could prove that the vessel was discharged in No.34 and No.59 terminal of port of discharge and the goods of No.01 bill of lading were not all unloaded in No.59 terminal but some of them in No.34 terminal. 2) Delivery records and order ticket of cargo in No.59 terminal, which could prove that goods of No.01 bill of lading’s unloading quantity, the actual number of delivery in the No.59 terminal and its entrusting party of unloading and delivery of the goods was Penavico Lianyungang International Freight Forwarding Co., Ltd. 3) Delivery records and order ticket of cargo in No.34 terminal, which could prove that goods of No.02 bill of lading and some of goods of No.01 bill of lading’s unloading quantity, the actual number of delivery and its entrusting party of unloading and delivery of the goods was Penavico Lianyungang International Freight Forwarding Co., Ltd. 4) Two pieces of Weight by Craft Certificate issued by Lianyungang Zhonglian Tallying Company, which could prove the actual total amount of the cargo’s discharge in No.34 and No.59 terminal was basically consistent with the total amount recorded in the two bills of lading. 5) Two pieces of Deliver Order that were kept respectively by Xinluqiao (Lianyungang) Terminal Co., Ltd., which No.34 terminal belongs to, and Jiangsu Lianyungang Port Co., Ltd. Dongtai Port Branch, which No.59 terminal belongs to. And the two pieces of bills of lading were stamped with seal special for delivery of Lianyungang Sinotrans Shipping Agency Co., Ltd. and customs release seal of the People’s Republic of China, which could prove the bill of lading’s consignees of No.01 and No.02 bills of lading were Zhongji Company in the discharge, delivery of cargo.

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6) A statement issued by Xinluqiao (Lianyungang) Terminal Co., Ltd., which No.34 terminal belongs to, which could prove the entrusting party of discharge and delivery of the relevant goods was Penavico Lianyungang International Freight Forwarding Co., Ltd., the number of goods of the No.1 bill of lading unloaded in the No.34 terminal and the actual number of delivered goods of No.1 and No.02 bills of lading in No.34 terminal. In terms of the above evidence, Pingan Hongkou Branch Company made cross-examination and held that: 1. the evidence was not new evidence of the second instance. 2. The navigation log could not achieve its purpose of proof, and whether weighed by draft and subdivision when loading was not related to the case. The case regards the bill of lading as the evidence to prove loading subdivision, and the notarized material did not show the IMO number of vessel in the form therefore it could not judge whether the notarized one was the relevant vessel. 3. Pingan Hongkou Branch Company did not recognize other materials’ authenticity, legality and relevancy, because the material submitted by the opposing party was not the original evidence. It was only stamped with seal on the copy not the original one. 4. The weight certificate issued by CIQ and the weight of goods recorded in the bill of lading were important basis for measurement and payment of the goods, and its effectiveness of evidence should be higher than the evidence submitted by the opposite part. 5. These evidence exactly proved that the goods of No.1 bill of lading were indeed short. The court holds that the log of port of loading and port of discharge was formed before the dispute in this case and was recorded continuously and has been notarized. The court confirms its effectiveness of evidence. The log on October 24, 2010 recorded the draft weight’s original data before the start of the loading operation and the log on October 27 recorded the results of the measurement after the completion of the loading, which could justify the fact that the cargo was weighed by the whole ship but not by draft and subdivision. Some of log of port of discharge could prove a part of the goods of No.01 bill of lading were unloaded in the No.34 terminal. Although other evidence was the copy, it was confirmed by the original production or the seal of preservation subject. The court supports its effectiveness of evidence. The above materials could prove that the total weight of the cargo of No.01 and No.02 bills of lading carried by M.V. “Bulk Prosperity” in port of loading was consistent with that of port of discharge. The court finds out that the M.V. “Bulk Prosperity” was the bulk cargo ship registering in the Hong Kong Special Administrative Region, the owner of registry was CLC Company, deadweight ton (DWT) was 172,964 tons. At 1835 on October 25, 2010, M.V. “Bulk Prosperity” began sub-loading operations of cargoes of No.01 and No.02 bills of lading in Brazil Itaguai, in which the goods in No.01 bill of lading were loaded in 1, 3, 5, 7, 9 cabins and the goods of No.02 bill of lading were loaded in the 2, 4, 6, 8 cabins. At 1525 on October 27, 2010, the whole ship’s loading operation was completed, during which it did not weight by draft and subdivision. According to the total weight of the whole vessel, the total weight of the whole ship’s cargoes was 160,221 DWT. On December 6, 2010, M.V. “Bulk

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Prosperity” arrived in No.5 anchorage of Lianyungang, shifted to No.34 terminal on December 8, and started unloading operations of 2, 4, 6, 8 cabins at 2110 and ended the operation at 2100 on December 10. It started unloading operations of 3, 5, 7 cabins at 2150, and ended the operation at 0600 on December 11. Then M.V. “Bulk Prosperity” shifted to No.59 terminal through tug boat, started unloading operations of 3, 5, 7, 9 cabins at 0820, and ended all the operation at 0320 on December 13. During the whole operation, the weight of cargo unloaded at No.34 terminal was 81,857 tons, and the weight of cargo unloaded at No.59 terminal was 77,898 tons and the total weight was 159,755 tons. No.01 and No.02 bills of lading were issued by the carrier on October 27, 2010. No.01 bill of lading records: sinter, “SAIDTOWEIGH” (said to weight) was 95,618 wet tons; No.02 bill of lading records: pellet, “SAIDTOWEIGH” (said to weight) was 64,603 wet tons. In addition to the above records, the rest includes the name of the vessel, the issuer, the shipper and other information. Two bills of lading stated that the freight was charged by the voyage charter party. No.01 and No.02 bills of lading were later endorsement transferred by the shipper Vale S. A. to the same consignee Zhongji Company. It is also found that Shanghai Da Xin Hua International Ship Management Co., Ltd. changed its name to Shanghai Zhijing International Ship Management Co., Ltd. on February 17, 2014. In addition to the above facts, other facts found by the court of first instance are clear and shall be confirmed. The court holds that the case is a dispute over a contract of carriage of goods by sea. Due to the port of loading of goods is outside our country, therefore there are foreign elements in this case. The parties did not agree on the application of the law in this case, and Zhijing Company claimed that the British law should be applied in this case, but it did not provide a basis, so it was proper for the court of first instance to determine the mainland law of China as applicable law of the case in accordance with the principle of the most closely linking. The court confirms it. The court holds that, according to the opinions of claim and defense of the parties, the issues in this case are the legal status of Zhijing Company and CLC Company in the contract of carriage of goods by sea and the fact whether there was cargo damage in the case of the carriage of goods by sea. As for the legal status of Zhijing Company and CLC Company in the contract of the carriage of goods by sea, The court holds that, according to the law, the bill of lading, as the demonstration of contract of carriage of goods by sea, was a document issued by the carrier at the shipper’s request after it receives the cargo or the cargo has been shipped. On the condition of no contrary evidence, the records of bill of lading should be regarded as a basis for determining the elements of the contract of carriage of goods by sea, including the identity of the carrier. On the condition that the bill of lading was issued by the captain of M.V. “Bulk Prosperity” and stamped with the ship seal, and the name of Zhijing Company is clearly reflected in the ship seal, it was appropriate to regard Zhijing Company as the carrier of the ocean cargo transportation. Although Zhijing Company defended that M.V. “Bulk Prosperity” was bareboat chartered by Daxinhua Shipping from CLC

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Company, its bareboat charter relationship’s authenticity could not be confirmed due to no registration and no evidence to prove and Zhijing Company has also clearly stated that it was the transportation carrier in the first trial, so the court shall not adopt its defense. Although Pingan Hongkou Branch Company advocated CLC Company was the actual carrier of the case, because it did not provide evidence to prove CLC Company was involved in the transportation of goods, and the identity of the owner of the ship’s registration and the identity of the actual carrier were not necessarily connected legally, therefore its claim lacked factual and legal basis. The court shall not accept its reasons for the appeal, and not support the appeal request. As for whether there was cargo damage of the ocean cargo transportation and whether the carrier should be liable for its compensation. According to the law, the carrier’s liability period for the goods shipped by non-containers means the period from the time the goods are loaded to the time when the goods are unloaded and in which the cargo is under the control of the carrier. During the liability of the carrier, if the goods are lost or damaged, the carrier shall be liable unless otherwise specified. Therefore, the carrier is liable for compensation, provided that during its period of responsibility the goods have been destroyed or damaged. There is no difference between the contents of the goods in No.01 and No.02 bills of lading except for name and weight of goods. According to the records of “TO BE USED WITH CHARTER-PARTIES” and “FREIGHT PAYABLE AS PER CHARTERPARTY” of two bills of lading, the fact that there is a charter party can be confirmed. Therefore Zhijing Company’s claim that the two bills of lading was issued for the reason that the carrier is to perform the same voyage charter party with the Vale S. A. (bill of lading shipper) is reasonable, and is consistent with the fact that the relevant ship was weighed by draft on the whole ship but not subdivision in port of loading. On the condition that Pingan Hongkou Branch Company has no evidence to prove that it had requested or the carrier had measured respectively the goods of No.01 and No.02 bills of lading, it made special marking “SAID TO WEIGH” in the front of the recorded weight of the goods in the two bills of lading, which could prove that the carrier indeed recorded the weight of the goods in accordance with the shipper’s declaration. Therefore, on the condition of the fact that the goods of No.01 bill of lading are short for discharge and the fact that the goods of No.2 bill of lading are over for discharge exist at the same time and the weight of the unloading cargo of the whole vessel, the weight of loading cargo in port of loading and the weight of cargo recorded in the two bills of lading are basically the same, the carrier is required to bear the responsibility respectively for the weight of the goods recorded in the associated bill of lading held by the same consignee, which lacks factual basis and is unfair. Accordingly, the carrier’s appeal reason of regarding the weight of the whole ship as a measure of whether it implements the obligations of the contract has factual basis. The court adopts it and supports its corresponding appeal. Zhijing Company also claimed that there existed the issue that the collegiate panel should avoid but did not and it was frequently changed and other procedural violations in the first instance. The court holds that Zhijing Company has not provided any evidence of its above claim. As for the application for withdrawal, the

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court of first instance has dealt with it and put it on record in accordance with the law, therefore its appeal reason lacked factual and legal basis and the court does not adopt it. In summary, on the condition that the new evidence of the second instance could prove that the goods were not weighed as per separate cabins, records of the weight of the goods in the bill of lading were declared according to the shipper and unloaded cargo weight in the ship was basically consistent with the total weight of goods recorded in two bills of lading, there was no shortage of goods of Zhijing Company therefore it shall not bear the responsibility for the damage. Its appeal has factual and legal basis, and the court supports it. In accordance with Article 42, Paragraph 1 of Article 46, Article 71, Article 75, Article 95 of the Maritime Code of the People’s Republic of China, Paragraph 1 of Article 64, Sub-paragraph 2 Paragraph 1 of Article 170, Article 175 of the Civil Procedure Law of the People’s Republic of China, Article 2 of the Several Provisions of the Supreme People’s Court on Evidence in Civil Procedures, the judgment is rendered as follows: 1. Revoke (2012) Hu Hai Fa Shang Chu Zi No.265 Civil Judgment rendered by Shanghai Maritime Court; 2. Not support the claims of the Appellant Ping An Property & Casualty Insurance Company of China Ltd. Shanghai Hongkou Branch. Court acceptance fee of first instance in amount of RMB42,062.47 shall be born by the Appellant Ping An Property & Casualty Insurance Company of China Ltd. Shanghai Hongkou Branch; court acceptance fee of second instance in amount of RMB42,062.47 shall be born by the Appellant Ping An Property & Casualty Insurance Company of China Ltd. Shanghai Hongkou Branch. The judgment is final. Presenting Judge: DONG Min Acting Judge: XU Yijin Acting Judge: HU Hailong December 5, 2014 Clerk: CHEN Xi

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Appendix: Relevant Laws 1. Maritime Code of the People’s Republic of China Article 42 For the purposes of this Chapter: (1) “Carrier” means the person by whom or in whose name a contract of carriage of goods by sea has been concluded with a shipper; (2) “Actual carrier” means the person to whom the performance of carriage of goods, or of part of the carriage, has been entrusted by the carrier, and includes any other person to whom such performance has been entrusted under a sub-contract; a) The person by whom or in whose name or on whose behalf a contract of carriage of goods by sea has been concluded with a carrier; b) The person by whom or in whose name or on whose behalf the goods have been delivered to the carrier involved in the contract of carriage of goods by sea; (3) “Shipper” means: (4) “Consignee” means the person who is entitled to take delivery of the goods; (5) “Goods” includes live animals and containers, pallets or similar articles of transport supplied by the shipper for consolidating the goods. Article 46 The responsibilities of the carrier with regard to the goods carried in containers covers the entire period during which the carrier is in charge of the goods, starting from the time the carrier has taken over the goods at the port of loading, until the goods have been delivered at the port of discharge. The responsibility of the carrier with respect to non-containerized goods covers the period during which the carrier is in charge of the goods, starting from the time of loading of the goods onto the ship until the time the goods are discharged there from. During the period the carrier is in charge of the goods, the carrier shall be liable for the loss of or damage to the goods, except as otherwise provided for in this Section. The provisions of the preceding paragraph shall not prevent the carrier from entering into any agreement concerning carrier’s responsibilities with regard to non-containerized goods prior to loading onto and after discharging from the ship. Article 71 A bill of lading is a document which serves as an evidence of the contract of carriage of goods by sea and the taking over or loading of the goods by the carrier, and based on which the carrier undertakes to deliver the goods against surrendering the same. A provision in the document stating that the goods are to be delivered to the order of a named person, or to order, or to bearer, constitutes such an undertaking. Article 75 If the bill of lading contains particulars concerning the description, mark, number of packages or pieces, weight or quantity of the goods with respect to which the carrier or the other person issuing the bill of lading on his behalf has the knowledge or reasonable grounds to suspect that such particulars do not accurately

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represent the goods actually received, or, where a shipped bill of lading is issued, loaded, or if he has had no reasonable means of checking, the carrier or such other person may make a note in the bill of lading specifying those inaccuracies, the grounds for suspicion or the lack of reasonable means of checking. Article 95 Where the holder of the bill of lading is not the charterer in the case of a bill of lading issued under a voyage charter, the rights and obligations of the carrier and the holder of the bill of lading shall be governed by the clauses of the bill of lading. However, if the clauses of the voyage charter party are incorporated into the bill of lading, the relevant clauses of the voyage charter party shall apply. 2. Civil Procedure Law of the People’s Republic of China Article 64 A party shall have the responsibility to provide evidence in support of its own propositions. For the evidence that cannot be obtained by any parties or their litigation representatives because of some realistic reasons or for the evidence that the people’s court considers necessary for adjudicating the case, the people’s court shall investigate and collect such evidence. The people’s court shall, according to the procedure prescribed by law, collect and examine evidence comprehensively and objectively. Article 170 After trying a case on appeal, the people’s court of second instance shall, in the light of the following situations, dispose of it accordingly: (1) If the facts were clearly ascertained and the law was correctly applied in the original judgment, the appeal shall be rejected in the form of judgment and the original judgment shall be affirmed; (2) If the facts were wrongly ascertained or the application of law was incorrect in the original judgment, the said judgment shall be amended according to the law; (3) If the basic facts were not clearly ascertained in the original judgment, the people’s court of second instance shall make a written order to revoke the original judgment and remand the case to the original people’s court for retrial, or the people’s court of second instance may amend the judgment after investigating and clarifying the facts; or (4) if there was serious violation of legal procedures such as omitting any party or making an illegal absentee judgment in the original judgment, the said judgment shall be revoke by a written order and the case remanded to the original people’s court for retrial. If the party files an appeal against the judgment made in the retrial by the court originally tried the case, the people’s court of second instance shall make a judgment according to the law. Article 175 The judgment and written order of the people’s court of second instance shall be final.

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3. Several Provisions of the Supreme People’s Court on Evidence in Civil Procedures Article 3 The people’s court shall inform the parties concerned of the requirements for producing evidence and the of the corresponding legal liabilities so that the parties concerned may produce evidence actively, completely, correctly and honestly within the reasonable time period. Any party who cannot independently collect evidence due to objective reasons may request the people’s court to collect after investigations.

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The Supreme People’s Court of the People’s Republic of China Civil Judgment Ping An Property & Casualty Insurance Company of China Ltd. Shanghai Hongkou Branch v. CLC Shipchartering-VI Co., Ltd. et al. (2016) Zui Gao Fa Min Zai No.18 Related Case(s) This is the judgment of retrial, and the judgment of first instance and the judgment of second instance are on page 943 and page 962 respectively. Cause(s) of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote Affirming decision that ship manager was contractual carrier under bill of lading but revoking intermediate appeal court’s decision of no liability because insufficient evidence of claimed shortage of cargo. Summary The Claimant of Retrial/Plaintiff of first instance/Appellant of second instance insurer brought a claim against the two Defendants for losses caused by a shortage of cargo. The Plaintiff/Appellant brought the first suit against the owner of the vessel (CLC Ship Chartering-VI Co., Ltd.) and the manager of the vessel (Shanghai Zhijing International Ship Management Co., Ltd.) claiming reimbursement for the amount of shortage above the agreed to amount. The vessel owner (the Respondent of second instance) did not participate in the first instance action, but the Defendant/Appellant, Zhijing Company, did and claimed that they were not liable because they had entered into a bareboat charter party with the outsider, Daxinhua Shipping, and therefore they were not the carrier; additionally, they claimed there was no shortage because the bill of lading No.02 was for the same goods, was to the same party, and was overfilled. The first instance Shanghai Maritime Court held that the Defendant was the carrier for purposes of the bill of lading No.01, there was loss due to the shortage of goods, and the Defendant must pay the Plaintiff for the value of the shortage amount totaling RMB3,948,234.95 plus interest. Both parties appealed. The Shanghai High People’s Court of second instance held that the judgment that the Defendant was the carrier for purposes of the bill of lading was correct; however, the judgment that there was a shortage was

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incorrect because the goods in the two bills of lading were basically the same; therefore, the second instance court revoked the Civil Judgment, (2012) Hu Hai Fa Shang Chu Zi No.265, of the court of first instance. The Plaintiff of first instance/ Appellant of second instance applied for a retrial. It was held by the Supreme People’s Court of the People’s Republic of China that the Civil Judgment, (2013) Hu Gao Min Si (Hai) Zhong Zi No.105, of the second instance court shall be revoked, and the Civil Judgment, (2012) Hu Hai Fa Shang Chu Zi No.265, of the court of first instance shall be reinstated. The court also found that the finding of both courts, that CLC Company was not the actual carrier, was incorrect; however, their judgments that CLC Company shall not be liable for the shortage was correct. Thus, the Defendant of first instance/Appellant of second instance shall be liable to the Plaintiff of first instance/Appellant of second instance for the amount of RMB3,948,234.95 plus interest; additionally, the Defendant of first instance/ Appellant of second instance shall bear the bulk of the court acceptance fee of first instance and all of the court acceptance fee of second instance.

Judgment The Claimant of Retrial (the Plaintiff of first instance, the Appellant of second instance): Ping An Property & Casualty Insurance Company of China Ltd. Shanghai Hongkou Branch Domicile: Ground Floor Part B, No.1230, North Zhong Shan No.1 Road, Shanghai. Person in charge: WU Jun, general manager. Agent ad litem: REN Yuwei, lawyer of Shanghai Rolmax Law Office. The Respondent of Retrial (the Defendant of first instance, the Appellant of second instance): Shanghai Zhijing International Ship Management Co. Ltd. Domicile: Room FGHIJ, Building No.15, No.588 South Pudong, Shanghai Pilot Free Trade Zone. Legal representative: ZHANG Zhongan. Agent ad litem: WANG Huaijiang, lawyer of Shanghai Sloma & Co Law Firm. Agent ad litem: SHU Liang, lawyer of Shanghai Sloma & Co Law Firm. The Respondent of Retrial (the Defendant of first instance, the Respondent of second instance): CLC Ship Chartering-VI Co., Ltd. Domicile: Room C, 16th Floor, Zhong Wang Business Building, No.414–424, Wanzai. Xiefei Avenue, Hong Kong Special Administrative Region. Representative: CHEN Zhaoli, director. Agent ad litem: WANG Huaijiang, lawyer of Shanghai Sloma & Co Law Firm. Agent ad litem: SHU Liang, lawyer of Shanghai Sloma & Co Law Firm.

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Dissatisfied with the Civil Judgment (2013) Hu Gao Min Si (Hai) Zhong Zi No.105 rendered by Shanghai High People’s Court (hereinafter referred to as second instance court) in respect of the dispute over a contract of carriage of good by sea with the Respondent of Retrial, Shanghai Zhijing International Ship Management Co. Ltd. (formerly known as Shanghai Daxinhua International Ship Management Co., Ltd., hereinafter referred to as Zhijing Company), CLC Shipchartering-VI Co., Ltd. (hereinafter referred to as CLC), the Claimant of Retrial, Ping An Property & Casualty Insurance Company of China Ltd. Shanghai Hongkou Branch (hereinafter referred to as Pingan Hongkou Branch) applied for retrial to the court. On November 26, 2015, the court made Civil Ruling (2015) Min Shen Zi No.1915, bringing this case to trial. The court constituted a collegiate panel in accordance with the law, and held a hearing in public on March 30, 2016. REN Yuwei, agent ad litem of the Claimant of Retrial, Pingan Hongkou Branch, WANG Huaijiang and SHU Liang, agents ad litem of Zhijing Company and CLC appeared in court to attend the trial. Now, this case has been closed. Pingan Hongkou Branch filed an action before the Shanghai Maritime Court (hereinafter referred to as court of first instance) that Zhongji Ningbo Group Co., Ltd. (hereinafter referred to as Zhongji Company), the insured of Pingan Hongkou Branch. bought a batch of Brazil agglomerate iron ore and bought cargo shipping transportation insurance policy from Pingan Hongkou Branch. On October 27, 2010, the involved goods were delivered and the carrier issued the No.01 B/L. On December 8, 2010, the involved goods arrived at the port of destination, but there was a shortage of 4,325 tons after inspection. After the court of first instance had made the judgment that Pingan Hongkou Branch should assume the compensation liability listed in the insurance contract, Pingan Hongkou Branch in accordance with the transfer of rights requirement of Zhongji Company, compensated the actual consignee Jiangsu Hemuda Trade Development Co., Ltd. (hereinafter referred to as Hemuda Company) RMB4,407,808.16, thus acquiring the subrogation right of all the losses of goods. As the carrier and the actual carrier of the involved freight transport contract, Zhijing Company and CLC should pay a total compensation RMB4,367,093.12 for the shortage and interest losses. Zhijing Company and CLC should also pay the acceptance fee RMB40,715.04 which have been undertaken by Pingan Hongkou Branch. In conclusion, the Plaintiff requested the court to sentence that Zhijing Company and CLC should jointly compensate Pingan Hongkou Branch all the losses RMB4,407,808.16 and undertake the legal cost of the case. The court of first instance found out: On November 11, 2010, Zhongji Company and Hemuda Company signed an import service contract agreeing that Zhongji Company, as the agent, shall import 100,000 tons (10% of the weight tolerance are allowed) Brazil iron ore for Hemuda Company and the unite price was USD70 per ton (dry ton). The time of shipment was before November 5, 2010, the port of shipment was Brazil and the port of destination was Rizhao Port or Lianyungang. On the same day, Zhongji Company and Aoneng Metal International Co., Ltd. (hereinafter referred to as Aoneng Company) signed a Brazil iron ore sales contract, agreeing that Zhongji Company shall buy 100,000 wet tons agglomerate (10% of the weight tolerance are allowed),

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the expected water content of the goods at the loading port shall be 8%, the unit price shall be CFR USD170 per ton, the loading port shall be the Brazil port, the port of destination shall be Rizhao Port or Lianyungang, and the time of shipment shall be no later than November 5, 2010. Meanwhile, Zhongji Company bought transportation insurance for this batch of goods from Pingan Hongkou Branch and the insured amount was USD16,296,348. The bulk of the imported goods was actually shipped on October 27, 2010 in Brazil Itaguai Port. According to B/L, the shipper was Vale S. A., the consignee was instructed, the name of the vessel was M.V. “BULKPROSPERITY”, the port of discharge was Chinese main port, the B/L’s number was 01, and the goods’ name was sintered ore, totaling 95,618 wet tons. The relevant B/L was issued by the captain, and shall be stamped Zhijing Company’s vessel seal. It was recorded “chart party incorporated” in the B/L. There was Vale S. A.’s endorsement and Zhongji Company’s signature on the back of the B/L. CLC was the owner of the involved M.V. “BULKPROSPERITY” and Zhijing Company was the vessel manager. On December 8, 2010, the involved goods arrived at Lianyungang. According to the weight inspection certificate, draft survey recording sheet and quality certificate provided by Lianyungang Entry-Exit Inspection and Quarantine Bureau, the consignee is Zhongji Company, consignor is Aoneng Company, the description of goods is SINTERFEEDOREGUAIBA, carrying vessel is M.V. “BULKPROSPERITY”, the number of B/L is 01, the reported weight of the goods is 95,618 tons but the actual weight is 91,293 tons, showing a shortage of 4,325 tons, the water content of the goods is 9.35%, the inspection date is December 13, 2010. According to the data that the court of first instance verified with Lianyungang Customs, on March 9, 2011, the final settlement data of the involved goods was changed to gross weight 91,293 tons, net weight 82,757.105 tons (this data was based on the water content 9.35% recorded on the quality certificate provided by Lianyungang Entry-Exit Inspection and Quarantine Bureau), the value of goods was USD14,068,707.85. After the losses of involved goods, Zhongji Company signed the letter of subrogation, confirming that Zhongji Company and Hemuda Company were the actual consignee and owner, and agreed to authorize Hemuda Company to claim against the carrier or the insurer, to litigate and collect indemnity in the name of Zhongji Company for the shortage of goods. On January 15, 2013, according to the Civil Judgment (2011) Hu Hai Shang Fa Chu Zhi No.881 of the court of first instance, Pingan Hongkou Branch paid Hemuda Company insurance claims RMB4,407,808 and other expenses and then obtained the subrogation right. Goods (VARGEMGRANDEBLASTFURNACEPELLETS) under No.2 B/L which arrived at the port of destination with the involved goods belonged to outsider. They were separately freighted from goods under No.1 B/L, separately weighed and unloaded. With respect to these goods, Lianyungang Entry-Exit Inspection and Quarantine Bureau provided weight inspection certificate and draft survey recording sheet individually. According to the testimony provided by Professor FENG Gensheng from University of Technology and Science Beijing, the name of the goods in the No.2 B/L was pellets, which was artificial rich ore and was iron ore that could be directly added to the blast furnace smelting; the relevant

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goods are rich ore powder, which could not be directly added to the blast furnace smelting and could only be used as raw materials to produce sintered ore through the iron ore powder block’s sintering process, and then could be added into blast furnace smelting. The major differences between the relevant goods and goods in the No.2 B/L lie in: 1. different pH of chemical properties; 2. different shapes in appearance. The relevant goods were the powder, goods of No.2 B/L were the ball-like; and 3. different methods of use. The relevant goods need sintering before processing into the blast furnace smelting, and goods of No.2 B/L could be directly added into the blast furnace smelting. During the first instance (namely March 9, 2012 and April 10, 2012), agent ad litem of Zhijing Company confirmed in written that Zhijing Company was the carrier of the involved transportation contract. The court of first instance held that this case was a dispute initiated by the consignee over the contract of goods of carriage by sea. The port of shipment of the involved goods was Brazil Itaguai port. CLC was registered in Hong Kong Special Administrative Region. According to the above-mentioned foreign and Hong Kong factors, the case could be determined as foreign civil relations. According to the law, the parties to the contract may choose applicable laws by agreement, except as otherwise stipulated by law. If both parties to the contract have no choice, the law of the state which has the closest connection with the contract shall apply. Both parties in this case did not reach an agreement on the application of the law. According to the specific case, the habitual residences of Pingan Hongkou Branch and Zhijing Company are located in the mainland of China. The involved place of delivery is Lianyungang, China, the place where the contract is fulfilled. Although advocating English Law, Zhijing Company failed to provide the law of that country in accordance with the law. Therefore, the court of first instance heard the case in accordance with the law of the People’s Republic of China. According to the law, a B/L is a document which serves as an evidence of the contract of carriage of goods by sea and the taking over or loading of the goods by the carrier, and based on which the carrier undertakes to deliver the goods against surrendering the same. The B/L has the shipping stamp affixed by Zhijing Company and the agent of Zhijing Company also confirmed in written the identity of the carrier of the involved goods during the litigation. Therefore, the shipping contract signed by Pingan Hongkou Branch and Zhijing Company was executed according to law. During the court hearing of first instance on July 2, 2013, agent ad litem of Zhijing Company denied its identity as carrier in court and handed in bareboat charter party and vessel management agreement to certify that the carrier of the involved goods was Hong Kong Daxinghua Shipping Co., Ltd. (hereinafter referred to as Daxinghua Shipping), Zhijing Company and CLC were not the parties of the involved shipping contract. Meanwhile, Zhijing Company claimed that the law of Hong Kong Special Administrative Region does not require ship owners to record bareboat charter information when they register the ship’s condition. Therefore, Pingan Hongkou Branch could not find the bareboat charter registration at the Maritime Department of Hong Kong Special Administrative Region. The court of

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first instance held that the evidence submitted by Zhijing Company did not comply with the rules of evidence and was contrary to the law, therefore the court did not accept it. Even if the bareboat charter party of Zhijing Company really existed, the case lasted for a year and a half from December 5, 2011 when the parties took legal action to July 2, 2013, the date of the trial. During that time, Zhijing Company’s agent ad litem had never disclosed what he called the bareboat charter party and admitted it was the carrier, but proposed the relevant defense on the day of the trial, which was contrary to the principle of good faith. Zhijing Company and Daxinhua Shipping are two closely-connected separate legal persons which belong to the same group, and they took advantage of the different stipulations on application and registration of bareboat charterer and the owner of the ship in the Hong Kong Special Administrative Region (HKSAR) vessel registration system, so that the counterpart of the transportation contract could not inquire about the information about the bareboat charter and exercise the right of action properly and effectively. Zhijing Company has defended the fact of bareboat charter after the counterpart of the contract of carriage lost limitation of the action to the outsider of the case (its connected company Daxinhua Shipping), and if such action is effectively established, it will violate the most basic principles of fairness and the principle of good faith in the provisions of the law. CLC was the owner of the relevant vessel, therefore Pingan Hongkou Branch held that CLC was the actual carrier of the relevant transportation. The court of first instance held that although Pingan Hongkou Branch advocated for its claim in the contract of carriage as the consignee, there was a record of “charter party incorporated” on the bill of lading. With regard to the contents of the lease, the two parties had no effective evidence to prove. The law also stipulates that the actual carrier is the person who accepts the carrier’s entrustment and is engaged in the transportation of goods or part of the transportation. The actual carrier bears joint liability with the carrier on the premise that the actual carrier bears the liability for compensation. And the current evidence submitted by Pingan Hongkou Branch could not prove that CLC was the actual carrier and need to bear the liability for compensation, so Pingan Hongkou Branch’s claim lacked factual and legal basis and the court of first instance did not accept it. The shortage of 4,325 tons (wet tons) of the relevant goods has been confirmed by Lianyungang Entry-Exit Inspection and Quarantine Bureau. According to the relevant provisions, with reference to international practice, measurement allowance of bulk cargo in the process of transportation is determined to be 0.5%. The case belongs to bulk iron ore bulk cargo transport, and in light of the case, can be deducted the corresponding measurement allowance. The weight of the goods in the inspection was 95,618 tons, and the 0.5% of the measurement allowance was 478.09 tons. After deducting the measurement allowance, the actual goods were short of 3,846.91 tons. Zhijing Company should compensate Pingan Hongkou Branch for goods loss of USD592,828.07. Pingan Hongkou Branch requested to convert the loss of goods into RMB3,948,234.95 in accordance with the exchange rate on December 13, 2010 (the day when Lianyungang Entry-Exit Inspection and Quarantine Bureau issued a weight inspection certificate) of 1:6.66 USD against RMB, and the court of first instance

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supported it. According to this case, it is more reasonable to count Pingan Hongkou Branch’s claim for interest loss in accordance with the People’s Bank of China’s RMB current deposit interest rate over the same period from December 13, 2010 to the date when the judgment took effect. Pingan Hongkou Branch’s compensation payments include insurance bonus, litigation costs and other expenses in the previous marine insurance contract case, these additional costs do not have a certain connection with the case. The above claim for the additional costs of Pingan Hongkou Branch in the maritime cargo transportation contract lacked factual and legal basis, and the court of first instance did not support it. Zhijing Company presumed that the goods were not short for the reason that the goods in No.2 bill of lading overflowed, the weight of the whole ship was basically the same with that in the port of loading, and the relevant goods precipitated a large number of sewage and other reasons. The court of first instance held that the goods in the No. 1 bill of lading and the goods in the No.2 bill of lading were loaded and weighed in different cabins, and discharged separately, so there was no confusion. In addition, Zhijing Company said the goods precipitated a large number of sewage in the condition of increased moisture content. In accordance with the data recorded by the vessel, the weight precipitated sewage was much larger than the weight of the whole ship shortage of goods, and the data was clearly contradictory. Therefore, the above defense of Zhijing Company lacked factual and legal basis, the court of first instance did not accept it. In addition, according to the law, the people’s court that accepts dispute case of the insurer exercises the subrogation of the right to claim compensation should only hear the legal relationship between the third person arising the insurance accident and the insured person. Zhijing Company’s objection of right of action of Pingan Hongkou Branch lacked factual basis, and not belonged to the court hearing, the court of first instance did not accept it. In summary, the court of first instance made the Civil Judgment (2012) Hu Hai Fa Shang Chu Zi No.265: Zhijing Company should pay compensation for goods loss of RMB3,948,234.95 and interest loss to Pingan Hongkou Branch within 10 days from the effective date of the judgment (calculating according to the same period of the deposit interest rate of the People’s Bank of China from the date of December 13, 2010 until the effective date of the judgment). Not support the other claims of Pingan Hongkou Branch. Court acceptance fee in amount of RMB42,062.47, Pingan Hongkou Branch Company should bear RMB5,385.58 and Zhijing Company should bear RMB37,676.89. Both Pingan Hongkou Branch and Zhijing Company refused to the accept the judgment of first instance and appealed to the court of second instance. Pingan Hongkou Branch claimed that the ascertained fact of first instance was unclear and the law was not correctly applied. The legal status of CLC involved in the transportation business failed to be correctly identified. Therefore Pingan Hongkou Branch requested the court of second instance to change the original sentence and commuted CLC to bear joint compensation responsibility with Zhijing Company. Zhijing Company appealed that the ascertained fact of first instance was unclear and the law was not correctly applied and there existed multiple violations of legal

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procedures. Therefore Zhijing Company requested the court to revoke the judgment of first instance and to reject all the claims of Pingan Hongkou Branch or remand for retrial in accordance with the law. The court of second instance found out: M.V. “Bulk Prosperity” was the bulk cargo ship registered in the Hong Kong Special Administrative Region, the registered shipowner was CLC, deadweight ton (DWT) was 172,964 tons. At 1835 on October 25, 2010, M.V. “Bulk Prosperity” began sub-loading operations of cargoes of No.01 and No.02 bills of lading in Brazil Itaguai, in which the goods in No.01 bill of lading were loaded in 1, 3, 5, 7, 9 cabins and the goods of No.02 bill of lading were loaded in the 2, 4, 6, 8 cabins. At 1525 on October 27, 2010, the whole ship’s loading operation was completed, during which it did not weight by draft and subdivision. According to the total weight of the whole vessel, the total weight of the whole ship’s cargoes was 160,221 DWT. On December 6, 2010, M.V. “Bulk Prosperity” arrived in No.5 anchorage of Lianyungang, shifted to No.34 terminal on December 8, and started unloading operations of 2, 4, 6, 8 cabins at 2110, and ended the operation at 2100 on December 10. It started unloading operations of 3, 5, 7 cabins at 2150, and ended the operation at 0600 on December 11. Then M.V. “Bulk Prosperity” shifted to No.59 terminal through tug boat, started unloading operations of 3, 5, 7, 9 cabins at 0820, and ended all the operation at 0320 on December 13. During the whole operation, the weight of cargo unloaded at No.34 was 81,857 tons, and the weight of cargo unloaded at No.59 was 77,898 tons and the total weight was 159,755 tons. No.01 and No.02 bills of lading were issued by the carrier on October 27, 2010. No.01 B/L records: sinter, “SAIDTOWEIGH” (said to weight) was 95,618 wet tons; No.02 B/L records: pellet, “SAIDTOWEIGH” (said to weight) was 64,603 wet tons. In addition to the above records, the rest includes the name of the vessel, the issuer, the shipper and other information. Two bills of lading stated that the freight was charged by the voyage charter party. No.01 and No.02 bills of lading were later endorsement transferred by the shipper Vale S. A. to the same consignee Zhongji Company. It was also found that Shanghai Daxinhua International Ship Management Co., Ltd. changed its name to Shanghai Zhijing International Ship Management Co., Ltd. on February 17, 2014. In addition to the above facts, other facts found by the court of first instance were clear and were confirmed by the court of second instance. The court of second instance held that: (1) As for the legal status of Zhijing Company and CLC in the contract of the carriage of goods by sea, The court of second instance held that, according to the law, the bill of lading, as the demonstration of contract of carriage of goods by sea, was a document issued by the carrier at the shipper’s request after it receives the cargo or the cargo has been shipped. On the condition of no contrary evidence, the records of bill of lading should be regarded as a basis for determining the elements of the contract of carriage of goods by sea, including the identity of the carrier. On the condition that the bill of lading was issued by

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the captain of M.V. “Bulk Prosperity” and stamped with the ship seal, and the name of Zhijing Company is clearly reflected in the ship seal, it was appropriate to regard Zhijing Company as the carrier of the ocean cargo transportation. Although Zhijing Company defended that M.V. “Bulk Prosperity” was bareboat chartered by Daxinhua Shipping from CLC, its bareboat charter relationship’s authenticity could not be confirmed due to no registration and no evidence to prove and Zhijing Company has also clearly stated that it was the transportation carrier in the first trial, so the court shall not adopt its defense. Although Pingan Hongkou Branch Company advocated CLC was the actual carrier of the case, because it did not provide evidence to prove CLC was involved in the transportation of goods, and the identity of the owner of the ship’s registration and the identity of the actual carrier were not necessarily connected legally, therefore its claim lacked factual and legal basis. The court of second instance did not accept its reasons for the appeal, and did not support the appeal request. (2) As for whether there was cargo damage of the ocean cargo transportation and whether the carrier should be liable for its compensation. According to the law, the carrier’s liability period for the goods shipped by non-containers means the period from the time the goods are loaded to the time when the goods are unloaded and in which the cargo is under the control of the carrier. During the liability of the carrier, if the goods are lost or damaged, the carrier shall be liable unless otherwise specified. Therefore, the carrier is liable for compensation, provided that during its period of responsibility the goods have been destroyed or damaged. There is no difference between the contents of the goods in No.01 and No.02 bills of lading except for name and weight of goods. According to the records of “TO BE USED WITH CHARTER-PARTIES” and “FREIGHT PAYABLE AS PER CHARTER PARTY” of two bills of lading, the fact that there is lease can be confirmed. Therefore Zhijing Company’s claim that the two bills of lading was issued for the reason that the carrier is to perform the same voyage charter party with Vale S. A. (bill of lading shipper) is reasonable, and is consistent with the fact that the relevant ship was weighed by draft on the whole ship but not subdivision in port of loading. On the condition that Pingan Hongkou Branch has no evidence to prove that it had requested or the carrier had measured respectively the goods of No.01 and No.02 bills of lading, it made special marking “SAIDTOWEIGH” in the front of the recorded weight of the goods in the two bills of lading, which could prove that the carrier indeed recorded the weight of the goods in accordance with the shipper’s declaration. Therefore, on the condition of the fact that the goods of No.01 bill of lading are short for discharge and the fact that the goods of No.2 bill of lading are over for discharge exist at the same time and the weight of the unloading cargo of the whole vessel, the weight of loading cargo in port of loading and the weight of cargo recorded in the two bills of lading are basically the same, the carrier is required to bear the responsibility respectively for the weight of the goods recorded in the associated bill of lading held by the same consignee, which lacks factual basis and is unfair. Accordingly, the carrier’s

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appeal reason of regarding the weight of the whole ship as a measure of whether it implements the obligations of the contract has factual basis. The court of second instance adopted it and supported its corresponding appeal. In summary, on the condition that the new evidence of the second instance could prove that the goods were not weighed as per separate cabins, records of the weight of the goods in the bill of lading was declared according to the shipper and unloaded cargo weight in the ship is basically consistent with the total weight of goods recorded in two bills of lading, there was no shortage of goods of Zhijing Company therefore it should not bear the responsibility for the damage. Its appeal has factual and legal basis, and the court of second instance supported it. Accordingly, the court of second instance made Civil Judgment (2013) Hu Gao Min Si (Hai) Zhong Zi No.105 to revoke the Civil Judgment (2012) Hu Hai Fa Shang Chu Zi No.265 made by the Shanghai Maritime Court and did not support the claim of Pingan Hongkou Branch. Court acceptance fee in the first and second instance respectively of RMB42,062.47 should be born by Pingan Hongkou Branch. Pingan Hongkou Branch applied for retrial, claiming that the fact of second instance was found unclearly, the application of law and the result of the judgment were wrong. 1. Subdivision draft survey data should not be recorded in the log. That the judgment of the second instance firmly held that the subdivision draft survey was not operated while goods being loaded lacked factual basis. 2. The ship owner and the actual carrier are closely related. If the ship owner or the bareboat charterer (under the circumstance that the bareboat charter party has been recorded) knows or agrees to load, they will be regarded as the actual carriers of the goods. Therefore, CLC should be the actual carrier of the involved case. 3. The involved No.01 bill of lading and the outside No.2 bill of lading are independent of each other with different goods. The carrier shall independently and separately bear the responsibility for delivery of the goods on the basis of the bill of lading, and the amount recorded in the bill of lading shall be the absolute evidence to confirm the quantity of the goods delivered by carrier to the transferee. Charter party incorporation into the B/L does not mean that the carrier can replace his fulfillment of charter party or exempt his liability for the consignee. Moreover, the judgment of the second instance did not find out whether the case had a charter party and which charter party was incorporated into the B/L. 4. The quantity of the goods recorded in the B/L is the quantity of shipment. “SAIDTOWEIGH” recorded in the involved B/L does not belong to negative endorsement thus having no legal force. 5. The judgment of second instance was rendered simply on the basis that the entrusted foreign trade agent was the same company. Meanwhile, the hedging of the shortage of the goods was operated according to different price and type. There is no legal basis and it seriously deviates from shipping and trade

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practices. Pingan Hongkou Branch requested the court to revoke the judgment of the second instance and to commute that Zhijing Company and CLC should jointly compensate for the loss of RMB3,948,234.95 and loss of interest (calculated from December 13, 2010 in accordance with RMB demand deposit interest rate of the People’s Bank of China to the effective date of the judgment) and bear the litigation fee of the first and second instance. Zhijing Company and CLC argued: 1. the goods involved in the ship was not short-delivered and the fact is that more goods were delivered. It is not improper for the judgment of second instance to adopt the logbook and the ship’s unloading record. 2. Goods under No.01 and No.02 bills of lading are in fact the same goods. and goods under No.02 bill of lading can be substituted for the short-unloaded goods under No.01 bill of lading, and the consignee of the bill of lading extracted all the goods. 3. Both bills of lading belong to the same contract of carriage of goods by sea, not mutually independent. Zhongji Company is both the holder of the two bills of lading and the consignee of the goods. The short delivery claimed by Hemuda Company was essentially due to improper allocation between the end users after the delivery of goods by Zhongji Company. 4. The short-delivery of goods under No.01 bill of lading was due to the improper quantity goods consigned by the consignor, and the bill of lading contains the clause “SAIDTOWEIGH” (weight alleged), which belongs to the carrier’s exceptions matter. 5. CLC did not constitute the actual carrier of the shipment involved, and the actual carrier was not responsible for the quantity recorded in the bill of lading. Request to dismiss the application for retrial of Pingan Hongkou Branch. During the trial, Zhijing Company and CLC have objection to the fact that the goods of the two bills of lading were imported by Zhongji Company under the agency from different companies ascertained in the first and the second instance judgments. The court holds that this case is a dispute over a contract of carriage of goods by sea. The port of shipment of the involved goods was in Brazil and CLC was registered in Hong Kong Special Administrative Region. This is a foreign-related and Hong Kong related case. Both parties have not reached an agreement on the application of law in this case. According to the fact that the domicile and the delivery port of the involved goods is in the mainland of China, the court of the first and second instance confirmed that the mainland law of China is regarded as the proper law to hear the case according to the principle of the most significant relationship. The court confirms it. As this case is a dispute arising from the short delivery, the relevant provisions of the Maritime Code of the People’s Republic of China shall be applied. According to the fact ascertained by the Civil Judgment of Shanghai Maritime Court (2011) Hu Hai Fa Shang Chu Zi No.881, the goods under No.01 bill of lading were purchased by Zhongji Company, the agent for import and shipment of Hemuda Company who is the actual owner of the goods involved. The relevant import agent contract and the contract for international sale of goods were signed before the involved goods arrived at the port of the destination, while the goods

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under No.02 bill of lading which arrived at the port of the destination with the involved goods together belong to the person other than involved in the case. Therefore, it is appropriate for the courts of first and second instance to confirm that the goods of the two bills of lading were imported by Zhongji Company under the agency from different companies. The court of second instance firmly believed that Zhijing Company was the carrier of the contract of carriage of goods involved in the case, and Zhijing had not applied for a retrial in the case, so this court confirms its status of the carrier. According to the reasons for the retrial application of Pingan Hongkou Branch, and to the opinions of Zhijing Company and CLC, the issues in this case are summarized as follows: 1. the legal status of CLC in the contract of carriage of goods by sea; 2. whether there is a short of the involved goods; and 3. whether Zhijing Company and CLC should bear the liability of the goods shortage. 1. The legal status of CLC in the contract of carriage of goods by sea. According to Article 42 of the Maritime Code of the People’s Republic of China, actual carrier means the person to whom the performance of carriage of goods, or of part of the carriage, has been entrusted by the carrier, and includes any other person to whom such performance has been entrusted under a sub-contract. After hearing, it is found out that the ship engaged in transportation of goods is M.V. “Bulk Prosperity”, the registered shipowner is CLC, the ship manager is Zhijing Company, and the involved bill of lading was issued by the captain and stamped with the name of Zhijing Company. After receiving the subrogation right, Pingan Hongkou Branch filed an action against Zhijing Company and CLC, thinking that Zhijing Company was the carrier and CLC was the actual carrier. The initial burden of proof has been completed with regard to the identification of the carrier and the actual carrier. CLC defensed that it was not the actual carrier and did not undertake the involved transportation. Therefore it should bear the burden of proof. Although Zhijing Company and CLC advocated that the involved ship had been bare chartered to Daxinhua Shipping by CLC, they did not provide sufficient proof. Therefore, CLC should bear the adverse result of failure on burden of proof. The distribution of evidence burden was wrong for the court of first and second instance firmly believed that CLC was not the actual carrier for the reason that Pingan Hongkou Branch could not prove that CLC actually was involved in the transportation of the goods involved. The claim of Pingan Hongkou Branch regarding CLC as the actual carrier of the involved goods shall be supported. 2. Whether there is a shortage of goods under No.01 bill of lading. After investigation, it is found out that the vessel involved undertook the shipment of two bills of goods, and the carrier respectively issued No.01 bill of lading and No.02 bill of lading. The description and weight of goods recorded in two copies of bills of lading are different and were separately loaded at the port of shipment. Goods under No.01 bill of lading were loaded in No.1, 3, 5, 7, 9 cabins and goods under No.02 bill of lading were loaded in No.2, 4, 6, 8 cabins. However subdivision draft survey was not carried out separately but for the whole ship and the total

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weight was 160,221 wet tons. The weight recorded in the two bills of lading is 95,618 wet tons in No.01 bill of lading, and 64,603 wet tons in No.02 bill of lading. After the involved goods had arrived at the port of destination, they were separately unloaded and stacked. Lianyungang Entry-Exit Inspection and Quarantine Bureau carried out draft survey in accordance with the different bills of lading. It is recorded on the inspection certificate of CIQ that the draft survey weight of goods SINTERFEEDOREGUAIBA under No.01 bill of lading was 91,293 tons, 4,325tons less than the weight 95,618 tons recorded on the bill of lading. Therefore, the weight of the involved goods had not been consistent with that recorded in the bill of lading when the goods arrived at the port of the destination. There was a shortage of weight, which was not related to the distribution of the goods after delivery by the consignee. The submitted relevant records of the delivery of cargo from storage and the port operation commission during the trial of the second instance are all the actual delivery weight, which is not a contradiction to the weight recorded in CIQ and cannot overturn the delivery weight recorded in CIQ. It is lack of factual evidence that Zhijing Company claimed that the goods involved in the shortage were caused by improper allocation of the goods by Zhongji Company. The goods carried by the involved ship belong to different bills of lading, whose name and quantity are not the same. This is only a dispute over the contract of carriage of goods under No.1 bill of lading. It is apparently inconsistent with the facts that the judgment of second instance firmly believes there is no shortage of goods for the reasons that the involved two batches of goods were not separately weighed, the weight recorded in bill of lading was given by consignor, the total unloading weight is basically consistent with the recorded total weight. The court of first instance held that there was shortage of goods under No.01 bill of lading. The court of first instance deducted 0.5% of the measurement allowance, and found that the goods involved were actually 3,846.91 tons short, and the goods were valued at 592,828.07 dollars, or RMB3,948,234.95. When Pingan Hongkou Branch applied for the retrial, no objection was raised to this method of calculation, and the court confirms it. 3. Whether Zhijing Company and CLC should be liable for damages. According to Article 71 of the Maritime Code of the People’s Republic of China, a provision in the document stating that the goods are to be delivered to the order of a named person, or to order, or to bearer, constitutes such an undertaking. Therefore, the involved carrier, Zhijing Company should deliver the goods to the holder of the bill of lading in accordance with the name and weight of the goods recorded in the bill of lading. The goods under No.01 bill of lading is SINTERFEEDOREGUAIBA, and the weight delivered at the port of destination did not correspond with the weight recorded in the bill of lading, so there was a shortage of weight. Zhijing Company should be liable for the compensation. The bills of lading involved are “short form bill of lading”, though marked “common use with charter party” and “freight paid as per charter party”, the bill of lading does not contain the name and terms of the charter party. Zhijing Company did not prove that the charter party was effectively incorporated into the bill of lading and that the weight of goods cannot be checked at

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the port of shipment. It is lack of factual and legal basis that Zhijing Company claimed that it should be exempted from the liability for compensation for the reasons that both bills of lading were performed for the same sequence of voyage, the shipper did not load properly, the weight recorded in the bill of lading was given by the shipper and the bill of lading marked clause “SAIDTOWEIGH”. The actual weight of the goods under the No.01 bill of lading did not correspond with the weight recorded in the bill of lading, and there was a shortage; the actual weight of the goods under No.02 bill of lading is not in conformity with the weight recorded in the bill of lading, and there was an overflow. The holder of the two bills of lading is Zhongji Company. In this case, the key problem is whether the carrier Zhijing Company can be exempted from the liability to pay compensation for the goods under No.01 bill of lading for the reasons that the total delivery weight is consistent with the total weight recorded in the bill of lading. The court holds: firstly, although the two batches of goods were bulk cargo consigned by the same consignor Vale S. A., the two were not the same kind of goods. The goods under No.01 bill of lading were sinter, the goods under No.02 bill of lading were pellet, and also, the weight of the goods was not the same. Zhijing Company claimed that the two batches of goods were the same and the goods under No.02 bill of lading can replace that under No.01 bill of lading, but it did not provide sufficient evidence. Its claim was not consistent with the record in bill of lading and the professor’s testimony, therefore it shall not be supported. The two batches of goods were separately loaded. The carrier, Zhijing Company, also issued two copies of blank bill of lading which can be respectively transferred. Therefore, two bills of lading were evidence of two independent transport contracts. Zhijing Company should respectively deliver the goods in accordance with the name and weight recorded in the bills of lading, and also, the holders of bills of lading should claim their right according to different bills of lading. The carrier, Zhijing Company only checked weight by draft for the whole ship, but did not separately check the goods, and did not verify the weight recorded in both bills of lading. Therefore, the resulting risks should be born by itself. Secondly, although the holder of both bills of lading is Zhongji Company, it was respectively entrusted as agents by different companies and the names of goods and quantity relate to different owners. Even if the consignee is the same person, as the type of goods under two bills of lading is different, the consignee still can exercise the right to require the carrier to pay the compensation in the condition of short and overflow of goods. By hedging of overflow and short for goods of types, specification and prices, it does not conform to the principle of independence, if the consignee was deprived of the right to claim compensation with respect to the shortage under one of the bills of lading only for the season that there is an actual loss in the total value of goods. The judgment of second instance held that the bills of lading held by Zhongji Company are related to each other thus firmly believing that Zhongji Company cannot require the carrier to bear the responsibility for the weight recorded in the two bills of lading respectively, which lacked corresponding factual and legal basis and shall be corrected. According to Article 63 of the Maritime Code of the People’s Republic of China, where both the carrier and the actual carrier are liable for compensation, they shall

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jointly be liable within the scope of such liability. The dispute involved is due to the discrepancy between the delivery weight at the port of destination and weight recorded in bill of lading, but the bill of lading was issued by Zhijing Company and CLC, as the actual carrier, did not issue the involved bill of lading, and there is no evidence of its responsibility for the shortage of goods, so CLC should not be liable for any loss of goods. Although, the court of first and second instance’s affirmation of the legal status of CLC is wrong, the judgment that CLC should not bear the compensation is not inappropriate. In summary, the judgment of the second instance that Zhijing Company should not bear the liability for the compensation shall be corrected. Although the court of first instance’s affirmation of the legal status of CLC is wrong, the judgment that CLC should not bear the compensation is not inappropriate, the judgment that Zhijing Company should bear the liability for compensation is right, which shall be affirmed. According to Article 71 of the Maritime Code of the People’s Republic of China, Article 207 Paragraph 1 and Article 170 Paragraph 1 Sub-paragraph 2 of the Civil Procedure Law of the People’s Republic of China, Article 407 Paragraph 2 of the Interpretation of the Supreme People’s Court concerning Application of the Civil Procedure Law of the People’s Republic of China, the judgment is rendered as follows: 1. Revoke the Civil Judgment of Shanghai High People’s Court (2013) Hu Gao Min Si (Hai) Zhong Zi No.105; and 2. Affirm the Civil Judgment of Shanghai Maritime Court (2012) Hu Hai Fa Shang Chu Zi No.265. Court acceptance fee of first instance in amount of RMB42,062.47, Ping An Property & Casualty Insurance Company of China Ltd. Shanghai Hongkou Branch shall bear RMB4,385.58, Shanghai Zhijing International Ship Management Co., Ltd. shall bear RMB37,676.89; court acceptance fee of second instance in amount of RMB42,062.47 shall be borne by Shanghai Zhijing International Ship Management Co., Ltd. This judgment is final. Presiding Judge: HU Fang Judge: GUO Zhonghong Judge: YU Xiaohan December 1, 2016 Clerk: LI Na

Ningbo Maritime Court Civil Judgment Ping An Property & Casualty Insurance Company of China Ltd. Ningbo Branch et al. v. Ningbo Zhenhai Ship Repair Yard et al. (2015) Yong Hai Fa Shi Chu Zi No.48 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 1010. Cause(s) of Action 196. Dispute over liability for damage of ship pollution. Headnote Ship repair yard and shipowner held liable to reimburse the Plaintiff insurers for sums paid by insurers to pollution claimants after explosion on ship at repair yard, because explosion was caused by negligent and unauthorized repairs conducted by yard workers and ship’s crew. Summary An explosion occurred aboard a vessel while it was docked in the Defendant’s ship repair yard, and an oil spill followed. The explosion was caused by unauthorized and negligent repair work done by the repair yard workers and the crew of the vessel. The Plaintiff insurers paid the resulting pollution claims and sued the Defendant seeking reimbursement. The court held that the Plaintiffinsurers had a lawful claim for reimbursement from the repair yard and that the repair yard would bear 60% of the liability for compensation of the cleanup costs, with the vessel bearing the remainder of the liability. The court also held that the second Defendant, the investor of the repair yard, should be personally liable for whatever portion of the debt that the repair yard could not pay.

Judgment The Plaintiff: Ping An Property & Casualty Insurance Company of China Ltd. Ningbo Branch Domicile: 17-18F, Ping An Building, No.396, Kai Ming Street, Ningbo City, Zhejiang Province. Organization code: 74,498,939–2. Person in charge: YANG Gang, general manager of the branch. © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_34

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The Plaintiff: Ping An Property & Casualty Insurance Company of China Ltd. Domicile: 6-7F, Xing Cheng Development Center Hotel, Fuhua Three Road, Futian Center District, Shenzhen, Guangdong Province. Organization code: 71,093,072–0. Legal representative: SUN Jianping, chairman of the company. Agent ad litem of the two Plaintiffs: ZHU Guolin, lawyer of Shanghai Hightime Law Office. Agent ad litem of the two Plaintiffs: ZHANG yvchao, lawyer of Shanghai Hightime Law Office. The Defendant: Ningbo Zhenhai Ship Repair Yard Domicile: Zhangjian Gan, Zhenhai District, Ningbo City, Zhejiang Province. Organization code: 14,435,522–2. Legal representative: XU Dingyang, general manager of the yard. The Defendant: XU Dingyang, male, born on January 27, 1954, Han, living in Zhejiang Province Agent ad litem of the two Defendants: LI Huibin, lawyer of Zhejiang Haoshang Law Office. With respect to the case arising from dispute over liability for ship pollution damage, the two Plaintiffs, Ping An Property & Casualty Insurance Company of China Ltd. Ningbo Branch (hereinafter referred to as Ping An Ningbo), and Ping An Property & Casualty Insurance Company of China Ltd. (hereinafter referred to as Ping An) filed an action against the Defendants, Ningbo Zhenhai Ship Repair Yard (hereinafter referred to as Zhenhai Repair Yard) and XU Dingyang, before the court on January 8, 2015. The court entertained the case and applied the ordinary procedure in light of the law. The Defendant Ping An Ningbo applied to the court for property preservation before the lawsuit, requiring the freezing of two Defendants’ bank deposits of RMB61,500,000 or seizing other equivalent property, the court ruled that it was permitted, and that the two Plaintiffs’ application for renewal and changing the amount of property preservation to RMB6,500,000 in the trial process was also permitted. The court held the first hearing in public on July 28, 2015, and on September 29, 2015 the court ruled to suspend the trial because the case must be based on the outcome of the case (2015) Zhe Yong Xing Chu Zi No.8. After that case was concluded, the court resumed trial of this case, and held a second hearing in public on March 25, 2016. Agent ad litem of the two Plaintiffs ZHU Guolin and agent ad litem of the two Defendants LI Huibin appeared in court to attend the trial. Now the case has been concluded. Ping An and Ping An Ningbo claimed that on October 12, 2013, a deflagration accident occurred and oil spilled from the M.V. “Xu Yang 11” whose ship pollution liability insurance was underwritten by the two Plaintiffs during the process of repairing at terminal by Zhenhai Repair Yard. The two Plaintiffs as insurers of ship oil pollution reached an agreement on the clean-up fee with the pollution-cleansing organization Ningbo Yongjie Oil Spilling Emergency Company (hereinafter referred to as Yongjie Company) and actually compensated it RMB6,500,000 for

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the clean-up cost. In addition, the Ningbo Environmental Protection Bureau also claimed RMB20,000,000 clean-up cost against the two Plaintiffs on the same oil accident, so the economic losses suffered by or possibly suffered by the two Plaintiffs due to the accident may reach RMB8,500,000. According to Investigation Report on “10.22” Major Deflagration Accident of the M.V. “Xu Yang 11” in Zhenhai District, Ningbo City (hereinafter referred to as Investigation Report) issued by Ningbo Safety Production Supervision and Administration Bureau (hereinafter referred to as Ningbo Safety Supervision Bureau), the direct cause of the accident are the spark generated by demolition of the valve with the use of hacksaw, gas cutting ignited the explosive mixture in fuel tank, which led to the explosion of No.4 and No.2 tanks on starboard during the process of repairing the oil spilling area by Zhenhai Repair Yard workers, FU Ajun, LIANG Guoling, YANG Jun, WANG Yahui and the M.V. “Xu Yang 11” crew members. At the same time, Investigation Report identified that the indirect cause of the accident was that Zhenhai Repair Yard failed to bear principal responsibility of safety production and its management was disordered. The specific performance was as follows: not seriously implementing the safety management system; not seriously carrying out safety education training; not providing two full-time safety management workers under the rule but only one part-time safety management staff; not seriously carrying out hazards screening, and not seriously learning the lessons from a number of several production safety accidents since 2005. Investigation Report identified the nature of the incident involved was a vast production safety accident caused by the enterprise’s illegal repair and incomplete multi-sectoral supervision. Investigation Report advised that the Defendant XU Dingyang should bear the major leadership responsibility and should be investigated for its long-term oversight and disordered management over the hazards and illegal acts in Zhenhai Repair Yard. Zhenhai Repair Yard was a sole proprietorship enterprise. According to the provisions of Article 2 of the Law of the People’s Republic of China on Individual Proprietorship Enterprises, its sole investor, the Defendant XU Dingyang, should bear unlimited liability for the debt of Zhenhai Repair Yard with his personal property. The Plaintiff Ping An Ningbo had applied for property attachment prior to lawsuit and paid the application fee of RMB5,000. The two Defendants should bear unlimited liability to the insurer of the M.V. “Xu Yang 11”, Ningbo Xu Yang Shipping Company (hereinafter referred to as Xu Yang Company) for their fault that resulted in major loss of the insurer of the M.V. “Xu Yang 11”. As the ship oil and pollution insurer, the two Plaintiffs should bear the insurance liability and have the right to recourse to the two Defendants as person in charge. So they requested the court to sentence as follows: the two Defendants should pay the two Plaintiffs RMB8,500,000 plus interests (of which RMB2,000,000 interest was calculated from December 13, 2013. RMB4,500,000 interest from April 10, 2015, the remaining RMB2,000,000 from the actual date of payment, to the date of actual payment by the Defendant in accordance with the loan interest rate stipulated by the People’s Bank of China for the corresponding period); 2. the two Defendants should bear the litigation costs and pre-litigation property insurance fee.

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Zhenhai Repair Yard and XU Dingyang commonly defended as follows: 1. when the accident occurred, the M.V. “Xu Yang 11” did not dock in the wharf of the Defendant Zhenhai Repair Yard, the M.V. “Xu Yang 11” did not apply for the ship repair procedures through Xu Yang Company, and Zhenhai Repair Yard did not receive any repair cost, without knowing the berthing condition of the M.V. “Xu Yang 11”. Zhenhai Repair Yard was not in relation to the accident involved; 2. Investigation Report identified that FU Ajun and others who repaired the items are in violation of their business limits, without the approval of Zhenhai Repair Yard. The acts of FU Ajun and others are non-duty behavior, and it was impossible for Zhenhai Repair Yard to discover that FU Ajun privately led workers to repair items beyond their business. So Zhenhai Repair Yard was not responsible for the major safe production of the M.V. “Xu Yang 11”. it has no fault, and should not bear any responsibility; 3. Zhenhai Repair Yard had quality management system certified by China Classification Society, also adopted inspection safety production by Ningbo Safety Supervision Bureau. Investigation Report concluded that Zhenhai Repair Yard did not implement the safety production system was wrong. Even if Investigation Report identified the indirect reason of Zhenhai Repair Yard accident based on administrative management, it had no direct causal relationship with the occurrence of accident. It should not bear the tort liability. The Defendant XU Dingyang was not neglect in his duty and should not bear the tort liability. 4. The loss appealed by the two Plaintiffs was not in line with the fact and its reconciliation with Yongjie Company did not notify the two Defendants, and even did not obtain the consent from the two Defendants. The RMB6,500,000 compensation agreed in the settlement agreement was not binding on the two Defendants. In order to support their support, the two Plaintiffs provided the following evidence to the court: 1. The ship pollution liability policy (issued by Ping An Ningbo) to prove that the Plaintiff Ping An Ningbo underwrote the ship pollution liability of the M.V. “Xu Yang 11”; 2. Investigation Report, the approval of the Ningbo Municipal Government to prove that the M.V. “Xu Yang 11” had a deflagration accident on October 12, 2013 and caused oil pollution damage, Zhenhai Repair Yard and XU Dingyang as the actual controller should bear major responsibility for the accident. 3. Zhenhai Repair Yard’s registration information to prove that the Defendant XU Dingyang was the only investor of Zhenhai Repair Yard; 4. The settlement agreement to prove that due to the explosion, the two Plaintiffs on behalf of the insurer Xu Yang Company reached a settlement on the clean-up cost and the two Plaintiffs should bear the cost of emergency clean-up and disposal for RMB6,500,000; 5. The bank slip to prove that Ping An has paid cost of emergency clean-up and disposal for RMB6,500,000 on behalf of the insurer; and 6. Meeting minutes and e-mail (submitted after the hearing) to prove that after the accident, Yongjie Company and Xu Yang Company and its insurance brokers and other parties coordinated on clean-up cost, and the parties reached a

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RMB6,200,000 verbal settlement agreement on clean-up cost in September 2014. After that, Xu Yang Company refused to sign the settlement agreement due to the subrogation problem after the Plaintiff paid off. In order to support their defense, the two Defendants provided the following evidence to the court: 1. The terminal plan, the port business license to prove that the M.V. “Xu Yang 11” did not dock at the wharf owned by the Defendant Zhenhai Repair Yard who was not informed of its berthing condition. 2. The quality management system certification, management system audit report to prove that China Classification Society issued the quality management system certification to Zhenhai Repair Yard in November 2011, and the 2012 reexamine was also qualified; 3. Notice on the release of the list of enterprises up to three level safety production standards in metallurgical and other industries 2011 Ningbo City, assessment methods of safety production standardization for ship repairing and building company, Zhejiang Province, check list of safety production standardization for ship repairing and building company, application form of reexamining for safety production standardization for ship repairing and building company, city (county) level approval report on safety production standardization for ship repairing and building company in Ningbo City to prove that Zhenhai Repair Yard passed audits and reviews in 2011 by the Ningbo Safety Supervision Bureau and was rated as management enterprise that reaches three level standardization of safety production; 4. The notice of Ningbo Safety Supervision Bureau on conducting special inspection on the safety production of the shipbuilding enterprises in Ningbo City, the notice of Ningbo Safety Supervision Bureau on conducting special inspection of safety production on the shipbuilding enterprises ship to prove that the Ningbo Safety Supervision Bureau organized a special inspection of safety production on all shipbuilding enterprises in Ningbo City. And Zhenhai Repair Yard was qualified in the inspection; and 5. Document provided by the enterprises related to the accidents and cover photo of the safety production management system file to prove that the accident investigation team obtained rules and regulations and safety management system documents of Zhenhai Repair Yard and the accident investigation report confirming that the welding workshop director led the workshop staff to repair the project beyond its business without the approval of Zhenhai Repair Yard. In order to find out the facts of the case, the court has obtained the following evidence according to law: 1. The ship pollution insurance policy (issued by the Plaintiff Ping An); 2. Two administrative judgments (Zhenhai Repair Yard refused to accept the specific administrative act by Ningbo People’s Government of issuing Reply of Ningbo People’s Government to Major Accident Investigation Report on the

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M.V. “Xu Yang 11” Tanker “10.12” Explosion in Zhenhai District, and filed a lawsuit, the first and second instance administrative judgment); and 3. (2014) Yong Hai Fa Shang Chu Zi No.869 case Ship Pollution Clearance Agreement and Dynamic Calculating of Clean-up Costs of the M.V. “Xu Yang 11” provided by Yongjie Company (hereinafter referred to as Dynamic Calculating). Through cross-examination, the two Defendants had no objection to the authenticity of the evidence by the two Plaintiffs, but argued as follows: Investigation Report merely identified that Zhenhai Repair Yard was the indirect cause of the accident; the settlement agreement of evidence 4 did not obtain the consent of the two Defendants, who were not aware of it, so it was not binding between the two Defendants; there was no objection of the representative of Xu Yang Company in evidence 6 of meeting minutes but it did not mean that the company agreed on the clean-up costs that lacked objective basis in meeting minutes. The Plaintiff said the fact that parties reached a RMB6,200,000 verbal agreement was not in line with the truth. In fact, Xu Yang Company also refused to sign the settlement agreement, meaning that even if Xu Yang Company agreed to pay the Plaintiff Yongjie Company the clean-up costs, the burden of proof on clean-up costs born by the Plaintiff should not be removed. The two Plaintiffs had no objection to the authenticity of the evidence provided by the two Defendants, but they did not recognize the probative force of the evidence, believing that because there was the identification of Investigation Report that the M.V. “Xu Yang 11” docked at wharf owned by Zhenhai Repair Yard, even if Zhenhai Repair Yard passed the assessment and audit of certain items by relevant agencies, the tort liability should not be removed in this accident. For the evidence obtained by the court, the two Plaintiffs had no objection, the two Defendants had no objection to the remaining evidence in addition to the one that they held unilateral calculation of Dynamic Calculating by Yongjie Company cannot prove the actual clean-up costs. The court, upon examination, holds that all parties have no objection to the pro forma authenticity of the evidence obtained by the court and submitted by the other, so the court confirms the authenticity of the evidence. For the probative force of some of the evidence: evidence 2, the investigation report of the two Plaintiffs passed administrative litigation, the effectiveness of which can be confirmed; in terms of rationality of reconciliation amount, that is yet to be confirmed in evidence 4 and 6 of the two Plaintiffs, the court will confirm it on the whole, by combining the evidence of the whole case; evidence 2 of the two Defendants is the certificate issued by the China Classification Society to Zhenhai Repair Yard before the accident occurred, evidence 3 and 4 are notices and regulatory documents issued by the government authorities, these three evidence are not related to the accident involved. The cross-examining by the Plaintiff proving the ability is reasonable, so the court does not confirm the three evidence. For the liability for the accident to be proved with the remaining evidence of the Defendant, the court will confirm it upon combining the overall evidence of the case; Dynamic Calculation obtained by court is a basis on which Yongjie Company claimed for compensation, and that the

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settlement fee is much lower than that of Dynamic Calculation. Therefore, Dynamic Calculation can be used as the preliminary basis for determining whether the clean-up fee is reasonable. In accordance with the statements of the parties and the valid evidence confirmed above, the court confirms the following facts: The M.V. “Xu Yang 11” was a tanker owned by Xu Yang Company. On August 8, 2013, Xu Yang Company had the ship insured by Ping An Ningbo and on the same day Ping An Ningbo issued to Xu Yang Company a policy with special seal of Ping An. The policy included as follows, the insured was Xu Yang Company, the insurance period was from 0000 on October 1, 2013 to 2400 on September 30, 2014, compensation limit was RMB48,000,000, the absolute deductible for each accident was RMB50,000 and so on. At 0800 on November 11, 2013, after providing fuel to the M.V. “Xing Long Zhou 918”, the M.V. “Xu Yang 11” docked at the outer berth of the M.V. “Xu Yang 7” of Zhenhai Repair Yard wharf, at 0330 on the same day the M.V. “Xu Yang 7” departed the port, and the M.V. “Xu Yang 11” re-docked the outer berth of the M.V. “Hengshunda 78”. At 3 o’clock on the next day, the second officer of the M.V. “Xu Yang 11” ZHONG Xinliang and others stopped the M.V. “Bei Tuo 1” at the outer berth of the M.V. “Xu Yang 11”. Due to the oil hole (plugged usually with cement) on oil pipeline valve of No.4 cargo tank on the M.V. “Xu Yang 11” starboard, ZHONG Xinliang contacted FU Ajun, welding workshop manager of Zhenhai Repair Yard, asking to help repair it in the port. At around 1000 on October 11, 2013, FU Ajun assigned welder ZHAO Shikun to put welding machine, acetylene, oxygen cylinders on the M.V. “Hengshunda 78”. At around 0730 on the next morning, FU Ajun led WANG Yahui, LIANG Guoling, YANG Jun, WANG Zhanglin, ZHAO Shikun and other five welders to the M.V. “Xu Yang 11” for repair operations. The crew CHEN Weichang was in the bow for painting maintenance, WANG Zhanglin, ZHAO Shikun were in the bow for welding cable hole, and FU Ajun, WANG Yahui, LIANG Guoling, YANG Jun were in the fourth cargo tank on the starboard for dismantling valve, crew ZHONG Xinliang, SUN Shizhong, WANG Yacun and YU Zufu were in the repair site. At about 0815, explosion occurred in the M.V. “Xu Yang 11” involved. When the accident occurred, CHEN Weichang, WANG Zhanglin and ZHAO Shikun in the bow who fell into the sea was rescued, ZHONG Xinliang, SUN Shizhong, YU Zufu, FU Ajun, WANG Yahui, LIANG Guoling, YANG Jun and other 7 people confirmed death on site, WANG Yacun died in hospital on October 27, 2013. On October 12, 2013, Ningbo Municipal Government authorized the Ningbo Safety Supervision Bureau to set up the accident investigation team. On June 10, 2014, the accident investigation team made Investigation Report, confirming the direct cause of the accident as follows: Zhenhai Repair Yard workers FU Ajun, LIANG Guoling, YANG Jun, WANG Yahui and the M.V. “Xu Yang 11” crew ZHONG Xinliang, SUN Shizhong and so on repaired oil spilling of valve of the M.V. “Xu Yang 11” and exploded mixed gas by producing spark during the process dismantling it with the use of hacksaw, gas cutting, resulting in the explosion of No.4 and No.2 cargo on starboard. The indirect cause of the accident was as follows: Xu Yang Company

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and Zhenhai Repair Yard did not seriously fulfill the principal responsibility for safety production, and its management was disordered. On July 4 of the same year, the Ningbo Safety Supervision Bureau submitted Investigation Report to the Ningbo Municipal Government, and the Ningbo Municipal Government made the approval of Investigation Report submitted for examining and approving. Zhenhai Repair Yard did not accept it and appealed to the People’s Government of Zhejiang Province for administrative reconsideration. On December 3, 2014, the People’s Government of Zhejiang Province made the administrative reconsideration decision to affirm the approval of Ningbo Municipal Government on Investigation Report. Zhenhai Repair Yard was against the results of administrative reconsideration, and brought administrative litigation [(2015) Zhe Yong Xing Chu Zi No.8] to Ningbo Intermediate People’s Court. On June 11, 2015, Ningbo Intermediate People’s Court rejected the claim of Zhenhai Repair Yard. Zhenhai Repair Yard refused to accept it and instituted an appeal [(2015) Zhe Xing Zhong Zi No.286]. On October 16, 2015, Zhejiang High People’s Court dismissed the appeal and affirmed the original judgment. The accident involved caused fuel overflow of the M.V. “Xu Yang 11”, and Yongjie Company took measures to control pollution and clean up pollution in accordance with ship pollution clearance agreement it signed with Yongjie Company. After the end of the clean-up operation, representatives from Yongjie Company, Xu Yang Company and its insurance brokers, Ping An conducted many consultations on clean-up costs and formed three meeting minutes on November 8, 2013, June 13, 2014, and August 29, 2014. The last meeting minute recorded as follows: after the coordination between Xu Yang Company’s representative FU Jinan, insurance brokers XUE Chaize, Yongjie Company’s representative CHEN Gepei, Ping An’s representative ZHU Min by Ningbo Maritime Safety Administration, Yongjie Company agreed to settle a lawsuit by reducing the previous RMB7,000,000 to RMB6,600.000, and Ningbo Maritime Safety Administration hoped that the quota from the insurance company should be increased from the RMB6,000,000 to about RMB6,500,000. After that, Yongjie Company drafted RMB6,200,000 worth of settlement agreement with Xu Yang Company, Yongjie Company and Ping An Ningbo as parties to the agreement, but Xu Yang Company refused to sign the settlement agreement, considering the Plaintiff would recourse to the Defendant the after the Plaintiff paid off. On November 20, 2014, Yongjie Company brought a lawsuit before the court [(2014) Yong Hai Fa Shang Chu Zi No.869], requiring Ping An to pay RMB104,44,046 plus interest, including oil spilling cost, saving cost and clean-up cost. During the trial process, Yongjie Company changed the claiming principal to RMB7,000,000, and reached RMB6,500,000 worth of settlement agreement with Ping An (including advance payment of RMB2,000,000 on December 13, 2013), the case was settled by a mediation. On April 10, 2015, Ping An paid Yongjie Company the balance of RMB4,500,000. After that the two Plaintiffs asked the two Defendants to pay the loss of clean-up costs caused by the accident involved on the ground that it subrogated the right to claim against third person after it paid insurance indemnity under the policy of accident involved.

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In addition, according to relevant repairing provisions and actual operation process of Zhenhai Repair Yard and Xu Yang Company, the usual process of repairing the M.V. “Xu Yang 11” were as follows: the captain or chief engineer reported to the manager, and next Xu Yang Company contacted the Defendant XU Dingyang, then the manager of Xu Yang Company sent repair list to the Defendant director of Zhenhai Repair Yard, FU Fengjun who sent repair list to workshop directors under repair works. The workshop directors then sent people to repair. The maintenance of the M.V. “Xu Yang 11” on October 12, 2013 was not done by Xu Yang Company contacting the two Defendants, and then by FU Fengjun assigning maintenance work, but by the second officer ZHONG Xinliang directly contacting with the Defendant FU Ajun, welding workshop director of Zhenhai Repair Yard who did not notify the Defendant XU Dingyang and director Fu Fengjun but directly sent the workshop welder to repair without confirming whether the M.V. “Xu Yang 11” had safe operating conditions. He also used gas cutting tools without approval while dismantling valve shall be done by the workshop workers and ship maintenance fire work shall obtain approval. In early 2010, Xu Yang Company signed an agreement with Ningbo Zhenhai Guangyang Trade Co., Ltd. (hereinafter referred to as Guang Yang Company), leasing the M.V. “Xu Yang 11” to Guang Yang Company for the oil supply with 5-year lease term from January 1, 2010 to December 31, 2014. Guang Yang Company only had the right to dispatch the M.V. “Xu Yang 11”, and Xu Yang Company shall be responsible for navigation safety, technical operation and safety outside operational period of fuel supply and pollution prevention responsibilities. On January 1, 2011, Zhenhai Repair Yard signed an agreement with Guang Yang Company to lease its wharf to Guang Yang Company for docking the M.V. “Xu Yang 11” from January 1, 2011 to December 31, 2016. Zhenhai Repair Yard was a sole proprietorship enterprise, and the Defendant XU Dingyang was its investor. Xu Yang Company’s legal representative XU Sunjia was the Defendant XU Dingyang’s daughter, Xu Yang Company was actually controlled by the Defendant XU Dingyang, Guang Yang Company’s legal representative, and the general manager were the Defendant XU Dingyang. The court holds that Xu Yang Company insured its M.V. “Xu Yang 11” to the Plaintiff Ping An Ningbo. Although the Plaintiff Ping An Ningbo issued to Xu Yang Company a policy with unified format and seal of the Plaintiff Ping An and the insurance claims are also paid by the Plaintiff Ping An. Ping An promised that the insurance involved belonged to Ping An Ningbo and the rights and obligations under the policy belong to Ping An Property Ningbo. Therefore, the court confirms that the Plaintiff Ping An Ningbo is the insurer of the policy involved, who has the right to claim compensation to third person who causes the accident after the M.V. “Xu Yang 11” occurred insurance incidents, and from the day when insurance claims is paid. Combining the opinions of claim and defense of the Plaintiff and the Defendant, the court summarizes and illustrates the issues in this case as follows: First, whether Zhenhai Repair Yard should bear the liability for the explosion and oil spilling accident of the ship involved.

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The Plaintiff advocated the explosion and oil spilling of the M.V. “Xu Yang 11” was caused by Zhenhai Repair Yard who failed to implement the safety management responsibility, and its the workers FU Ajun, who caused the explosion of tank by using open fire to repair the ship under the condition where fire work was not allowed. Zhenhai Repair Yard shall bear the responsibility for the explosion and oil spilling accident of the ship involved. Zhenhai Repair Yard argued that the M.V. “Xu Yang 11” did not dock at its terminal for maintenance, and that he was not in knowledge of maintenance matters. The acts of FU Ajun and others were non-official activities. Zhenhai Repair Yard was not the major safety producer of the M.V. “Xu Yang 11”, so it had no fault, and shall not bear any responsibility. The court holds as follows: Zhenhai Repair Yard leased its wharf to Guang Yang Company for berthing of the M.V. “Xu Yang 11”, and before the incident the M.V. “Xu Yang 11” docked in the outer berth of the M.V. “Hengshunda 78” near the wharf, and the berthing location belonged to the wharf of the Defendant Zhenhai Repair Yard. The repair matters were contacted by the M.V. “Xu Yang 11” second officer ZHONG Xinliang with the Defendant welding workshop director of Zhenhai Repair Yard, FU Ajun. After that FU Ajun assigned workshop welder workers to place maintenance tool on the M.V. “Hengshunda 78” one day ahead and led five welders on board for maintenance operations on that day (four workers including FU Ajun dismantling valve and two people welding cable hole in the bow). Although the repair and dispatching process did not meet the usual maintenance process of the M.V. “Xu Yang 11”, and after accident it was also found that the maintenance workshop should be responsible for demolition of the valve, but FU Ajun, the person in charge of repair matters and organizer, was workshop director of Zhenhai Repair Yard, and the specific maintenance staff were also the workshop workers, and maintenance tools came from Zhenhai Repair Yard, and maintenance work occurred in working hours of FU Ajun and others, and the ship repaired was Xu Yang Company’s ship actually controlled by the Defendant XU Dingyang. Although the two Defendants claimed that acts of FU Ajun and others were non-official activities, they did not provide any evidence to prove that FU Ajun and others privately contracted repair operations. FU Ajun and others’ illegal operation violated internal rules and regulations of Zhenhai Repair Yard, Zhenhai Repair Yard as a manager ought to bear the responsibility for improper management. So the court does not adopt the above defense by Zhenhai Repair Yard. FU Ajun and others caused the explosion of tanks by illegally conducting fire work without confirming whether the M.V. “Xu Yang 11” had safe operating conditions, and applying approval for the fire operations. FU Ajun and others’ acts were clearly erroneous. Zhenhai Repair Yard as the employer shall bear the liability for the loss caused by explosion and oil spilling of the M.V. “Xu Yang 11”. The M.V. “Xu Yang 11” crew ZHONG Xinliang violated related regulations and repair process when repairing, and ZHONG Xinliang and other crew also participated in the repair operations. For the same reason, Xu Yang Company had fault in the occurrence of the accident involved, which can reduce Zhenhai Repair Yard’s responsibility. Given that Zhenhai Repair Yard was the leading party of the repair operation

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involved, it shall bear major liability for explosion oil spilling accident. The court decides that Zhenhai Repair Yard shall bear 60% liability for oil pollution damage. Second, whether RMB6,500,000 insurance claims are reasonable. The two Defendants argued that the Plaintiff Ping An paid the pollution cleaning company Yongjie Company RMB6,500,000 insurance claims through reconciliation approach without the consent of the two Defendants who were not informed of such. The indemnity was not binding on the two Defendants, and the Plaintiff should provide evidence to prove the actual loss of clean-up costs. The court holds as follows: after the accident, the Plaintiff, Xu Yang Company and Yongjie Company conducted many consultations on clean-up costs and payment matter under the coordination of the administrative authorities, and finally all parties confirmed the cost between RMB6,000,000 and RMB7,000,000, but after that Xu Yang Company refused to sign RMB6,200,000 worth of settlement agreement considering that the Plaintiff would recourse to the two Defendants. From the fact of the section, it can be seen that Xu Yang Company as the insured involved, participated in and was informed of the negotiation on clean-up cost. The two Defendants said that because the clean-up was paid by the insurance company, Xu Yang Company is not concerned about the specific amount during the consultation, which did not conform to the common sense and was also contrary to the insurer’s basic obligations and responsibilities. The three parties, including Xu Yang Company, had no objection to the cost confirmed in meeting, showing that the compensation between RMB6,000,000 to RMB7,000,000 was in line with the interests of the three parties. Xu Yang Company finally did not sign the agreement neither due to high cost nor unreasonable cost, but taking into account the interests of its relevant companies. So in case between Yongjie Company and the Plaintiff Ping An, it was not illegal that the two sides reached a settlement with RMB6,500,000 on the basis of the above consultations The insurance indemnity should not obtain the consent of the parties to the accident. While the Defendant XU Dingyang actually controlled Zhenhai Repair Yard, and as the accident responsible party it questioned RMB6,500,000 insurance indemnity on the ground of not knowing it. The court holds that Zhenhai Repair Yard’s reason is unable to establish. Given that the two Defendants did not provide any evidence to support its reasonable defense of insurance indemnities. Based on the fact that Xu Yang Company and Zhenhai Repair Yard belong to interested parties of the insurance accident and their association relationship, the court confirms the RMB6,500,000 insurance indemnities aims are largely reasonable. The Plaintiff Ping An Ningbo had the right to claim from Zhenhai Repair Yard within the range of the amount. To sum up, according to the above-mentioned responsibilities proportion, Zhenhai Repair Yard shall compensate the Plaintiff Ping An Ningbo RMB3,900,000 (RMB6,500,000 million yuan  60%), the interest loss advocated by the Plaintiff shall be protected by the court but the interest rate shall start from the date of the prosecution (on January 8, 2015). The two Plaintiffs also said that Ningbo Environmental Protection Bureau compensated them RMB2,000,000 for clean-up cost for the oil pollution incident involved, but the two Plaintiffs did not

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provide any evidence to prove and it also confirmed that the cost was not actually paid. So, there was not a basis on the law that the two Plaintiffs asked Zhenhai Repair Yard to compensate and the court does not support it. The application fee for the pre-litigation preservation of property was RMB5,000 which was reasonable costs paid by Ping An Ningbo in order to safeguard its legitimate rights and interests. There is basis on the law that it asked Zhenhai Repair Yard to bear the cost and the court shall protect it. Zhenhai Repair Yard was a sole proprietorship and the Defendant XU Dingyang was its investor. According to law, the Defendant XU Dingyang shall bear unlimited liability for the debt of Zhenhai Repair Yard with its personal property. So when the assets of the Defendant Zhenhai Repair Yard was not enough to pay off the above debt, the Defendant XU Dingyang shall bear the liability for satisfaction. To sum up, the court supports the rational part of the claims of the Plaintiff. In accordance with Article 252 of the Maritime Code of the People’s Republic of China, Article 6 Paragraph 1, Article 26 and Article 34 Paragraph 1 of the Tort Liability Law of the People’s Republic of China, Article 2 of the Law of the People’s Republic of China on Individual Proprietorship Enterprises, and Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgement is rendered as follows: 1. The Defendant Ningbo Zhenhai Ship Repair Yard shall pay the Plaintiff Ping An Property & Casualty Insurance Company of China Ltd. Ningbo Branch RMB3,900,000 and interests (calculated in accordance with the loan interest rate stipulated by the People’s Bank of China for the corresponding period from January 8, 2015 to date of actual performance), and the fee for pre-litigation preservation of property in amount of RMB5,000; 2. The Defendant XU Dingyang shall bear the liability for satisfaction when assets of the Defendant Ningbo Zhenhai Repair Yard is not enough to pay off the debt; 3. Reject the other claims of the Plaintiffs Ping An Property & Casualty Insurance Company of China Ltd. Ningbo Branch and Ping An Property & Casualty Insurance Company of China Ltd. If the Defendant fails to fulfill the obligation of paying money during the period designated by the judgment, it shall double pay debt interest during the period of delayed performance according to Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB71,300, the Plaintiffs Ping An Property & Casualty Insurance Company of China Ltd. Ningbo Branch and Ping An Property & Casualty Insurance Company of China Ltd. shall bear RMB38,590, the Defendants Ningbo Zhenhai Repair Yard and XU Dingyang shall bear RMB32,710. In case of dissatisfaction of the judgment, the statement of appeal shall be submitted to the court within 15 days as of the date of service of the judgment, and provide copies according to the number of the other party and appeal to the Zhejiang High People’s Court [court acceptance fee of the appeal shall be RMB71,300 (specific amount shall be determined by Zhejiang High People’s Court

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and the excess part will be refunded later) shall be advanced when the appeal is submitted. If the payment has not been made within seven days after the expiration of the appeal period, it shall be subject to the automatic withdrawal of appeal. Payment shall be remitted to sub-account for non-tax revenue settlement of Department of Finance of Zhejiang Province, account number: 19000101040006575401001, bank of deposit: Agricultural Bank of China West Lake Branch of Hangzhou]. Presiding Judge: HU Jianxin Judge: ZHANG Jiansheng Acting Judge: MENG Yunfeng May 4, 2016 Acting Clerk: ZHENG Jing

Appendix: Relevant Laws 1. Maritime Code of the People’s Republic of China Article 252 Where the loss of or damage to the subject matter insured within the insurance coverage is caused by a third person, the right of the insured to demand compensation from the third person shall be subrogated to the insurer from the time the indemnity is paid. 2. Tort Liability Law of the People’s Republic of China Article 6 One who is at fault for infringement upon a civil right or interest of another person shall be subject to the tort liability. Article 26 Where the victim of a tort is also at fault as to the occurrence of harm, the liability of the tortfeasor may be mitigated. Article 34 Where an employee of an employer which is an entity causes any harm to another person in the execution of his work duty, the employer shall assume the tort liability. 3. Law of the People’s Republic of China on Individual Proprietorship Enterprises Article 2 For purposes of this Law, a sole proprietorship enterprise means a business entity established within China with its capital contributed by one individual and its assets owned personally by the sole proprietor, who assumes unlimited liability to the extent of his personal assets. 4. Civil Procedure Law of the People’s Republic of China Article 64 It is the duty of a party to an action to provide evidence in support of his allegations.

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Zhejiang High People’s Court Civil Judgment Ping An Property & Casualty Insurance Company of China Ltd. Ningbo Branch et al. v. Ningbo Zhenhai Ship Repair Yard et al. (2016) Zhe Min Zhong No.477 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 997. Cause(s) of Action 196. Dispute over liability for damage of ship pollution. Headnote Affirming lower court decision holding ship repair yard and shipowner liable to reimburse the Plaintiff insurers for sums paid by insurers to pollution claimants after explosion on ship at repair yard, because explosion was caused by negligent and unauthorized repairs conducted by yard workers and ship’s crew; apportionment of 60% to repair yard and 40% to ship affirmed. Summary An explosion occurred aboard a vessel while it was docked in the Defendant’s ship repair yard, and an oil spill followed. The explosion was caused by unauthorized and negligent repair work done by the repair yard workers and the crew of the vessel. The Plaintiff insurers paid the resulting pollution claims and sued the Defendant seeking reimbursement. The court of first instance held that the Plaintiff-insurers had a lawful claim for reimbursement from the repair yard and that the repair yard would bear 60% of the liability for compensation of the cleanup costs, with the vessel bearing the remainder of the liability. The court of first instance also held that the second Defendant, the investor of the repair yard, should be personally liable for whatever portion of the debt that the repair yard could not pay. The Defendants appealed. The issues on the appeal were: (1) whether the repair yard was liable for the pollution damage; (2) whether the compensation award had been correctly calculated; and (3) whether apportioning 60% liability to the repair yard and 40% to the vessel was correct. The appeal court affirmed the trial court’s judgment and dismissed the appeal. Firstly, the repair yard was liable because the work that caused the explosion and oil spill was performed at its wharf and by its

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employees in the regular course of their duties. Secondly, the monetary award was correct because the costs of the oil spill clean-up were properly negotiated. Thirdly, the 60%-40% apportionment of liability was accurate because crew members of the vessel participated in the work that caused the accident. Additionally, because the Defendant XU Dingyang was the sole owner of the repair yard, he was personally liable for any portion of the damages that the repair yard was unable to pay.

Judgment The Appellant (the Plaintiff of first instance): Ping An Property & Casualty Insurance Company of China Ltd. Ningbo Branch Domicile: 17-18F, Ping An Building, No.396, Kai Ming Street, Ningbo City, Zhejiang Province. Organiƶation Code: 74,498,939-2. Person in charge: YANG Gang, general manager of the branch. The Appellant (the Plaintiff of first instance): Ping An Property & Casualty Insurance Company of China Ltd. Domicile: 6-7F, Xing Cheng Development Center Hotel, Three Fuhua Road, Futian Center District, Shenzhen City, Guangdong Province. Oganiƶation Code: 71,093,072-0. Legal representative: SUN Jianping, chairman of the company. Agent ad litem of the above two Appellants: ZHU Guolin, lawyer of Shanghai Hightime Law Office. Agent ad litem of the two Appellants: LUO Hongjuan, lawyer of Shanghai Hightime Law Office. The Appellant (the Defendant of first instance): Ningbo Zhenhai Ship Repair Yard Domicile: Zhangjian Gan, Zhenhai District, Ningbo City, Zhejiang Province. Organiƶation Code: 14,435,522-2. Legal representative: XU Dingyang, general manager of the yard. The Appellant (the Defendant of first instance): XU Dingyang, male, born on January 27, 1954, Han, living in Zhejiang Province Agent ad litem of the above two Appellants: LI Huibin, lawyer of Zhejiang Haoshang Law Office. With respect to the case arising from dispute over liability for ship pollution damage, the two Appellants, Ping An Property & Casualty Insurance Company of China Ltd. Ningbo Branch (hereinafter referred to as Ping An Ningbo), and Ping An Property & Casualty Insurance Company of China Ltd. (hereinafter referred to as Ping An) and the Appellants, Ningbo Zhenhai Ship Repair Yard (hereinafter referred to as Zhenhai Repair Yard) and XU Dingyang, all appealed the decision made by Ningbo Maritime Court (2015) Yong Hai Fa Shi Chu Zi No.48 Civil

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Judgment to the court. The court entertained the case, constituted a trial bench in light of law and held a hearing in public on July 28 of the same year. Agents ad litem of the Appellants Ping An Ningbo and Ping An, ZHU Guolin and LUO Hongjuan, agent ad litem of the Appellants Zhenhai Repair Yard and XU Dingyang, LI Huibin, appeared in court to attend the trial. After trial, this case has been concluded. Ping An and Ping An Ningbo on January 8, 2015 filed an action before the court of first instance that the oil tanker M.V. “Xu Yang 11”,whose ship pollution insurance was underwritten by Ping An and Ping An Ningbo (under standard policy of Ping An and was in fact issued by Ping An Ningbo) exploded and spilled oil during its repair in Zhenhai Repair Yard on October 12, 2013. As the ship pollution insurer of M.V. “Xu Yang 11”, Ping An and Ping An Ningbo reached a settlement on the clean-up fee with the cleaning company Ningbo Yongjie Oil Spill Emergency Services Limited (hereinafter referred to as Yongjie Company), and paid cleaning costs of RMB6,500,000 to Yongjie Company. In addition, Environmental Protection Bureau of Ningbo also filed a claim of RMB2,000,000 clean-up fee on oil pollution against Ping An and Ping An Ningbo, thus the economic losses in the case suffered or possibly suffered by Ping An and Ping An Ningbo amounted to RMB8,500,000. According to Investigation Report on the Great Deflagration Accident of MV “Xu Yang 11” Oil Tanker on October 22 in Zhenhai District of Ningbo (hereinafter referred to Investigation Report) issued by Ningbo Safety Manufacture Supervision and Administration Bureau (hereinafter referred to as Ningbo Safety Supervision Bureau), the direct cause of the accident was that Zhenhai Repair Yard workers, FU Ajun, LIANG Guoling, YANG Jun, WANG Yahui and the crew member of M.V. “Xu Yang 11” detonated explosive gas when removing the valve with the use of hacksaw and gas cutting during the process of repairing the leakage of the pipeline on main deck of fourth cargo hold, resulted in the explosion of the fourth and then the second cargo hold on the starboard. Investigation Report identified the indirect cause of the accident was that Zhenhai Repair Yard did not shoulder full responsibility for safety manufacture, and the management was in disorder, including not seriously implementing the safety management system; not seriously carrying out safety training education, providing only one part-time safety management staff instead of two full-time safety management personnel under the relevant rule, not seriously carrying out the investigation and management of latent dangers, not learning the lessons from several safety accidents since 2005. Investigation Report found that the nature of the incident involved was a severe accident caused by enterprise’s violating repair, lacking multi-sectoral supervision. Investigation Report proposed that XU Dingyang should shoulder major responsibility and his criminal responsibility should be investigated for lack of long term oversight and the latent danger management as well as the illegal acts of Zhenhai Repair Yard. Zhenhai Repair Yard was an individual proprietorship enterprise. Under the Article 2 of the Individual Proprietorship Law, its only investors XU Dingyang, should have personal liability to Zhenhai Repair Yard. Ping An Ningbo had applied for the pre-litigation preservation of property and paid the application fee of RMB5,000. Zhenhai Repair

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Yard’s and XU Dingyang’s faults had led to some significant economic losses to the insured of the M.V. “Xu Yang 11”, and should assume compensation to the insured of M.V. “Xu Yang 11”, Ningbo Xuyang Shipping Co., Ltd. (hereinafter referred to as Xuyang Company). As the ship pollution liability insurer, Ping An and Ping An Ningbo assumed the insured liability and had the right to file a claim for recovery from Zhenhai Repair Yard, XU Dingyang. So they claimed the court of first instance to sentence: 1. Zhenhai Repair Yard and XU Dingyang to pay Ping An and Ping An Ningbo RMB8,500,000 and interest losses (of which RMB2,000,000 interest was calculated from December 13, 2013, RMB4,500,000 interest from April 10, 2015, and the remaining RMB2,000,000 interest from the actual date of payment to the date of actual payment of Zhenhai Repair Yard and XU Dingyang according to the loan interest rate stipulated by the People’s Bank of China for the corresponding period); and 2. Zhenhai Repair Yard and XU Dingyang to bear the litigation costs and pre-limitation property preservation fee. Zhenhai Repair Yard and XU Dingyang in the first trial jointly argued: 1. When the accident involved in the case took place, M.V. “Xu Yang 11” did not dock in the wharf of Zhenhai Repair Yard, and the M.V. “Xu Yang 11” did not apply for the ship repair business through the company. Zhenhai Repair Yard did not receive any repairing cost, and was not informed of the berthing, so Zhenhai Repair Yard had nothing to do with the accident. 2. Investigation Report confirmed that FU Ajun and others illegally repaired the projects outside its scope without the approval of Zhenhai Repair Yard, and FU Ajun’s act was non-job behavior, and Zhenhai Repair Yard could not have found the private repair by FU Ajun and other workshop employees. So, Zhenhai Repair Yard was not the safety responsibility entity of the M.V. “Xu Yang 11”. It had no fault and should not bear any responsibility. 3. Zhenhai Repair Yard had quality management system certified by China Classification Society, passed the safety manufacture inspection by the Supervision and Administration Bureau. Investigation Report has wrongly identified that it was fault of Zhenhai Repair Yard that did not implement the safety management system. Even if that Investigation Report identified Zhenhai Repair Yard was the indirect cause of the accident based on the administrative management, it had no direct causation to the occurrence of the accident, so it should not bear the tort liability, XU Dingyang did not neglect in his duty so he should not bear the tort liability. 4. The loss of the amount requested Ping An and Ping An Ningbo did not conform to the fact and their settlement with Yongjie Company did not notify Zhenhai Repair Yard and XU Dingyang, was not approved by Zhenhai Repair Yard and XU Dingyang. The compensation of RMB6,500,000 agreed in settlement agreement was not binding between Zhenhai Repair Yard and XU Dingyang. The court of first instance identified the following facts: The M.V. “Xu Yang 11” was a tanker owned by Xuyang Company. On August 8, 2013, Ping An Ningbo insured the ship against ship pollution liability to Xuyang

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Company. On the same day, Ping An Ningbo issued a policy with the special stamp of Ping An. The policy provided that the insured was Xuyang Company and the insurance period was from 0000 on October 1, 2013 to 2400 on September 30, 2014, the compensation limit was RMB48,000,000, and absolutely deductible of each accident was RMB50,000. At about 0800 on October 11, 2013, after providing fuel to the M.V. “Xing Long Zhou 918”, the M.V. “Xu Yang 11” docked in Zhenhai Repair Yard after the return voyage. At about 1530 on the same day when the M.V. “Xu Yang 7” departed from the port, the M.V. “Xu Yang 11” re-docked in the outside berth of M.V. “Hengshunda 78”. At around 1500 the next day, the second officers of the M.V. “Xu Yang 11” including ZHONG Xinliang and others, docked the M.V. “Bei Tuo 1” in the outside berth of the M.V. “Xu Yang 11”. Due to the oil hole on the valve of oil pipeline in the No.4 cargo tank of starboard of the M.V. “Xu Yang 11” (usually plugged with iron and cement), ZHONG Xinliang contacted FU Ajun, the head of welding workshop in Zhenhai Repair Yard owner, asking him to help repair it upon berthing. At 1100 on November 11, 2013, FU Ajun asked welder ZHAO Shikun to put welding machine, acetylene, oxygen cylinders on the M.V. “Hengshunda 78”. At 0730 the next day, FU Ajun led WANG Yahui, LIANG Guoling, YANG Jun, WANG Zhanglin, ZHAO Shikun to the M.V. “Xu Yang 11” for repair operations. The crew, CHEN Weichang, was in the bow for paint maintenance. WANG Zhanglin, ZHAO Shikun were in the bow for welding cable hole. FU Ajun, WANG Yahui, LIANG Guoling, YANG Jun were in the fourth cargo tank of the starboard for dismantling valve. Crew, ZHONG Xinliang, SUN Shizhong, WANG Yacun and YU Zufu repaired on the spot. At about 0815, M.V. “Xu Yang 11” exploded and burned. When the accident occurred, CHEN Weichang, WANG Zhanglin and ZHAO Shikun who worked in the bow fell into the sea and were rescued. ZHONG Xinliang, SUN Shizhong, YU Zufu, FU Ajun, WANG Yahui, LIANG Guoling, YANG Jun were confirmed death at the scene, WANG Yacun later died in hospital on October 27, 2013. On October 12, 2013, Ningbo Municipal Government authorized the Ningbo Safety Supervision Bureau established the group for accident investigation, On June 10, 2014, the accident investigation group made Investigation Report, and identified the direct cause of accident: FU Ajun, LIANG Guoling, YANG Jun, WANG Yahui, Zhenhai Repair Yard workers and ZHONG Xinliang, SUN Shizhong, the crew of the M.V. “Xu Yang 11”, maintained the leak of valve of the M.V. “Xu Yang 11”. During the process of demolition using hacksaw, gas cutting, spark ignited explosive mixed gas in the cargo tank, resulting the explosion of No.4 and No.2 cargo tank on the starboard. The indirect causes of the accident were as follows: Xuyang Company and Zhenhai Repair Yard did not seriously fulfill the main responsibility for the safety manufacture, and its management was in disorder. On July 4 of the same year, the Ningbo Safety Supervision Bureau submitted Investigation Report to the Ningbo Municipal Government, and the Ningbo Municipal Government made the approval of the submitted Investigation Report. Zhenhai Repair Yard did not accept and applied to the People’s Government of Zhejiang Province for administrative reconsideration. On December 3, 2014, the People’s Government of Zhejiang

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Province made administrative review decision that affirmed the approval of Ningbo Municipal Government on Investigation Report. Zhenhai Repair Yard objected administrative review decisions and brought administrative litigation to Ningbo Intermediate People’s Court [(2015) Zhe Yong Xing Chu Zi No.8]. On June 11, 2015, Ningbo Intermediate People’s Court rejected Zhenhai Repair Yard’s claim. Zhenhai Repair Yard refused to accept the judgment and instituted an appeal [(2015) Zhe Xing Zhong Zi No.286]. On October 16, 2015, Zhejiang High People’s Court dismissed the appeal and affirmed the original judgment. Zhenhai Repair Yard and XU Dingyang in the first trial jointly replied: 1. When the accident occurred, the M.V. “Xu Yang 11” did not dock in the wharf of Zhenhai Repair Yard. The M.V. “Xu Yang 11” did not apply for the ship repair procedure through Xuyang Company and Zhenhai Repair Yard did not receive any repair cost and was not informed of berthing of the M.V. “Xu Yang 11”. There was no correlation between Zhenhai Repair Yard and the accident; 2. Investigation Report confirmed FU Ajun and others illegal maintained the repair project outside its business without the approval of Zhenhai Repair Yard. Their action was not on duty and Zhenhai Repair Yard could not find that the workshop staff’s private maintenance led by FU Ajun privately did not belong to the repair project within its business scope. So, Zhenhai Repair Yard was not the principal part of manufacture safety of the M.V. “Xu Yang11” and had no fault. It should not bear any responsibility; 3. Zhenhai Repair Yard had quality management system certified by China Classification Society, and also passed the safety manufacture inspection by Ningbo Safety Supervision Bureau, Investigation Report confirmed that it was fault of Zhenhai Repair Yard for failing to implement the safety management system, and even if Investigation Report identified indirect causes of Zhenhai Repair Yard accident based on administrative management, the yard had no direct causal relationship with the accident involved in the case. So, it should not bear the tort liability. XU Dingyang did not neglect his duty and should not bear the tort liability; and 4. the losses claimed by Ping An and Ping An Ningbo did not confirm to the fact and its reconciliation with Yongjie Company neither notified Zhenhai Repair Yard and XU Dingyang, nor was approved by Zhenhai Repair Yard and XU Dingyang. The compensation of RMB6,500,000 settled in the reconciliation agreement was not binding on Zhenhai Repair Yard and Xu Dingyang. The court during the first instance found the following facts: The M.V. “Xu Yang 11” was a tanker owned by Xuyang Company. On August 8, 2013, Xuyang Company insured the ship against pollution liability from Ping An Ningbo. On the same day, Ping An Ningbo issued a policy covering the special seal of Ping An to Xuyang Company. The policy included as follows: the insured was Xuyang Company, the insurance period was from 0000 on October 1, 2013 to 2400 on September 30, 2014, the compensation limit was RMB48,000,000, and absolute deductible of each accident was RMB50,000. At 0800 on November 11, 2013, after providing fuel to the M.V. “Xing Long Zhou 918”, the M.V. “Xu Yang 11” docked at the outer berth of the M.V. “Xu Yang 7” of Zhenhai Repair Yard wharf, at 0330 on the same day the M.V. “Xu Yang 7” departed the port, and the M.V. “Xu Yang 11” re-docked the outer berth of

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the M.V. “Hengshunda 78”. At 3 o’clock on the next day, the second officer of the M.V. “Xu Yang 11” ZHONG Xinliang and others stopped the M.V. “Bei Tuo 1” at the outer berth of the M.V. “Xu Yang 11”. Due to the oil hole (plugged usually with cement) on oil pipeline valve of No.4 cargo tank on the M.V. “Xu Yang 11” starboard, ZHONG Xinliang contacted FU Ajun, welding workshop manager of Zhenhai Repair Yard, asking to help repair it in the port. At around 1000 on October 11, 2013, FU Ajun assigned welder ZHAO Shikun to put welding machine, acetylene, oxygen cylinders on the M.V. “Hengshunda 78”. At around 0730 on the next morning, FU Ajun led WANG Yahui, LIANG Guoling, YANG Jun, WANG Zhanglin, ZHAO Shikun and other five welders to the M.V. “Xu Yang 11” for repair operations. The crew CHEN Weichang was in the bow for painting maintenance, WANG Zhanglin, ZHAO Shikun were in the bow for welding cable hole, and FU Ajun, WANG Yahui, LIANG Guoling, YANG Jun were in the fourth cargo tank on the starboard for dismantling valve, crew ZHONG Xinliang, SUN Shizhong, WANG Yacu and YU Zufu were in the repair site. At about 0815, explosion occurred in the M.V. “Xu Yang 11” involved. When the accident occurred, CHEN Weichang, WANG Zhanglin and ZHAO Shikun in the bow who fell into the sea was rescued, ZHONG Xinliang, SUN Shizhong, YU Zufu, FU Ajun, WANG Yahui, LIANG Guoling, YANG Jun and other 7 people confirmed death on site, WANG Yacun died in hospital on October 27, 2013. On October 12, 2013, Ningbo Municipal Government authorized the Ningbo Safety Supervision Bureau to set up the accident investigation team. On June 10, 2014, the accident investigation team made Investigation Report, confirming the direct cause of the accident as follows: Zhenhai Repair Yard workers FU Ajun, LIANG Guoling, YANG Jun, WANG Yahui and the M.V. “Xu Yang 11” crew ZHONG Xinliang, SUN Shizhong and so on repaired oil spilling of valve of the M.V. “Xu Yang 11” and exploded mixed gas by producing spark during the process dismantling it with the use of hacksaw, gas cutting, resulting in the explosion of No.4 and No.2 cargo on starboard. The indirect cause of the accident was as follows: Xuyang Company and Zhenhai Repair Yard did not seriously fulfill the principal responsibility for safety production, and its management was disordered. On July 4 of the same year, the Ningbo Safety Supervision Bureau submitted Investigation Report to the Ningbo Municipal Government, and the Ningbo Municipal Government made the approval of Investigation Report submitted for examining and approving. Zhenhai Repair Yard did not accept it and appealed to the People’s Government of Zhejiang Province for administrative reconsideration. On December 3, 2014, the People’s Government of Zhejiang Province made the administrative reconsideration decision to affirm the approval of Ningbo Municipal Government on Investigation Report. Zhenhai Repair Yard was against the results of administrative reconsideration, and brought administrative litigation [(2015) Zhe Yong Xing Chu Zi No.8] to Ningbo Intermediate People’s Court. On June 11, 2015 Ningbo Intermediate People’s Court rejected the claim of Zhenhai Repair Yard. Zhenhai Repair Yard refused to accept it and instituted an appeal [(2015) Zhe Xing Zhong Zi No.286]. On October 16, 2015, Zhejiang High People’s Court dismissed the appeal and affirmed the original judgment.

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The accident involved caused fuel overflow of the M.V. “Xu Yang 11”, and Yongjie Company took measures to control pollution and clean up pollution in accordance with ship pollution clearance agreement it signed with Yongjie Company. After the end of the clean-up operation, representatives from Yongjie Company, Xuyang Company and its insurance brokers, Ping An conducted many consultations on clean-up costs and formed three meeting minutes on November 8, 2013, June 13, 2014, and August 29, 2014. The last meeting minute recorded as follows: after the coordination between Xuyang Company’s representative FU Jinan, insurance brokers XUE Chaize, Yongjie Company’s representative CHEN Gepei, Ping An’s representative ZHU Min by Ningbo Maritime Safety Administration, Yongjie Company agreed to settle a lawsuit by reducing the previous RMB7,000,000 to RMB6,600.000, and Ningbo Maritime Safety Administration hoped that the quota from the insurance company should be increased from the RMB6,000,000 to about RMB6,500,000. After that, Yongjie company drafted RMB6,200,000 worth of settlement agreement with Xuyang Company, Yongjie Company and Ping An Ningbo as parties to the agreement, but Xuyang Company refused to sign the settlement agreement, considering Ping An and Ping An Ningbo would recourse to Zhenhai Repair Yard and XU Dingyang after Ping An and Ping An Ningbo paid off. On November 20, 2014, Yongjie Company brought a lawsuit before the court [(2014) Yong Hai Fa Shang Chu Zi No.869], requiring Ping An to pay RMB104,44,046 plus interest, including oil spilling cost, saving cost and clean-up cost. During the trial process, Yongjie Company changed the claiming principal to RMB7,000,000, and reached RMB6,500,000 worth of settlement agreement with Ping An. (including advance payment of RMB2,000,000 on December 13, 2013), The case was settled by a mediation. On April 10, 2015, Ping An paid Yongjie Company the balance of RMB4,500,000. After that Ping An and Ping An Ningbo asked Zhenhai Repair Yard and XU Dingyang to pay the loss of clean-up costs caused by the accident involved on the ground that it subrogated the right to claim against third person after it paid insurance indemnity under the policy of accident involved. It was also found out that according to relevant repairing provisions and actual operation process of Zhenhai Repair Yard and Xuyang Company, the usual process of repairing the M.V. “Xu Yang 11” were as follows: the captain or chief engineer reported to the manager, and next Xuyang Company contacted XU Dingyang, then the manager of Xuyang Company sent repair list to the director of Zhenhai Repair Yard, FU Fengjun who sent repair list to workshop directors under repair works. The workshop directors then sent people to repair. The maintenance of the M.V. “Xu Yang 11” on October 12, 2013 was not done by Xuyang Company contacting Zhenhai Repair Yard, and then by FU Fengjun assigning maintenance work, but by the second officer ZHONG Xinliang directly contacting with FU Ajun, welding workshop director of Zhenhai Repair Yard who did not notify XU Dingyang and director FU Fengjun but directly sent the workshop welder to repair without confirming whether the M.V. “Xu Yang 11” had safe operating conditions. He also used gas cutting tools without approval while dismantling valve shall be done by the workshop workers and ship maintenance fire work shall obtain approval.

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The court also identified that Xuyang Company signed an agreement with Ningbo Zhenhai Guangyang Trade Co., Ltd. (hereinafter referred to as Guang Yang Company), leasing the M.V. “Xu Yang 11” to Guang Yang company for the oil supply with 5-year lease term from January 1, 2010 to December 31, 2014. Guangyang company only had the right to dispatch the M.V. “Xu Yang 11”, and Xuyang Company shall be responsible for navigation safety, technical operation and safety outside operational period of fuel supply and pollution prevention responsibilities. On January 1, 2011, Zhenhai Repair Yard signed an agreement with Guangyang Company to lease its wharf to Guangyang Company for docking the M.V. “Xu Yang 11” from January 1, 2011 to December 31, 2016. Zhenhai Repair Yard was a sole proprietorship enterprise, and XU Dingyang was its investor. Xutang Company’s legal representative XU Sunjia was XU Dingyang’s daughter, Xuyang Company was actually controlled by XU Dingyang, Guang Yang Company’s legal representative, and the general manager were XU Dingyang. The court of first instance held that: Xu Yang Company insured its M.V. “Xu Yang 11” to Ping An Ningbo. Although Ping An Ningbo issued to Xuyang Company a policy with unified format and seal of Ping An and the insurance claims are also paid by Ping An. Ping An promised that the insurance involved belonged to Ping An Ningbo and the rights and obligations under the policy belong to Ping An Ningbo. Therefore, the court of first instance confirmed that Ping An Ningbo is the insurer of the policy involved, who has the right to claim compensation to third person who causes the accident after the M.V. “Xu Yang 11” occurred insurance incidents, and from the day when insurance claims is paid. The court of first instance summarized and illustrated the issues in this case as follows: First, whether Zhenhai Repair Yard should bear the liability for the explosion and oil spilling accident of the ship involved. Ping An and Ping An Ningbo claimed that the explosion and oil spilling of the M.V. “Xu Yang 11” was caused by Zhenhai Repair Yard who failed to implement the safety management responsibility, and its the workers FU Ajun, who caused the explosion of tank by using open fire to repair the ship under the condition where fire work was not allowed. Zhenhai Repair Yard shall bear the responsibility for the explosion and oil spilling accident of the ship involved. Zhenhai Repair Yard argued that the M.V. “Xu Yang 11” did not dock at its terminal for maintenance, and that he was not in knowledge of maintenance matters. The acts of FU Ajun and others were non-official activities. Zhenhai Repair Yard was not the major safety producer of the M.V. “Xu Yang 11”, so it had no fault, and shall not bear any responsibility. The court of first instance held as follows: Zhenhai Repair Yard leased its wharf to Guang Yang Company for berthing of the M.V. “Xu Yang 11”, and before the incident the M.V. “Xu Yang 11” docked in the out berth of the M.V. “Hengshunda 78” near the wharf, and the berthing location belonged to the wharf of Zhenhai Repair Yard. The repair matters were contacted by the M.V. “Xu Yang 11” second officer ZHONG Xinliang with the welding workshop director of Zhenhai Repair Yard, FU Ajun. After that FU Ajun assigned workshop welder workers to

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place maintenance tool on the M.V. “Hengshunda 78” one day ahead and led five welders on board for maintenance operations on that day (four workers including FU Ajun dismantling valve and two people welding cable hole in the bow). Although the repair and dispatching process did not meet the usual maintenance process of the M.V. “Xu Yang 11”, and after accident it was also found that the maintenance workshop should be responsible for demolition of the valve, but FU Ajun, the person in charge of repair matters and organizer, was workshop director of Zhenhai Repair Yard, and the specific maintenance staff were also the workshop workers, and maintenance tools came from Zhenhai Repair Yard, and maintenance work occurred in working hours of FU Ajun and others, and the ship repaired was Xu Yang Company’s ship actually controlled by XU Dingyang. Although Zhenhai Repair Yard and XU Dingyang claimed that acts of FU Ajun and others were non-official activities, they did not provide any evidence to prove that FU Ajun and others privately contracted repair operations. FU Ajun and others’ illegal operation violated internal rules and regulations of Zhenhai Repair Yard, Zhenhai Repair Yard as a manager ought to bear the responsibility for improper management. So the court of first instance did not adopt the above defense by Zhenhai Repair Yard. FU Ajun and others caused the explosion of tanks by illegally conducting fire work without confirming whether the M.V. “Xu Yang 11” had safe operating conditions, and applying approval for the fire operations. FU Ajun and others’ acts were clearly erroneous. Zhenhai Repair Yard as the employer shall bear the liability for the loss caused by explosion and oil spilling of the M.V. “Xu Yang 11”. The M.V. “Xu Yang 11” crew ZHONG Xinliang violated related regulations and repair process when repairing, and ZHONG Xinliang and other crew also participated in the repair operations. For the same reason, Xuyang Company had fault in the occurrence of the accident involved, which can reduce Zhenhai Repair Yard’s responsibility. Given that Zhenhai Repair Yard was the leading party of the repair operation involved, it shall bear major liability for explosion oil spilling accident. The court of first instance decided that Zhenhai Repair Yard should bear 60% liability for oil pollution damage. Second, whether RMB6,500,000 insurance claims are reasonable. Zhenhai Repair Yard and XU Dingyang claimed that Ping An paid the pollution cleaning company Yongjie Company RMB6,500,000 insurance claims through reconciliation approach without the consent of Zhenhai Repair Yard and XU Dingyang who were not informed of such. The indemnity was not binding on Zhenhai Repair Yard and XU Dingyang, and Ping An should provide evidence to prove the actual loss of clean-up costs. The court of first instance held as follows: after the accident, Ping An, Xuyang Company and Yongjie Company conducted many consultations on clean-up costs and payment matter under the coordination of the administrative authorities, and finally all parties confirmed the cost between RMB6,000,000 and RMB7,000,000, but after that Xuyang Company refused to sign RMB6,200,000 worth of settlement agreement considering that Ping An would recourse to Zhenhai Repair Yard and XU Dingyang. From the fact of the section, it can be seen that Xuyang Company as the insured involved, participated in and was informed of the negotiation on clean-up cost. Zhenhai Repair Yard and XU

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Dingyang said that because the clean-up was paid by the insurance company, Xuyang Company is not concerned about the specific amount during the consultation, which did not conform to the common sense and was also contrary to the insurer’s basic obligations and responsibilities. The three parties, including Xuyang Company had no objection to the cost confirmed in meeting, showing that the compensation between RMB6,000,000 to RMB7,000,000 was in line with the interests of the three parties. Xuyang Company finally did not sign the agreement neither due to high cost nor unreasonable cost, but taking into account the interests of its relevant companies. So in case between Yongjie Company and Ping An, it was not illegal that the two sides reached a settlement with RMB6,500,000 on the basis of the above consultations The insurance indemnity should not obtain the consent of the parties to the accident. While XU Dingyang actually controlled Zhenhai Repair Yard, and as the accident responsible party it questioned RMB6,500,000 insurance indemnity on the ground of not knowing it. The court of first instance held that Zhenhai Repair Yard’s reason is unable to establish. Given that Zhenhai Repair Yard and XU Dingyang did not provide any evidence to support its reasonable defense of insurance indemnities. Based on the fact that Xuyang Company and Zhenhai Repair Yard belong to interested parties of the insurance accident and their association relationship, the court of first instance confirmed the RMB6,500,000 insurance indemnities aims are largely reasonable. Ping An Ningbo had the right to claim from Zhenhai Repair Yard within the range of the amount. To sum up, according to the above-mentioned responsibilities proportion, Zhenhai Repair Yard shall compensate Ping An Ningbo RMB3,900,000 (RMB6,500,000 million yuan  60%), the interest loss advocated by Ping An and Ping An Ningbo shall be protected by the court but the interest rate shall start from the date of the prosecution (on January 8, 2015). Ping An and Ping An Ningbo also said that the Ningbo Environmental Protection Bureau compensated them RMB2,000,000 clean-up cost for the oil pollution incident involved, but Ping An and Ping An Ningbo did not provide any evidence to prove and they also confirmed that the cost was not actually paid. So, there was not a basis on the law that Ping An and Ping An Ningbo asked Zhenhai Repair Yard to compensate and the court of first instance did not support it. The application fee for the pre-litigation preservation of property was RMB5,000 which was reasonable costs paid by Ping An Ningbo in order to safeguard its legitimate rights and interests. There is basis on the law that it asked Zhenhai Repair Yard to bear the cost and the court of first instance protected it. Zhenhai Repair Yard was a sole proprietorship and XU Dingyang was its investor. According to law, XU Dingyang shall bear unlimited liability for the debt of Zhenhai Repair Yard with its personal property. So when the assets of Zhenhai Repair Yard was not enough to pay off the above debt, XU Dingyang shall bear the liability for satisfaction. To sum up, the court of first instance supported the rational part of the claims of Ping An and Ping An Ningbo. In accordance with Article 252 of the Maritime Code of the People’s Republic of China, Article 6 Paragraph 1, Article 26 and Article 34 Paragraph 1 of the Tort Liability Law of the People’s Republic of China, Article 2 of the Law of the People’s Republic of China

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on Individual Proprietorship Enterprises, and Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgement of first instance was rendered on May 4, 2016 as follows: 1. Zhenhai Repair Yard should pay Ping An Ningbo RMB3,900,000 and interests (calculated in accordance with the loan interest rate stipulated by the People’s Bank of China for the corresponding period from January 8, 2015 to date of actual performance), and the fee for pre-litigation preservation of property in amount of RMB5,000; 2. XU Dingyang should bear the liability for satisfaction when assets of Zhenhai Repair Yard is not enough to pay off the debt; 3. reject the other claims of Ping An Ningbo and Ping An. If Zhenhai Repair Yard or XU Dingyang fails to fulfill the obligation of paying money during the period designated by the judgment, it should double pay debt interest during the period of delayed performance according to Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee of first instance in amount of RMB71,300, Ping An Ningbo and Ping An should bear RMB38,590, Zhenhai Repair Yard and XU Dingyang should bear RMB32,710. Ping An, Ping An Ningbo, Zhenhai Repair Yard and XU Dingyang were not satisfied with the judgment of first instance, and lodged an appeal to the court. Ping An and Ping An Ningbo appealed that: First, the judgment of first instance identified the facts wrongly, and then mistakenly identified responsibility. 1. The crew of the M.V. “Xu Yang 11” ZHONG Xinliang violated the relevant provisions of Xuyang Company when repairing and the repair process and the occurrence of accident involved are not proximate cause of the accident. It cannot constitute the situation where the responsibility of Zhenhai Repair Yard can be reduced. 2. The first instance identified the fact that ZHONG Xinliang and other crew members were also involved in the operation did not meet the facts. The result in page 7 of Investigation Report showed that ZHONG Xinliang, SUN Shizhong, WANG Yacun were only in the repair site, and did not participate in the repair work. If Zhenhai Repair Yard conducted procedures of cabin, tubing inserting degassing in strict accordance with the ship repairing procedures and fire procedures, even if ZHONG Xinliang and others were involved in fire repair work, the accident could not happen; on the contrary, if ZHONG Xinliang and others had not participated in the repair work, the accident would had inevitably occurred. Therefore, Zhenhai Repair Yard should be fully responsible for the accident. Second, the first instance judgment on the starting point of interest loss was inappropriate. Ping An had prepaid Yongjie Company oil spilling saving and clean-up costs totaling RMB2,000,000 on December 13, 2013, and paid Yongjie Company the balance of RMB4,500,000 as agreed on April 10, 2015 after Yongjie Company and Ping An reached a RMB6,500,000 settlement agreement. Therefore, the interest loss of above two costs should be calculated from the date of payment. Third, applicable laws of the first instance were right, but the conclusions were wrong. According to Article 2 of the Individual Proprietorship Law, XU Dingyang shall bear the unlimited indemnity liability for the first item of the judgment of first instance with his personal property (the interest loss is calculated at the interest rate of the People’s Bank of China over the same period, of which the interest of RMB2,000,000 is calculated from December 13, 2013 to the date of actual

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performance, and the interest of the RMB4,500,000 is calculated from April 10, 2015 to the actual date of implementation). Zhenhai Repair Yard and XU Dingyang argued against the appeal of Ping An and Ping An Ningbo: first, if ZHONG Xinliang had repaired in accordance with the requirements of Xuyang Company, then Xuyang Company would have submitted to the repair form to Zhenhai Repair Yard. Zhenhai Repair Yard issued a certificate after reviewing repair project, and dispatched repair workers with appropriate qualifications so that rules and regulations of safety manufacture and operating procedures would be implemented and the explosion could be avoided. Page 7 of Investigation Report recorded the fact that ZHONG Xinliang and other three people were in the repair site, but it did not confirm the three people did not participate in the repair work. In fact, the three people, as representatives of the crew of the M.V. “Xu Yang 11”, were not only involved in repair work, but also responsible for command and management. Second, only on April 10, 2015 did Ping An paid Yongjie Company the second installment of RMB4,500,000, while the first instance confirmed that the interest of its total claiming amount of RMB6,500,000 were calculated from January 8, 2015, which was obviously wrong. Although the first installment of RMB2,000,000 was paid as early as December 13, 2013 to Yongjie Company, it was neither approved by Zhenhai Repair Yard, nor noticed Zhenhai Repair Yard. The first trial determined that calculating from the date of its prosecution was in line with the judicial trial practice. Request to dismiss the appeal of Ping An and Ping An Ningbo. Zhenhai Repair Yard and XU Dingyang appealed: First, the first instance confirmed that Zhenhai Repair Yard as an employer shall bear the liability of the loss caused by the M.V. “Xu Yang 11” oil spilling, which was obviously wrong. 1. The first instance identified that the berthing location of the M.V. “Xu Yang 11” that belonged to Zhenhai Repair Yard wharf was not in line with the fact. The first instance had identified that before the incident, the M.V. “Xu Yang 11” docked in the outer berth of the M.V. “Hengshunda 78” adjacent to the pier, so it was not located in the pier, but outside the pier and within the public area at the side of Yongjiang channel. 2. The first instance identified that maintenance operations occurred in the working hour of FU Ajun did not match the fact. Zhenhai Repair Yard work began at 0830, while the explosion occurred at about 0815. It can be concluded that FU Ajun and other people did not repair on the M.V. “Xu Yang 11” during the working hour. 3. FU Ajun and others did not cause the accident by implementing the task, so the first instance identified the fact that Zhenhai Repair Yard shall bear the liability was wrong under Article 34 Paragraph 1 of the Tort Liability Law. Investigation Report had confirmed that operations by FU Ajun and others on the M.V. “Xu Yang 11” was a repair item that was not approved by Zhenhai Repair Yard and was done by FU Ajun who illegally led the workshop staff to the M.V. “Xu Yang 11” to maintain the repair project beyond their business scope. So it shall be identified that FU Ajun and others did not perform their work, even the judgment of first instance put undue emphasis on the violation of internal rules and regulations of Zhenhai Repair Yard and then identified that Zhenhai Repair Yard as a manager, should bear the responsibility of improper management, which was the indirect reasons identified in Investigation Report. Even the

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insufficient implementation of management responsibility for safety management by local government and related company was identified based on the administrative management, rather than the tort liability from the legal prospective. 4. The accident occurred in the process of repairing the M.V. “Xu Yang 11”, and it did not commission Zhenhai Repair Yard to repair, It was not the business behavior of Zhenhai Repair Yard. 5. When the M.V. “Xu Yang 11” exploded, the fire department had been to the scene for emergency rescue, but when quenching fire, they failed to take into account the stability of the ship, draft and other issues, which caused too much water on the ship and led it to sink. This was the main reason that resulted the oil pollution accident. Therefore, Zhenhai Repair Yard shall not be responsible. Xuyang Company and Zhenhai Repair Yard and XU Dingyang shared the same interests. After the insurer compensated Xuyng Company, it also recourse to Zhenhai Repair Yard and XU Dingyang, which did not meet the legislative intention of Article 62 of the Insurance Law of our country, and also made the insurance compensation lose actual significance. Second, if FU Ajun and others caused the accident involved due to the implementation of the task, the judgment of first instance that Zhenhai Repair Yard shall bear the 60% liability of pollution damage was also wrong. 1. The accident involved occurred in the process of repairing the M.V. “Xu Yang 11”. The judgment of first instance wrongly identified Zhenhai Repair Yard was the leader of the repair business involved. 2. The On-Duty Rules of Seamen of the People’s Republic of China clearly stipulates that when the ship in port, seamen shall fulfill the safety management obligations including repair operations and bear the legal responsibility. 3. The Ningbo Water Safety Supervision and Management Regulations more clearly stipulates that berthing vessels shall be responsible for safety management by themselves, and that if maintenance is needed, they shall apply for approval from the competent authorities in advance. If open fire operations are needed, they must apply to the competent authorities in advance, and they can only operate after being approved. Third, the judgment of first instance confirmed the RMB6,500,000 insurance claims were basically reasonable without Ping An providing the objective basis for clean-up costs and proving the truth, necessity and rationality of the clean-up costs. It was obviously wrong. Fourth, because Zhenhai Repair Yard should not bear tort liability of the loss caused by the M.V. “Xu Yang 11” explosion and oil spilling, XU Dingyang as an individual also should not bear the supplement responsibility in this case. Request to revoke the first and second items of the judgment of first instance, and change the judgment to reject the claims of first instance of Ping An and Ping An Ningbo. Ping An and Ping An Ningbo defensed against Zhenhai Repair Yard’s and XU Dingyang’s appeal, and said: First, Zhenhai Repair Yard, as an employer, should bear the liability of the loss caused by the M.V. “Xu Yang 11” oil spilling. 1. When the accident occurred, the M.V. “Xu Yang 11” docked in wharf of Zhenhai Repair Yard. The M.V. “Xu Yang 11” docked in the outer berth of the M.V. “Hengshunda 78”, which did not mean that it was not located in Zhenhai Repair Yard. (2015) Zhe Xing Zhong Zi No.286

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Judgment confirmed the M.V. “Xu Yang 11” docked in Zhenhai Repair Yard terminal for maintenance. 2. FU Ajun and others repaired during the working hours. At around 1000 on October 11, 2013 (Friday), FU Ajun, as the workshop director of Zhenhai Repair Yard, assigned workshop welding workers to first place the maintenance tool on the M.V. “Hengshunda 78” in preparation of the second-day maintenance work. At this point, Zhenhai Repair Yard had begun its maintenance work. The next morning, the maintenance work on board by FU Ajun and others was a continuation of the previous preparation. In the ship repairing operations, work in shift was normal, operation at 0815 did not explain it was beyond the working hours. 3. Zhenhai Repair Yard and XU Dingyang contended that FU Ajun and others did not cause the accident involved by performing the task. The confirmation in Investigation Report about failure to find and stop FU Ajun, welding workshop manager, who illegally led the workshop staff to the M.V. “Xu Yang 11” to maintain the repairing project beyond its business scope without the approval of Zhenhai Repair Yard was to justify that Zhenhai Repair Yard did not seriously implement the safety management system, rather than to justify that maintenance operations did not belong to behavior of FU Ajun and others. In fact, welding operations of course belonged to the business scope of FU Ajun and others in welding workshop. FU Ajun organized and led repair workers in Zhenhai Repair Yard, and used repair tools of Zhenhai Repair Yard for repair operations, which took place in the working hours. It was duty behavior of the implementation of the job. (2015) Zhe Xing Zhong Zi No.286 Judgment also clearly identified that maintenance behavior of FU Ajun and others was not a privately contracted maintenance operations, but a ship repair operation on behalf of Zhenhai Repair Yard. 4. Zhenhai Repair Yard and XU Dingyang appealed that the repair involved that belonged to the self-repair of the M.V. “Xu Yang 11” was unsound. Second, Zhenhai Repair Yard and XU Dingyang should bear the liability of explosion and oil-spilling accident involved. Regardless of the act of the M.V. “Xu Yang 11”, as long as Zhenhai Repair Yard conducted fire work in violation, the accident would eventually happen and damage would be caused. Therefore, it did not constitute situation or reasons to reduce the responsibility of Zhenhai Repair Yard and XU Dingyang. Third, RMB6,500,000 insurance claims was reasonable. In (2004) Yong Hai Fa Shang Chu Zi No.869 case, Yongjie Company confirmed the clean-up cost was RMB10,440,000 according to the evidence it provided, much higher than the amount of RMB6,500,000 reconciliation. After the accident, under the coordination of competent authorities, Xuyang Company, Ping An and Yongjie Company conducted negotiations many times on the clean-up costs and payment matters, and the cost was finally determined between RMB6,000,000 to RMB7,000,000. After that, the three parties reached a settlement agreement and determined the cost of RMB6,200,000, but Xuyang Company refused to sign the settlement agreement. Yongjie Company then sued Ping An to the court of first instance. Ping An took into account the risk of litigation, it reached RMB6,500,000 settlement agreement with the coordination of the court of first instance.

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Fourth, XU Dingyang should bear the unlimited liability of RMB6,500,000 insurance indemnity born by Zhenhai Repair Yard with its personal property. As the only investor of Zhenhai Repair Yard, XU Dingyang shall bear unlimited liability of Zhenhai Repair Yard according to the provisions of the Individual Proprietorship Law. Request to dismiss all the appeal request by Zhenhai Repair Yard and XU Dingyang. In the second instance, Ping An and Ping An Ningbo did not submit new evidence materials. Zhenhai Repair Yard and XU Dingyang submitted six sets of new evidence to the court: First, written application for incorporation of Xuyang Company, equity adjustment agreement, articles and amendments, rental agreement, the person in charge of financial information, residence book and marriage card, to prove that XU Dingyang and SUN Mitao were couples, XU Sunjia was his daughter, all of whom were the company’s shareholders, XU Dingyang was the actual controller and Xuyang Company and Zhenhai Repair Yard worked in the same place. Second, labor contract signed by Zhenhai Repair Yard and WU Weifen, Xuyang Company and LIN Jingqi, payroll of Zhenhai Repair Yard of August and September in 2013, employee pension insurance account of two companies and part of the vouchers were to prove that the two companies shared the financial staffs. Third, personal accounts of bank in-and–out document of XU Dingyang, and LIN Jingqi, XU Yang Company’s financial documents, transport companies, the cost list and the ship visa book were to prove that part of the freight that the Xu Yang Company should collect externally was directly charged by XU Dingyang, and XU Dingyang often directly withdraw money from the Xu Yang Company, or through Lin Jingqi’s account, and when Xuyang Company was in need of capital for operation, XU Dingyang would transfer its personal money into Xuyang Company through Lin Jingqi’s personal account in the form of spare money. Fourth, a labor contract signed between Zhenhai Repair Yard and FU Jinan, 2013 annual pension insurance account of Zhenhai Repair Yard, accounting vouchers, travel claims reimbursement were to prove that FU Jinan was Zhenhai Repair Yard’s employee, and travel expense was paid by Xuyang Company. Fifth, accounting vouchers of Xuyang Company, accounting receipts, bank bills and arbitral mediation were to prove that after the accident, in order to solve the compensation for many deaths, XU Dingyang compensated the deceased family through LIN Jingqi’s personal account. Sixth, the Provisions on Safety Production of Sea-going Vessels of Zhejiang Province (excerpt) was to prove that the accident occurred in the self-repairing process of the M.V. “Xu Yang 11”, and FU Ajun and others operated on board to cooperate with the crew for self-repair. The cross examination opinions of Ping An and Ping An Ningbo are as follows: in the first set of evidence, the rental agreement, the information of personnel in charge of finance were all copies, its authenticity was not recognized. The residence book and marriage certificate were contradictory and their authenticity was not recognized. The authenticity of the remaining evidence was recognized, but the

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relevancy of the evidence was not recognized. Xuyang Company is a financially independently limited liability company, the rights and obligations of the shareholders provided in the company articles did not exceed the provisions of the law. Zhenhai Repair Yard was neither Xuyang Company’s branch, nor its shareholders. There is not any direct connection between them, they are two independent entities. And “other members” under Article 62 of the Insurance Law are those who are outside the family and have raising, supporting or maintaining relationship with the insured person or the internal staff as the insured entity. So, the evidence cannot prove that the Xuyang Company and Zhenhai Repair Yard were the interests community. In the second set of evidence, the authenticity of Xuyang Company (LIN Jingqi), Zhenhai Repair Yard (WU Weifen) 2013 annual pension insurance account was recognized, and the authenticity and legality of the remaining evidence were not recognized, and the relevancy of the evidence were not recognized. The cashier of Zhenhai Repair Yard and Xuyang Company acted as the corresponding company’s accounting director and document making staff, which violated the provisions of accounting law. The business scope of the two companies and their nature were completely different, and its executives and employees were not the same. Even if the financial director and the staff are same, they cannot be regarded as one, and illegal interests shall not be protected. The authenticity, legality and relevancy of the third set of evidence were not recognized. The transaction information of XU Dingyang’s personal account and freight stipulated in transport agreement cannot be verified, and it cannot correspond to bill of Lin Jingqi’s personal account. If the fact that XU Dingyang often withdrew money from Xuyang Company was true, it was the illegal act and its illegal interests shall not be protected. The authenticity, legality and relevancy of the fourth set of evidence were not recognized. FU Jinan’s labor contract had expired at the end of 2010 without renewal. Xuyang Company’s vouchers were not reimbursement, and had no FU Jinan’s signature. So, it cannot prove that the Xuyang Company directly reimbursed FU Jinan, nor can it prove that FU Jinan worked in Zhenhai Repair Yard and Xuyang Company at the same time. In the fifth set of evidence, the authenticity, legality and relevancy of the bookkeeping vouchers and arbitral mediation of Xuyang Company and Zhenhai Repair Yard were recognized. The accounting receipt and LIN Jingqi personal bank bill with the stamp of the bank seal were recognized, but the relevancy and legality of other evidence except arbitral mediation with the case were not recognized, and the evidence cannot prove the aims of Zhenhai Repair Yard and XU Dingyang. The sixth set of evidence were copies, so its authenticity, legality and relevancy were not recognized. The court confirms the evidence submitted by Zhenhai Repair Yard and XU Dingyang as follows: In the first set of evidence, Ping An and Ping An Ningbo had no objection to the authenticity of Xuyang Company’s registration application for company establishment, equity adjustment agreement and the constitution and the amendment, which shall be confirmed by the court. In terms of the residence book and marriage certificate, account number 071015884 residence book recorded family members were the father XU Dingyang and daughter XU Sunjia, account number 07108700

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residence book recorded family member was only SUN Mitao, marital status column recorded XU Dingyang and SUN Mitao were married, marriage certificate recorded they registered marriage on April 11, 1977. As it was common that the residence book of husband and wife was separate and the law was not prohibiting it, the residence book and marriage certificate were not contradictory and its authenticity shall be confirmed. Rental agreement and the person in charge of financial information came from the Market Supervision and Administration Bureau in Jiangbei District, Ningbo City, whose authenticity shall be confirmed. In the second group of evidence, Ping An and Ping An Ningbo had no objection to the authenticity of 2013 annual pension insurance account of Zhenhai Repair Yard (WU Weifen), Xuyang Company (LIN Jingqi) and the court confirms it. The labor contracts between Zhenhai repair factory and WU Weifen, as well as Xuyang Company and LIN Jingqi, payroll and 2013 employees’ pension insurance account can be confirmed, so the authenticity shall be confirmed. In this group of evidence, “accounting director WU Weifen”, “reviewer WU Weifen”, “document staff LIN Jingqi” recorded in the accounting vouchers confirmed the vouchers in the fifth set of evidence, which can prove each other, so its authenticity shall be confirmed. The third set of evidence were copies, and the freight stipulated in the Xuyang Company’s contract of carriage cannot form a chain of evidence with XU Dingyang’s personal account, and had no relevancy with the substance proceedings of the case. In addition, if the fact that XU Dingyang often directly withdraw money from Xuyang Company was true, its behavior was in violation of the provisions of the Company Law, and its legality shall not be confirmed. So, the evidence shall not be confirmed. In the fourth set of evidence, FU Jinan’s labor contract and his employee’s pension insurance account can be confirmed, and the two pieces of evidence are identical to WUWeifen’s labor contract and pension insurance account in form in the second set of evidence. So, its authenticity can be confirmed. But travel expenses reimbursed by Zhenhai Repair Yard workers, FU Jinan, to Xuyang Company and the company’s related accounts, and the relevant accounting and accounting examination regulation did not meet the requirement and its legality shall not be confirmed. So, the reimbursement and related account voucher shall not be confirmed. Ping An and Ping An Ningbo had no objection to authenticity, legality and relevancy of the fifth set of evidence, and the court confirms it. The sixth set of evidence of the Provisions on Safety Production of Sea-going Vessels of Zhejiang Province (excerpt) did not reflect the facts of the evidence, and the court does not confirm it. Ping An and Ping An Ningbo appealed that the identification of the first instance that M.V. “Xu Yang 11” crew members such as ZHONG Xinliang were involved in the operation, and Xuyang Company had the fault for the accident was wrong. The court, upon examination, considering that the fact that the crew members of the M. V. “Xu Yang 11” including ZHONG Xinliang and others were involved in the operation was proved by the record of Investigation Report by accident investigation team, and the confirmation of responsibility of the parties belongs to the

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issue of law, not the fact of the case. The facts confirmed by the first instance were with substantial evidence to prove, and the court confirms it. According to the new evidence of the second instance, the court also confirms that the establishment Xuyang Company was set up by XU Sunjia and SUN Mitao and there were three existing shareholders: XU Sunjia accounting for 29.6%, SUN Mitao 25.6% and XU Dingyang 44.8%. XU Dingyang, SUN Mitao and XU Sunjia was the parent-daughter relationship. Xuyang Company and Zhenhai Repair Yard shared financial staffs. After the accident, Zhenhai Repair Yard and Xuyang Company paid the families of the dead compensation and other related payments through personal account of the financial staff, LIN Jingqi. The court holds that according to Article 60 of the Insurance Law of the People’s Republic of China, where an insured incident occurs for any loss caused by a third party to the subject matter insured, the insurer shall, from the day when it pays insurance money to the insurant, subrogate the insured’s claim for indemnity against the third party within the extent of the indemnity amount. In this case, as the insurer of subject matter insured, Ping An Ningbo exercised the right of subrogation to the third party who causes insurance accident from the day when it pays insurance money. According to the views of the parties, the court summarizes and illustrates the issues in this case as follows: first, whether Zhenhai Repair Yard should bear the liability of oil pollution damage; second, whether the first instance confirming the RMB6.5 million insurance compensation was correct; third, whether the responsibility proportion decided in the first instance and the recognition of the liability of XU Dingyang was correct. There was no objection to the issues summarized by the court between parties. The analysis of the court is as follows: First, whether Zhenhai Repair Yard should bear the liability of oil pollution damage. According to Investigation Report issued by the investigation team of accident of the M.V. “Xu Yang 11” oil tanker “10.12” explosion in Zhenhai, Ningbo City, at 1100 on October 11, 2013, the M.V. “Xu Yang 11” docked in the outside berth of the M.V. “Xu Yang 11” at terminal of Zhenhai Repair Yard. At about 0300 in the afternoon, the M.V. “Xu Yang 7” departed from the port, the M.V. “Xu Yang 11” docked in the outer berth of the M.V. “Hengshunda 78”. Because there was an oil hole on oil pipeline valve of No.4 cargo tank on the starboard of the M.V. “Xu Yang 11”, the second officer, ZHONG Xinliang, contacted FU Ajun, workshop manager of Zhenhai Repair Yard, in violation of the company’s regulations, asking for repair help. At 1000 on October 11, FU Ajun assigned workshop welding workers to place the maintenance tool on the M.V. “Hengshunda 78”, and at 0730 on the morning of October 12, he led five welders to conduct maintenance operations on board. Although the M.V. “Xu Yang 11” docked in the outside berth of the M.V. “Hengshunda 78”, the location still belonged to the wharf of Zhenhai Repair Yard. So, the judgment of first instance found that the preparation for maintenance operations involved began in October 11 morning. Although the repair and dispatching process did not meet the rules and regulations of Xuyang Company and Zhenhai Repair Yard, but FU Ajun, the person in charge and organizer of the

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repair was the workshop director of Zhenhai Repair Yard, and the maintenance staff were their workshop workers, maintenance tools came from Zhenhai Repair Yard, and maintenance operations occurred in working hours of FU Ajun and others. So, there was evidence to prove. Zhenhai Repair Yard and XU Dingyang claimed the maintenance of the ship involved was the M.V. “Xu Yang 11” self-repairing behavior, and there was no corresponding evidence to support, which shall be inadmissible. FU Ajun and others illegally conducted fire operations in the absence of confirming whether the M.V. “Xu Yang 11” had safe operating conditions, which was the direct cause of ship explosion. FU Ajun and others’ behavior was obviously wrong, and Zhenhai Repair Yard shall bear the liability of the loss caused the M.V. “Xu Yang 11” explosion and oil spilling accident as an employer. The reason claimed by Zhenhai Repair Yard and XU Dingyang that Zhenhai Repair Yard should not bear the liability of the ship explosion and oil spilling shall not be established, and not be supported. In addition, although investors of Zhenhai Repair Yard and Xuyang Company’s shareholders are family members, Zhenhai Repair Yard was a wholly-owned enterprise, and Xuyang Company was a limited liability company, all of which are independent legal entities under the law. While according to Article 62 of the Insurance Law of the People’s Republic of China. the insured person’s family member shall mean that the insured person is a natural person, and the member of the insured person shall refer to the internal staff of the insured person as the legal person and the insured person of other organizations or the non-natural person of constituent part. So, the regulation about restricting the relative person of insurance subrogation right shall not apply to the case. Second, whether the first instance confirming the RMB6.5 million insurance compensation is correct. According to meeting minutes of the M.V. “Xu Yang 11” clean-up work briefing submitted by Ping An and Ping An Ningbo, after the accident, with the coordination of the administrative authority, Ping An, Xuyang Company and Yongjie Company conducted discussions on the clean-up costs and payment matters, and finally parties agreed the cost to be between RMB6,000,000 and RMB7.000.000. FU Jinan, Zhenhai Repair Yard employees, representing the company, had been involved in the meeting. Therefore, the compensation between RMB6.000.000 and RMB7,000,000 was agreed through the negotiation by all parties and was the result of the balance of interests of the parties. Xuyang Company refused to sign RMB6,200,000 settlement agreement considering Ping An would recourse to Zhenhai Repair Yard and XU Dingyang, which was also due to taking into account the interests of its relative companies. Because Xuyang Company refused to sign the settlement agreement, Yongjie Company claimed to the court of first instance against Ping An during the litigation under the presidency of the court of first instance, it was reasonable that the two sides reached RMB6,500,000 agreement based on the above consultations, and it did not violate the law. Therefore, the confirmation of the first instance court that the insurance claims involved was RMB6,500,000 was appropriate. Zhenhai Repair Yard’s and XU Dingyang’s claim that RMB6,500,000 compensation lacked objective evidence was unable to establish, and shall not be supported.

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Third, whether the responsibility proportion decided in the first instance and the recognition of the liability of XU Dingyang was correct. Ping An and Ping An Ningbo appealed that the M.V. “Xu Yang 11” crew did not participate in the maintenance operations, and Zhenhai Repair Yard’s worker’s maintenance violation was the direct cause of explosion, and Zhenhai Repair Yard shall bear full responsibility for the occurrence of the accident involved. Zhenhai Repair Yard and XU Dingyang held that FU Ajun and others was only to help repair rather than lead the maintenance, and the 60% liability of oil damage of the accident born by Zhenhai Repair Yard judged by the first instance was too high. The court holds as follow: Investigation Report has clearly identified the direct cause of the accident. Zhenhai Repair Yard workers, FU Ajun and other four people, ZHONG Xinliang, SUN Shizhong, crew members of the M.V. “Xu Yang 11” of Xuyang Company caused the explosion by illegal operation in the process of repairing. The indirect reason is that Xuyang Company, Zhenhai Repair Yard did not seriously fulfill the principal responsibility for the safety manufacture, and its management was in disorder. Therefore, according to the cause of the accident determined in Investigation Report, and considering the role that the employees of two parties played in the maintenance work, the judgment of first instance that Zhenhai Repair Yard and Xuyang Company should bear 60% and 40% liability respectively of oil pollution damage was proper. In addition, Zhenhai Repair Yard was a sole individual proprietorship enterprise, and XU Dingyang was its investors. According to law, XU Dingyang shall bear unlimited liability of Zhenhai Repair Yard’s debt with its personal property. The judgment of first instance that XU Dingyang should bear the liability of paying off the debt when Zhenhai Repair Yard fails to pay off the debt was proper. To sum up, grounds of appeal by Ping An, Ping An Ningbo, Zhenhai Repair Yard and XU Dingyang were unable to establish, which shall not be supported. The facts were clearly ascertained and the law was correctly applied in the first instance. According to Article 170 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is rendered as follows: Dismiss the appeal and affirm the original judgment. Court acceptance fee of second instance in amount of RMB71,300, Ping An Property & Casualty Insurance Company of China Ltd. Ningbo Branch and Ping An Property & Casualty Insurance Company of China Ltd. shall bear RMB35,650, Ningbo Zhenhai Repair Yard and XU Dingyang shall bear RMB35,650. The judgment is final. Presiding Judge: KONG Fanhong Acting Judge: ZHENG Enliang Acting Judge: TONG Xin November 17, 2016 Clerk: DING Lin

Tianjin Maritime Court Civil Judgment Qinhuangdao Bohai Shipping Matters Engineering Co., Ltd. v. Pai A Qinhuangdao Tourism Culture Management Co., Ltd. (2016) Jin 72 Min Chu No.399 Related Case(s) None. Cause(s) of Action 236. Dispute over contract for construction of dock or harbor. Headnote The Defendant held liable to pay balance of purchase price for construction of an off-shore platform after court rejected the Defendant’s contention that construction of the platform was faulty and the materials used poor. Summary The Plaintiff brought a lawsuit against the Defendant for breach of contract for failure to pay the remaining balance of the contract price. The Defendant contracted the Plaintiff to build an off-shore platform according to the design provided by the Defendant. The terms of the contract required the Plaintiff to provide all of the materials for the construction of the platform; however, the material of the steel was to be chosen by the Defendant. The terms of payment for the off-shore platform were stipulated in the contract, and the dispute was over the remaining balance of RMB238,600 the Defendant had not yet paid. In response to the Plaintiff’s claim, the Defendant filed a counterclaim alleging the quality of the off-shore platform materials were poor and the construction quality was under qualifications. The Defendant’s counterclaim asked the court to order the Plaintiff to pay compensation for the Defendant’s alleged loss of RMB1,200,000 due the poor quality and construction of the platform, and a further RMB600,000 compensation for performance losses. It was held by the Tianjin Maritime Court that the Defendant failed to prove that the damage caused to the off-shore platform was due to the quality of construction or the materials used; therefore, the court ordered the Defendant to pay the Plaintiff RMB238,600 plus interest for its losses.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_35

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Judgment The Plaintiff (the counterclaim Defendant): Qinhuangdao Bohai Shipping Matters Engineering Co., Ltd. Domicile: No.28, Youyi Road, Qinhuangdao City, Hebei Province. Legal representative: YANG Yubao, general manager of the company. Agent ad litem: ZHANG Fanqiang, an employee of Qinhuangdao Bohai Shipping Matters Engineering Co., Ltd. Agent ad litem: QI Xianghui, lawyer of Hebei Lushun Law Firm. The Defendant (the counterclaim Plaintiff): Pai A Qinhuangdao Tourism Culture Management Co., Ltd. Domicile: Third District, Nandaihe Tourist Resort, Funing County, Qinhuangdao City, Hebei Province (inside the yard of Nandaihe International Entertainment Center). Legal representative: ZHAO Xiaopeng, general manager of the company. With respect to the case arising from dispute over contract of an off-shore platform building, the Plaintiff Qinhuangdao Bohai Shipping Matters Engineering Co., Ltd. (hereinafter referred to as “Bohai Company”) filed an action against the Defendant Pai A Qinhuangdao Tourism Culture Management Co., Ltd. (hereinafter referred to as “Pai A Company”). On May 13, 2016, the court, after accepting the case, applied the summary procedure with Acting Judge OUYANG Hongwei hearing the case independently according to the law. Pai A Company brought a counterclaim against Bohai Company during pleading period. The court applied the common procedure according to the law and organized a collegiate bench consisting of Judge CHEN Shunping as the Presiding Judge, Acting Judge OUYANG Hongwei and People’s Juror BIAN Hong, and decided to merge with the principal action. On September 2, 2016, the court held a hearing in public to try the case. Agents ad litem of the Plaintiff Bohai Company, ZHANG Fanqiang and QI Xianghui, and the legal representative of the Defendant Pai A Company, ZHAO Xiaopeng, appeared in court to attend the trial. The case has now been concluded. The Plaintiff Bohai Company claimed: the off-shore platform building contract had been concluded between Bohai Company and Pai A Company on March 21, 2014. In this contract, Bohai Company was asked to build an off-shore platform (30  50 m) for Pai A Company, and the total amount of the contract was settled according to the actual weight of the off-shore platform. The construction duration was 60 days. The payment terms was settled by three parts. Firstly, 75% of the total amount would be paid before the platform launched. Secondly, 15% would be paid after fixed at the pointed location in Nandaihe International Entertainment Center. Thirdly, 10% of the total amount as the guarantee money would be paid in a month after the platform was delivered and put into service. Bohai Company performed the obligation of the contract after the contract had been signed. On May 19, 2014, the parties confirmed that the total amount of the contract was RMB2,140,000. The Defendant paid RMB1,901,400 in four times, and the unpaid amount was

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RMB238,600. The Defendant should bare the corresponding liability for breach of contract, because the Defendant constituted a breach of contract by failing to pay the amount that should be paid under the contract. The Plaintiff alleged two requests to the court: 1. the Defendant Pai A Company should pay the remaining amount of RMB238,600 and interests (the interests should be calculated according to the current loan interest rate over the same period of the People’s Bank of China, starting from July 20, 2014); and 2. court acceptance fee should be born by the Defendant Pai A Company. The Defendant alleged that the unpaid amount of RMB238,600 was guarantee money. Due to the poor quality of the off-shore platform that Bohai Company delivered, and Pai A Company did not have to pay the guarantee money. The Defendant asked to reject the Plaintiff’s claims. The counterclaim Plaintiff requested the court to order that: 1. The counterclaim Defendant, Bohai Company, should compensate the counterclaim Plaintiff for the loss 1,200,000 RMB for using counterfeit and shoddy products of shipping materials and unqualified quality of technical construction. 2. The counterclaim Defendant should pay the counterclaim Plaintiff performance damage compensation 600,000 RMB. 3. The counterclaim Defendant should bear the court acceptance fee. Facts and reasons are as follows: Pai A Company signed an off-shore platform building contract with Bohai Company on March 21, 2014, where Bohai Company was asked to build an off-shore performance platform (30  50 m) for Pai A Company. Both parties ensured the total settlement price was 2,140,000 RMB on May 19, 2014, and 1,901,400 RMB had been paid till May 28, 2014. Bohai Company lost the corrosion and rust prevention control of the hull after the payment of off-shore platform, leading to the hull-rusting soon. Water-seeping and hull deformation were found separately in July, 2014 and August, 2014. The counterclaim Plaintiff reflected the situation and got the reply from the manager LIAN of the counterclaim Defendant about the water-seeping and hull deformation that problems could not be solved. The counterclaim Plaintiff was told that neither the quality of steels of the platform nor the engineering technology were up to standard after asking experts to check the hull, and there existed serious problems in welding and rust-prevention. Massive fracture of hull wielding zones and fracture of steel parts were found. The off-shore platform begin to seep through the hull massively with serious rust problems and sank into the sea at the beginning of 2015, till which is less than one year after contract signing. That caused the counterclaim Plaintiff about 2,000,000 RMB loss for the off-shore platform and irreparable heavy economic losses and social impacts losses. The counterclaim Defendant argued that: the off-shore platform drawing was designed by the counterclaim Plaintiff, and the building materials were used as the counterclaim Plaintiff requested. At the time delivery, the off-shore platform was in accord with the standard as agreed. The problems arose in the operation period. There were not problems attributed to the off-shore platform, but problems

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attributed to the operating method. With one side on land while the other side in the sea, the off-shore platform would be broken sooner or later by wave strike. The counterclaim Defendant requested to reject the claims of the counterclaim Plaintiff. According to the claim and defence of the Plaintiff and the Defendant, the issues of the case are concluded as: 1. whether the Defendant should pay the guarantee money RMB238,600 to the Plaintiff; 2. whether the damage of the counterclaim Plaintiff exists, if the damage exists, whether the counterclaim Defendant should pay for it. To prove its claims, the Plaintiff submitted the following evidential documents to the court within the time limited for burden of proof: 1. the off-shore platform building contract, to prove the relationship between the Plaintiff and the Defendant under this contract. 2. The off-shore platform drawing, to prove the drawing was provided by the Defendant. 3. The price list of the off-shore platform, to prove the parties confirmed the total amount of the contract which was RMB2,140,000. 4. Payment documents. 5. The final accounts for building the off-shore platform, to prove that the Defendant paid RMB1,901,400 to the Plaintiff, and the unpaid amount was RMB238,600. 6. Certificates of quality, purchased material list and invoices, to prove that the material that the Plaintiff used was fit the bill. Cross-examination opinions of the Defendant: the Defendant did not object to evidence 1–5, but object to the authenticity of evidence 6. To prove its claim, the counterclaim Plaintiff submitted the following evidential documents to the court: 1. the off-shore platform building contract, to prove the relationship between the Plaintiff and the Defendant under this contract. Bank document for payment, to prove that the counterclaim Plaintiff had paid RMB1,901,400. 2. Photographs, to prove that the off-shore platform had serious problems of poor quality. 3. Agreement, to prove the loss of the counterclaim Plaintiff. Cross-examination opinions of the counterclaim Defendant: the counterclaim Defendant did not object to the authenticity of evidence 1, but object to the authenticity of evidence 2 and 3. The court confirms the evidence that both parties did not object to and records such evidence in files as secondary evidence. As to disputed evidence, the court confirms as follows: evidence 6 of the Plaintiff, certificates of quality, purchased material list and invoices, could verify each other mutually, so the court confirms the authenticity of the evidence, but it could only prove that the Plaintiff purchased steels and welding materials with certificates of quality in March 2014. Evidence 2 of the counterclaim Plaintiff, since neither the shooting time of the photographs was provided, nor other proof to prove was provided, so the court does not adopt it. Evidence 3, agreement, as the counterclaim Plaintiff provided the original, so the court confirms the authenticity of the evidence, but it could only prove that Pai A Company made the off-shore platform at a price RMB380,000 to repay the debt of the outsiders Qinhuangdao Dongxu Advertising Decoration Engineering Co., Ltd. and Qinhuangdao Economic and Technological Development Zone Yushang Construction Engineering Machinery Leasing Service Department.

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Upon the statement of parties and the evidence affirmed through investigation, the court ascertains the following facts: On March 21, 2014, Pai A Company (Party A) signed an off-shore platform building contract with Bohai Company (Party B). According to engineering contents, quantities and reasons of construction in article one of the contract, “first, according to engineering contents, to build an off-shore platform (30  50 m). … … Third, to be under construction based on construction drawing which was offered by Party A and accepted by both parties. … … Sixth, all materials and equipment needed in this contract would be in charge of Party B (steel materials should be following Party A’s demand)” contract price and terms of the payment in article two of the contract, “after signing the contract, Party A needed to make an advance payment 25% of the total. After steel was sent into the field, Party A should to pay 25% of the total payment. Both parties began to balance the account before the platform was launched. Party A should pay 75% of the total price. After the platform being moved and fixed in the certain place of Nandaihe International Entertainment Center directed by Party B, Party A paid 15% of the total price. 10% of the total price was regarded as warranty bond, which would be paid within one month after the platform was put into use.” manufacture and supervision agreement in article three says: “Party A was in charge of arranging manufacture and supervision and related expense.” launching and checking upon delivery in article five, “Party B should make sure that there was no leaking when the off-shore platform was launched and checked upon delivery.” delivery of vessel agreement in article six says: “the ownership of the platform belonged to Party B during the construction period, meanwhile Party B would take the risks of it. After the platform construction being finished and launched successfully, risks would be transferred to Party A.” quality-guarantee agreement in article eight, “first, on the responsibility and arrange of flaws, the platform was under guarantee within six months since both parties signed the platform-turning-over procedure. All the flaws caused by construction, technology and material quality of Party B would be Party B’s responsibility to fix or change for free. Party A would pay for its damage and breakdown caused by lacking of maintenance, which Party B was in charge of fixing. … … Third, on flaw treatment, if there happened with quality problems under guarantee which was caused in other ports or bodies of water and Party A could not wait for Party B’s treatment on scene, Party A should inform Party B in time. Party B should send people to check and confirm. If Party B could not send people to check, Party A could look for places to get fixed itself nearby. If the fixing or changing items were under Party B’s guarantee indeed, Party A should provide relevant inspection certificate and invoice of repair shops, and Party B should pay for the expense.” Bohai Company purchased steels and welding materials with certificates of quality in March 2014. Pai A Company paid RMB1,901,400 to Bohai Company separately on April 14, April 15, May 21, May 28 in 2014. On May 19, 2014, Bohai Company and Pai A Company confirmed that the total amount of the contract was RMB2,140,000. On the same day, Bohai Company delivered the off-shore platform to Pai A Company, and there was no water-leaking when checking upon

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delivery. During April to August in 2014, Pai A Company asked Bohai Company to repair the platform for several times. In February of 2016, Pai A Company signed an agreement which made the off-shore platform at a price of RMB380,000 to repay the debt of the outsiders Qinhuangdao Dongxu Advertising Decoration Engineering Co., Ltd. and Qinhuangdao Economic and Technological Development Zone Yushang Construction Engineering Machinery Leasing Service Department. As Pai A Company did not pay the quality guarantee deposit, RMB238,600, to Bohai Company, therefore the action was filed. The court confirms that the case is dispute over the building contract of off-shore platform. The contract which was signed between Pai A Company and Bohai Company was real declaration of intention of the two parties, legal and valid, so both parties should perform the obligation of the contract strictly. Pai A Company insisted that Bohai Company should not be paid the 238,600 RMB guarantee money for serious quality problems in the off-shore platform, but evidence offered could not prove the serious problems in the off-shore platform. Although this off-shore platform had been repaired by Bohai Company several times from June to August in 2016, Pai A Company could still not be able to prove that it was due to quality problems of the off-shore platform that the off-shore platform needed to be repaired, nor can it show the evidence that there still existed quality problems after being repaired. According to the contract of both parties, Bohai Company was in charge of all materials and equipment in the contract but should follow demands of Pai A Company to use steel materials, meanwhile Pai A Company was in charge of supervision and related expense. During the platform building, Pai A Company never raised an objection to the building process and materials. According to the contract, 10% of the total price was paid as warranty bond one month later after the platform was put into use. Pai A Company did not raise any objection after checking and accepting the platform on May 19, 2014, which meant that Bohai Company had already fulfilled the obligation as contracted. Pai A Company should have paid Bohai Company warranty bond 238,600 RMB before June 20, 2014, as contracted. The court supports Bohai Company’s claim that Pai A Company had paid the debts 238,600 RMB and interest calculated according to the current loan rate over the same period of the People’s Bank of China starting from July 20, 2014, because of facts and evidence. Evidence shown by Pai A Company could not prove that there were severe quality problems in the off-shore platform, neither can show that Pai A Company suffered 1,200,000 RMB loss and 600,000 RMB performance loss from the quality problems in the off-shore platform. The court does not recognize that Pai A Company in counterclaim asked Bohai Company to pay for 1,200,000 RMB loss and 600,000 RMB performance loss, as it is not based on facts and evidence. In conclusion, in accordance with Article 109 of the Contract Law of the People’s Republic of China, Paragraph 1 of Article 64 of the Civil Procedure Law of the People’s Republic of China, the judgment is rendered as follows:

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1. The Defendant Pai A Qinhuangdao Tourism Culture Management Co., Ltd. shall, within ten (10) days as of the effective day of this Judgment, pay the Plaintiff Bohai Company in sum of RMB 238,600; 2. The Defendant Pai A Company shall, within ten (10) days as of the effective day of this Judgment, pay the Plaintiff Qinhuangdao Bohai Shipping Matters Engineering Co., Ltd. the interest of amount aforementioned (calculated according to the current loan interest rate over the same period of the People’s Bank of China from June 20, 2014 to the date of actual payment); and 3. Reject the claims of the Plaintiff Qinhuangdao Bohai Shipping Matters Engineering Co., Ltd. If the obligations of monetary payment are not performed within the period specified in this judgment, the interest on the debt shall be doubled in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee of the principle action in amount of RMB4,879, and court acceptance fee of the counterclaim in amount of RMB10,500 shall be born by the Defendant Pai A Qinhuangdao Tourism Culture Management Co., Ltd. In the event of dissatisfaction with this judgment, both parties may within 15 days upon delivery of this judgment, submit a statement of appeal with 6 copies to lodge an appeal with Tianjin High People’s Court. Both parties must submit the statement of appeal within 7 days upon, and pay the appeal fee according to the amount that the judgment of dissatisfaction of first instance made (account name: Finance Department of Tianjin High People’s Court; number: 02200501040006269; deposit bank: Agriculture Bank of China Tiancheng Branch). Exceeding the time limit, it will be regarded as a withdrawal of appeal. Presiding Judge: CHEN Shunping Acting Judge: OUYANG Hongwei People’s Juror: BIAN Hong September 28, 2016 Clerk: WANG Xiaorui

Tianjin Maritime Court Civil Judgment Qinhuangdao Jinhai Real Estate Development Co., Ltd. v. Zhuhai Sun Bird Yacht Manufacturing Co., Ltd. (2015) Jin Hai Fa Shang Chu Zi No.930 Related Case(s) None. Cause(s) of Action 207. Dispute over shipbuilding contract. Headnote Rejecting the Plaintiff buyer’s claims for damages for the Defendant shipbuilder’s failure to deliver at agreed delivery place, and for alleged defects in ship. Summary The Plaintiff (buyer) sued the Defendant (ship builder) for breach of contract. The Plaintiff alleged that the Defendant breached a ship construction contract by failing to deliver at the agreed place of delivery by reason of defects in the delivered ship. The Defendant asserted that it did not breach the contract on the ground that the place of delivery was the construction site rather than the site asserted by the Plaintiff and that the ship delivered conformed with the contract. The court found for the Defendant, holding that there was no breach because the place of delivery was the construction site subject to the supplemental contract, since the two parties had not expressly stipulated it in the ship construction contract. The court further rejected the Plaintiff’s claim for damages because it failed to prove the losses caused by the existing problems in the ship.

Judgment The Plaintiff: Qinhuangdao Jinhai Real Estate Development Co., Ltd. Domicile: Beidaihe District, Qinhuangdao City, Hebei Province. Legal representative: SHI Chunyu, general manager. Agent ad litem: WANG Xueliang, clerk of the company. Agent ad litem: SHAO Lixin, lawyer of Hebei Desheng Law Firm.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_36

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The Defendant: Zhuhai Sun Bird Yacht Manufacturing Co., Ltd. Domicile: West Jiti Gate Bridge, Pingsha Town, Jinwan District, Zhuhai City, Guangdong Province. Legal representative: LI Yuexian, chairman of the company. Agent ad litem: WANG Dequn, clerk of the company. Agent ad litem: HE Jianbao, legal counsel of the company. With respect to the case arising from the dispute over shipbuilding contract, the Plaintiff Qinhuangdao Jinhai Real Estate Development Co., Ltd. (hereinafter referred to as Jinhai Co., Ltd.) against the Defendant Zhuhai Sun Bird Yacht Manufacturing Co., Ltd. (hereinafter referred to as Sun Bird Co., Ltd.). The court after accepting the case on December 9, 2015, this case was legally heard in accordance with the ordinary procedure with the collegiate panel composed of Judge CHEN Shunping as Presiding Judge, Acting Judge OUYANG Hongwei, and People’s Juror BIAN Hong. The court held a hearing in public on March 23, 2016. WANG Xueliang, SHAO Lixin, agents ad litem of the Plaintiff and WANG Dequn, HE Jianbao, agent ad litem of the Defendant appeared in court to attend the trial. After trial, this case has now been concluded. The Plaintiff alleged in the statement of claim that the Plaintiff and the Defendant signed Ship Construction Contract which agreed that the Plaintiff commissioned the Defendant to design and construct the 67ft yacht, and the total contract price is RMB6,100,000 (the following currencies are denominated in RMB). 50% of the total amount of the contract as a prepayment shall be paid by the Plaintiff to the Defendant within 3 days after the contract has been signed. The Plaintiff pays the balance after the ship has been checked and accepted by the Plaintiff. The Defendant should issue 5% of the total contract amount for the bank guarantee as the quality deposit. The delivery period is within 40 calendar days from the date of receipt of the prepayment. When the ship is received, the Plaintiff and the Defendant need to sign Ship Delivery Book and the ownership of the yacht is transferred to the Plaintiff. After the contract had been signed, the Plaintiff completed the first prepayment on July 3, 2015. But the Defendant fails to deliver the ship to the destination within 40 calendar days from the date of receipt of the first prepayment on August 12. The seaworthiness certificate has also not been delivered to the Plaintiff. So far, the Plaintiff has paid the contract price of RMB6,097,255. But the Defendant’s delivery time has been repeatedly delayed, and the ship has not conformed with the contract. The Defendant has constituted a breach of contract. The Plaintiff in order to safeguard their legitimate rights and interests, requested the court to sentence: 1. cancel the contract which was signed by the Plaintiff and the Defendant. The Defendant should return the payment of the contract price of RMB6,097,255 and interests. 2. The Defendant should bear the liquidated damages of RMB45,727.5. 3. The Defendant should compensate the economic loss of RMB413,587.49. 4. The costs of litigation in this case shall be born by the Defendant. The Plaintiff in the trial changed the second item to that the Defendant has to bear the liquidated damages of RMB1,220,000 and the third item to that the Defendant should compensate economic loss of RMB503,500.49.

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The Defendant defended that: 1. the Defendant did not breach the contract for the delay in delivery and the seaworthiness certificate had also been delivered to the Plaintiff. The contract had actually been fulfilled. 2. According to the contract, the delivery site was the construction site of Zhuhai, rather than Qinhuangdao. 3. There was no fact that the ship did not conform the contract. 4. The yacht was for its own operation, so the loss of operation that the Plaintiff used to claim had no legal basis. Based on the claims of the Plaintiff and the defense of the Defendant, the issues of the case are concluded as: 1. whether there are any situations of cancelling the contract of ship construction and whether the contract should be cancelled; 2. whether there is a breach of contract by the Defendant and whether the Defendant should bear the liability for breach of contract to the Plaintiff; 3. whether the Plaintiff has loss and the specific amount of the loss. The Plaintiff submitted the following evidence to the court in support of its claims: 1. Ship construction contract, to prove that there was a ship construction contract relationship between the Plaintiff and the Defendant; 2. Payment details and transfer voucher, to prove that the Plaintiff paid the ship construction price to the Defendant in accordance with the contract; 3. Letter of communication (three pieces), to prove that the quality of the ship provided by the Defendant was not working properly; 4. Crew service contract and crew certificate number, to prove that the Plaintiff hired the relevant personnel for the operation of the ship; 5. Bank electronic return receipt, to prove that the Plaintiff has paid the salaries of the crew from September to October in 2015; 6. Crew meal fee receipt, to prove that the cost of working meals after the crew were employed; 7. Proof of crew accommodation expenses, to prove that crew accommodation expenses due to overdue delivery of the ship by the Defendant; 8. Payment certificate and charter agreement of yacht berth, to prove that the Plaintiff and the outsider Qinhuang International Tourism Development Co., Ltd. signed a yacht berth contract and paid the berth rental expense; 9. Rectification letter, to prove that up to September 10, the rectification of the ship has not yet been completed; 10. Repair list on October 30, 2015; 11. Return suggestion; 12. The letter dated on October 29, to prove that the ship had quality problems. The Defendant’s cross-examination to the Plaintiff’s evidence: the Defendant confirmed the authenticity, legality and relevancy of evidence 1 and evidence 2. The Defendant confirmed the authenticity, legality and relevancy and probative force of first letter of evidence 3, but the Defendant argued about the second letter and the third letter of evidence 3. The Defendant argued about the authenticity of the evidence 4 to evidence 8. The Defendant did not recognize its relevancy. Evidence 9 to evidence 12 are issued by the Plaintiff unilaterally, the Defendant argued about the authenticity and legality.

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The Defendant submitted the following evidence to the court in support of its claims: 1. Receipt vouchers of prepayment, to prove that the Plaintiff’s first payment time is July 3. 2. Receipt vouchers of the second paragraph of the contract price, to prove that the Plaintiff second paragraph of the contract price was delayed. 3. Bank quality guarantee, to prove that the Defendant fulfilled the obligation to deliver the letter of guarantee. 4. Receipt of product maintenance report, to prove that the Defendant fulfilled the maintenance duty during the warranty period. 5. Seaworthiness certificate, to prove that the Defendant has completed the seaworthiness certificate on August 6, 2015, and the ship has been tested. The ship was seaworthy. The Plaintiff’s cross-examination to the Defendant’s evidence: the Plaintiff confirmed the authenticity, legality of evidence 1 and evidence 3, the Plaintiff confirmed the authenticity of evidence 2, 4, 5 but objected to the purpose of the Defendant’s proof. The confirmation opinions of the court on the evidence submitted by the Plaintiff: the court confirms the authenticity of evidence 1, which can prove that there was a ship construction contract relationship between the Plaintiff and the Defendant. The court confirms the authenticity of evidence 2, which can prove that the Plaintiff paid the ship construction contract price to the Defendant. The evidence 3 provided by the Plaintiff and the evidence 4 provided by the Defendant can be confirmed each other. The court confirms its authenticity, which can prove that the Plaintiff communicated on delivery and maintenance issues in August and October. The court confirms the authenticity of evidence 4 and evidence 5, which can prove that the Plaintiff hired the relevant personnel for the operation of the ship and paid the corresponding salary. Evidence 6 and evidence 7 were receipts and the Plaintiff did not provide evidence to prove the necessity and rationality of its expenditure, so the court does not confirm the evidence provided by the Plaintiff. The court confirms the authenticity of evidence 8 to prove that the Plaintiff and the outsider Qinhuang International Tourism Development Co., Ltd. signed a yacht berth lease contract and paid the berth rental expense. The evidence 9 was issued by the Plaintiff unilaterally, and there was no other evidence to prove. The court does not confirm the authenticity of the evidence. The staff of the Defendant and the Plaintiff both signed on the evidence 10, evidence 11 and evidence 12, so the court confirms its authenticity, which can prove that the Defendant had solved the problem which was raised by the Plaintiff. The court confirms the evidence provided by the Defendant: the court confirms the authenticity of evidence provided by the Defendant. Evidence 1 to prove that Plaintiff’s first payment time is July 3. Evidence 2 to prove that the Plaintiff paid second paragraph of the contract price on August 17. Evidence 3 to prove that the Defendant fulfilled the obligation to pay the guarantee. Evidence 4 to prove that the Defendant repaired the yacht involved on October 2015. Evidence 5 to prove that

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the Defendant completed the seaworthiness certificate on August 6, 2015, and the ship had been tested. The ship was in seaworthy condition. The court finds the facts as follows: On July 1, 2015, the Plaintiff Jinhai Co., Ltd. (as Party A) and the Defendant Sun Bird Co., Ltd. (as Party B) signed a ship construction contract which agreed that the Plaintiff commissioned the Defendant to design and construct an 67ft yacht. The contract agreed: “1.6 Yacht certificate: Party B is responsible for handling Yacht Seaworthiness Certificate and bearing all expenses of the certificate. The Party B shall deliver the certificate to Party A when delivering the ship; …… 1.7 …… The hydraulic boom must be installed when the yacht leaves the factory, and the delivery shall not be affected. If there is no time to install when it is delivered, all expenses arising from installation in Qinhuangdao shall be born by Party B. …… 2.1 Price of the contract: the total contract price is RMB6,100,000; 2.2 payment method: phase one, 50% of the total amount of the contract as a prepayment shall be paid by the Party A to the Party B within 3 days after the contract has been signed, totally RMB3,050,000. Phase two, the Party A pays the balance after the ship has been checked and accepted by the Party B. The Party B shall issue 5% of the total contract amount for the bank guarantee as the quality deposit …… 5.2 Check before acceptance: Party A shall inspect the ship at the place of manufacture according to the prior agreement and delivery the instructions, related information and documents at the same time. The ship inspection certificate is provided together when the shipment started. In the inspection and acceptance of the experiment: if Party A discovers that the materials and equipment used in the construction of the ship do not conform the design or the construction quality, Party A shall notify Party B in written in time. Party B shall deal with it within 24 h after receiving the notice, and replace, repair or reduce the price in time. 5.3 Time of delivery: the delivery period is within 40 calendar days from the date of receipt of the prepayment. …… 5.4 Delivery of the ship: when the ship has been tested, the defects found in the seaworthiness have been eliminated, finishing project has all been completed, all equipment can function properly, all spare parts, tools and prescribed documents, drawings, technical documents have been completely delivered, the technical performance of this ship conforms the requirements of this contract and the whole ship instructions, Party B can notify Party A to receive the ship. When the ship is received, the Party A and Party B need to sign Ship Delivery Book and the ownership of the ship transfers to Party A. 5.5 Mode of transport and cost bearing: Party B is responsible for sending the yacht to Party A’s designated place. Party B shall be responsible for transportation expense. Any risks and other accident in the course of transportation shall be born by Party B. 7.1 If any Party fails to fulfill the contract, it should pay twenty percent of the total contract amount for the liquidated damages to another party”. On July 3, 2015, the Plaintiff paid RMB3,050,000 to the Defendant as the first payment. On August 3, 2015, the Plaintiff’s staff arrived in Zhuhai to inspect the ship, and indicated two issues that the yacht boom is not installed and the seaworthiness certificate does not handle on August 11, 2015, the Plaintiff’s staff came again to Zhuhai for inspection and acceptance the ship. At the same time, the Defendant was requested to transport the

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yacht to Qinhuangdao as soon as possible. But the two parties did not sign Ship Delivery Book. The Plaintiff paid 3,047,255 yuan to the Defendant on August 17, 2015. On August 6, 2015, the Defendant handled the seaworthiness certificate of the ship. The yacht was inspected in Zhuhai on August 6, 2015, and was in seaworthy condition. On August 12, 2015, the Defendant delivered the quality guarantee which issued by China Resources Bank of Zhuhai Co., Ltd. to the Plaintiff. After the Plaintiff paid the balance of the contract to the Defendant, the Defendant transported the boat to Qinhuangdao. On September 8, 2015, the Defendant delivered the yacht involved to the Plaintiff. The Plaintiff actually received and managed the yacht. But the two parties did not sign Ship Delivery Book. On October 8, 2015 and October 21, 2015, the Plaintiff contacted the Defendant Sun Bird Co., Ltd. to determine the maintenance of the yacht. From October 25 to 30, 2015, the Defendant’s staff repaired the ship. Until October 30, there were still four problems unsolved. The court also finds out that the Plaintiff signed a labor contract with WANG Huaiyong on August 8, 2015 and signed a labor contract with LIU Chunjiang on August 26. The two person served as captain and sailor in the yacht respectively. On September 2, 2015, the Plaintiff and Qinhuang International Tourism Development Co., Ltd. signed a yacht berth lease agreement. The rental fee for berth was 20,000 yuan per month. The court holds that the case is dispute over shipbuilding contract, and there is a contractual relationship of ship construction between the Plaintiff Jinhai Co., Ltd. and the Defendant Sun Bird Co., Ltd. Regarding to the issue whether the Defendant had a breach of contract and whether the Defendant should bear the liability for breaching the contract. The Plaintiff held that the Defendant did not deliver the ship on time, and the ship does not meet the contract. So the Defendant breached the contract. The court holds that to determine whether the Defendant delivered the ship on time, firstly it was necessary to make clear the place of ship delivery agreed in the contract. In this case, in the ship construction contract, neither the Plaintiff nor the Defendant had expressly stipulated the place of delivery or reached a supplementary agreement with respect to the place where the ship shall be delivered to. According to Article 61 of the Contract Law of the People’s Republic of China: “if a term such as quality, price or remuneration, or place of performance etc. was not prescribed or clearly prescribed, after the contract has taken effect, the parties may supplement it through agreement; if the parties fail to reach a supplementary agreement, such term shall be determined in accordance with the relevant provisions of the contract or in accordance with the relevant usage.” The ship construction contract in this case agreed: “1.7……The hydraulic boom must be installed when the yacht is out of the factory and the delivery of the ship shall not be affected. If there is no time to install the hydraulic boom when it is delivered, all expenses arising from installation in Qinhuangdao shall be born by Party B.” In view of this agreement, “when it is too late to install the ship, it is necessary to install it in Qinhuangdao……” The place of delivery should not be Qinhuangdao, but the site of construction, Zhuhai. The contract also agreed: “5.5 Mode of transport and cost bearing: Party B is responsible for sending the yacht to Party A’s designated place. Party B shall be responsible for

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transportation expenses. Any risks and other contingencies in the course of transportation shall be born by Party B.” If the site of delivery was Qinhuangdao, the Defendant of course needs to transport the yacht to Qinhuangdao and bear the expenses and risks without further agreement. Therefore, from the two agreements, the delivery site of the ship should be the construction site of the ship in Zhuhai. Even if in accordance to Article 61 of the Contract Law of the People’s Republic of China, it was still unable to determine the site of performance, according to the Article 62 Sub-paragraph 3 of the Contract Law of the People’s Republic of China: “if the place of performance is not clear and the way of payment is currency, the performance shall be performed at the place where the Party of accepted the currency is located. Delivery of real estate, it shall be performed at the place where the real estate is located. The subject is for the other shall be performed at the place where the performing Party is located.” In this case, the party responsible for the delivery of the ship is the Defendant, and the place of performance shall be the Defendant’s place, Zhuhai, so the delivery place should be Zhuhai. The Plaintiff Jinhai Co., Ltd. paid RMB3,050,000 for prepayment to the Defendant Sun Bird Co., Ltd. on July 3, 2015. According to the contract, the Defendant shall deliver the ship within 40 calendar days from the date of receipt of the prepayment. So the Defendant need to deliver the ship before August 12, 2015. The two parties agreed on the terms of acceptance of the contract: “in the inspection and acceptance of the experiment, if Party A discovers that the material and equipment used in the construction of the ship do not conform with the design or the construction quality question. Party A shall notify Party B in written in time. Party B shall deal with it within 24 h after receiving the notice, and replace, repair or reduce the price in time.” On August 3, 2015, the Plaintiff’s staff arrived in Zhuhai to inspect the ship, and indicate two issues that the yacht boom was not installed and the seaworthiness certificate does not handle in. On August 11, 2015, the Plaintiff’s staff come again to Zhuhai for inspection and acceptance the ship, but the Plaintiff did not inform the Defendant that the construction materials, equipment do not meet the design and have construction quality problems. Instead, the Defendant was requested to transport the yacht to Qinhuangdao as soon as possible, and the balance was paid to the Defendant on August 17, 2015. Because of the delivering site of the ship involved in the contract is in the construction site, Zhuhai. Although the two parties did not sign Ship Delivery Book in time, the Plaintiff’s act should be deemed as agreement that the Defendant delivered the ship in the state of acceptance at that time. The Defendant delivered the ship at the site of the construction, Zhuhai on August 11, 2015. The Plaintiff’s belief that the Defendant delayed the delivery of the ship that breached the contract do not constitute. On September 8, 2015, the Defendant transported the yacht to Qinhuangdao and delivered it to the Plaintiff who was actually managing the ship. The two parties had actually fulfilled the contract of ship construction. Although after repairing by the Defendant, there are still several problems. The Plaintiff had no evidence to prove that the yacht could not be used due to the existence of the problems and the existence of these problems causes losses to them. There is also no evidence to prove that the circumstances in which the contract is assumed to be liable for breach of contract. These problems

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can be solved by repair or replace. Therefore, the Plaintiff’s belief that the Defendant does not perform the contract and requirement that the Defendant should bear the liquidated damages of RMB1,220,000, there is no factual and legal basis and the court does not support it. It is normal for the Plaintiff to employ the staff managing the ship and to rent the berth. The loss caused by the Defendant’s breach of contract, and the claim that the Defendant should compensate the economic loss of RMB503,500.49 has no factual and legal basis. The court does not support it. Regarding to the issue whether there exists a condition of cancellation of the shipbuilding contract in this case and whether the contract should be canceled or not. The Defendant has delivered the ship on time, and the ship construction contract between the two parties has actually been fulfilled. There is no agreement between the two parties to terminate the contract. And the Plaintiff failed to provide evidence to prove that the case exists statutory rescission of contract. Therefore, the Plaintiff has no factual and legal basis for the cancellation of the contract for the construction of the ship signed by the Plaintiff and the Defendant. The claim that the Defendant should return the payment of the contract price of RMB6,097,255 and interest has no factual and legal basis. The court does not support it. In conclusion, there is a contractual relationship for ship building between the Plaintiff Jinhai Co., Ltd. and the Defendant Sun Bird Co., Ltd. The Defendant has fulfilled the duty of delivering the ship in the time stipulated in the contract. The ship construction contract between the two parties has actually been fulfilled. There is no agreement or statutory rescission of the contract in this case. The Plaintiff’s request for rescission of the contract, return of the payment and interest, to bear liquidated damages and compensate for losses have no factual and legal basis and shall be rejected. According to Article 61, Article 62 Sub-paragraph 3 of the Contract Law of the People’s Republic of China and Article 64 Paragraph 4 of the Civil Procedure Law of the People’s Republic of China, the judgment is rendered as follows: Reject the claims of the Plaintiff Qinhuangdao Jinhai Real Estate Development Co., Ltd. Court acceptance fee in amount of RMB66,545 shall be born by the Plaintiff Qinhuangdao Jinhai Real Estate Development Co., Ltd. In case of dissatisfaction with the judgment, any party shall within fifteen (15) days as of the service of this judgment submit a statement of appeal to the court, with duplicates in six copies, so as to make an appeal to Tianjin High People’s Court. The appeal fee shall be paid for the amount of dissatisfaction with the judgment of first instance (bank of deposit: Agricultural Bank Tiancheng Branch 02200501040006269; name of account: Organ Finance Department of Tianjin High People’s Court). If the time limit is overdue, the appeal shall be withdrawn automatically. Presiding Judge: CHEN Shunping Acting Judge: OUYANG Hongwei People’s Juror: BIAN Hong May 26, 2016 Clerk: WANG Xiaorui

Qingdao Maritime Court Civil Judgment QU Rongmo v. China Continent Insurance Co., Ltd. Weihai Center Branch et al. (2012) Qing Hai Fa Hai Shang Chu Zi No.240 Related Case(s) This is the judgment of first instance, and the judgment of second instance and the judgment of retrial are on page 1071 and page 1089 respectively. Cause(s) of Action 230. Dispute over marine insurance contract on the sea or sea-connected waters. Headnote The Plaintiff assured awarded damages and interest for the Defendant insurer’s refusal to pay for constructive total loss of ships lost in a typhoon, rejecting the Defendant’s argument that the Plaintiff had breached warranty of seaworthiness by shifting berths. Summary The Plaintiff-Insured filed suit against the Defendants-Insurers in a dispute over constructive total loss. The Plaintiff requested the two Defendants to indemnify the insured amount and related bank interests after the insured ships stranded as a result of a typhoon (covered risk) and was declared a constructive total loss by the authorities. The Defendants argued that they were not obliged to pay because the Plaintiff had breached the seaworthiness obligation while the ship was shifting berths, which approximately caused the accident. The court found in favor of the Plaintiff, holding that the losses were approximately caused by the covered risk typhoon. The court rejected the Defendant’s unseaworthiness claim because the berth shift did not satisfy the requirement of “before and at the beginning of the voyage.”

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_37

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Judgment The Plaintiff: QU Rongmo, male, Han, born on December 13, 1957. Domicile: Rongcheng City, Shandong Province. Agent ad litem: YV Jingjie, lawyer of Shandong Guangwei Law Firm. Agent ad litem: LIU Hao, lawyer of Shandong Guangwei Law Firm. The Defendant: China Continent Insurance Co., Ltd. Weihai Center Branch. Domicile: No. 14 Haibain North Road, Weihai City, Shandong Province. Legal representative: WANG Jian, general manager. Agent ad litem: SUN Jinghai, lawyer of Shandong Haihangjia Law Firm. The Defendant: China Continent Insurance Co., Ltd. Shidao Branch. Domicile: No. 109, Huang Hai Road, Shidao Town, Rongcheng City, Shandong Province. Legal representative: JIANG Zhen, manager. Agent ad litem: SUN Jinghai, lawyer of Shandong Haihangjia Law Firm. Agent ad litem: ZHAO Yonggang, male, Han, born on March 7, 1967, living in Weihai, Shandong. With respect to the case arising from dispute over the contract of maritime insurance, the Plaintiff, QU Rongmo, against the Defendants, China Continent Insurance Co., Ltd. Weihai Center Branch (hereinafter referred to as Continent Insurance Weihai Company) and China Continent Insurance Co., Ltd. Shidao Branch (hereinafter referred to as Continent Insurance Shidao Branch). After being accepted, this case was legally heard in accordance with the collegiate panel and the court held a hearing in public. YV Jingjie and LIU Hao, agents ad litem of the Plaintiff QU Rongmo and SUN Jinghai, agent ad litem jointly entrusted by the Defendants Continent Insurance Weihai Company and Continent Insurance Shidao Branch appeared in court to attend the trial. Now, this case has been concluded after trial. QU Rongmo, the Plaintiff alleged that he was the shipowner of the fishing boat “Lu Rong Yu 1813/1814” and insured two fishing boats with Continent Insurance Shidao Branch, the second Defendant (policy number is PCBG201137011847000015/0016). The policy contract risks covered all risks, the insurance amount of each fishing boat was 3 million yuan, and the insurance period was 12 months, from 0000 on May 26, 2011 until 2400 on May 25, 2012. The Plaintiff totally paid RMB132,000 insurance expenses. At 0330 on June 26, 2011, the typhoon “Mireille” caused the fishing boat “Lu Rong Yu 1813/1814” stranded in Rongcheng Yandunjiao Port, The Plaintiff timely reported to the insurance company. On September 13, 2011, the first Defendant Continent Insurance Weihai Company replied that the salvage expenses and the repair costs of insured fishing boats was more than two ship’s value in the market when the accident occurred, so the first Defendant would not participate in the two ships all rescue operations, and did not undertake corresponding rescue costs. On February 7, 2012, the first Defendant Continent Insurance Weihai Company issued the notice of refusal. The Plaintiff holds that the insurance contract established between the Plaintiff and the Defendant should be legally valid. The Plaintiff paid the premium according to

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the contract. During the period of ship insurance liability, the typhoon caused two fishing boats have been stranded and constituted a constructive total loss. The Defendant rejected the Plaintiff’s abandonment explicitly. On September 15, 2011, the statutory authority of Rongcheng Port Supervision of the People’s Republic of China made a sea fishing accident report, the authority identified the cause of stranded even total loss of fishing boats was the typhoon, which brought fishing chain fracture then blew boats to sea cucumber pool and stranded. This is the proximate cause of the accident of fishing boats. Therefore, the two Defendants should, in accordance with the law, paid the premium in full according to the amount insured by the insurance contract. The Plaintiff requested the court to sentence that the two Defendants should pay the insurance compensation 6 million yuan and bear interests over the period from October 1, 2011 to the date of the actual performance according to the bank loan rate to the Plaintiff, and born the costs of litigation. To support his claim, QU Rongmo, the Plaintiff, offered the following evidence to the court: 1. QU Rongmo, the Plaintiff’s identity card, to prove that the identity of the Plaintiff. The two Defendants had no objection to the authenticity of the evidence, and the court confirms it. 2. The certificate of ownership of fishery vessels of the People’s Republic of China, certificate of registration for fishery vessels, to prove that the Plaintiff was the shipowner of the fishing boat “Lu Rong Yu 1813/1814” who had the insurable interest in the subject matter of the insurance. The two Defendants had objection to the authenticity of the evidence, they hold that there was no proof that on this copy of the evidence “agrees with the original” was the stamp of the fishing vessel registration authority. On March 21, 2011, the Plaintiff obtained the ownership of the insured ship, but it could not prove that the Plaintiff still had the ownership of the insured ship when the accident occurred, and the Plaintiff could not prove that he enjoyed the insurance benefit when the accident occurred. The court confirms the authenticity of the evidence, holds that the above certificates are the corresponding certificate issued by the competent authority. 3. The fishing license of the People’s Republic of China, to prove that the fishing boat “Lu Rong Yu 1813/1814” obtained the fishing licenses. The two Defendants had objection to the authenticity of the evidence, they hold that the seal on the copy did not show the time of the seal and the certificate was valid when the insurance accident happened. The court confirms the authenticity of the evidence, holds that the above certificates are the corresponding certificates issued by the competent authority. 4. The certificate of fishing vessel safety of register of fishing vessel of the People’s Republic of China, to prove that the ships had been inspected in accordance with the relevant provisions according to the Fishery Law of the People’s Republic of China. The two Defendants had objection to the authenticity of the evidence, they hold that the evidence showed the occurrence of date was on April 18, 2011, only proved that the subject-matter insured ship was inspected on April 18, 2011, but it could not prove that on June 25, 2011

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5.

6.

7.

8.

9.

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the main engine, stern shaft and the joint shaft of the subject-matter insured ship repaired and inspected again, also could not prove that the subject-matter insured ship was seaworthy when the accident happened. The court confirms the authenticity of the evidence, holds that the above certificates are the corresponding certificates issued by the competent authority. The inspection report of fishery ship labour of register of fishing vessel of the People’s Republic of China, to prove that the fishing boat “Lu Rong Yu 1813/ 1814” had been inspected and qualified. The cross-examination opinions of the two Defendants were the same as evidence four. The court confirms the authenticity of the evidence, holds that the above certificates are the corresponding certificates issued by the competent authority. 6.The inspection record of fishery ship of register of fishing vessel of the People’s Republic of China, to prove that the fishing boat “Lu Rong Yu 1813/ 1814” had been inspected and qualified. The cross-examination opinions of the two Defendants were the same as evidence four. The court confirms the authenticity of the evidence, holds that the above certificates are the corresponding certificates issued by the competent authority. The certificate of ship tonnage of register of fishing vessel of the People’s Republic of China, to prove that according to the Fishery Law, the tonnage of the fishing boat “Lu Rong Yu 1813/1814” had been measured in accordance with the relevant provisions. The two Defendants hold that the evidence was the copy and the authenticity could not be confirmed. The court confirms the authenticity of the evidence, holds that the above certificates are the corresponding certificates issued by the competent authority. The certificate of fishing vessels fishing and heavy equipment of register of fishing vessel of the People’s Republic of China, to prove that according to the Fishery Law, stranding machine, intermediate section, steeve and front section of the ships had been inspected as the relevant provisions of the Statutory Inspection Rules for Fishery Ships and passed the inspection. The cross-examination opinions of the two Defendants were the same as evidence seven. The court confirms the authenticity of the evidence, holds that the above certificates are the corresponding certificates issued by the competent authority. The certificate of fishing vessel load line of register of fishing vessel of the People’s Republic of China, to prove that according to the Fishery Law the vessels had been evaluated the rail by the relevant regulations and drawn loading line. The cross-examination opinions of the two Defendants were the same as evidence seven. The court confirms the authenticity of the evidence, holds that the above certificates are the corresponding certificates issued by the competent authority. The certificate of fishery vessels prevent oil pollution of register of fishing vessel of the People’s Republic of China, to prove that according to the Fishery Law the vessels had passed the inspection. The cross-examination opinions of the two Defendants were the same as evidence seven. The court confirms the authenticity of the evidence, holds that the above certificates are the corresponding certificates issued by the competent authority.

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11. The policy of fishing vessel insurance of Continent Insurance Shidao Branch, to prove that the policy was legally effective and should be protected by law, except the special stipulation. The two Defendants had no objection to the authenticity of the evidence, but objected to the content of the proof: the exact definition of the special contract was that the cost of the new vessel is RMB4,285,700 instead of the insurance value of RMB4,285,700. The court confirms the authenticity of the evidence, ensures that there is an insurance contractual relationship between the Plaintiff and the Defendant. 12. The premium invoice of Continent Insurance Shidao Branch, to prove that the Plaintiff fulfilled his obligation, the payment of the insurance premium. The two Defendants had no objection to the authenticity of the evidence, and the court confirms it. 13. The letter of notice of Continent Insurance Shidao Branch about the “6.26” accident of the fishing boat “Lu Rong Yu 1813/1814”, to prove that the Plaintiff had timely reported to the insured, fulfilled the obligation of noticing. This letter of notice belonged to the declaration that insured agreed to fulfill the obligations to pay claims. The two Defendants had no objection to the authenticity of the evidence, but objected to the content of the proof: they held that the evidence did not prove that the Defendant agreed to bear the involved insurance liability. In the last paragraph of the letter of notice, the Defendant explicitly clarified that the letter of notice does not represent that we shall undertake any insurance liability for any accident described, we have the right to investigate the accident and retain the relevant legal rights and interests under the insurance contract and the relevant laws. The court confirms the authenticity of the evidence. 14. Survey Report on Fishing and Maritime Traffic Accidents of fishing vessel accident authority of the People’s Republic of China, Rongcheng Fishing Port Supervision, to prove the process and reason of the accident, It proved that the accident of the typhoon Meari was proximate, and the strand was specific type of accident. The two Defendants had no objection to the authenticity of the evidence, but objected to the content of the proof and the content which the Plaintiff used the evidence to prove: they held that according to the law, the evidence was just a common documentary, the contents of the evidence could be completely reversed, if the Defendant had sufficient evidence. The analysis about the reason of accident was wrong and unscientific. The court confirms the authenticity of the evidence. 15. The illustration which the Plaintiff sent to the insurer, Continent Insurance Weihai Company on August 6, 2011 about the salvage of the fishing boat “Lu Rong Yu 1813/1814”, to prove that the insured actively sought rescue unit. The two Defendants held that the illustration was a copy and the authenticity cannot be determined by the copy, and the Defendant had not received the evidence. The court does not confirm the evidence, because the evidence is formed and copied by the Plaintiff.

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16. Notification which the Plaintiff sent to the insurer, Continent Insurance Weihai Company on September 7, 2011, to prove that the Plaintiff requested the Defendant to verify the salvage value of the stranded ship for the next insurance claim settlement. The two Defendants had no objection to the authenticity of the evidence, but objected to the content of the proof. The court confirms the authenticity of the evidence. 17. Returning Letters about the Stranding “2011.9.7” of the Fishing Boat “Lu Rong Yu 1813/1814” sent by the Defendant, Continent Insurance Weihai Company, to prove that the Defendant expressly refused the abandonment of the Plaintiff. The two Defendants had no objection to the authenticity of the evidence, but held that the letter did not prove the Plaintiff proposed the application of abandonment to the Defendant, and the Plaintiff claimed that the Defendant expressly objected the application of abandonment of the Plaintiff. The court confirms the authenticity of the evidence. 18. The letter of the Defendant, Continent Insurance Weihai Company to outsider Rongcheng Yandunjiao Aquatic Products Co., Ltd., to prove that the Plaintiff did not receive any written reply from insurance company that the accident did not belong to the insurance liability. The two Defendants had no objection to the authenticity of the evidence, but held that it could not conclude that the Plaintiff’s claim that they did not receive the written reply that the accident did not belong to the insurance liability. The court confirms the authenticity of the evidence 19. Notice of Rejection from the Defendant, Continent Insurance Weihai Company, signed by the Plaintiff on February 7, 2012, to prove the reason of the Defendant’s rejection. The action was filed because the Plaintiff did not agree with Defendant’s views. The two Defendants had no objection to the authenticity of the evidence, the court confirms the authenticity of the evidence. 20. (Adminicular evidence one) meteorological data from professional meteorological stations in Weihai illustrated that to prove the weather conditions of the city Rongcheng Chengshantou station from 0000 on June 25, 2011 to 2400 on 26, especially the period when the accident occurred. The sea wind of Rongcheng up to level nine, and the rainfall reached 87.4 mm, which was affirmed as the rainstorm. That fully verified the conclusion of the competent authorities was completely correct. The two Defendants had no objection to the authenticity of the evidence, but objected to the content of the proof: the evidence also indicated that when QU Rongmo sailed away from Yandunjiao North Dock of fishing port the weather was still good, the largest wind power was only six, the ship dropped the anchor because of the unseaworthiness during the sail lead anchored. Until the early morning of June 26, the ship encountered typhoon Meari then stranded. Therefore, the two Defendants held that typhoon Meari was not the proximate cause of the insurance accident. The court confirms the authenticity of the evidence. 21. (Adminicular evidence two) the website information from Weihai People’s Government, to prove that affected by the typhoon Meari, since June 25, the wind power in Weihai sea area had gradually increased and there had been

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heavy rain. The Weihai Meteorological Observatory also issued a typhoon yellow warning signal, it also fully proved the necessity of shifting the Plaintiff’s fishing vessel, and the Plaintiff’s active self-help behavior had no fault subjectively. The two Defendants had no objection to the authenticity of the evidence, but had an objection to the purpose and relevancy of the evidence: they held that the weather report was not the real weather and was irrelevant with this case. It could not prove that the unseaworthiness was not the proximate cause of the accident involved either. The court confirms the authenticity of the evidence. 22. (Adminicular evidence three) the original certificate and auxiliary photos from Rongcheng Yandunjiao Aquaculture Company, to prove that the Defendant expressly refused to rescue, fishing vessel involved in damage still at the dock and be buried by wharf construction, made an actual constructive total loss. The two Defendants had objection to the objectivity, relevancy and legality of the evidence: they held that the form of evidence did not conform the statutory requirements, and even if the evidence was real and valid, the insured was the first person who should be the subject of the obligation of statutory derogation, after the insurance accident occurred. The Plaintiff, QU Rongmo, was responsible for the total loss of the salvage value of insurance. The court holds that there is no objection about the stranded fishing ship accident between the Plaintiff and the Defendant, they both recognized the wreckage of ship near the coast of Yandunjiao Aquaculture Company is sinking fixed state. Therefore, the objective fact that the wreckage of fishing ship is buried underground shall be confirmed. The court confirms the authenticity of the evidence and the fact that the fishing boat “Lu Rong Yu 1813/1814” in this case have an actual total loss. 23. (Adminicular evidence four) the schematic diagram of the Yandunjiao Fishing Port, to prove that the geography situation of the Yandunjiao Fishing Port was like “U”, a tornado would be generated when the northeast wind was blowing, a plenty of sea water influx would lead to high wind and waves at the port, the ships parked in the original place would occur accidents easily. The choice of Yandunjiao South Port was reasonable. The two Defendants had no objection to the authenticity of the evidence, but objected to the content of the proof: they held that from the schematic diagram, we can see that there was an island in the northeast of the port, the North Port was formed by embracing of the island exactly. It formed a natural barrier to resist the northeast wind, that proved the Defendant claims that the shelter conditions of North Port were better than the South. The motivation of the Plaintiff’s opinion, shifting a shelter was skeptical. The court confirms the authenticity of the evidence. 24. The views of the expert witness, SUN Jianming, in court. During the trial, the Plaintiff applied for the advice of SUN Jianming, the director of Qingdao Jian Ming Marine Advisory Service Co., Ltd., as an expert, to present the relevant opinions and to accept the inquiries from both parties.

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The opinions were as follows: (1) In this case, the insurance amount of the fishing vessels agreed to RMB3 million, and the insurance value of the vessels agreed to RMB4,285,700. It was a typical insufficient insurance, which was not an unvalued insurance. The legal consequences of insufficient insurance shall be stipulated in the maritime law, if there is a partial loss, the compensation is the proportion of insurance amount and insurance value, if there is a total loss, the total compensation is the insurance amount. (2) The policyholder in the lower left corner of the policy claims was blank, this form was designed by the insurance company to ensure the fulfillment of the insurance obligation and the legal validity of the insurance policy. After the insured himself read the contents he should be asked to sign on it, but the insurer did not do it and the blank was signed by the salesman, so the terms of the special agreements did not have legal effect on the Plaintiff. (3) About the condition that in order to avoid typhoon the shipowner shift fishing boats to South Port. Directing at the scene of the South and North Port after surveyed, SUN Jiaming asked the local people at the port and the village, according to his years of experiences in the shipping work, he believe that South Port wind condition was far better than the North Port’s. After the survey, expert believed that stopping at the North Port was a passive inaction. If the ship suffered loss, the insurer based on the inaction of the insured would refuse to give any compensation. From the seamanship, in normal weather, there was not much difference on the degree of risk among a ship’s anchorage, a port, a mooring buoy or a vessel tied to it. When the typhoon was coming, whether it was merchant ship or fishing ship, regardless of tonnage in size, tying the ship with anchor, mooring buoy or another ship did not inevitable damage, there was no absolute safety position, only according to the actual situation of the ship and the master and crew’s judgments that they could take appropriate way to avoid the damage. Generally, in the period of avoiding typhoon, fishing boats parked on the port and fishing boats tied with anchor was certain, and the number of fishing boats parked on the port was not necessarily more than the fishing ship tied with anchor. (4) Approved that the fishing ships was unseaworthy at that time. But the expert held that ships were in danger regardless whether they were seaworthy or not, emergency measures should be taken, the insured held that the North Port was more safe, the ship should not be moved if the ships were not safe, they should be located at where wind waves were small. Ship sailing refers to the purpose of the ship for commercial purposes. Ships in the port adjusted berth could not be called “sailing”, short distance movement called “shifting anchor”, the specific way of “shifting anchor” was moving the ship, along the channel to the appropriate place, securely lashing. (5) It was not a logical act for any insured with normal mind engaging in commercial activities after the insurer explicitly refused to pay compensations, the insured still issued notice of abandonment, put the remains of unconditional to

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the insurer. After the accident, through the assessment of insurer and insurance consultation company, the salvage expenses exceed insurance value. The loss should be defined as a constructive total loss. The expert after the scene knew that due to the ships were not salvaged, the ships disintegrated and the local port land filled reclamation work, the ships had been destroyed, in this situation, the constructive total loss changed to the actual total loss. That did not require abandonment. (6) About the proximate cause. The reasons for the damage of fishing ships were the wind and waves, there has nothing to do with the seaworthiness of the ship. And another reason was stranded, if there was no typhoon, the accident was dragging an anchor and stranding. The expert further held that: to determine the cause of the accident, the most fundamental one should be analyzed and screened according to the cause of the accident chain, if a cause, whether there were others involved in or not, could cause an accident independently, that would directly become the cause of the accident or been called proximate cause, depending on whether the cause chain of the accident broken or not. Ships were unseaworthy and because of the impact of the typhoon, they collided with the port, dragged anchor, stranded, capsized, excepting the cause of the accident, there were also the accident results. Specific analysis were that first to find the time points of after or before the exception of insured liability, if the cause of unseaworthiness did not let the insurer have exception rights, and the accidents caused by external factors, then the unseaworthiness could not be used as an exemption. Specifically, the starting point for determining whether the ship was seaworthy subjected to the time of the sailing of the vessel. Sailing was expressly stipulated in the maritime law, if a vessel was unseaworthy and causes an accident directly due to unseaworthiness, the unseaworthiness shall become the exception of the insurer, and in this case no other factor should be considered. However, if the ship was unseaworthy in anchorage, port or dock, the typhoon changed the state and occurred accident, then the cause of the accident would be the fundamental cause of the accident. Therefore, analysis of the cause of the accident should considered that if there were no certain reason the accident is inevitable or not. Logically, if an exception could cause an accident independently and was inevitable, then the cause of the insurer’s liability could be neglected; vice versa, the reason that the insurer should undertake the responsibility for the accident and there are also exceptions, the exception cannot lead to accidents independently, the exceptions should not be the proximate cause and the insurer should compensate to it. The Plaintiff had no objection to the expert’s view. The two Defendants held that the expert was good at cargo insurance, they had doubt about his level and opinions in the field of fishing ship insurance’s view. The expert believed that the Maritime Code of our country did not distinguish between cargo ships and fishing ships, both of them apply the same legal principles and regulations about the legal issues of ship insurance.

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In the lawsuit, the Plaintiff applied the identification to affirm whether the signature on the two insurance policies on May 23, 2011 was written by QU Rongmo. The court legally entrusted Shandong Yongding Judicial Identification Center in identifying whether 1. two insurance policies of ocean fishing insurance; 2. two installment agreements; and 3. two receipts of contract’s delivery and inform was signed by the Plaintiff or not. The Defendants arrived at the scene and took part in the collection of the handwriting of QU Rongmo. The institution collected the fingerprints of the Plaintiff at the same time, which also made a reference to compare the fingerprints of the Plaintiff. The center had made corresponding identification and supplementary explanations in accordance with the law, the conclusion was that the signature on the above insurance materials and the sample written by QU Rongmo were not the same written habits of one person. Neither the signature nor the fingerprints of all policies and materials were from the Plaintiff QU Rongmo himself. The Plaintiff agreed the expert opinions of the institution, held that the signature of the applicant involves the legal obligations of reminder and clearly stated of insurer. The two Defendants had no objection to the expert opinions, but had objection to the purpose of the use of the Plaintiff of the expert opinions, held that the Plaintiff, QU Rongmo, was not present, when signing the insurance contract, but they told his son-in-law FU Shihua about the exceptions and the special terms of the handwriting. The conclusion of the expert opinions should not affect the outcome of the case anyhow, because the proximate cause of involved accident was unseaworthy, which is the legal exemption of insurer from the provisions of the Maritime Code. The court confirms the authenticity of the evidence and the expert conclusion that the signature, the fingerprints on the above insurance materials were not from QU Rongmo. The analysis of the evidence by the Plaintiff of the court are as follows: The evidence one of the Plaintiff could prove the Plaintiff was qualified. The evidence two to ten was the certification issued by the corresponding competent authority in accordance with the laws and regulations concerning the ownership, operation qualification and seaworthiness of the fishing boat “Lu Rong Yu 1813/ 1814”, could prove that the certificates of the fishing boat “Lu Rong Yu 1813/1814” were complete, legal and the ships were seaworthy from the fishing off season in June, 2011 to the period of hull maintenance and shipboard mechanical maintenance in Rongcheng Yandunjiao North Port. The above evidence produced and given by the competent authority in accordance with the authority. That could belong to the documentary evidence and shall be adopted in law. The evidence eleven and twelve were the evidence of the establishment of the contract between the Plaintiff and the Defendants, which shall be accepted and regarded as the main evidence of disputes in the insurance contract of this case, except the “special agreement” written by the insurance salesman in written, which did not have the legal effect because of failing to fulfill the obligations of informing and special instructions to the Plaintiff QU Rongmo. The evidence thirteen, sixteen, seventeen, eighteen and nineteen were the evidence that the Plaintiff reported and claimed for compensation timely, the two Defendants refused to save and compensate. They

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were notices and replies in the procedure of claim after the insured accident occurred and should be accepted in law, which shall be accepted in law. The evidence fourteen, Survey Report on Fishing and Maritime Traffic Accidents from fishing vessel accident authorities o the People’s Republic of China, Rongcheng Fishing Port Supervision, according to the law, the one of the duties of this department was deciding the accident’s liabilities for the fishing ships in the sea and investigating the occurrence of related accidents, therefore, the survey report from this department should be the basic evidence for dealing with maritime fishing ship accidents. The evidence made by the competent authority in accordance with the law, and the effectiveness and probative force of the evidence were higher than other evidence. If the Defendant did not have sufficient evidence to prove that the procedure was illegal or there was sufficient evidence to reverse the report, the evidence shall be used as the basis for the verdict according to law. Therefore, the court adopts the evidence. Evidence twenty and twenty-one, meteorological data from professional meteorological stations in Weihai and the website information from Weihai People’s Government can cover the weather conditions from 0000 on June 25, 2011 to 2400 on 26 for 48 h, and the content is objective and real, from the sea wind 5–6 to the wind level 9–10 were expressed, the court accepts the evidence. Evidence twenty-two, the original certification and auxiliary photos from Rongcheng Yandunjiao Aquaculture Company, prove that the involved fishing vessel in damage still at the dock and be buried by wharf construction, which makes an actual total loss, the evidence is in conformity with objective facts and the court accepts it. Evidence twenty-three, the schematic diagram of the Yandunjiao Fishing Port, is objective and the court adopts the evidence. Evidence twenty-four, SUN Jianming, the expert witness appearing in court expressed his opinion about the issue of the case, about 1. this case is undervalued policy; 2. the Defendants did not perform the obligation of notification to the Plaintiff, and the special agreement clauses do not have any legal effect; 3. the Plaintiff decided to avoid the typhoon from the North Port to the South Port was proper, and there was no problem about the indiscretion act; 4. the fishing ships sailed from the North Port to the South Port to avoid the typhoon was shifting berth rather than legally sailing; 5. the fishing ships had become actual total loss from constructive total loss; and 6. the proximate cause involved the accident was the typhoon Meari. All above the expert opinion conformed to the relevant provisions of the law, the court adopts these opinions. The two Defendants jointly defended that: 1. The stranding of the subject of insurance fishing boat “Lu Rong Yu 1813/1814” was due to the unseaworthiness, at the time of sailing, the Defendants should not undertake the liability for compensation. (1) Fishing boat “Lu Rong Yu 1813/ 1814” itself was unseaworthy at the beginning of the sail; (2) fishing boat “Lu Rong Yu 1813/1814” did not have sufficient crews; (3) fishing boat “Lu Rong Yu 1813/1814” did not have the qualification for towage, did not get the towage certificate that relevant department issued. (4) According to the provisions of the

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Maritime Code and ocean fishing vessel insurance clause, the insurer shall not be liable for the losses caused by the unseaworthiness of the ship; The accident occurred was a result of the intentional or gross negligence of the Plaintiff as the shipowner, whether it is in accordance with the provisions of the insurance contract or the relevant provisions of the Maritime Code, the Defendant should not undertake the liability for compensation. (1) Fishing boat “Lu Rong Yu 1813/1814” was unseaworthy. (2) The Plaintiff, knowing that the insured vessels were not seaworthy, still decided to drive himself to the Yandunjiao Fishing Port; According to the special written agreements on the insurance policy, the maximum amount of compensation for each vessel was RMB1.5 million, that was to say the maximum amount of two ships were RMB3 million. The special agreement had expressly informed to the Plaintiff by the Defendant, and signed, fingerprint pressed by QU Rongmo; As for the involved accident the typhoon “Meari” was not the proximate cause. The proximate cause was that the ships were unseaworthy at the beginning of the sail; and If the insurer should take the liability of compensation for the accident involved according to the assessment from Qingdao Xinyang Maritime Consulting Company commissioned by the Defendant, each ship cost RMB800,000, the compensation of the two ships were only RMB1,600,000.

To support their arguments, the two Defendants offered the following evidence to the court together. 1. The insurance policy for ocean fishing ship, to prove that: (1) the Plaintiff insured the ocean fishing ship insurance from the Defendant for fishing boats “Lu Rong Yu 1813” and “Lu Rong Yu 1814” on May 24, 2011. (2) The policy made clear agreement on the sum insured and all content of the policy was handwritten, the new ship price, deductibles and the upper limit of compensation when the total loss happened, the policy was not the standard terms. (3) The contents that the insurance policy clerk filled in the content were the true meaning of the Plaintiff, the Defendant had fulfilled the explicit explanation obligation of exempting clause in the insurance contract. The Plaintiff had objection to the authenticity of the evidence, held that the signature, the stamp and the fingerprint were not the Plaintiff’s. As to the special agreement clause, the Defendant did not make any interpretation and explanation to the Plaintiff. The Plaintiff requested judicial appraisal for the signature and fingerprint of the so-called “QU Rongmo”. The court confirms the insurance contractual relationship between the parties. To judge whether the “handwritten content” is binding to the Plaintiff or not shall be combined with the judicial appraisal conclusion of the signature and fingerprints from “QU Rongmo”. 2. The installment agreement, to prove that the Defendants agreed to insure the ships “Lu Rong Yu 1813” and “1814 Lu Rong Yu”. But the fund of the Defendants was tight, the two parties reached an agreement to pay premiums in

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installments. The Plaintiff held that the insurance contract was established and performed according to the contents of the agreement. The court confirms the authenticity of the evidence. The invoice of payment, to prove that the Plaintiff fulfilled the obligation of premium payment in accordance with the instalment agreement. The two Defendants had no objection to the authenticity of the evidence, the court confirms the authenticity of the evidence. The policies of fishing ship, to prove that the Defendants signed two policies of fishing ship to the Plaintiff according to the contents of the policies which were provided by the Plaintiff, there was an ocean fishing contractual relationship between the Plaintiff and the Defendants. The contents which provided by the Defendants fitted perfectly with the policies which provided by the Plaintiff. The Plaintiff had no objection to authenticity of the evidence, but held that the value of insurance was appointed by the two parties and according with the provisions of the Maritime Code and the Insurance Law, the unvalued insurance did not exist. In addition, about the special agreements of the policies, the signature on the notice of receipt was not signed by the Plaintiff. The Plaintiff held that the part of the policies of the special agreements on releasing the liability of the insurer and exempting part liability did not have legal effect to the Plaintiff. The court confirms the insurance contractual relationship between the two parties. To judge whether the “handwritten content” is binding to the Plaintiff or not shall be combined with the judicial appraisal conclusion of the signature and fingerprints of “QU Rongmo”. The insurance clauses of ocean ship, to prove that there were detailed provision about the scope of insurance property, exclusions, deductions etc. in the insurance clauses. The clause attracted the Plaintiff’s attention by bold and deep colors. Combining with the contents of the insurance policy, signed by the Plaintiff, the Defendants had clearly explained the clause of exempt the liability of insurer in the insurance contract. The two Defendants had no objection to the authenticity of the standard terms, other cross-examination opinions were as same as evidence three and four, the court confirms the authenticity of the evidence. The record of interrogation from the appraisal company unilaterally committed by the Defendants, to prove that: (1) the insured ships were unseaworthy at the beginning of the sail; (2) the Plaintiff did not take any salvage acts in more than two hours after the steering gear of the fishing boat “Lu Rong Yu 1814” out of order; and (3) when the accident happened, other fishing ships were berthing at Yandunjiao North Port, that was to say, Yandunjiao North Port had shelter conditions to the typhoon Meari. The Plaintiff approved the signature of QU Rongmo, but held that the location of the record and the question of the person were not reflected, did not conform the formal requirements. From the contents, the Plaintiff handled the two ships aimed at avoiding danger. The court confirms the authenticity of the attachment of the interrogation record and the inspection report of Qingdao Xinyang Maritime Consulting Company.

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7. The record of interrogation from the Weihai Public Security Bureau of the Plaintiff QU Rongmo, to prove that: (1) after the accident, the Plaintiff under the investigation of the Weihai Public Security Bureau, said the ships went to the South Port to take shelter and rudder out of order on the way then the accident happened; (2) the insured ships were unseaworthy at the beginning of the sail; (3) the Plaintiff did not take any salvage acts in more than two hours after the steering gear of fishing boat “Lu Rong Yu 1814” was out of order; (4) admitted that the wave was not rough at the beginning of the sail; (5) in the situation which the wave was not rough, the Plaintiff drove the unseaworthy ship “Lu Rong Yu 1814” by himself to tow the unseaworthy ship M.V. “Lu Rong Yu 1813”, then the accident happened, unseaworthiness was the continuous and predominant cause in the accident. The Plaintiff had an objection to the authenticity and the legality of evidence seven, held that it was a copy and should not have cross-examination. The court confirms the authenticity of the evidence which came from the Weihai Public Security Bureau. 8. The record of interrogation of FU Shihua from the appraisal company unilateralky committed by the Defendants, to prove that: (1) the insured ships were unseaworthy at the beginning of the sail; and (2) when the accident happened, other fishing ships were berthing in Yandunjiao North Port, that was to say, Yandunjiao North Port had shelter conditions to the typhoon Meari. The Plaintiff had an objection to the authenticity of the evidence, held that the witness should have appeared in court. The court confirms the authenticity of the attachment of the interrogation record and the inspection report of Qingdao Xinyang Maritime Consulting Company. 9. The record of interrogation from the Weihai Public Security Bureau of FU Shihua, to prove that: (1) apart from there was no main engine installed in the fishing boat “Lu Rong Yu 1813”, there was also some problems with the main engine, stern shaft and the joint shaft of the boat “Lu Rong Yu 1814”, the ships of the insurance subject were unseaworthy at the beginning of the sail; (2) the Plaintiff did not take any salvage acts in more than two hours after the steering gear of the boat “Lu Rong Yu 1814” was out of order; and (3) the Plaintiff drove the unseaworthy ship “Lu Rong Yu 1814” by himself to tow the unseaworthy ship “Lu Rong Yu 1813”, then the accident happened. Unseaworthiness was the continuous and predominant cause in the accident. The Plaintiff had an objection to the authenticity and the legality of evidence that should not have cross-examination. The court confirms the authenticity of the evidence which came from the Weihai Public Security Bureau. 10. The record of interrogation of WU Huaqiao from the appraisal company unilaterally committed by the Defendants, to prove that: (1) the insured ships were unseaworthy at the beginning of the sail; (2) the Plaintiff did not take any salvage acts throughout. The Plaintiff had an objection to the authenticity of the evidence, held that the witness should have appeared in court. The court confirms the authenticity of the attachment of the interrogation record and the inspection report of Qingdao Xinyang Maritime Consulting Company.

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11. The record of interrogation of MENG Fanchao from the appraisal company unilaterally committed by the Defendants, to prove that: (1) the insured ships were unseaworthy at the beginning of the sail; (2) the Plaintiff did not take any salvage acts throughout; and (3) other fishing ships were berthing in port, that was to say, Yandunjiao North Port had shelter conditions to the typhoon. The Plaintiff had objection to the authenticity of the evidence, held that the witness should have appeared in court. The court confirms the authenticity of the attachment of the interrogation record and the inspection report of Qingdao Xinyang Maritime Consulting Company. 12. The certificate of meteorological data, to prove that: (1) within 4 h after the departure of the insured ships at 1800, the maximum wind power was only six, and within the first two hours, the wind power was only four to five, in accordance with the provisions of the Shandong marine fishery safety production administration regulations, the insured ship could sail under the seven grade wind. Therefore, within 4 h after the departure of the insured vessel from the North Port at 1800, there was no “bad weather”; and (2) after the steering engine was out of order, the Plaintiff had sufficient time and external conditions to save the insured ships, but the Plaintiff took negative act. The Plaintiff had no objection to the authenticity of the surface of evidence, but held that the certificate of meteorological data only proved the record of the mountain wind. The place of involved accident was Yandunjiao Fishing Port, the wind power and the wind speed were not the real data before and after the accident. The court confirms the authenticity of the evidence. 13. Downloaded materials, to prove that: when the involved accident happened, especially at the beginning of the sail of the insured ships, the center of typhoon Meari from the accident were thousands of kilometers of Yandunjiao Fishing Port, there was no so-called typhoon, the fact were consistent with the meteorological data from Weihai Meteorological Bureau completely. The Plaintiff had an objection to the authenticity of evidence thirteen, the reason was the same as evidence twelve. The court confirms the authenticity of the evidence. 14. The inspection report from Qingdao Xinyang Maritime Consulting Company unilaterally committed by the Defendants, to prove that: (1) the unseaworthiess of the ships was the proximate cause of the involved accident. (2) The secondhand market price of the insured ship was RMB800,000 as the same old and same type as the insured ship. Therefore, the involved insurance was unvalued insurance, the insurance value of each insured ship was RMB800,000. Assuming that the Defendants should undertake the insurance liability, the amount of compensation was only RMB1.6 million. The Plaintiff held that the commission was unilateral by the Defendants, and he did not approve with the opinion that the involved insurance was unvalued insurance, because the report did not mention the word “unvalued insurance” at all. The inspection was committed by the first Defendant to assess the loss. Furthermore, the report was based on the fact from three witnesses who failed to appear in court and the Plaintiff did not approve the conclusion of the report. The court confirms the authenticity of the evidence.

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15. (Adminicular evidence one) the certification of weather data, meteorological information obtained from Weihai Meteorological Bureau on June 25, 2011 from 1700 to 2200 in Shidao, to prove that the highest wind was only 5 to 6 degrees in Shidao waters from the insured ships beginning to sail to submergence. The court confirms the authenticity of the evidence. 16. (Adminicular evidence two) the satellite map of Rongcheng waters, to prove that Yandunjiao which belonged to Rongcheng City Lidao Town was located between Chengshan and Shidao, and the distance from the north side of Chengshan was only 1/3 of the distance from the sourth side of Shidao. The above adminicular evidence combined with evidence twelve and thirteen submitted by the Defendants commonly prove that: from 1700 to 2200 on June 25, 2011, which was the period of the insured ships from the beginning of the sail to sinking, the highest wind around Yandunjiao waters was only 6, which was not the typhoon or the force majeure. As for the two adminicular evidence from the Defendants, the Plaintiff held that in the reply of Rongcheng Yandunjiao Aquatic Products Co., Ltd., the Defendants explicitly admitted that the boat “Lu Rong Yu 1813/1814” were stranded by the effect of typhoon in written. This was a documentary evidence and came from the Defendants. The meteorological analysis provided by the Defendants did not reflect the weather condition of the place where the accident occurred, and only counted to 2200 on June, the wind power and the rainstorm of the latter half of the night which were unfavorable to the Defendants were not be provided. It was overgeneralization and trump substitution. On the contrary, the evidence fourteen which was provided by the Plaintiff was clearly shown the meteorological conditions of the wind, rainstorm and others for all 48 h from June 25 to 26. The court confirms the authenticity of the two adminicular evidence. 17. (Adminicular evidence three) the Notice of the Zhangpu County of Fujian Province on Issuing the Tentative Measures for the Registration and Administration of the Pledge of the Ratification of Fishing Ship Network Tool, from the government public website, to prove that the ratification of fishing ship network tool could be used as the subject of pledge, which had certain market value, and its value can be measured in money, therefore, the cost of new ship and the insurance amount which claimed by the Plaintiff all included the market value of the ratification of fishing ship network tool which can be measured in money. The Plaintiff had no objection to the authenticity of the evidence, but did not approve the content of proof, held that the value of the ratification should not be included in the insurance value and it was unrelated to the insurance amount, there was no risk of loss from the insurance accident. It was essentially a kind of administrative permission and was not insurable. The Defendants held that the opinion it belonged to insurable subject was absurd. The court confirms the authenticity of the two adminicular evidence.

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The court analyzes and confirms the evidence submitted by the two Defendants as follows: About the evidence one to five provided by the Defendants, the insurance policy for ocean fishing ship, the installment agreement, the invoice of payment, the policies of fishing ship and the insurance clauses of ocean ship. The insurance policy is the offer of applicant, the policies are the promise of insurer. There is no objection about the insurance contractual relationship between the Plaintiff and the Defendants, the court confirms it. But the court ascertains that the signature which shall be signed by the applicant himself, is signed by the policy clerk, and that cannot prove that the Defendants undertake the obligations of clear statement, that leads to the corresponding special agreements and the exemption clauses of insurer did not have legally effective according to the law. Therefore, the corresponding defense of the two Defendants cannot be accepted and supported by court. The evidence six, eight, ten and eleven are the inspection report’s attachment from Qingdao Xinyang Maritime Consulting Company unilaterally committed by the Defendants, in accordance with the relevant provisions of the rules of evidence, these shall be comprehensively evaluated with the inspection report. The evidence seven and nine, were the records of interrogation to QU Rongmo and his son-in-law FU Shihua from Weihai Public Security Bureau, the Public Security Bureau did not file a criminal case, according to the provisions of the civil procedure law and the rules of evidence. Because the interrogated did not appear in court, the court shall make a comprehensive evaluation of the transcript and other evidence. The evidence twelve, thirteen, fifteen and sixteen, the certificate of relevant meteorological data, the court holds that compared with the relevant meteorological data submitted from the Plaintiff, the weather forecast covers 48 h from June 25 to June, 26 in 2011, the Defendants only picked up the time from 1700 to 2200 on June 25 for five hours, neither scientific nor persuasive. The court does not adopt it. The evidence fourteen, the inspection report from Qingdao Xinyang Maritime Consulting Company unilaterally committed by the Defendants shall make a comprehensive evaluation with other evidence. The opinion that the fishing ships were unseaworthy when the accident happened conforms to the objective situation, the court adopts it. The report did not mention that the insurance contract was an unvalued insurance, the view that the Defendants unilaterally set the insurance contract as an unvalued insurance lacks legal basis, the court does not adopt it. The evidence seventeen, the Defendants use analogy to claim that the object of insurance in this case shall include the value of the approval certificate of the vessel net tool, however, the provisions of the insurance clauses of ocean fishing ships provided by the Defendants themselves clearly stipulated in article one: “the scope of property insurance refers to the hull and ancillary equipment of fishing ship, including sub ship, machinery and its accessories, winches, communication equipment and other instruments, electrical equipment”, the record of the scope of the property insurance is quite specific. In addition, the ratification of fishing is not insurable. Therefore, the opinion of the Defendants cannot be established, the court does not adopt it.

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In accordance with the above adopted evidence, the cross-examination opinions of the two parties, the expert opinions, etc., and the statements made by the parties in the court, the court finds out the fact as follows: On May 25, 2011, the Plaintiff and Continent Insurance Shidao Branch made two insurance contractual relationships under which policy numbers were PCBG201137011847000015/0016, the risk was comprehensive insurance, the insurance amount was RMB3 million, the insurance period was 12 months, from 0000 on May 26, 2011 to 2400 on May 25, 2012. For this purpose, the Plaintiff QU Rongmo paid the premium RMB132,000. The registry port of insured ships “Lu Rong Yu 1813/1814” was Shidao, the ships were built in June 1999, both 30.62 m long, 6.3 m wide, the material of the ships was steel, the host power was 220 kilowatts, the total tonnage of each ship was 120 tons and the net tonnage was 42 tons. According the insurance contract, the insurance value appointed by the two parties was RMB4,285,700, it was an undervalued insurance. With the absence of the applicant QU Rongmo, the staff of the Defendants wrote in hand that “when the total loss happened, each ship maximum amount of compensation does not exceed RMB1.5 million” and other special agreements. The staff imitated the signature of “QU Rongmo” and fingerprints in the signature of the insured on the ocean fishing ship insurance. In the lawsuit, the Plaintiff applied the authentication for the signature and fingerprints whether was made by himself, the court legally entrusted Shandong Yongding Judicial Forensic Center to authenticate 1. the signature and fingerprints in the ocean fishing ship insurance policy; 2. two installment agreements; 3. the signature and fingerprint of QU Rongmo on the two copies of insurance contract delivery receipt, the Defendants also sent people to take part in the collection of QU Rongmo’s handwriting and ten fingerprints. The center made the related authentication according to the law and the conclusion is that neither the signature nor the fingerprints of all policies and materials are from the Plaintiff QU Rongmo himself. The mainly ocean fishing boat clauses of China Continent Insurance are: 1. the scope of property insurance and the insured fishing boat refers to the fishing boat hull and ancillary equipment in this policy, including sub ship, machinery and its accessories, winches, communication equipment and other instruments, electrical equipment; and 2. the insurance includes total loss insurance and comprehensive insurance. (1) Total loss insurance: if the following reasons caused the loss of insured fishing ship and fishing net, the company is responsible for compensation: the storm, typhoon, lightning, ice, earthquake, tsunami, flood, volcano eruption, stranding, sinking, collision, submergence, fire, explosion, boiler or other equipment pipeline rupture and other natural disasters and accidents; the potential defects in hull and machinery; the negligence of captain, chief officer, pilot or crew, ship repair staff; 3. exclusions, the company shall not be liable for the following loss, expenses and liabilities: the loss due to the seaworthiness of the insured ship; the loss due to the negligence and the intentional acts of the shipowner and his representative. After the fishing off season on June 1, 2011, the fishing ships “Lu Rong Yu 1813/1814” of the Plaintiff QU Rongmo were doing the maintenance of the hull and the mechanical in Rongcheng Yandunjiao North Dock, the boat “Lu Rong Yu

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1813” in June 20 was hoisted out warehouse for maintenance. Because the typhoon Meari was approaching according to the weather report, the Plaintiff QU Rongmo decided to shift berth to the South Port to avoid the typhoon when the wind power was not strong. At 1900 on June 25, 2011, the Plaintiff QU Rongmo and the captain WU Huaqiao and MENG Fanchao tried to rely on the power of the fishing boat “Lu Rong Yu 1814” to tow two ships to Yandunjiao South Dock. Then, on the way to the South Port the steering gear were out of control, two ships dropped anchors and waited for the rescue ships to salvage. During the period, the wind gradually increased, until 0000 on June 26, under the influence of the typhoon and waves, anchor cables broken and ships were dragging, the two ships were out of control. At around 0300 on June 26, the two ships were stranded in the sea cucumber pool of Yandunjiao Fishery Company by the very rough waves. On September 15, 2011, the Rongcheng Fishing Port Supervision of the People’s Republic of China after investigation, made Investigation Report to the Fishery Marine Traffic Accidents, affirmed that the accident occurred as follows: 1. the two ships were repaired in Yandunjiao North Fishing Port on June 1, 2011, the ship “Lu Rong Yu 1813” took the main engine out of the cabin and repaired it at the port on June 20. At 1900 on June 25, the ship “Lu Rong Yu 1814” started engine, dragged the ship “Lu Rong Yu 1813” to shift to the South Port to shelter. At that time, the waves were large, water got into the engine room, pump vent valve, and sprayed to electric power of the ship “Lu Rong Yu 1814”, steering gear out of control, two ships broke down immediately. At 0000 on June 26, the anchor chains of the ship “Lu Rong Yu 1814” broken. At 0100, two ships were out of control. At around 0300, the two ships were stranded in the sea cucumber pool in the southwest of Yandunjiao Fishing Port by the very rough waves. 2. The causes of the accident were: to avoid the typhoon, the waves were large, the anchor chains of two ships broken and ships were out of control stranded in the sea cucumber pool by the very rough seas, after repeated salvage invalid, the two ships were scrapped. The meteorological conditions were the northeast wind 10 grade, heavy rain, the sea conditions were rough waves. The report was stamped with the official seal of the authority and signed by the investigators LIU Kuanxin and CHEN Zhikai. After the accident, the Plaintiff reported to the second Defendant Continent Insurance Shidao Branch. On September 7, 2011, the first Defendant Continent Insurance Weihai Company expressly refused the claim of the Plaintiff for compensation in the form of the reply about the matters of the stranded of ships “Lu Rong Yu 1813/1814”; on September 13, 2011, the first Defendant replied again, said that the costs of the insured ships salvage and the costs of the repairs were more than the market value of the two ships at the time of the accident, therefore, the first Defendant did not participate any salvage of the two ships or undertake the related salvage fee; in fact, the Defendant admitted the objective situation of the total loss of the two ships. On February 7, 2012, the first Defendant Continent Insurance Weihai Company issued the notice of rejection again. The Plaintiff QU Rongmo brought a lawsuit to the court. It is also found out: in late June, 2011, the typhoon “Meari” did have a great influence on the Shandong sea, caused damages to the coastal ships and other

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properties. In Rongcheng, Shandong Province, whenever a fishing ship accident occurred, according to the provisions of the relevant laws, the only lawful competent authority to conduct the investigation of the accident and make identification of the accident is Rongcheng Fishing Port Supervision of the People’s Republic of China. For finding out the post processing situation of involved fishing ships “Lu Rong Yu 1813/1814”, the court sent a letter to the Shandong Provincial Oceanic and Fishery Monitoring Corps detachment of the second branch for inquiry, the detachment sent a certificate to the court on June 9, 2015, to prove that the involved fishing ships “Lu Rong Yu 1813/1814” had handled the corresponding cancellation of registration. And according to the certificate of Yandunjiao Fishery Company on August 20, 2015, the wreckage of two fishing ships at the latest before January 1, 2013, they were completely buried under the seabed during the reclamation in 2012. The court holds that: Firstly, the first issue is the cause of the accident of the stranding fishing ships and the question whether the insurance company should bear the corresponding insurance compensation liability. (1) The identification of the accident by the competent authority, according to law, it should be used as the basis for the judgment. Survey Report on Fishing and Maritime Traffic Accidents of Rongcheng Fishing Port Supervision of the People’s Republic of China, according to the law, the one of the duties of this department defined the accident liability of the fishing ships in the sea and investigate the occurrence of related accidents, therefore, the survey report of this department should be the basic evidence for dealing with maritime fishing ship accidents. The evidence made by the competent authority in accordance with the law, and the effectiveness and probative force of the evidence shall be higher than other evidence. The direct cause of the accident was that the ship “Lu Rong Yu 1813/1814” to avoid the typhoon, the waves were large, the anchor chains of two ships broken and ships were out of control stranded in the sea cucumber pool by the very rough seas, after repeated salvage invalid, the two ships were scrapped. The main opinions about the report of the two Defendants in court were that Fishing Port Supervision was the competent authority, but it was not the meteorological department, the contents of the report, the northeast wind 10 grade, heavy rain lacked factual basis. The Plaintiff supplied a full 48 h of meteorological records of Weihai Professional Meteorological Observatory from 0000 on June 25 to 2400 on June 26 in 2011, to prove that at 0000 on June 26, the wind gradually increased to nine, heavy rain. According to Article 114 of the Interpretation of the Supreme People’s Court concerning the Application of the Civil Procedure Law of the People’s Republic of China, “the matters recorded in the documents made by the state organs or other organizations that have the functions of social administration according to law within the scope of their functions are presumed to be true, except that there is

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sufficient evidence to reverse them”, when the Defendant don’t have sufficient evidence to indicate that the authority exceeded its authority or there is sufficient evidence to reverse the report, the evidence shall be the settlement basis of this case according to the law. (2) The case belongs to an insurance accident, and the Defendants shall bear the corresponding liability in accordance with the law. 1. This case belongs to the scope of insurance appointed in the insurance contract. The provisions of clause two of the insurance form for ocean fishing ships printed by the Defendant clearly stipulated “the insurance includes total loss insurance and comprehensive insurance. Total loss insurance: if the following reasons caused the loss of insured fishing ship and fishing net, the company is responsible for compensation: the storm, typhoon, lightning, ice, earthquake, tsunami, flood, volcano eruption, stranding, sinking, collision, submergence, fire, explosion, boiler or other equipment pipeline rupture and other natural disasters and accidents; the potential defects in hull and machinery; the negligence of captain, chief officer, pilot or crew, ship repair staff”. The competent authority finds that the accident is caused by storm and typhoon which caused the fishing ships collide to the rocks and strands. Among them, the storm, typhoon are the cause, collision to the rocks and stranded are not only the cause of the accident, but also the results of accident. Therefore, the above causes belongs to the agreement of insurer and the scope and matters of the claims. 2. There is no intentional act of causing an insurance accident of the Plaintiff QU Rongmo. First, June is the fishing off season, so the Plaintiff repaired and maintained the fishing ships appropriately that does not violate the mandatory provisions of the law. Second, during the fishing off season, the crew returned home on holiday, so the Plaintiff could not in accordance with the relevant provisions of the normal production of Shandong Province supply full crews. Third, when the typhoon was coming, the Plaintiff shifted berth from the North Dock to the South Dock. It was an action of averting danger instead of the sailing in the real meaning, the insufficient of the crew was not the cause that constituted a gross negligence. Fourth, there is no doubt between the Plaintiff and the Defendants that the wind power is about 6 when QU Rongmo decided to shift ships from the North Dock to the South Dock. That is to say, there is no fact that the Plaintiff QU Rongmo despite the risk of typhoon to sail out of the North Dock. Fifth, the record of inquiries of Qingdao Xinyang Maritime Consulting Company to the witness QU Rongmo and FU Shihua from the Defendants, it verified that after the water flowing into the engine room, the mobile phone broke down and the alarm could not be carried out during the anchorage of the fishing ships. Sixth, excluding the typhoon, the Plaintiff could solve the dragging anchor problem in other ways, the ships dragged anchor due to typhoon and rough sea that caused the two ships out of control and stranded in the sea cucumber pool. Therefore, the claim that the Plaintiff refused to appeal for help actively did not fix with the objective situation at sea at that time, and shall not be adopted by the court. Thus, in accordance with the

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contract of insurance, the stranding accident of the fishing ships belongs to the normal commercial risk of the Defendants and the scope of the statutory or as agreed by the insurer. The opinion of the two Defendants claimed that according to Article 242 of the Maritime Code of the People’s Republic of China, “the insurer shall not be liable for the loss caused by the intentional act of the insured” does not have the corresponding factual and legal basis, the court does not support it. 3. The facts and legal confirmation in this case about the unseaworthiness of the ships at the beginning of the sail. The expert SUN Jianming indicates that when typhoon comes, whether it is merchant vessel or fishing vessel, no matter the size of ship tonnage, it is not inevitable damaged in anchorage, dock or other locations, and there is no absolute safety position, the captains and crew members in accordance with the actual situation of the ship chose the appropriate way which they thought was proper to avoid the loss. According to the ascertained facts, the act of the Plaintiff QU Rongmo, shifting fishing ships from the North Dock to the South Dock belongs to the shifting berth for avoiding the danger, not the sailing in the maritime law, it shall not in accordance with the provisions of Article 244 Sub-paragraph 1 of the Maritime Code claim that the insurer shall not be liable for compensation. 4. There is no direct causal relationship between the shifting berth and the stranding of the fishing ships. In this case, on the premise of urgent danger prevention, QU Rongmo shifted ships out of the North Dock, due to the water flowing into the engine room, the ships dropped anchor. The competent authority finds that because of the typhoon Meari, the waves are large, the anchor chains of two ships breaks down and ships are out of control, stranding in the sea cucumber pool. In another word, the stranding of the fishing ships is caused by typhoon Meari, unseaworthiness is not the direct cause. 5. The conclusion of the insurance consultancy company unilaterally appointed by the Defendant cannot be used as evidence of the cause of the accident in this case. During the trial, the Defendants provided the survey report of the appraisal company to prove that the unseaworthiness of the ships was the proximate cause of the accident. However, according to the above analysis, this report did not have a causal relationship between the analysis of typhoon Meari and the accident, the conclusions were not accurate and cannot be used as the basis for the judgment. Secondly, regarding to the insurance value and the specific amount of compensation appointed by both parties in this case which the insurance company should undertake. According to Article 219 Paragraph 1 of the Maritime Code of the People’s Republic of China, “the insurable value of the subject matter insured shall be agreed upon between the insurer and the insured”, Article 220, “the insured amount shall be agreed upon between the insurer and the insured; The insured amount shall not exceed the insured value; Where the insured amount exceeds the insured value, the portion in excess shall be null and void”, and Article 238, “the insurer’s indemnification for the loss from the peril insured against shall be limited to the insured

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amount. Where the insured amount is lower than the insured value, the insurer shall indemnify in the proportion that the insured amount bears to the insured value”, the court makes comprehensive evaluations of the following legal facts. (1) The involved fishing ships “Lu Rong Yu 1813/1814” have total losses. After the accident, inspected by the insurer and the entrusted insurance consulting firm, they held that the expenses of the salvage exceed the insurance value, it can be characterized as the constructive total loss. Later, because the fishing vessels involved were not salvaged, they were disintegrated under the action of the wind and waves and were buried at the bottom of the sea by the local port in 2012. The ships had been destroyed completely, from constructive total loss turned to actual total loss. (2) The insured amount of the fishing ships involved is RMB3 million per ship, which is the fixed value insurance, the compensation of the Defendants for the losses caused by the insured accident shall be limited to RMB6 million of the insured amount: 1. according to the facts, the “special agreements” unilaterally made by the Defendants in the policy mitigates their liability, without the written consent and approval of the Plaintiff. It is contrary to the mandatory provisions of the Contract Law, and there is no willingness or consent of the Plaintiff. 2. The court entrusted Shandong Yongding Judicial Expertise Center to affirm signature and fingerprints on ocean fishing ships policies; two installment agreements; the signature and the fingerprints on the receipt of insurance contract and notification. The relevant expert conclusion about whether they were made by QU Rongmo himself is: neither the signature nor the fingerprints on all policies and materials are from the Plaintiff QU Rongmo himself. Therefore, it can be definitely confirmed that the Plaintiff, QU Rongmo, does not know anything about the special agreements. And there are no ratification and recognition of it. 3. The Plaintiff QU Rongmo has delivered the premium RMB66,000, in accordance with each ship insurance amount of RMB3 million according to the premium ratio, the total premium is RMB132,000. According to the principle of “consistent rights and obligations”, the Defendants shall also pay RMB3 million for each ship. (3) Regarding to the question that the Plaintiff QU Rongmo requested the Defendants to pay the interest. Although the Plaintiff requests the two Defendants to bear the interest on bank loans during the same period from October 1, 2011 to the date of actual performance, but according to the facts ascertained, the time of the total loss of the involved fishing ships is 2012. This case affirms the Plaintiff’s claims as the actual loss, therefore, the starting point of interests shall be calculated from January 1, 2013 to the date affirmed by the judgment. Thirdly, regarding to the responsibility of the two Defendants in this case. According to Article 52 of the Interpretation of the Supreme People’s Court concerning the Application of the Civil Procedure Law of the People’s Republic of China, “as mentioned in Article 48 of the Civil Procedure Law, “other organizations” means organizations that are lawfully established, have certain organizational frameworks and property but do not have the legal person status, including: (6) Commercial

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banks’, policy banks’ and non-banking financial institutions’ lawfully formed branch offices that have obtained business licenses according to the law”, the second Defendant Continent Insurance Shidao Branch and the Plaintiff QU Rongmo are the qualified subjects to sign the insurance contract. As the insurer in the insurance contract, Continent Insurance Shidao Branch shall undertake the corresponding liability for the insurance accident. The first Defendant Continent Insurance Weihai Company is the superior and owner of the second Defendant, according to the relevant provisions of law, when the property of the second Defendant is insufficient to undertake the responsibility of the case, the first Defendant, Weihai company, shall undertake the supplementary liability for the payment. In conclusion, after study by the judicial committee of the court, according to Article 64, Article 119 of the Civil Procedure Law of the People’s Republic of China, Article 106 Paragraph 1 of the General Principles of the Civil Law of the People’s Republic of China, Article 219 Paragraph1, Article 220, Article 237, Article 238 of the Maritime Code of the People’s Republic of China, the judgment is rendered as follows: 1. The Defendant China Continent Insurance Co., Ltd. Shidao Branch shall pay the insurance compensation of RMB6 million to the Plaintiff QU Rongmo, and undertake the interest from January 1, 2013 to the payable date provided by the judgment (calculated according to interest on bank loans in the same period of the People’s Bank of China). 2. The Defendant China Continent Insurance Co., Ltd. Weihai Center Branch shall undertake the supplementary liability for the aforementioned payment. The aforementioned obligation of monetary payment shall be fulfilled within 10 days as of the effective date of this judgment, and if the payment is overdue, the interest on the debt during the delayed period shall be doubled in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB53,800, the Plaintiff, QU Rongmo shall bear RMB3,800 and the Defendant, China Continent Insurance Co., Ltd. Shidao Branch shall bear RMB50,000. Appraisal fee in amount of RMB6,000 shall be born by the Defendant, China Continent Insurance Co., Ltd. Shidao Branch. In case of dissatisfaction with this judgment, any party shall within fifteen days as of the service of this judgment submit the statement of appeal to the court with eight duplicates, so as to make an appeal to Shandong High People’s Court. Presiding Judge: WANG Limin. Judge: DING Qixue. Judge: LI Junfeng. January 5, 2016. Clerk: TAN Tianjiao.

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Shandong High People’s Court Civil Judgment QU Rongmo v. China Continent Insurance Co., Ltd. Weihai Center Branch et al. (2016) Lu Min Zhong No.1542 Related Case(s) This is the judgment of second instance, and the judgment of first instance and the judgment of retrial are on page 1047 and page 1089 respectively. Cause(s) of Action 230. Dispute over marine insurance contract on the sea or sea-connected waters. Headnote Affirming lower court decision about amount of interest to be awarded to the Plaintiff assured who succeeded in recovering damages for the Defendant insurer’s refusal to pay for constructive total loss of ships lost in a typhoon; also affirming lower court’s rejection of the Defendant’s argument that the Plaintiff had breached warranty of seaworthiness by shifting berths. Summary The Plaintiff-Insured filed suit against the Defendants-Insurers in a dispute over constructive total loss. The Plaintiff requested the two Defendants to indemnify the insured amount and related bank interests after the insured ships stranded as a result of a typhoon (covered risk) and was declared a constructive total loss by the authorities. The Defendants argued that they were not obliged to pay because the Plaintiff had breached the seaworthiness obligation while the ship was shifting berths, which approximately caused the accident. The court of first instance found in favor of the Plaintiff, holding that the losses were approximately caused by the covered risk typhoon. The court of first instance rejected the Defendant’s unseaworthiness claim because the berth shift did not satisfy the requirement of “before and at the beginning of the voyage.” Dissatisfied with amount of interest awarded in the judgment of first instance, the Plaintiff appealed and alleged that the period of interest accumulation should be expanded. The Plaintiff-Appellant argued that the Defendants-Respondents’ refusal to pay the constructive total loss constituted a serious breach of the insurance contract and thus overdue bank interest should be included. The Defendant-Respondent counter-argued that the Plaintiff-Appellant breached the seaworthiness obligation and should not be entitled to the total loss.

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The appeal court held that the Defendant-Respondent should be responsible for the total loss and bank interest should not be counted until the actual total loss of the ship.

Judgment The Appellant (the Plaintiff of first instance): QU Rongmo, male, Han, born on December 13, 1957 Domicile: Rongcheng City, Shandong Province. Agent ad litem: LIU Hao, lawyer of Shandong Chenggong Law Firm. Agent ad litem: ZHANG Lei, apprentice lawyer of Shandong Chenggong Law Firm. The Appellant (the Defendant of first instance): China Continent Insurance Co., Ltd. Weihai Center Branch. Domicile: No.14 Haibin North Road, Weihai City, Shandong Province. Legal representative: ZHANG Xiangwu, general manager. Agent ad litem: ZHONG Cheng, lawyer of Guangdong Jinghai Law Firm. Agent ad litem: QIAO Jing, lawyer of Guangdong Jinghai Law Firm. The Appellant (the Defendant of first instance): China Continent Insurance Co., Ltd. Shidao Branch Domicile: No.109 Huang Hai Road, Shidao Town, Rongcheng City, Shandong. Legal representative: JIANG Zhen, manager. Agent ad litem: XU Jianfeng, lawyer of Guangdong Jinghai Law Firm. Agent ad litem: QIAO Jing, lawyer of Guangdong Jinghai Law Firm. Dissatisfied with the Civil Judgment (2012) Qing Hai Fa Hai Shang Chu Zi No.240, with respect to the case arising from dispute over marine insurance contract, the Appellant QU Rongmo and the Appellant China Continent Insurance Co., Ltd. Weihai Center Branch (hereinafter referred to as Continent Insurance Weihai Company) and the Appellant China Continent Insurance Co., Ltd. Shidao Branch (hereinafter referred to as Continent Insurance Shidao Branch) appealed to the court. After being accepted, this case was legally heard in accordance with the collegiate panel and the court held a hearing in public. Agents ad litem of the Appellant QU Rongmo, LIU Hao and ZHANG Lei, agents ad litem of the Appellant Continent Insurance Weihai Company, ZHONG Cheng and QIAO Jing, agent ad litem of the Appellant Continent Insurance Shidao Branch, QIAO Jing, appeared in court to attend the trial. After trial, this case has now been concluded. The Appellant QU Rongmo appealed that: increase the interest rate in the first item of the judgment of first instance to RMB510,616.66 (calculated from October 1, 2011 to December 31, 2012, according to the loan interest rate of the People’s Bank of China for the same period). The facts and reasons: there was a mistake of the recognition that the initial date of the compensation which Continent Insurance Weihai Company and Continent Insurance Shidao Branch should pay was the date that the construction total loss changed to the actual total loss of the ships in the

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judgment of first instance. 1. After the constructive total loss of the involved ships, Continent Insurance Weihai Company and Continent Insurance Shidao Branch should pay the compensation to QU Rongmo timely. The act that Continent Insurance Weihai Company and Continent Insurance Shidao Branch refused to compensate constituted a serious breach of contract. 2. The act that Continent Insurance Weihai Company and Continent Insurance Shidao Branch refused to compensate made QU Rongmo could not abandon the ship, which seriously hindered the right that QU Rongmo can get the compensation from the constructive total loss. 3. If the court did not support the appeal of QU Rongmo, and exempt the interests of the overdue compensation which Continent Insurance Weihai Company and Continent Insurance Shidao Branch should pay, that would violate the intent of legislation and was not conducive to the protection of the seriousness and the normal economic order. Continent Insurance Weihai Company and Continent Insurance Shidao Branch defended that: 1. The cause of the involved accident was that the ships were unseaworthy, unsuitable to tow and QU Rongmo violated the statutory obligations. Therefore Continent Insurance Weihai Company and Continent Insurance Shidao Branch should not undertake any responsibility nor the related interests. 2. According to the regulations of Article 23 of the Insurance Law, to the insurance liability, the insurer had the obligation to compensate or pay the insurance money within 10 days after the compensation or payment of the insurance agreement was reached by the insured and insurer. In this case, Continent Insurance Weihai Company and Continent Insurance Shidao Branch held that the accident did not belong to the insurance liability, furthermore, even if it was an insurance liability, it should also be paid within a certain period agreed in the agreement between the two parties. There were no legal provisions of the compensation ruled that the payment should be paid from the date on which date the ship affirmed as the actual total loss or constructive total loss. In this case, the two parties did not reach an agreement on insurance liability and resorted to court to settle. Even if it was necessary to fulfill the insurance liability, the date of judgment should be taken as the starting point for the calculation of the interests. Therefore, there is no factual or legal basis for QU Rongmo’s appeals. The Appellant Continent Insurance Weihai Company and Continent Insurance Shidao Branch appealed that: revoke the first instance judgment and change to reject the claims of QU Rongmo. The facts and the reasons are as follows: 1. The facts identified by the first instance judgment were wrong. (1) The first instance judgment to the policy of the “special agreements clause” recognized that Continent Insurance Weihai Company and Continent Insurance Shidao Branch did not fulfill the obligation of notification to QU Rongmo was wrong. (2) The conclusion which was recognized by the first instance judgment that “QU Rongmo decided to avoid the typhoon from Yandunjiao North to South

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Dock was appropriate and there was no problem as lightly” was not accordance with the fact. (3) The conclusion which recognized that the insured ships anchored and waited for rescue, but the mobile phone and other contact tools were watered and failed to call, which concluded that QU Rongmo was unable to contact the outside to sign for salvage was not accordance with the fact. (4) The judgment emphasized the accident report issued by the Port Supervision of Rongcheng while ignoring the facts that the contents of the report conflicted with the certificate issued by the authority of the department of meteorological. (5) The conclusion that “the accident happened during the fishing moratorium, the crew returned home on holiday, so QU Rongmo could not be in accordance with the relevant provisions to arrange sufficient crew” was not accordance with the facts and there was no legal basis. (6) The conclusion of the first instance judgment that the act that “when typhoon was coming, the Plaintiff shifted berth from North Dock to South Dock, belonged to the emergency action, rather than the true sense of sailing, the insufficient of crew does not constitute the reason of gross negligence” was not in accordance with the facts and there was no legal basis. 2. The judgment of the first instance fully approved the expert witness who was invited by QU Rongmo, and the expert witness entirely in QU Rongmo’s position to analyze the problem, which was clearly contrary to the purpose of expert witnesses that they can only express their views on professional rather than legal issues. Therefore, the opinion of the expert witness does not have any objectivity of the truth and is biased obviously. 3. The application of the law in the judgment of first instance was improper. (1) The fact that the judgment of first instance avoided the facts that QU Rongmo should fulfill the statutory obligations of abandonment. (2) There was no legal basis that the judgment of first instance affirmed the involved fishing ships had become actual total loss from constructive total loss, and required Continent Insurance Weihai Company and Continent Insurance Shidao Branch to compensate the actual total loss. (3) The judgment of first instance identified that the shifting berth of the insured ships from North Dock to South Dock was the shifting berth rather than the sail in legal, therefore, there was no legal basis to avoid the application of the Maritime Code. (4) The judgment of first instance identified that the proximate cause of the involved accident was typhoon Meari rather than the unseaworthiness of the ship, was not in accordance with the facts and there was no legal basis. (5) The judgment of first instance violated the fundamental principal, the principle of indemnity. (6) The opinion of the judgment of first instance that “Continent Insurance Weihai Company received the premium according to the insurance amount of RMB3 million, therefore, they should paid RMB3 million per ship” was contrary to the provisions of the Insurance Law. QU Rongmo defended that:

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1. In the first instance, the facts were clear and the evidence were sufficient. (1) The special agreements of the involved policy were not applied to QU Rongmo. (2) According to the weather condition and the situation of the ships when the accident happened, as an experienced captain, after comprehensive consideration, QU Rongmo decided to shift berth from Yandunjiao North Dock to South Dock to minimize the losses. If he did not shift berth, it may suffer greater losses. (3) The involved accident happened during the fishing moratorium, the ships were maintained when the typhoon was coming, the act of rescue, shifting berth was not the “sail” whose purpose was operating at sea. Therefore, there was no factual basis that Continent Insurance Weihai Company and Continent Insurance Shidao Branch refused to compensate for the ships because of unseaworthiness. (4) After the accident happened, QU Rongmo took active measures to rescue, but for objective reasons, the ship already caused an actual total loss, QU Rongmo had no fault to the total loss. 2. The application of law of the judgment of first instance was correct. (1) Because the written refusing claims of Continent Insurance Weihai Company and Continent Insurance Shidao Branch, QU Rongmo did not have the legal obligation of abandonment. (2) After the involved accident happened, as time goes by, the constructive total loss became the actual total loss, QU Rongmo had the right to get the free of all average. (3) The court of first instance identified that “the involved ships shifted berth to avoid danger rather than the meaning of the sail of the Maritime Code”, and “the approximate cause of the involved insurance accident was typhoon Meari, there was no direct causal relationship between shifting berth to avoid danger and the strand of the ships”, the application of law was correct. (4) Continent Insurance Weihai Company and Continent Insurance Shidao Branch should undertake the liability of compensation according to the appointed insurance value (RMB4,285,700) and the insurance amount (RMB3 million). QU Rongmo claimed to the court of first instance: Continent Insurance Weihai Company and Continent Insurance Shidao Branch should pay the compensation RMB6 million to QU Rongmo and undertake the interests over the same period from October 1, 2011 until the date of the actual performance of bank loans, and the costs of litigation. The court of first instance identified that: There were two insurance contractual relationships between QU Rongmo and Continent Insurance Shidao Branch. The policy numbers are PCBG201137011847000015/0016 on May 25, 2011 and the insurance period was 12 months, starting at 0000 on May 26, 2011 and ending at 2400 on May 25, 2012. For this, QU Rongmo totally paid the premium RMB132,000. The port of registry of the insured fishing ships “Lu Rong Yu 1813/ 1814” was Shidao and the ship was built in June 1999. Each ship was 30.62 m long, 6.3 m wide, the ship was steel material, the host power was 220 kilowatts. The total tonnage of each ship was 120 tons and net tonnage of each ship was 42 tons.

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According to the insurance contract, the appointed insurance value of the fishing ships was RMB4,285,700, the insurance amount was RMB3 million, it was an undervalued policy. With the absence of the applicant QU Rongmo, the staff of Continent Insurance Shidao Branch hand-wrote special agreements on the ocean fishing ship policy that “when the total loss happened, the maximum indemnity of each ship was no more than RMB1.5 billion” etc. and imitated the signature and fingerprint of QU Rongmo. During litigation, QU Rongmo applied the authentication for the signature and handprint whether they were written by himself or not, the court of first instance legally entrusted Shandong Yongding Judicial Forensic Center to authenticate 1. the signature and fingerprint in the two ocean fishing ship insurance policies; 2. two installment agreements; and 3. the authentication of the signature and fingerprint of QU Rongmo whether was made by himself or not on the two copies of insurance contract delivery receipt, Continent Insurance Weihai Company and Continent Insurance Shidao Branch also sent people to take part in the collection of QU Rongmo’s handwriting and ten fingerprints. The center made corresponding identification in accordance with the law and the conclusion was that neither the signature nor the fingerprints in all policies and materials were from the Plaintiff QU Rongmo himself. The mainly ocean fishing boat clauses of China Continent Insurance were: 1. the scope of property insurance that the insurance referred to the fishing boat hull and ancillary equipment of this policy, including sub ship, machinery and its accessories, winches, communication equipment and other instruments, electrical equipment; 2. the insurance included total loss insurance and comprehensive insurance. (1) Total loss insurance: if the following reasons caused the loss of insured fishing ship and fishing net, the company was responsible for compensation: (a) the storm, typhoon, lightning, ice, earthquake, tsunami, flood, volcano eruption, stranding, sinking, collision, submergence, fire, explosion, boiler or other equipment pipeline rupture and other natural disasters and accidents; (b) the potential defects in hull and machinery; and (c) the negligence of captain, chief officer, crew, pilot or ship repair staff; and 3. exclusions, the company shall not be liable for the following losses, expenses and liabilities: the loss due to the unseaworthiness of the insured ship; the loss due to the negligence or the intentional acts of the shipowner and his representatives. After the fishing off season on June 1,2011, the fishing ships “Lu Rong Yu 1813/ 1814” of QU Rongmo were doing the maintenance of the hull and the mechanical in Rongcheng Yandunjiao North Port, the boat “Lu Rong Yu 1813”’s main engine in June 20 was hoisted out warehouse for maintenance. Because the typhoon Meari was approaching according to the weather report, QU Rongmo decided to shift berth to the South Port to avoid the typhoon when the wind power was not strong. At 1900 on June 25, 2011, QU Rongmo, the captain WU Huaqiao and the chief officer MENG Fanchao tried to rely on the power of the fishing boat “Lu Rong Yu 1814” to tow the two ships to Yandunjiao South Port. Then, on the way to the South Port, because of the steering gear was out of control, two ships dropped anchors and waited for the rescue ships to salvage. During the period, the wind gradually increased, until 0000 on June 26, under the typhoon waves, anchor cables

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were broken and ships were dragging, the two ships were out of control. At around 0300 on June 26, the two ships were stranded in the sea cucumber pool of Yandunjiao Fishery Company by the very rough seas. On September 15, 2011, the Rongcheng Fishing Port Supervision of the People’s Republic of China after investigation, made Investigation Report to the Fishery Marine Traffic Accidents, affirmed the accident occurred as follows: 1. the two ships were repaired in Yandunjiao North Fishing Port on June 1, 2011, the ship “Lu Rong Yu 1813” took the main engine out of the cabin and repaired it at the port on June 20. At 1900 on June 25, the ship “Lu Rong Yu 1814” started engine, dragged the ship “Lu Rong Yu 1813” to shift to the South Port for shelter. At that time, the waves were large, water got into the engine room, pump vent valve, and sprayed to electric power supply of M.V. “Lu Rong Yu 1814”, the steering gear were out of control, two ships broke down immediately. At 0000 on June 26, the anchor chains of the ship “Lu Rong Yu 1814” were broken. At 0100, the anchor chains of the boat “Lu Rong Yu 1813” were broken, two ships were out of control. At around 0300, the two ships were stranded in the sea cucumber pool in the southwest of Yandunjiao Fishing Port by the very rough seas. 2. The cause of the accident was: to avoid the typhoon, because the waves were large, the anchor chains of two ships were broken and the ships were out of control and stranded in the sea cucumber pool by the very rough seas, after repeated salvage invalid, the two ships were scrapped. The meteorological conditions were the northeast wind 10 grade, heavy rain, the sea conditions were very rough seas. The report was stamped with the official seal of the authority and signed by the investigators LIU Kuanxin and CHEN Zhikai. After the accident, QU Rongmo reported to Continent Insurance Shidao Branch. On September 7, 2011, Continent Insurance Weihai Company expressly refused the claim of QU Rongmo for compensation in the form of the reply about the matters of the stranded of ships “Lu Rong Yu 1813/1814”; on September 13, 2011, Continent Insurance Weihai Company replied again, said the costs of the insured ships salvage and the costs of the repairs were more than the market value of the two ships at the time of the accident happened, therefore, Continent Insurance Weihai Company did not participate any salvage of the two ships and did not pay the fee of salvage; in fact, it admitted the objective situation of the total loss of the two ships. On February 7, 2012, Continent Insurance Weihai Company issued the notice of rejection again. So QU Rongmo brought a lawsuit to the court of first instance. In late June, 2011, the typhoon “Meari” did have a great influence on the Shandong Seas, caused damages to the coastal ships and other property. In Rongcheng, Shandong Province, whenever a fishing ship accident occurred, according to the provisions of the relevant laws, the only lawful competent authority to conduct the investigation of the accident and make identification of the accident was Rongcheng Fishing Port Supervision of the People’s Republic of China. For finding out the post processing situation of involved fishing ships “Lu Rong Yu 1813/1814”, the court of first instance sent a letter to the Shandong Provincial Oceanic and Fishery Monitoring Corps detachment of the second branch for

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inquiry, the detachment sent a certificate to the court on June 9, 2015, to prove that the involved fishing ships “Lu Rong Yu 1813/1814” had handled the corresponding cancellation of registration. And according to the certificate of Yandunjiao Fishery Company on August 20, 2015, the wreckage of two fishing ships at the latest, before January 1, 2013, were completely buried under the seabed during the reclamation in 2012. The court of first instance held that: Firstly, the first issue was the cause of the accident of the stranding fishing ships and the question whether the insurance company should bear the corresponding insurance compensation liability or not. (1) The identification of the accident by the competent authority, according to law, should be used as the basis for the judgment. Survey Report on Fishing and Maritime Traffic Accidents of Rongcheng Fishing Port Supervision of the People’s Republic of China,, according to the law, the one of the duties of this department defined the accident liability of the fishing ships in the sea and investigated the occurrence of related accidents, therefore, the survey report of this department should be the basic evidence for dealing with maritime fishing ship accidents. The evidence made by the competent authority in accordance with the law, and the effectiveness and probative force of the evidence should be higher than other evidence. The direct cause of the accident was that the ships “Lu Rong Yu 1813/1814” in order to avoid the typhoon and because the waves were large, the anchor chains of two ships were broken and ships were out of control and stranded in the sea cucumber pool by the very rough seas, after repeated salvage invalid, the two ships were scrapped and caused the actual loss. The main opinions about the report of Continent Insurance Shidao Branch and Continent Insurance Weihai Company in court were that Fishing Port Supervision was the competent authority, but it was not the meteorological department, the contents of the report, the northeast wind 10 grade, heavy rain lacked factual basis. QU Rongmo supplied a full 48 h of meteorological records of Weihai Professional Meteorological Observatory from 0000 on June 25 to 2400 on June 26 in 2011, to prove that after 0000 on June 26, the wind gradually increased to nine, the rain was heavy. According to Article 114 of the Interpretation of the Supreme People’s Court concerning the Application of the Civil Procedure Law of the People’s Republic of China, “the matters recorded in the documents made by the state organs or other organizations that have the functions of social administration according to law within the scope of their functions are presumed to be true, except that there is sufficient evidence to reverse them”, when Continent Insurance Weihai Company and Continent Insurance Shidao Branch did not have sufficient evidence to indicate that the authority exceeded its authority and there was no sufficient evidence to reverse the report, the evidence should be the settlement basis of this case according to the law.

QU Rongmo v. China Continent Insurance Co., Ltd. Weihai Center …

1079

(2) The case belonged to an insurance accident, and Continent Insurance Weihai Company and Continent Insurance Shidao Branch should bear the corresponding liability in accordance with the law. 1. This case belonged to the scope of insurance appointed in the insurance contract. The provisions of clause two of the insurance form for ocean fishing ships printed by the Defendant clearly stipulated, “the insurance included total loss insurance and comprehensive insurance. Total loss insurance: if the following reasons caused the loss of insured fishing ship and fishing net, the company was responsible for compensation: the storm, typhoon, lightning, ice, earthquake, tsunami, flood, volcano eruption, stranding, sinking, collision, submergence, fire, explosion, boiler or other equipment pipeline rupture and other natural disasters and accidents; the potential defects in hull and machinery; the negligence of captain, chief officer, pilot crew or ship repair staff”. The competent authority found that the accident was caused by storm and typhoon that caused the fishing ships collided to the rocks and stranded. Among them, the storm and typhoon were the cause, the colliding to the rocks and stranding were not only the cause of the accident, but also the results of accident. Therefore, the above causes belonged to the agreement of insurer and the scope and matters of the claims. 2. There was no intentional act of causing an insurance accident of QU Rongmo. First, June was the fishing off season, so QU Rongmo repaired and maintained the fishing ships appropriately and that did not violate the mandatory provisions of the law. Second, during the fishing off season, the crew returned home on holiday, so QU Rongmo could not in accordance with the relevant provisions of the normal production of Shandong Province supply full crews. Third, when the typhoon was coming, QU Rongmo shifted berth from the North Dock to the South Dock was an action of averting danger instead of the sailing in the real meaning, the insufficient of the crew was not the cause that constituted the gross negligence. Fourth, there was no doubt between the parties that the wind power was about 6 when QU Rongmo decided to shift ships from the North Dock to the South Dock. That was to say, there was no fact that QU Rongmo despite the risk of typhoon to shift the ship out of the North Dock. Fifth, the records of inquiry of Qingdao Xinyang Maritime Consulting Company to the witness QU Rongmo and FU Shihua submitted by Continent Insurance Weihai Company and Continent Insurance Shidao Branch verified that after the water flowing into the engine room, the mobile phone was flooded, the alarm could not be carried out during the anchorage of the fishing ships. Sixth, excluding the typhoon, QU Rongmo could solve the dragging anchor problem in other ways, the ships were dragging anchor due to the typhoon and rough sea, that caused the two ships out of control and stranded in the sea cucumber pool. Therefore, the claim that QU Rongmo refused to appeal for help actively was not in accordance with the objective situation at sea at

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that time, and was not adopted by the court of first instance. Thus, in accordance with the contract of insurance, the stranding and grounding accident of the fishing ships belonged to the normal commercial risks of Continent Insurance Weihai Company and Continent Insurance Shidao Branch and also included in the scope of the statutory or as agreed by the insurer. The opinion of Continent Insurance Weihai Company and Continent Insurance Shidao Branch claimed that according to Article 242 of the Maritime Code of the People’s Republic of China, “the insurer shall not be liable for the loss caused by the intentional act of the insured” did not have the corresponding factual and legal basis, the court of first instance did not support it. 3. The facts and legal confirmation in this case about the unseaworthiness of the ships at the beginning of the sail. The expert SUN Jianming indicated that if typhoon came, whether it was merchant vessel or fishing vessel, no matter the tonnage of ship, it was not inevitable damaged in anchorage, dock or other locations, and there was no absolute safety position, the captains and crew members in accordance with the actual situation of the ship and chose the appropriate way which they thought was proper to avoid the loss. On the ascertained facts, the act of QU Rongmo, shifting fishing ships from the North Dock to the South Dock belonged to the shifting berth for avoiding the danger rather than the sailing in the Maritime Code and should not in accordance with the provisions of Article 244 Sub-paragraph 1 of the Maritime Code claim that the insurer should not be liable for compensation. 4. There was no direct causal relationship between the shifting berth and the stranding of the fishing ships. In this case, on the premise of urgent danger prevention, QU Rongmo shifted ships from the North Dock to the South Dock. Due to the water flowing into the engine room, the ships dropped anchor. The competent authority found that because of the typhoon Meari was coming and the waves were large, the anchor chains of two ships broken and ships were out of control and stranded in the sea cucumber pool by the sea and wind. In another word, fishing ships collided to the rocks and the stranding was caused by typhoon Meari. Unseaworthiness was not the direct cause. 5. The conclusion of the insurance consultancy company unilaterally appointed by Continent Insurance Weihai Company and Continent Insurance Shidao Branch cannot be used as evidence of the cause of the accident in this case. During the trial, Continent Insurance Weihai Company and Continent Insurance Shidao Branch provided the survey report of the appraisal company to prove that the unseaworthiness of the ships was the proximate cause of the accident. However, according to the above analysis, this report did not analysis the causal relationship between the typhoon Meari, the latter factor and the accident, the conclusions were not accurate and cannot be used as the basis for the judgment.

QU Rongmo v. China Continent Insurance Co., Ltd. Weihai Center …

1081

Secondly, regarding to the insurance value appointed by both parties in this case and the specific amount of compensation which the insurance company should undertake. According to Article 219 Paragraph 1 of the Maritime Code of the People’s Republic of China, “the insurable value of the subject matter insured shall be agreed upon between the insurer and the insured”, Article 220, “the insured amount shall be agreed upon between the insurer and the insured; The insured amount shall not exceed the insured value; Where the insured amount exceeds the insured value, the portion in excess shall be null and void”, and Article 238, “the insurer’s indemnification for the loss from the peril insured against shall be limited to the insured amount. Where the insured amount is lower than the insured value, the insurer shall indemnify in the proportion that the insured amount bears to the insured value”, the following legal facts had been made a comprehensive evaluation. (1) The involved fishing ships “Lu Rong Yu 1813/1814” already had total losses. After the accident, inspected by the insurer and the entrusted insurance consulting firm, they held that the expenses of the salvage exceed the insurance value, and it can be characterized as the constructive total loss. Later, because the fishing vessels involved were not salvaged, they were disintegrated under the action of the wind and waves and were buried to the bottom of the sea by the local port in 2012. The ships had been destroyed completely and changed the constructive total loss to the actual total loss. (2) The insured amount of the fishing ships involved was RMB3 million per ship, which was the fixed value insurance, the compensation of Continent Insurance Weihai Company and Continent Insurance Shidao Branch for the losses caused by the insured accident shall be limited to RMB6 million of the insured amount: 1. according to the facts, the “special agreements” unilaterally made by Continent Insurance Weihai Company and Continent Insurance Shidao Branch in the policy to mitigate their liabilities and without the written consent and approval of QU Rongmo. It was contrary to the mandatory provisions of the Contract Law, and there was no willingness or consent of QU Rongmo; 2. the signature and fingerprints on the two ocean fishing ships policies authenticated by Shandong Yongding Judicial Expertise Center, which was entrusted by the court of first instance; the two installment agreements; the signature and the fingerprints on the receipt of insurance contract and the notification to affirm whether they were made by QU Rongmo himself or not. The conclusion was that: neither the signature nor the fingerprints on all policies and materials were from QU Rongmo himself. Therefore, it can be definitely confirmed that QU Rongmo did not know anything about the special agreements. And there was no ratification and recognition of it; and 3. QU Rongmo had delivered the premium RMB66,000, in accordance with each ship insurance amount of RMB3 million according to the premium ratio, the total premium was RMB132,000. According to the principle of “consistent rights and obligations”, Continent Insurance Weihai Company and Continent Insurance Shidao Branch also should pay RMB3 million for each ship.

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(3) Regarding to the question that QU Rongmo requested Continent Insurance Weihai Company and Continent Insurance Shidao Branch to pay the interest. Although QU Rongmo requested Continent Insurance Weihai Company and Continent Insurance Shidao Branch to bear the interests on bank loans during the same period from October 1, 2011 to the date of actual performance, but according to the facts ascertained, the time of the total loss of the involved fishing ships was 2012. The court of first instance supported the QU Rongmo’s claims as the actual loss, therefore, the starting point of interests should be calculated from January 1, 2013 to the date provided in the judgment. Thirdly, regarding to the responsibility of Continent Insurance Weihai Company and Continent Insurance Shidao Branch in this case. According to Article 52 of the Interpretation of the Supreme People’s Court concerning the Application of the Civil Procedure Law of the People’s Republic of China, “as mentioned in Article 48 of the Civil Procedure Law, “other organizations” means organizations that are lawfully established, have certain organizational frameworks and property but do not have the legal person status, including: (6) Commercial banks’, policy banks’ and non-banking financial institutions’ lawfully formed branch offices that have obtained business licenses according to the law”, Continent Insurance Shidao Branch and QU Rongmo are the qualified subject to sign the insurance contract. As the insurer in the insurance contract, it should undertake the corresponding liability for the insurance accident. Continent Insurance Weihai Company as the superior and owner of Continent Insurance Shidao Branch, according to the relevant provisions of law, when the property of Continent Insurance Shidao Branch was insufficient to undertake the responsibility of the case, Continent Insurance Weihai Company should undertake the supplementary liability for the payment. In conclusion, after study by the judicial committee of the court, according to Article 64, Article 119 of the Civil Procedure Law of the People’s Republic of China, Article 106 Paragraph 1 of the General Principles of the Civil Law of the People’s Republic of China, Article 219 Paragraph1, Article 220, Article 237, Article 238 of the Maritime Code of the People’s Republic of China, the judgment of first instance was rendered as follows: 1. China Continent Insurance Co., Ltd. Shidao Branch should pay the insurance compensation of RMB6 million to QU Rongmo, and undertake the interest from January 1, 2013 to the payable date provided by the judgment (calculated according to interest on bank loans in the same period of the People’s Bank of China). 2. China Continent Insurance Co., Ltd. Weihai Center Branch should undertake the supplementary liability for the aforementioned payment. The aforementioned obligation of monetary payment should be fulfilled within 10 days as of the effective date of this judgment, and if the payment was overdue, the interest on the debt during the delayed period should be doubled in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB53,800, QU Rongmo should bear RMB3,800 and China Continent Insurance Co., Ltd. Shidao Branch should bear RMB50,000. Appraisal fee in amount of RMB6,000 should be born by China Continent Insurance Co., Ltd. Shidao Branch.

QU Rongmo v. China Continent Insurance Co., Ltd. Weihai Center …

1083

The court finds out that: two fishing boats “Lu Rong Yu 1813/1814” were insured by QU Rongmo, on May 25, 2011, Continent Insurance Shidao Branch issued insurance policies whose numbers were PCBG201137011847000015/0016, QU Rongmo paid the premium RMB132,000. According to the above policies, the insurer, Continent Insurance Shidao Branch should undertake the compensation responsibility within the scope of insurance liability according to the provisions of fishing ships and policies; the risk was comprehensive insurance, the insurance period was 12 months, from 0000 on May 26, 2011 to 2400 on May 25, 2012. The risk covered by Continent Insurance Shidao Branch was comprehensive risks, according to the provisions on comprehensive risks of China Continent Insurance Co., Ltd. Ocean Fishing Vessel Insurance Clauses, Continent Insurance Shidao Branch shall be responsible for compensation about the total loss or partial loss caused by the storm, typhoon, lightning, ice, earthquake, tsunami, flood, volcano eruption, stranding, sinking, collision, submergence, fire, explosion, boiler or other equipment pipeline rupture and other natural disasters and accidents. At the meantime, according to the provision of the above insurance clause about the “exclusions”, Continent Insurance Shidao Branch shall not be liable for the losses of unseaworthiness of the insured ship of the negligence or intentional acts of the shipowner and his representative. At the fishing off season in June 2011, the fishing ships “Lu Rong Yu 1813/ 1814” were doing the maintenance of the hull and the mechanical in Rongcheng Yandunjiao North Port, there were 5 keepers. The main engine of the ship “Lu Rong Yu 1813” in June 20 was hoisted out warehouse for maintenance, a new tail shaft of intermediate shaft of the ship “Lu Rong Yu 1814” in June 25 was replaced, there were two screws not installed. At around 1900 on June 25, 2011, QU Rongmo, the captain FU Shihua, MENG Fanchao and a seaman drove the ship “Lu Rong Yu 1814” to tug the ship “Lu Rong Yu 1813” left Yandunjiao North Dock to Yandunjiao South Dock, which located 4 sea miles far from the North Dock. When the ships “Lu Rong Yu 1813/1814” left Yandunjiao North Dock, there were two or three pairs of fishing ships in dock. On the sailing of the ships “Lu Rong Yu 1813/ 1814”, the water pump of host engine of the ships “Lu Rong Yu 1814” was dropped out by water pressure, water got into the engine room. The personnel of the two ships were connecting the rope between the two ships, no one was in the engine room, and did not notice the water was getting into the engine room. After the water got into the engine room, the switchboard was burned out, the generator did not generate electricity, the steering gear out of control, the engine stalled, the two ships dropped anchors and waited for the rescue ships to salvage. About 2 h after the two ships dropped anchors, at around 0000 on June 26, the anchor cables broken and ships dragged, the two ships were out of control. At about 2200, QU Rongmo got a call from the shore grocery store, and the phone was out of order after the storm becoming stronger. At around 0300 on June 26, the two ships were stranded in the sea cucumber pool of Yandunjiao Fishery Company by the very rough seas. The meteorological data issued by meteorological stations submitted by Continent Insurance Weihai Company and Continent Insurance Shidao Branch in the first instance record that, the wind of the head of Rongcheng Chengshan was 4

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grade at 1700 and 1800 on June 25, 5 grade at 1900, 6 grade from 2000 to 2200; the maximum wind at the head of Rongcheng Chengshan was 5 grade from 1200 to 2400 on June 25, and extreme wind was 6 grade; at 1700 on June 25, the wind was 6 grade, 5 grade at 1800, 6 grade from 1900 to 2200 in Rongcheng Shi Island. The meteorological data issued by meteorological stations submitted by QU Rongmo record that the maximum wind of Rongcheng Chengshan was 6 grade on June 25, the extreme wind was 9 grade on June 26. After the accident, QU Rongmo reported to Continent Insurance Shidao Branch. On September 7, 2011, QU Rongmo informed that QU Rongmo tried to find ways to save the fishing ships and reduce losses to Continent Insurance Shidao Branch, but received that it was unable to carry out the whole floating rescue, only split and dismantle, please as soon as possible to determine the residual value of stranded fishing ships, so that the next insurance claims could go on. On September 13, 2011, Continent Insurance Weihai Branch Company informed QU Rongmo about the matters of the stranding of the ships “Lu Rong Yu 1813/1814” that the costs of the insured ships salvage and the costs of the repairs were more than the market value of the two ships at the time of the accident, therefore, Continent Insurance Weihai Company did not participate in any salvage of the two ships and did not undertake any corresponding salvage fee; the matters about the insured ships, were determined by shipowner. Other facts identified by the court are in accordance with the facts in the first instance. The court holds that the issues of the case are whether Continent Insurance Weihai Company and Continent Insurance Shidao Branch should bear the corresponding insurance compensation liability; the amount of compensation which Continent Insurance Weihai Company and Continent Insurance Shidao Branch should pay; whether the starting time of overdue payment interest determined by the court of first instance is correct. The first issue, whether Continent Insurance Weihai Company and Continent Insurance Shidao Branch should bear the corresponding insurance compensation liability. QU Rongmo insured two fishing ships “Lu Rong Yu 1813/1814”, Continent Insurance Shidao Branch issued two fishing ships policies, and the insurance contract between two parties was founded and valid. According to the record of the above policies, the insurer, Continent Insurance Shidao Branch shall undertake the compensation responsibility within the scope of policy responsibility in accordance with the provisions of fishing ship clause and policies. On June 25, 2011, the main engine of the ship “Lu Rong Yu 1813” was hoisted out of the warehouse for maintenance, without power; a new tail shaft of intermediate shaft of the ship “Lu Rong Yu 1814” was replaced, there were two screws not installed; the personnel in two ships were four, seaman insufficient. At around 1900, QU Rongmo had known the above situation, and known the typhoon Meari was approaching, still commanded the fishing boats “Lu Rong Yu 1813/1814” to leave Yandunjiao North Dock, the ship “Lu Rong Yu 1814” dragged the ship “Lu Rong Yu 1813” to Yandunjiao South Dock about 4 sea miles away from the North

QU Rongmo v. China Continent Insurance Co., Ltd. Weihai Center …

1085

Dock, there have obvious negligence. Because the ship “Lu Rong Yu 1813” had no power and need to be dragged by the ship “Lu Rong Yu 1814”, the two ships could not reach Yandunjiao South Dock in a short time, and after the machine of the ship “Lu Rong Yu 1814” was out of control, it could not resist the wind wave only rely on the power of the ship “Lu Rong Yu 1814”; due to the sea man insufficient, there was no people in the engine room, and could not notice the water was getting into the engine room and took measures, that leaded the switchboard burned out, the generator did not generate electricity, the steering gear out of control, the two ships had to drop anchors and wait for the rescue ships to save them. The personnel on board only relied on mobile phones to contact with shore personnel, it can be seen that the ship communication equipment could not be used normally, after the phone was wet, they could not seek for help. Thus, there was a causal relationship between the negligence of the shipowner QU Rongmo and the stranding accident in this case. Survey Report on Fishing and Maritime Traffic Accidents of Rongcheng Fishing Port Supervision of the People’s Republic of China, held that the direct cause of the accident was that the two ships during the period of avoiding the typhoon, because the waves were large, the anchor chains of two ships broken, the ships were out of control and stranded in the sea cucumber pool by the very rough seas, after repeated salvage invalid, the two ships were scrapped. The survey report of Rongcheng Fishing Port Supervision described the process and objective cause of the accident, but did not describe the objective negligence of shipowner. In fact, the two ships stranded due to the anchor chains of two ships broken and ships out of control, however, the ships had no power and the steering engine were out of control, which finally led to dropping anchor, they were caused by the negligence of QU Rongmo, it was not contradictory to the report to confirm that QU Rongmo had the negligence. According to Article 122 of the Interpretation of the Supreme People’s Court concerning the Application of the Civil Procedure Law of the People’s Republic of China, the parties can in accordance with Article 79 of the Civil Procedure Law of the People’s Republic of China, a party may apply for a person who has special knowledge to appear in court, and on behalf of the party, make comments on the professional issues involved in the facts of the case. The opinion of a person with special knowledge on the subject in court is regarded as the statement of the parties concerned. QU Rongmo applied the expert auxiliary SUN Jianming to join the court in the first instance, the opinion of SUN Jianming should be regarded as the statement of QU Rongmo. QU Rongmo had no valid evidence to prove that the fishing ships was obviously safer at Yandunjiao South Dock rather than at Yandunjiao North Dock to avoid typhoon, in the conditions that one of the ships without power, another ship’s seaman insufficient, the communication devices of the two ships out of order and typhoon was coming, he commanded the two ships to leave Yandunjiao North Dock to Yandunjiao South Dock 4 sea miles away. The act of avoiding danger was obviously inappropriate. Article 216 Paragraph 1 of the Maritime Code of the People’s Republic of China stipulates: “a contract of marine insurance is a contract whereby the insurer

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undertakes, as agreed, to indemnify the loss to the subject matter insured and the liability of the insured caused by perils covered by the insurance against the payment of an insurance premium by the insured.” Whether the insurer makes compensation for the loss of the object of insurance, a judgment shall be made in accordance with the contract of insurance. According to the record of the involved policy, China Continent Insurance Co., Ltd. Ocean Fishing Ship Insurance Clauses is a part of involved insurance contract. According to the provision, Continent Insurance Shidao Branch shall undertake the compensation responsibility of the losses of the ships caused by typhoon but did not undertake the compensation responsibility of the losses of the ships caused by the negligence of shipowner. In this case, due to the negligence of the shipowner, the two ships lost power, the steering engine were out of control, then the wind wave became stronger, the anchor chains of two ships broken and ships were out of control then stranded. Therefore, as for the causes of this case, the first is the negligence of the shipowner, then is the effect of typhoon, without any of the two causes, the fishing ships would not strand. As for which cause between the negligence of the shipowner and the effect of typhoon was the direct, effective, decisive reason, that was difficult to determine. Continent Insurance Weihai Company and Continent Insurance Shidao Branch shall according to the proportion of appointed premium of 50% pay to QU Rongmo. The second issue, the amount of compensation which Continent Insurance Weihai Company and Continent Insurance Shidao Branch should pay. The two policies issued by Continent Insurance Shidao Branch recorded that the insurance value of each ship “Lu Rong Yu 1813/1814” was RMB4,285,700, insurance amount was RMB3 million. The “special agreement” in the policies both recorded that “the maximum amount of compensation does not exceed RMB1.5 million when total loss happened”. The above provisions were insurer liability exemption clauses. Article 17 Paragraph 2 of the Insurance Law of the People’s Republic of China stipulates, for those clauses exempting the insurer from liability in the insurance contract, the insurer shall sufficiently warn the insurance applicant of those clauses in the insurance application form, the insurance policy or any other insurance certificate, and expressly explain the contents of those clauses to the insurance applicant in written or verbally. If the insurer fails to make a warning or express explanation thereof, those clauses shall not be effective. Continent Insurance Weihai Company and Continent Insurance Shidao Branch did not prove that they had fulfilled the instructions and explicit obligations about the exemption clauses in law. Therefore, the clause that “the maximum amount of compensation does not exceed RMB1.5 million when total loss happened” was not effective. According to the record of policies, the insurance value of each involved fishing ship “Lu Rong Yu 1813/1814” was RMB4,285,700, insurance amount was RMB3 million, Continent Insurance Weihai Company and Continent Insurance Shidao Branch did not provide effective evidence to prove that the value of each ship was less than RMB3 million when insurance accident happened. Therefore, it should be determined that the insurance amount recorded in the policy did not exceed the value of the ship at the time of the insurance accident.

QU Rongmo v. China Continent Insurance Co., Ltd. Weihai Center …

1087

After the accident of the ships “Lu Rong Yu 1813/1814” happened, QU Rongmo reported to Continent Insurance Shidao Branch. On September 13, 2011, Continent Insurance Weihai Company replied that the costs of the insured ships salvage and the costs of the repairs were more than the market value of the two ships at the time of the accident, therefore, Continent Insurance Weihai Company did not participate in any salvage of the two ships and did not undertake any salvage fee. At that time, the two ships were constructive total loss. On February 7, 2012, Continent Insurance Weihai Company issued the notice of rejection, the reason of rejection was that the accident of the two ships was not the insurance responsibility. Shandong Provincial Oceanic and Fishery Monitoring Corps detachment of the second branch sent a certificate on June 9, 2015, to prove that the involved fishing ships “Lu Rong Yu 1813/1814” had handled the corresponding cancellation of registration. And according to the certificate of Yandunjiao Fishery Company on August 20, 2015, the two fishing ships were disintegrated under the action of wind and waves, the wreckage was completely buried under the seabed during the reclamation of the dock in 2012, the two ships were actual total loss. After the constructive total loss of the two ships happened, Continent Insurance Weihai Company rejected the claims for the reason that the accident was not the insurance liability. Then, the two ships were actual total loss, there were no need of abandonment. Due to the insurance subject of the two fishing ships suffered total loss, Continent Insurance Weihai Company and Continent Insurance Shidao Branch shall pay the insurance compensation of half of RMB3 million, RMB1.5 million, totaling RMB3 million of two ships. The third issue, whether the starting time of overdue payment interest determined by the court of first instance is correct. The time of the actual total loss of involved fishing ships was 2012, the court of first instance confirmed the starting time of overdue payment interest which Continent Insurance Weihai Company and Continent Insurance Shidao Branch should pay was from January 1, 2013, there was nothing wrong. In conclusion, the appeal of QU Rongmo cannot establish and shall be dismissed; the appealing grounds of Continent Insurance Weihai Company and Continent Insurance Shidao Branch partly establish, the judgment of first instance applied inappropriate law to determine the cause of accident involved, and shall be changed. According to Article 216 Paragraph 1 of the Maritime Code of the People’s Republic of China, Article 170 Paragraph 1 Sub-paragraph 2 of the Civil Procedure Law of the People’s Republic of China, the judgment is rendered as follows: 1. Change the first item of Qingdao Maritime Court (2012) Qing Hai Fa Hai Shang Chu Zi No.240 to: China Continent Insurance Co., Ltd. Shidao Branch shall pay the insurance compensation RMB3 million to QU Rongmo, and undertake the interest from January 1, 2013 to the payable date provided by the judgment (calculated according to the benchmark loan interest rate in the same period of the People’s Bank of China);

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2. Change the second item of Qingdao Maritime Court (2012) Qing Hai Fa Hai Shang Chu Zi No.240 to: China Continent Insurance Co., Ltd. Weihai Center Branch shall undertake the supplementary liability for the aforementioned payment. The aforementioned obligation of monetary payment shall be fulfilled within 10 days as of the effective date of this judgment, and if the payment is overdue, the interest on the debt during the delayed period shall be doubled in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee of first instance in amount of RMB53,800, QU Rongmo shall bear RMB26,900 and China Continent Insurance Co., Ltd. Shidao Branch shall bear RMB26,900. Appraisal fee in amount of RMB6,000 shall be borne by China Continent Insurance Co., Ltd. Shidao Branch. Court acceptance fee of second instance in amount of RMB53,800, QU Rongmo shall bear RMB26,900 and China Continent Insurance Co., Ltd. Shidao Branch shall bear RMB26,900. This judgment is final. Presiding Judge: DONG Bin Acting Judge: WANG Lei Acting Judge: FENG Yuhan September 13, 2016 Clerk: LI Jianwei

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The Supreme People’s Court of the People’s Republic of China Civil Judgment QU Rongmo v. China Continent Insurance Co., Ltd. Weihai Center Branch et al. (2017) Zui Gao Fa Min Zai No.413 Related Case(s) This is the judgment of retrial, and the judgment of first instance and the judgment of second instance are on page 1047 and page 1071 respectively. Cause(s) of Action 230. Dispute over marine insurance contract on the sea or sea-connected waters. Headnote The Supreme People’s Court changed lower court decisions about amount loss to be recovered by the Plaintiff assured for constructive total loss of ships lost in a typhoon; two causes of the loss were covered (typhoon and master’s fault), one was not (shipowner fault) and in the light of their relative contribution to the loss, insurer should pay 75% (trial court had held 100%, intermediate court 50%). Summary The Plaintiff-Insured brought suit against the Defendants-Insurers in a dispute over constructive total loss. The Plaintiff requested the two Defendants to indemnify the insured amount and related bank interests after the insured ships stranded as a result of a typhoon (covered risk) and was declared a constructive total loss by the authorities. The Defendants argued that they were not obliged to pay because the Plaintiff had breached the seaworthiness obligation while the ship was shifting berths, which approximately caused the accident. The court of first instance found in favor of the Plaintiff, holding that the losses were approximately caused by the covered risk typhoon. The court of first instance rejected the Defendant’s unseaworthiness claim because the berth shift did not satisfy the requirement of “before and at the beginning of the voyage”. The court of first instance held that the Plaintiff was entitled to recover 100% of the loss. Dissatisfied with amount of interest awarded in the judgment of first instance, the Plaintiff appealed and alleged that the period of interest accumulation should be expanded. The Plaintiff-Appellant argued that the Defendants-Respondents’ refusal to pay the constructive total loss constituted a serious breach of the insurance contract and thus overdue bank interest should be included. The Defendant-Respondent counter-argued that the Plaintiff-Appellant breached the seaworthiness obligation and should not be entitled

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to the total loss. The appeal court held that the Defendant-Respondent should be responsible for the loss and bank interest but reduced the recovery to 50% because of the Plaintiff’s partial responsibility. The Plaintiff-Appellant appealed to the Supreme People’s Court, asking for a retrial. The Supreme People’s Court changed the judgments of the lower courts. Two of the causes of the loss were insured risks (the typhoon and the negligence of the master) and one was not (the shipowner’s negligence). The typhoon was the main cause. In light of the impact each of the causes had on the accident, the Defendant should pay 75% of the loss.

Judgment The Claimant of Retrial (the Plaintiff of first instance, the Appellant of second instance): QU Rongmo, male, Han, born on December 13, 1957 Domicile: Rongcheng City, Shandong Province. Agent ad litem: LIU Hao, lawyer of Shandong Chenggong Law Firm. Agent ad litem: LI Quantong, trainee lawyer of Shandong Chenggong Law Firm. The Respondent of Retrial (the Defendant of first instance, the Appellant of second instance): China Continent Insurance Co., Ltd. Weihai Center Branch Domicile: No.14 Habin North Road, Weihai City, Shandong Province. Representative: ZHANG Qihao, general manager. Agent ad litem: ZHONG Cheng, lawyer of Guangdong WANG JING & CO (Shanghai) Law Firm. Agent ad litem: QIAO Jing, lawyer of Guangdong WANG JING & CO (Shanghai) Law Firm. The Respondent of Retrial (the Defendant of first instance, the Appellant of second instance): China Continent Insurance Co., Ltd. Shidao Branch Domicile: No. 109 Huang Hai Road, Shidao Town, Rongcheng City, Shandong Province. Representative: JIANG Zhen, manager of the company. Agent ad litem: XU Jun, lawyer of Guangdong WANG JING & CO (Shanghai) Law Firm. Agent ad litem: QIAO Jing, lawyer of Guangdong WANG JING & CO (Shanghai) Law Firm. With respect to the case arising from dispute over marine insurance contract between the Claimant of Retrial, QU Rongmo, and the Respondents of Retrial, China Continent Insurance Co., Ltd. Weihai Center Branch (hereinafter referred to as CCIC Weihai) and China Continent Insurance Co., Ltd. Shidao Branch (hereinafter referred to as CCIC Shidao), the Claimant of Retrial disagreed with the Shandong High People’s Court (hereinafter referred to as the court of second

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instance) (2016) Lu Min Zhong No.1542 Civil Judgment, and applied for retrial. The court made (2017) Zui Gao Fa Min Shen No.1341 Civil Ruling on October 31, 2017 to retry the case. The court legitimately constituted the collegiate panel and held a hearing in public on December 20, 2017. Agents ad litem of the Claimant of Retrial QU Rongmo, LIU Hao and LI Quantong, agent ad litem of the Respondent of Retrial CCIC Weihai, QIAO Jing, agents ad litem of the Respondent of Retrial CCIC Shidao, XU Jun and QIAO Jing, appeared in court to attend the trial. Now the case has been concluded. QU Rongmo claimed to the Qingdao Maritime Court (hereinafter referred to as the court of first instance) that: QU Rongmo was the shipowner of “LURONGYU 1813” and “LURONGYU 1814”, he bought fishing vessel comprehensive insurance from CCIC Shidao on May 25, 2011. The two ships suffered typhoon and total loss because of stranding at 0330 on June 26, 2011, but CCIC Shidao did not pay insurance indemnity. So the court of first instance was requested to order CCIC Weihai and CCIC Shidao to pay QU Rongmo an insurance compensation of RMB6,000,000 yuan, bear the interest on bank loans of the same period from October 1, 2011 to the date of actual performance, and bear the court acceptance fee of this case. The court of first instance found out that: On May 25, 2011, QU Rongmo and CCIC Shidao formed two insurance contract relationships. The policy numbers were PCBG201137011847000015/0016. The insurance type was comprehensive insurance. The insurance amount was 3,000,000 yuan per vessel. The insurance period was 12 months, from 0000 on May 26, 2011 to 2400o on May 25, 2012. QU Rongmo paid a total premium of 132,000 yuan. The port of registry of the two insured fishing vessels “LURONGYU 1813/1814” was CCIC Shidao. The vessels were built in June 1999, each with the length of 30.62 m and the width of 6.3 m. The vessels were made of steel. The main engine power was 220 kilowatts. Each vessel had a gross tonnage of 120 tons and a net tonnage of 42 tons. According to the insurance contract, both parties agreed that the insured value of the fishing vessels was 4,285,700 yuan, and the insurance amount was 3,000,000 yuan. The insurance was an under-valued insurance. In the absence of the applicant QU Rongmo, insurance salesman wrote special agreements “in the case of total loss, the maximum compensation for each vessel was 1,500,000 yuan”, etc. on the insurance applications of ocean-going fishing vessels, and copied the signature “QU Rongmo” and the fingerprint of QU Rongmo at the place for the signature of the applicant on the form. During the lawsuit, QU Rongmo applied for appraisals on whether the name of QU Rongmo on the two insurance applications were written by himself and whether the fingerprint on the two insurance applications were pressed by himself. The court entrusted Shandong Yongding Judicial Appraisal Center according to law to appraise. The signature and fingerprint on the two insurance applications for ocean-going fishing vessels; 2. two installment payment agreements; 3. whether the signatures of “QU Rongmo” and the fingerprints on the receipts of insurance contract delivery and notification were made by QU Rongmo

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himself. Representatives from CCIC Shidao and CCIC Weihai was present to participate in the collection of QU Rongmo’s handwriting and fingerprints of his ten fingers. The center made corresponding appraisal according to law. The conclusion was that all the signatures and fingerprints on the insurance materials were not made by QU Rongmo. The main insurance clauses of China Continent Property & Casualty Insurance Company Ltd. for ocean-going fishing vessels were as follows: article 1 the scope of the insured property: the vessel insured by this insurance policy refers to the vessel shell and its attached equipment, including sub vessel, machines and their accessories, winches, communication equipment and other instruments and electrical equipment. Article 2, this insurance is divided into total loss insurance and comprehensive insurance. (1) Total loss insurance: the company shall be responsible for the total loss of the insured fishing vessel, fishing nets and fishing gear caused by the following reasons: 1. natural disasters or accidents, such as rainstorm, typhoon, lightning, drift ice, earthquake, tsunami, flood, volcanic eruption, grounding, reef, sinking, collision, fire, explosion of boiler or other equipment, rupture of oil pipe, etc.; 2. latent defects of the shell or the engine; 3. negligence of the captain, chief mate, crew, pilot or ship repair personnel…… Article 3, exclusive liability: the company would not compensate for the following losses, expenses and liabilities: (1) losses caused by the insured fishing vessel’s unseaworthiness; (2) losses caused by the negligence of the shipowner or the representative of the shipowner and losses caused by the intentional act of the shipowner, the representative of the shipowner or the captain. After June 2011, the fishing off season, “LURONGYU 1813/1814” of QU Rongmo were in the north wharf of Yandunjiao Fishing Port, Rongcheng for hull maintenance and on-board mechanical maintenance. And the main engine of “LURONGYU 1813” was lifted out of the warehouse for maintenance on June 20. QU Rongmo learned that typhoon Meari was approaching through the weather forecast. So he decided to shift the two vessels to the south wharf to take shelter before the wind became strong. At about 1900 on June 25, 2011, QU Rongmo, together with the captain WU Huaqiao and the machine keeper MENG Fanchao, tried to shift the two vessels to the south wharf of Yandunjiao Port relying on the power of “LURONGYU 1814”. On the way to the south wharf, due to the failure of the steering gear, the two vessels broke down. So they waited for rescue. During this period, the wind scale gradually increased. At about 0000 on June 26, under the action of typhoon and waves, the anchor cable broke and the vessel anchored. The two vessels were out of control. At about 0300 on June 26, the two vessels were caught stranded on the east side of the sea cucumber culture pond of Rongcheng Yandunjiao Aquaculture Co., Ltd. On September 15, 2011, after investigation, Rongcheng Fishing Port Superintendency Agency of the People’s Republic of China issued Fishery Maritime Traffic Accident Investigation Report, identified the following accident process: firstly, the vessels were at the north wharf of Yandunjiao Fishing Port on June 1, 2011 for maintenance. The main engine of “LURONGYU 1813” was lifted out of the warehouse for maintenance on June 20. At about 1900 on June 25, the

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main engine of “LURONGYU 1814” was started, towing “LURONGYU 1813” to the south wharf for shelter. At that time, the waves were large. The water pump vent valve in the engine room of “LURONGYU 1814” opened, and water poured into the engine room, spraying to the power distributor. The steering gear went out of control. The two vessels immediately anchored. At about 0000 on June 26, the anchor cable of “LURONGYU 1814” broke, and at 0100, the anchor cable of “LURONGYU 1813” broke. The two vessels lost control. At about 0300, the two vessels were pushed by wind and waves to the reef and stranded on the southeast side of a sea cucumber culture pond outside the Yandunjiao Fishing Port. Secondly, the cause of the accident was that: due to the strong wind and waves on the sea when avoiding typhoon, the two vessels’ anchor cable broke and they lost control, being pushed by the wind and waves to the reef beside a sea cucumber culture pond and stranded. The rescue failed and the two vessels scrapped. At that time the scale of northeast wind was level 10. The rain was heavy and the waves were very high. The report was stamped with the official seal of the competent authority and signed by the investigators LIU Kuanxin and CHEN Zhikai respectively. After the accident, QU Rongmo reported the situation to CCIC Shidao. On September 7, 2011, CCIC Weihai refused QU Rongmo’s application for compensation explicitly in the form of Reply to “LURONGYU 1813/1814” Grounding Accident “September 7, 2011”; on September 13, 2011, CCIC Weihai replied again, expressing that the sum of rescue fee and repair fee of the insured vessels had exceeded their market value at the time of the accident. Therefore, it would no longer participate in the rescue of the two vessels, and would not bear corresponding rescue fees. In fact, it meant that CCIC Weihai recognized the total loss of the vessels. On February 7, 2012, CCIC Weihai issued a notice of refusal of compensation. Then QU Rongmo brought the lawsuit to the court of first instance. It was also found that: in late June 2011, typhoon Meari did have a great impact on the whole Shandong sea area, causing certain losses to vessels by the coast and other properties. And in Rongcheng, Shandong Province, whenever a fishing vessel accident happened, according to the relevant laws and regulations, the only competent authority with the legal right to investigate and determine the accident was Rongcheng Fishing Port Superintendency Agency of the People’s Republic of China. In order to find out how “LURONGYU 1813/1814” involved were dealt with after the accident, the court of first instance sent a letter to the second detachment of Shandong Marine and Fishery Supervision Corps for inquiry. The certificate issued by the detachment to the court of first instance on July 9, 2015 confirmed that the fishing vessels involved “LURONGYU 1813/1814” had gone through the corresponding registration on January 12, 2012. And according to the certificate issued by Rongcheng Yandunjiao Aquaculture Co., Ltd. on August 20, 2015, the wreckage of the fishing vessels was completely buried in the sea bottom on January 1, 2013 at the latest, namely, it was buried by the wharf construction in 2012.

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The court of first instance held that: Firstly, the first issue in this case was the cause of the accident in which fishing vessels ran on the reef and grounded, and whether the insurance company should bear the corresponding insurance liability. 1. The determination of the cause of the accident made by the competent authority should, according to law, be the basis for the final decision. After the occurrence of the accident, the legal competent authority, Rongcheng Fishing Port Superintendency Agency of the People’s Republic of China made Fishery Maritime Traffic Accident Investigation Report. It invested in detail and made the determination on the process and cause of the accident. According to the Fishery Law of the People’s Republic of China and other relevant laws and regulations, Rongcheng Fishing Port Superintendency Agency had the right to define the accident responsibilities of fishing vessels engaged in offshore operations and make investigation on those accidents. Therefore, the accident investigation report issued by it should be the basis for handling the accidents of fishing vessels at sea. The evidence was made by the legal competent authority according to its functions, so it had higher probative force than other evidence. According to the investigation report above, the proximate cause of the accident was that, “due to the strong wind and waves on the sea when avoiding typhoon, the anchor cable of ‘LURONGYU 1813/1814’ broke, and they lost control, being pushed by the wind and waves to the reef beside a sea cucumber culture pond and stranded. The rescue failed and the two vessels scrapped, causing actual total loss”. CCIC Weihai and CCIC Shidao’s main opinion on the report during the court hearing was that: although Rongcheng Fishing Port Superintendency Agency was the legal competent authority, it was not a meteorological department. The meteorological condition northeast wind of level 10, heavy rain recorded in the report lacked factual basis. The 48 h meteorological record from 0000 on June 25, 2011 to 2400 on June 26, 2011 made by Weihai professional meteorological station, which was submitted by QU Rongmo, proved that: after 0000 on June 26, the wind scale gradually increased to level 9, and there was rainstorm. According to the Interpretation of the Supreme People’s Court concerning the Application of the Civil Procedure Law of the People’s Republic of China Article 114, the matters recorded in the documents which were formulated by a state organ or another organization with social management functions according to law within their scope of functions should be presumed to be true, except as otherwise overthrown by sufficient contrary evidence. In the case that CCIC Weihai and CCIC Shidao did not have sufficient evidence to prove that Rongcheng Fishing Port Superintendency Agency made the report beyond its scope of functions, or had enough evidence to turned it over, it should be the basis for the final decision. 2. This case was an insurance accident, and CCIC Weihai and CCIC Shidao should bear the corresponding liability for compensation according to law. (1) This case was the insurance compensation scope stipulated in the insurance contract. Article 2 of the standard terms of insurance for ocean-going fishing

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vessels printed by CCIC Weihai and CCIC Shidao stipulated clearly that “this insurance is divided into total loss insurance and comprehensive insurance. Total loss insurance: the company shall be responsible for (natural disasters or accidents, such as rainstorm, typhoon, lightning, drift ice, earthquake, tsunami, flood, volcanic eruption, grounding, reef, sinking, collision, fire, explosion of boiler or other equipment, rupture of oil pipe, etc.; (potential defects of the shell or the engine; (negligence of the captain, chief mate, crew, pilot or ship repair personnel”. The competent authority determined that the accident was caused by storm and typhoon, leading to the fishing vessels’ running on reefs and grounding. The storm and typhoon were causes. Running on reefs and grounding were both causes and consequences. Therefore, the reasons above belonged to the scope of claim agreed and committed by the insurer. (2) QU Rongmo did not intentionally cause the insurance accident. Firstly, June was in fishing off season, so QU Rongmo’s proper repair and maintenance of the fishing vessels did not violate the mandatory provisions of the law. Secondly, it was in fishing off season at that time, and the crew had gone home on holiday. So there was no possibility for QU Rongmo to have enough crew as stipulated in the relevant regulations of Shandong Province for normal production period. Thirdly, when typhoon came, QU Rongmo shifted the vessels from the north wharf to the south wharf, which was a kind of risk avoidance behavior rather than sailing. The lack of crew could not constitute the gross negligence of QU Rongmo. Fourthly, there was no dispute between QU Rongmo and CCIC Weihai and CCIC Shidao about the fact that “when QU Rongmo decided to shift the fishing vessels from the north wharf to the south wharf to avoid the wind, the wind scale was about level 6”. That was to say, in this case, the fact that QU Rongmo ventured out of the north wharf against typhoon did not exist. Fifthly, in the inquiry record of the witnesses QU Rongmo and FU Shihua made by Qingdao Xinyang Maritime Consulting Co., Ltd. provided by CCIC Weihai and CCIC Shidao, QU Rongmo and FU Shihua also clearly recognized that water flowed into mobile phones when the fishing vessels anchored after the flooding of the engine room. And they were not able to call the police for rescue. Sixthly, if typhoon did not happen, QU Rongmo would be able to solve the problem of anchoring by other methods. However, due to typhoon and big waves, the two vessels’ anchor cable broke and they lost control, being pushed to the reef by the east of the sea cucumber culture pond of Rongcheng Yandunjiao Aquaculture Co., Ltd. and stranded. Therefore, CCIC Weihai and CCIC Shidao’s argument that QU Rongmo passively refused to ask for help does not in line with the objective maritime situation at that time. The court of first instance did not accept it. To sum up, according to the stipulations of the insurance contract, the accident of the fishing vessels’ running on reefs and grounding belonged to the normal commercial risk of CCIC Weihai and CCIC Shidao and was in the legal or agreed scope of compensation for the insurer. The court of first instance did

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not support CCIC Weihai and CCIC Shidao’s argument that according to the Maritime Code of the People’s Republic of China Article 242, the insurer should not be liable for the loss caused by the intentional act of the insured, which had no corresponding factual or legal basis. (3) About the factual and legal recognition of the “unseaworthiness of the vessels when sailing”, expert SUN Jianming pointed out that when typhoon happened, damage would not necessarily be caused despite the type, tonnage or position of the vessels. And there was no absolute safe position. The captain and crew could only choose the appropriate way to seek advantages and avoid disadvantages according to the situation and their own judgment at that time. According to the facts having been found out, QU Rongmo’s shifting the vessels from the north wharf to the south wharf was a kind of risk avoidance behavior rather than sailing in the maritime law. The insurer could not exclude its liability for compensation in accordance with the Maritime Code Article 244 Paragraph 1. (4) There was no direct causal relationship in law between the behavior of shifting and the accident of the vessels’ running on reefs and grounding. In this case, on the premise of avoiding risks, QU Rongmo sailed the vessels out of the north wharf. However, water poured into the engine room and the two vessels anchored. The competent authority determined that the accident was caused by storm and typhoon, leading to the fishing vessels’ running on reefs and grounding. That was to say, the reason for the fishing vessels’ running on reefs and grounding was typhoon Meari. The unseaworthiness of the vessels was not the proximate cause of the accident. (5) The conclusion of the insurance consulting company entrusted by CCIC Weihai and CCIC Shidao unilaterally could not be used as evidence to determine the cause of the accident in this case. In the trial, CCIC Weihai and CCIC Shidao provided the inspection report of the appraisal company entrusted by them to prove that the unseaworthiness of the vessels was the proximate cause of the accident involved. However, according to the analysis above, the report did not analyze the cause and effect relationship between typhoon Meari, the latecomer, and the accident. The conclusions drawn by the report were not accurate, and could not be the basis for the final decision. Secondly, about the insurance value agreed by both parties in this case and the specific amount of compensation that the insurance company should bear. According to the Maritime Code of the People’s Republic of China Article 219 Paragraph 1 “the insurable value of the subjects matter insured shall be agreed upon between the insurer and the insured”, Article 220 “the insured amount shall be agreed upon between the insurer and the insured. The insured amount shall not exceed the insured value. Where the insured amount exceeds the insured value, the portion in excess shall be null and void” and Article 238 “the insurer’s indemnification for the loss from the peril insured against shall be limited to the insured amount. Where the insured amount is lower than the insured value, the insurer shall

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indemnify in the proportion that the insured amount bears to the insured value”, etc., the court of first instance made a comprehensive judgment on the following confirmed legal facts. 1 .The fishing vessels involved “LURONGYU 1814” had constituted actual total loss. After the accident, according to the assessment of the insurer and the insurance consulting company it entrusted, the repair fee of the vessels had exceeded the market value of the vessels, which constituted a constructive total loss. However, due to the fact that the vessels were not salvaged, they had been disintegrated by the action of wind and waves and land filled by the reclamation operation of the local port in 2012. The constructive total loss was converted to actual total loss. 2. The insurance amount of the vessels involved was 3,000,000 yuan per vessel. The type of the insurance was valued insurance. The maximum compensation for the loss of QU Rongmo caused by the accident should be 6,000,000 yuan: 1. according to the facts found out, the “special agreement” in the insurance policies was unilaterally made by CCIC Weihai and CCIC Shidao to reduce the compensation liability undertaken by themselves. QU Rongmo did not consent it in the written form. It was not only contrary to the mandatory provisions of the Contract Law or other laws, but also not agreed willingly by QU Rongmo. 2. The court of first instance entrusted Shandong Yongding Judicial Appraisal Center according to law to appraise whether the signatures and the fingerprints on the “two insurance applications for ocean-going fishing vessels; two installment payment agreements; the receipts of insurance contract delivery and notification” were made by QU Rongmo himself. The conclusion was that: all the signatures and fingerprints on the insurance materials were not made by QU Rongmo. Therefore, it could be confirmed that QU Rongmo knew nothing about the special agreement. In addition, there was no subsequent recognition afterwards. 3. QU Rongmo paid a premium of 66,000 yuan in proportion to the insurance amount of 3,000,000 yuan per vessel. The total premium was 132,000 yuan. In accordance with the principle of “equity of rights and obligations”, CCIC Weihai and CCIC Shidao should compensate 3,000,000 yuan for each vessel. 3. On the issue that QU Rongmo asked CCIC Weihai and CCIC Shidao to pay the interest, though QU Rongmo required CCIC Weihai and CCIC Shidao to bear the interest of bank loan in the same period from October 1, 2011 to the date of actual performance in the indictment, according to the facts found out, the time of actual total loss of the fishing vessels involved was the year 2012. The court of first instance supported QU Rongmo’s claim of the actual total loss part. Therefore, the interest should be calculated from January 1, 2013 to the date determined by the judgment. Thirdly, as for the issue of the liability of CCIC Weihai and CCIC Shidao, according to the Interpretation of the Supreme People’s Court concerning the Application of the Civil Procedure Law of the People’s Republic of China Article 52, as mentioned in Article 48 of the Civil Procedure Law, “other organizations” meant organizations that were lawfully established, having certain organizational

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frameworks and property, but did not have the legal person status, including: (6) branch offices of commercial banks, policy banks and non-banking financial institutions which are lawfully formed and have obtained business licenses according to the law. In this case, CCIC Shidao was a qualified subject to sign the insurance contract with QU Rongmo. As the insurer of the insurance contract, it should bear the corresponding liability for compensation for the insurance accident. As the superior competent company and founder of CCIC Shidao, according to relevant laws and regulations, CCIC Weihai should bear the supplementary payment liability when the property of CCIC Shidao was not enough to bear the payment liability in this case. Pulling the threads together, after the study of the court of first instance’s judicial committee, according to the Civil Procedure Law of the People’s Republic of China Article 64 and Article 119, the General Principles of the Civil Law of the People’s Republic of China Article 106 Paragraph 1 and the Maritime Code of the People’s Republic of China Article 219 Paragraph 1, Article 220, Article 237 and Article 238, the judgment was as follows: 1. CCIC Shidao should pay QU Rongmo insurance compensation of 6,000,000 yuan, and bear the interest from January 1, 2013 to the date of payment determined in the judgment (calculated according to the loan interest of the People’s Bank of China in the same period). 2. CCIC Weihai should be liable for the supplementary payment of the compensation above. The pecuniary payment above should be performed within 10 days after the judgment came into effect. If CCIC Weihai and CCIC Shidao failed to perform their obligations of pecuniary payment within the period specified in the judgment, they should pay double interest on the debt for the delayed period in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of 53,800 yuan, QU Rongmo should bear 3,800 yuan, CCIC Shidao should bear 50,000 yuan. Appraisal fee in amount of 6,000 yuan should be born by CCIC Shidao. QU Rongmo, CCIC Weihai and CCIC Shidao disagreed with the judgment of first instance and appealed. QU Rongmo appealed that: add RMB510,616.66 yuan in the first item of judgment of first instance (from October 1, 2011 to December 31, 2012, according to the loan interest rate of the People’s Bank of China). CCIC Weihai and CCIC Shidao required the court of second instance to revoke the judgment of first instance, and change to dismiss the appeal of QU Rongmo. The court of second instance found out that, the facts found out by the court of first instance had evidence to prove, so those were confirmed. The court of second instance also found out that: QU Rongmo bought insurance for two fishing vessels “LURONGYU 1813/1814”, CCIC Shidao issued two fishing vessel policies No.PCBG201137011847000015/0016 on May 25, 2011, QU Rongmo paid insurance premium RMB132,000 yuan. According the above policies, the insurer CCIC Shidao should be liable for compensation within the scope of insurance liability in accordance with the terms of the fishing vessel and the conditions stated in the insurance policy; the insurance was comprehensive insurance; the insurance period was 12 months, from 0000 on May 26, 2011 to 2400 on May 25, 2012.

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The insurance was comprehensive insurance, according to the provisions about comprehensive insurance in China Continent Property & Casualty Insurance Co., Ltd. Ocean-going Fishing Vessel Insurance Clause, insured fishing vessels due to natural disasters and accidents such as storms, typhoons, lightning, drifting ice, earthquakes, tsunamis, floods, volcanic eruptions, stranding, reefing, sinking, collision, fire, explosion of boilers or other equipment, tubing rupture, etc., for all or part of the loss, CCIC Shidao should be responsible for compensation. Meanwhile, according to the “exclusions” section of the above-mentioned insurance clause, losses due to the inability of the insured fishing vessel to have seaworthiness conditions and the negligence of the shipowner and its representatives, losses caused by intentional acts of the shipowner’s representative and the captain’s, should not be responsible for CCIC Shidao. During the fishing off in June 2011, “LURONGYU 1813/1814” were hull maintenance and on-board mechanical maintenance at the north wharf fishing terminal of Yandunjiao, Rongcheng, and five people watched the ship. “LURONGYU 1813” ship mainframe was lifted out of the cabin on June 20. “LURONGYU 1814” was replaced with a new tail shaft intermediate shaft on June 25, and two screws were not installed. At 1900 on June 25, 2011, QU Rongmo and the captain FU Chihua, MENG Fanchao and a sailor, a total of four people, started “LURONGYU 1814”, and dragged “LURONGYU 1813” to leave the north wharf fishing port at Yandunjiao to the south wharf of Yandunjiao, about four nautical miles away. When “LURONGYU 1813/1814” left the north wharf fishing port at Yandunjiao, there were two or three pairs of fishing boats in the port. On the way of “LURONGYU 1813/1814”, the water pump plug on the main engine of “LURONGYU 1814” was topped off by water pressure and the cabin was flooded. The crew on board were tied between the two ships, no one in the cabin, did not pay attention to the water in the cabin. After the engine room was flooded, the switchboard burnt out, the generator did not generate electricity, the steering gear failed, the engine stalled, and the two ships were anchored for rescue. After about two hours of anchoring, at about 0000 on June 26, the ships’ anchorages were moved, and then the anchor broke, and the two ships were out of control. At about 2200, QU Rongmo received a call from the shore commissary. After the storm, the phone failed. At about 0300 on June 26, two ships were photographed by the big waves to the east side of the sea cucumber pond of Yandunjiao Fishery Company. Meteorological data of weather station provided by CCIC Weihai and CCIC Shidao in first instance stated that, the wind of the head of Rongcheng Chengshan was 4 grade at 1700 and 1800 on June 25, 5 grade at 1900, 6 grade from 2000 to 2200; the maximum wind at the head of Rongcheng Chengshan was 5 grade from 1200 to 2400 on June 25, and extreme wind was 6 grade; at 1700 on June 25, the wind was 6 grade, 5 grade at 1800, 6 grade from 1900 to 2200 in Rongcheng Shi Island. The meteorological data issued by meteorological stations submitted by QU Rongmo record that the maximum wind of Rongcheng Chengshan was 6 grade on June 25, the extreme wind was 9 grade on June 26. After the accident, QU Rongmo reported the case to CCIC Shidao. On September 7, 2011, QU Rongmo wrote to CCIC Shidao, and QU Rongmo tried to

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find a way to rescue the fishing boat and reduce losses. However, the response was not able to carry out the overall lifting rescue, only division dismantling, please verify the residual value of the stranded fishing boat as soon as possible, so as to proceed with the next insurance claims work. On September 13, CCIC Weihai issued Reply to QU Rongmo on the Stranding of “LURONGYU1813/1814” on “2011.9.7”, saying that the sum of the rescue cost and the later repair cost of the insurance ship had exceeded the market value of the two ship accidents, therefore, CCIC Weihai would no longer participate in all rescue operations of the two ships, and would not bear the corresponding rescue costs; regarding the handling of the subject ship, which should be decided by shipowner. The court of second instance held that: The issues of the case were: whether CCIC Weihai and CCIC Shidao should bear insurance compensation; the amount that CCIC Weihai and CCIC Shidao should pay for; whether the confirmation in first instance about the beginning of interest of overdue payment was correct. Issue one, whether CCIC Weihai and CCIC Shidao should bear insurance compensation. QU Rongmo bought insurance for two fishing vessels “LURONGYU 1813/ 1814”. CCIC Shidao issued two fishing vessel insurance policies, and the insurance contract between the two parties was established and came into effect. According to the above insurance policies, the insurer CCIC Shidao should be liable for compensation within the scope of insurance liability in accordance with the terms of the fishing vessel and the conditions stated in the insurance policy. On June 25, 2011, the main engine of LURONGYU 1813” was lifted out of the cabin for maintenance, and there was no power; “LURONGYU 1814” was replaced with a tail shaft intermediate shaft. There were still two screws not installed; there were four people in the boat, and the staffing was insufficient. At about 1900, QU Rongmo knew the above situation, and knew that typhoon “Meari” was approaching, he still ordered “LURONGYU 1813/1814” to leave Yandunjiao north wharf fishing port, “LURONGYU 1814” towed “LURONGYU 1813” to the south wharf of Yandunjiao, about four nautical miles away, with obvious negligence. Since “LURONGYU 1813” had no power, it must be towed by “LURONGYU 1814”, which made it impossible for the two ships to reach the Yandunjiao south wharf in a short time, and after “LURONGYU 1814” machine failed, it could not rely on the power of “LURONGYU 1813” to resist the wind and waves; due to insufficient manning, there was no one in “LURONGYU 1814″ cabin, the situation of the cabin water intake could not be found in time and measures were taken, as a result, the switchboard was burnt out due to water, the generator and the steering gear failed, and the two ships were forced to anchor for assistance; the ship’s personnel only rely on the mobile phone to communicate with the shore personnel, it could be seen that the ship’s communication equipment could not be used normally, and the mobile phone could not be rescued after being wet. In conclusion, the negligence of the shipowner QU Rongmo had a causal relationship with the stranded accidents involved.

QU Rongmo v. China Continent Insurance Co., Ltd. Weihai Center …

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Fishery Maritime Traffic Accident Investigation Report issued by Rongcheng Fishing Port Superintendency Agency of the People’s Republic of China recognized that, the reason of accident was that in the typhoon, the two ships were out of control due to large winds and waves at sea, and the reefs on the side of the sea cucumber pool were stranded by the wind and waves, after repeated rescues, the two ships were scrapped. The above report of Rongcheng Fishing Port Supervision described the process and objective reasons of the accident and did not involve the subjective negligence of the shipowner. In fact, the two ships were broken due to the breakage of the anchor cable and lost control. The reason why the two ships did not have the power and the steering gear failed was the result of the negligence of QU Rongmo. It was determined that QU Rongmo was negligent and did not contradict the above report. According to the Interpretation of the Supreme People’s Court concerning the Application of the Civil Procedure Law of the People’s Republic of China Article 122, the parties could apply for the person with specialized knowledge to appear in court in accordance with Article 79 of the Civil Procedure Law of the People’s Republic of China, and made opinions on the professional issues involved in the facts of the case on behalf of the parties. The opinions of a person with specialized knowledge on professional issues in court should be considered as statements of the parties. QU Rongmo applied for expert assistant SUN Jianming to appear in court in first instance. SUN Jianming’s comments should be regarded as QU Rongmo’s statement. QU Rongmo did not give valid evidence to prove that the fishing vessels avoiding typhoon at the south wharf of Yandunjiao was more conducive to the safety of the ship than the typhoon at the north wharf fishing port of Yandunjiao. It had no power in one ship, and there was insufficient manning of one ship. The equipment could not work normally. When the typhoon was about to come, the two vessels left the berthed Yandunjiao north wharf fishing port and went to Yandunjiao south wharf about four nautical miles away. The safe-haven behavior was obviously inappropriate. According to the Maritime Code of the People’s Republic of China Article 216, a contract of marine insurance was a contract whereby the insurer undertakes, as agreed, to indemnify the loss to the subject matter insured and the liability of the insured caused by perils covered by the insurance against the payment of an insurance premium by the insured. Whether the insurer should compensate for the loss of the subject-matter insured should be judged in accordance with the agreement of the insurance contract. According to the statement of insurance policies involved, China Continent Property & Casualty Insurance Co., Ltd. Ocean-going Fishing Vessel Insurance Clause was part of the insurance contract involved. In accordance with the provisions of this clause, CCIC Shidao should be liable for the loss of the ship caused by the typhoon and should not be liable for the loss of the ship caused by the negligence of the shipowner. In this case, the shipowner’s negligence caused the two ships to lose power and the steering gear failed and broke down. After the wind and waves became larger, the anchor cable broke, and the two ships lost control and ran aground. Therefore, the cause of the accident involved was first owned by the shipowner, then the negligence, after the impact of

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the typhoon, if there was either of the two reasons, the fishing ship would not have a stranded accident. Among the two reasons for the shipowner’s negligence and typhoon, it is difficult to determine which one is direct, effective and decisive. CCIC Weihai and CCIC Shidao should pay 50% of the agreed insurance compensation to QU Rongmo. Issue two, the amount that CCIC Weihai and CCIC Shidao should pay for. According to the two insurance policies issued by CCIC Shidao, the insurance value of each vessel of “LURONGYU 1813/1814” was 4,285,700 yuan, and the insurance amount was 3 million yuan. In the “special agreement” section of the insurance policies, there was a record of “the maximum compensation amount did not exceed 1.5 million yuan when total loss happens”. The above terms were provisions exempting the insurer from liability. According to the Insurance Law of the People’s Republic of China Article 17 Paragraph 2, if there were any exclusion clauses imposed by the insurer in the insurance contract, then the insurer should give specific and clear explanations thereof to the applicant when concluding the insurance contract, otherwise such clauses should not be enforceable. CCIC Weihai and CCIC Shidao had not proved that the provisions on exempting the insurer’s liability had fulfilled the legal requirements and clearly stated the obligation. Therefore, “when total loss happens, the maximum compensation amount does not exceed 1.5 million yuan” did not work. According to the insurance policy, the value of the insurance for each vessel involved was 4,285,700 yuan, and the insurance amount was 3 million yuan. CCIC Weihai and CCIC Shidao did not submit valid evidence to prove the value of each ship at the time of the insurance accident was less than 3 million yuan, therefore, it should be determined that the amount of insurance recorded in the insurance policy did not exceed the value of the ship at the time of the insurance accident. After “LURONGYU 1813/1814” stranding accident, QU Rongmo reported the case to CCIC Shidao. On September 13, 2011, CCIC Weihai sent a letter to QU Rongmo saying that the sum of the rescue cost and the later repair cost of the insurance ship had exceeded the market value of the two ship accidents, so CCIC Weihai would no longer participate in all rescue operations of the two ships, and would not bear the corresponding rescue costs. At that time, the two ships were constructive total loss. On February 7, 2012, CCIC Weihai issued a notice of refusal of compensation. The reason for the refusal of compensation for the two ships was not insurance liability. The second detachment of the Shandong Ocean and Fisheries Supervision Corps was certified on July 9, 2015, confirming that “LURONGYU 1813/1814” had registered the cancellation of fishing vessels on January 12, 2012. Rongcheng Yandunjiao Aquatic Products Co., Ltd. proved on August 20, 2015 that the two ships had been dismantled under the influence of wind and waves. The wreckage was completely buried in the 2012 reclamation construction, and the two ships were actual total loss. After the two ships were constructive total loss, CCIC Weihai refused to compensate for the fact that the accident was not insurance liability, and the latter two ships were actual total loss, and there was no need to abandon.

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The two fishing vessels that were the subject of insurance had suffered total losses. For each fishing vessel, CCIC Weihai and CCIC Shidao should pay 50% of the insurance compensation of RMB3 million yuan, namely 1.5 million yuan. The fishing vessels totaled 3 million yuan. Issue three, whether the confirmation in first instance about the beginning of interest of overdue payment was correct. The actual total loss of the two fishing vessels involved was 2012. The court of first instance determined that CCIC Weihai and CCIC Shidao assumed the interest of overdue payment from January 1, 2013, which was not inappropriate. Pulling the threads together, the appeal of QU Rongmo could not be established, and should be dismissed; part of appeal of CCIC Weihai and CCIC Shidao could be established, the application of law in first instance about confirmation of cause of accident was inappropriate, which should be changed. According to the Maritime Code of the People’s Republic of China Article 216 Paragraph 1, the Civil Procedure Law of the People’s Republic of China Article 170 Paragraph 1 Sub-paragraph 2, the judgment was as follows: 1. change the Qingdao Maritime Court (2012) Qing Hai Fa Hai Shang Chu Zi No.240 Civil Judgment first item to: China Continent Property & Casualty Insurance Co., Ltd. Shidao Branch should pay QU Rongmo insurance indemnity RMB3,000,000 yuan, and bear the interest from January 1, 2013 to the date of payment determined in the judgment (calculated according to the loan interest of the People’s Bank of China in the same period); 2. change the Qingdao Maritime Court (2012) Qing Hai Fa Hai Shang Chu Zi No.240 Civil Judgment second item to: China Continent Property & Casualty Insurance Co., Ltd. Weihai Center Branch should be liable for the supplementary payment of the compensation above. The pecuniary payment above shall be performed within 10 days after the judgment came into effect. If the Appellants failed to perform their obligations of pecuniary payment within the period specified in the judgment, they should pay double interest on the debt for the delayed period in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee of first instance in amount of RMB53,800 yuan, QU Rongmo should bear 26,900 yuan, China Continent Property & Casualty Insurance Co., Ltd. Shidao Branch should bear 26,900 yuan. Appraisal fee in amount of 6,000 yuan should be born by China Continent Property & Casualty Insurance Co., Ltd. Shidao Branch. Court acceptance fee of second instance in amount of RMB53,800 yuan, QU Rongmo should bear 26,900 yuan, China Continent Property & Casualty Insurance Co., Ltd. Shidao Branch should bear 26,900 yuan. QU Rongmo disagreed with the judgment of second instance and applied for retrial that: 1. the judgment of second instance held that CCIC Weihai and CCIC Shidao should “pay 50% of the agreed insurance compensation to QU Rongmo”, which was wrong application of law. The judgment of second instance held that QU Rongmo had obvious negligence in moving the ship from the north wharf of Yandunjiao to the south wharf to avoid typhoon, which had no evidence. The move to the south wharf to avoid typhoon was the right choice for those who had the common sense of navigation and familiar with the conditions of the local port. And how to avoid typhoon was the responsibility of the captain’s crew, even if it was

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slightly defective, it was the insurance risk listed in the insurance policy. CCIC Weihai and CCIC Shidao did not promptly and clearly explain QU Rongmo’s exclusion clause in the insurance clause involved. According to Article 17 of the Insurance Law of the People’s Republic of China, the exclusion clause was not valid. 2. The beginning of interest of insurance indemnity confirmed by the court of second instance was wrong. The interest of overdue payment for insurance compensation should be based on the time of constructive total loss. In the reply dated September 13, 2013, CCIC Weihai determined that the ships constituted constructive total loss and clearly refused to pay, indicating that CCIC Weihai and CCIC Shidao had completed the internal claims work, and should calculate the overdue interest from the date of constructive total loss. The issuance of the notice should not affect the time when the interest started. In conclusion, the facts confirmed by the court of second instance were wrong, the application of law was wrong, QU Rongmo required the court to change to support the appeal of QU Rongmo. CCIC Weihai and CCIC Shidao argued that: 1. The judgment of second instance confirmed that CCIC Shidao should bear 50% of insurance indemnity, which was not inappropriate. QU Rongmo did not prove that the loss was caused by the underwriting risk stipulated in the insurance contract involved. The insurer could be excused from liability for the shipowner’s negligence and the ship’s loss caused by the ship’s unseaworthiness, in accordance with the terms of the exclusion clause in the insurance clause involved. CCIC Weihai and CCIC Shidao gave hints on the exclusion clause in bold, and verbally stated that QU Rongmo confirmed the exclusion clause in second instance. The second-instance judgment did not apply the exclusion clause to determine the insurer’s exemption, but based on the analysis and determination of the cause of the accident involved, adopted the principle of proportional liability. According to the Maritime Code of the People’s Republic of China Article 244, the insurer should not be liable for the loss of or damage to the insured ship arising from unseaworthiness of the ship at the time of the commencement of the voyage, unless where under a time policy the insured had no knowledge thereof. “Voyage” should be literally understood. The ship involved was transferred from the state of mooring or mooring to the state of non-moiling or non-lineage, which was voyage. Even if CCIC Shidao could not claim disclaimer in accordance with the terms of the exclusion clause stipulated in the contract, it could also be exempted from liability according to the exclusion clauses stipulated in the above law. 2. The judgment of second instance confirmed that QU Rongmo should obtain insurance indemnity 3,000,000 yuan, which was not inappropriate. The amount claimed by QU Rongmo should be 3 million yuan. The special agreed terms recorded on the front of the insurance policy were not part of the format contract, and no liability exemption was required. No prompting or explanation was required. Although QU Rongmo did not personally sign the insurance policy, he had already paid the insurance premium, according to the Interpretation of the Supreme People’s Court on Several Issues concerning the Application of the

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Insurance Law of the People’s Republic of China (II) Article 3, it should be confirmed that QU Rongmo signed on the insurance policy. The interest claimed by QU Rongmo had no basis. The actual total loss of the ship involved happened, and the interest of the loss should be calculated from the date of the actual total loss. In conclusion, the facts confirmed by second instance were clear, application of law was correct, they required the court to dismiss the retrial of QU Rongmo. After investigation, the court finds out that: the facts found out by the court of first and second instance have evidence to prove, and the parties have no objection, so the court confirms them. The court also finds out that: The insurance clause 2 (coverage of insurance) stipulated that: the insurance was divided into total loss insurance and comprehensive insurance, in which the comprehensive insurance all or part of the loss of the insured fishing vessel caused by the three reasons and the salvage expenses and other 5 liabilities and expenses caused by the following 3 reasons: 1. storms, typhoons, lightning, drifting ice, earthquakes, tsunamis, floods, volcanic eruptions, stranding, reefing, sinking, collision, fire, explosions of boilers or other equipment, tubing ruptures, etc.; 2. potential defects in hulls and machinery; the negligence of the master, chief officer, crew, pilot or ship repairer; and 3. negligence of the captain, chief mate, crew member, pilot or ship repairer. The insurance clause 3 (exclusion) stipulated that: the insurer should not be liable for compensation for the eight losses, expenses and liabilities listed, of which items 1 and 2 were: loss caused by the insured fishing vessel without seaworthiness conditions; the loss caused by the shipowner and its representatives and the master’s intentional acts due to the negligence of the shipowner and his representative. The insurance clause 7 (claim and compensation) stipulated that: when the assured requested a claim, the insurer should be provided with a formal written claim letter, accident report, insurance policy, expense document and the assured’s ability to provide confirmation of the nature, cause and degree of loss of the insured event, other certificates and information; after the assured requested compensation from the insurer and provided the information required for the claim, the insurer should verify it within 60 days; for insurance liability, the insurer should perform the compensation obligation within 10 days after reaching an agreement with the assured to compensate or pay the insurance. The insurance clause 8 (deductible) stipulated that: in the event of an indemnity, the insurer should deduct the deductible for each accident specified in the insurance policy, but this did not apply to the total loss or the cost of checking the bottom of the ship after the ship had been stranded. In the insurance clauses involved, clause 3 (exclusion) part was printed in a darker and thicker font than the other terms. In first instance, QU Rongmo claimed that the clause did not work because CCIC Shidao did not make any effect on the exclusion clause. CCIC Shidao did not provide evidence to prove that it had clearly stated the exclusion clause and the special agreement on the insurance policy to QU Rongmo when entering into the insurance contract.

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After accident, QU Rongmo reported the case to CCIC Shidao. Reply to QU Rongmo on the Stranding of “LURONGYU1813/1814” on “2011.9.7” issued by CCIC Weihai stipulated that: the sum of the rescue cost of the insurance ship and the later repair cost had exceeded the market value of the two ship accidents, CCIC Weihai would no longer participate in all rescue actions of the two ships, nor would it bear the corresponding rescue costs; whereas the fact that the cause of the ship stranding accident was under investigation, the above statement could not be regarded as confirmation of the insurance policy, abandonment application or similar matters of CCIC Weihai; please QU Rongmo continue to cooperate with the next step of CCIC Weihai and provide relevant materials to successfully determine insurance liability. The court holds that: The case is dispute over marine insurance contract. QU Rongmo agreed to insure the ship insurance of ships in accordance with the actual payment of insurance premiums. The parties entered into the insurance contract, and the terms of the exemption from the insurer’s liability in the contract should be determined according to the special agreement of the law, the other terms are basically legal and valid. According to the arguments of the parties in the retrial, the issues of the retrial are the insurance liability and the amount of insurance compensation and interest recognition. Firstly, confirmation of insurance compensation liability. The determination of insurance liability involves the cause of the accident, the scope of insurance coverage, the (exclusive and statutory) insurance exclusion liability, and the influence of insurance underwriting risk. For the extent to which the insurer should assume insurance liability for specific accidents and assume liability for insurance compensation, first analyze the cause of the accident and the scope of insurance coverage, and determine whether all or part of the cause of the accident belongs to insurance coverage; then review whether the exclusion clauses stipulated in the insurance contract are valid and whether there are reasons for the statutory exclusion, and determine whether the insurer has the right to refuse to pay according to the agreement or statutory exclusion; finally, according to the degree of influence of the insurance underwriting risk (the causal relationship constitutes the situation), the insurer’s ultimate liability for insurance compensation should be determined accordingly. QU Rongmo, as shipowner of “LURONGYU 1813” and “LURONGYU 1814”, knew that typhoon “Meari” approached to the port that the two ships berthed, then he decided to move the berth to avoid typhoon on June 25, 2011, the motivation of the decision is appropriate. During the mooring process, the two ships were out of control due to the loss of control over the sea, and the typhoon had a direct and important impact in the cause of the accident and the cause of the loss. From the fact that the ships’ cabin in the ships were flooded due to unattended attention, there were also reasons for improper response during the accident: firstly, when QU

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Rongmo organized the mooring operation, it should be noted in advance that both ships had not been repaired and completed (one of the ships has no power) and would be berthed for about 4 nautical miles in the typhoon, there was a great difficulty and risk in the berthing, so that the corresponding convening was adequate, the crew drove and took care of the two ships, and the above facts indicated that QU Rongmo did not have enough crew members to drive and safely with the three captains in the move; then, the captain’s crew did not pay due attention to the waterproofing and drainage of the ships’ engine room during the mooring process, it also had an impact on the loss of power and accidents in one of the ships’ engine rooms. Accordingly, the accidents involved are caused by the typhoon, the negligence of the shipowner, and the negligence of the captain and crew. The typhoon is the main cause. The insurance clauses involved list three reasons for comprehensive insurance coverage, the first of which is natural disasters and accidents such as storms, typhoons, stranding and reefing. “Accident” is usually understood as an accident that is not caused by the intention or fault of the party, but is caused by reasons other than the will of the party, it can be concluded that the first reason does not include the negligence or intention of the party; the second reason is the latent defects of the hull and the machine, but the accident involved does not involve; the third reason is “the negligence of the captain, the chief officer, the crew, the pilot or the ship repairer”, which stipulates that the scope of the negligent personnel does not include the shipowner himself. The above three reasons indicate that the insurance clause involved specifically lists the relevant personnel’s negligence, which also confirms that the first reason does not include the negligence of the parties. The insurance clauses involved have clearly indicated that the shipowner’s negligence is not covered by its stated coverage. Although clause 3 (exclusion liability) of the insurance clause in question lists the shipowner’s negligence, it can only indicate that the insurance clause also emphasizes (inversely) that the insurer is not responsible for compensating the loss caused by the shipowner’s negligence, but not indicates that the shipowner’s negligence is originally covered by the terms of the article. The three reasons listed in clause 2 (scope of responsibility) of the insurance clause involved are the risks covered by the insurance. According to this, it can be concluded that among the three causes of the accident, the typhoon and the captain’s negligence are the underwriting risks, and the shipowner’s negligence is a non-insurance risk. According to the Insurance Law of the People’s Republic of China Article 17 Paragraph 2, if there are any exclusion clauses imposed by the insurer in the insurance contract, then the insurer shall give specific and clear explanations thereof to the applicant when concluding the insurance contract, otherwise such clauses shall not be enforceable. CCIC Shidao did not provide evidence that it had clearly stated the exclusion clause to QU Rongmo when it entered into the insurance contract. Although QU Rongmo recognized that he had entered into an insurance contract with CCIC Shidao to apply the insurance clause and recognized the

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validity of the clause, in the case that QU Rongmo objected to the validity of the exclusion clause, the exclusion clause cannot be determined to be valid accordingly. QU Rongmo claimed that the exclusion clause in insurance clauses did not work, which has factual and legal basis, and shall be support by the court. CCIC Shidao provides exemption defense in accordance with the exclusion clause stated in the insurance clauses involved, which cannot be established. According to the Maritime Code of the People’s Republic of China Article 244 Paragraph 1, unless otherwise agreed in the insurance contract, the insurer shall not be liable for the loss of or damage to the insured ship arising from any of the following causes: (1) unseaworthiness of the ship at the time of the commencement of the voyage, unless where under a time policy the insured has no knowledge thereof; and (2) wear and tear or corrosion of the ship. The seaworthiness of a ship as stipulated by the law means that the ship is suitable for navigation on a predetermined voyage in all respects and has the ability to withstand the general maritime risks that may be encountered in the voyage, so that the ship is in a safe state of navigation. The reason why the law is applicable to the seaworthiness of the ship is limited to “at the time of the commencement of the voyage” because the risk that the ship may encounter in the scheduled voyage is greater than that in the port, and the ship’s repair, loading and unloading activities in the port are objectively difficult to maintain at all times. Therefore, “at the time of the commencement of the voyage” in the Maritime Code of the People’s Republic of China Article 244 Paragraph 1 means that “at the time of the commencement of the voyage” shall mean the departure of a ship from the port and the commencement of a scheduled voyage, and does not include the movement of the ship within the port. In shipping practice, the ship transitions from mooring, shoreline, stranded to non-moored, non-banked, non-grounded, which is underway, but not all in-flight conditions are subject to the above-mentioned “at the time of the commencement of the voyage”. “At the time of the commencement of the voyage” claimed by CCIC Shidao should be understood as non-moisting or non-shore, which is inconsistent with laws and regulations and shipping practice, so the court does not support it. During the repair of the two ships involved in the port, QU Rongmo arranged the berthing of the ship in order to avoid the typhoon. It was not arranged for the voyage of the ship to leave the port and the voyage was not included in the Maritime Code of the People’s Republic of China Article 244 Paragraph 1 “at the time of the commencement of the voyage”. CCIC Shidao claimed to exempt the insurance indemnity in accordance with this Article, which lacks factual basis, so the court does not support it. As mentioned above, the accident in this case happened by the combination of the underwriting risk (the typhoon and the captain’s negligence) and the non-insurance risk (the shipowner’s negligence), of which typhoon is the main cause. According to the above-mentioned various risks (causes) on impact on the accident, the court decides that CCIC Shidao should bear 75% of the insurance liability for the accident. The court of first instance did not find out the cause of all accidents and the coverage stated in the insurance clauses involved, and determined that CCIC Shishi was responsible for 100% of the insurance liability for the accident involved, which is wrong confirmation of facts and wrong application of

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law, and that should be corrected. The court of second instance did not ascertain whether CCIC Shidao clearly stated the exclusion clause in the insurance clause involved in the insurance contract when it entered into the insurance contract, and directly determined that CCIC Shidao was exempted from 50% of the insurance liability, which is wrong confirmation of facts and wrong application of law, and that shall be corrected. Secondly, confirmation of amount of insurance indemnity and interest. The insurance contract involved in the contract stipulates that the insurance value of each ship is 4,285,700 yuan, and the insurance amount of each ship is 3 million yuan. Although the special agreement clause of the insurance policies in question states that “the maximum compensation amount should not exceed RMB1.5 million when the total loss happens”, the clause was handwritten by the salesman of CCIC Shidao, the signature and fingerprint on the insurance policy is not QU Rongmo; QU Rongmo paid the insurance premium according to the insurance contract, which can only be regarded as the ratification of the insurance contract between the two parties, however, it cannot be presumed that when QU Rongmo paid the insurance premium, he knew and accepted the special agreement. CCIC Shidao claimed that the amount claimed by QU Rongmo was 3,000,000 yuan in accordance with the special agreement, which has no factual or legal basis, so the court does not support it. The insurance contract involved stipulates that the insurance amount of the two vessels should be lower than the insurance value, and the two vessels involved suffered total loss. According to Article 238 of the Maritime Code of the People’s Republic of China, the assured’s compensation for the loss caused by the insurance accident should be subject to insurance amount, if the total loss of the two ships is completely caused by the insurance underwriting risk, the compensation for the two-ship insurance is 6 million yuan. Whereas the fact that the total loss of the two vessels is caused by the insurance underwriting risk and the non-insurance risk, CCIC Shidao should pay the insurance compensation of 4.5 million yuan to QU Rongmo in accordance with the above 75% of the liability ratio. According to the Insurance Law of the People’s Republic of China Article 23, after receiving the request of the assured to pay the insurance premium, the insurer shall make the verification in time; if the situation is complicated, it shall be verified within 30 days, unless otherwise agreed in the contract. The insurance clause involved stipulates that after the assured requests compensation from the insurer and provides the information required for the claim, the insurer should verify it within 60 days. However, QU Rongmo did not provide evidence to prove his specific time for filing insurance claims and submitting relevant certificates and materials. On September 13, 2011, CCIC Weihai issued Reply to “LURONGYU 1813/1814” Grounding Accident “September 7, 2011”, indicating that it had not completed the insurance verification work, and needed QU Rongmo to provide relevant materials. CCIC Weihai issued a notice of refusal of compensation on

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February 7, 2012, indicating that it had completed the insurance approval and expressly refused to pay compensation to QU Rongmo. However, according to the above-mentioned confirmation, it should be authorized to administer QU Rongmo to assume 4,500,000-yuan insurance liability and timely payment. According to the Insurance Law of the People’s Republic of China Article 23, for those who are insured, the insurer shall fulfill the obligation to pay the insurance within 10 days after the agreement with the assured to reach compensation or pay the insurance; if the insurer fails to pay the insurance in time, the assured shall be compensated for the insurance loss suffered by people. CCIC Shidao did not pay in a reasonable time in accordance with the law. In addition to paying 4.5 million yuan in insurance compensation to QU Rongmo, it should also pay interest on insurance compensation. The interest should be calculated from February 18, 2012, based on the benchmark interest rate of the same type of loans of the People’s Bank of China for the same period as the payment determined by the judgment. The court of second instance calculated interest of overdue payment from the date of total loss, which is not in accordance with law, so the court corrects it. Pulling the threads together, the facts confirmed by the court of first and second instance are not clear, application of law is wrong, which shall be corrected. It is not inappropriate that the court of first and second instance confirmed that CCIC Weihai should be liable for the supplementary payment of the compensation, and the parties have no objection, so the court confirms it. According to the Civil Procedure Law of the People’s Republic of China Article 170 Paragraph 1 Sub-paragraph 2, the Interpretation of the Supreme People’s Court concerning the Application of the Civil Procedure Law of the People’s Republic of China Article 407 Paragraph 2, the judgment is rendered as follows: 1. Revoke the Shandong High People’s Court (2016) Lu Min Zhong No.1542 Civil Judgment; 2. Chang the Qingdao Maritime Court (2012) Qing Hai Fa Hai Shang Chu Zi No.240 Civil Judgment first item to: China Continent Insurance Co., Ltd. Shidao Branch shall pay QU Rongmo insurance indemnity RMB4,500,000 yuan and interest (from February 18, 2012 to the date of payment determined in the judgment according to the loan interest of the People’s Bank of China in the same period); and 3. Affirm the Qingdao Maritime Court (2012) Qing Hai Fa Hai Shang Chu Zi No.240 Civil Judgment second item. The pecuniary payment above shall be performed within 10 days after the judgment comes into effect. If the parties fail to perform the obligations of pecuniary payment within the period specified in the judgment, they shall pay double interest on the debt for the delayed period in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China.

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Court acceptance fee of first instance in amount of RMB53,800 yuan, China Continent Insurance Co., Ltd. Shidao Branch shall bear 40,350 yuan, QU Rongmo shall bear 13,450 yuan. Appraisal fee in amount of 6,000 yuan shall be born by China Continent Insurance Co., Ltd. Shidao Branch. Court acceptance fee of second instance in amount of RMB53,800 yuan, China Continent Insurance Co., Ltd. Shidao Branch shall bear 40,350 yuan, QU Rongmo shall bear 13,450 yuan. The judgment is final. Presiding Judge: YU Xiaohan Judge: REN Xuefeng Judge: HUANG Xiwu May 15, 2018 Clerk: CHEN Hui

Qingdao Maritime Court Civil Judgment Rongcheng Xixiakou Ship Industry Co., Ltd. v. Wartsila Engine (Shanghai) Co., Ltd. et al. (2011) Qing Hai Fa Hai Shang Chu Zi No.271 Related Case(s) This is the judgment of first instance, and the judgment of second instance and the judgment of retrial are on page 1131 and page 1157 respectively. Cause(s) of Action 246. Dispute over maritime fraud. Headnote Shipbuilder and engine maker held liable for fraudulently installing old, refurbished, engine part instead of new engine part during shipbuilding. Summary The Plaintiff purchased two brand new vessels through a ship building contract with one of the Defendants, Spliethoff, which then employed Wartsila Engine to install two new main engine hosts on the respective ships. The technical specifications stated the Wartsila engine type and model. During the sea trials of the first ship, the engine oil pressure was found to be low and the report stated that the host was an old refurbished host bought from a Dutch Company which Wartsila Shanghai, Wartsila Finland, and Spliethoff knew about and deliberately installed anyway. The court judged in favor of the Plaintiff and awarded damages on the costs associated with the ship’s dockage and cost of repairs.

Judgment The Plaintiff: Rongcheng Xixiakou Ship Industry Co., Ltd. Domicile: Xixiakou Village, Rongcheng, Shandong, China. Legal representative: WANG Qiang, general manager of the company. Agent ad litem: ZHAI Xuemei, lawyer of Beijing Huacheng Law Firm. Agent ad litem: JIANG Peihai, male, Han, born on March 20, 1982, living in Huancui District, Weihai, Shandong.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_38

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The Defendant: Wartsila Engine (Shanghai) Co., Ltd. Domicile: No.55 (Plot FM5-1, Area F) Xiya Road, Waigaoqiao Free Trade Zone, Shanghai. Legal representative: Jiong J Zhu, general manager of the company. Agents ad litem: LIU Haitao, LI Yi, lawyers of King & Wood Mallesons Law Firm Shanghai Branch. The Defendant: Wartsila Finland Oy. Domicile: P. 0. Box252, Tarhaajantie 2, FIN-65101 VAA SA, FI NLAND. Legal representative: Ensio Juhani Halkivaha, chief contracts manager of the company; Sten Johan Hansten, sales director of the company. Agents ad litem: LIU Haitao, LI Yi, lawyers of King & Wood Mallesons Law Firm Shanghai Branch. The Defendant: SPLIETHOFF’S BEVRACHTINGSKANTOOR B.V. Domicile: Radarweg36, 1042AA Amsterdam, The Netherlands. Legal representative: G. W. Bos, chairman of the company. Agents ad litem: LUO Congrui, SHEN Yinlin, lawyers of Shanghai Rolmax Law Office. With respect to the case arising from dispute over ship equipment sale fraud tort between the Plaintiff, Rongcheng Xixiakou Ship Industry Co., Ltd. (hereinafter referred to as Xixiakou Ship Industry), and the Defendants, Wartsila Engine (Shanghai) Co., Ltd. (hereinafter referred to as Wartsila Shanghai), Wartsila Finland Oy. (hereinafter referred to as Wartsila), and SPLIETHOFF’S BEVRACHTINGSKANTOOR B.V. (hereinafter referred to as SPLIETHOFF), after accepting it, the court applied the general procedure and formed a collegiate panel to hold a hearing in public according to law. In October 2011, the three Defendants filed a challenge of jurisdiction during the submission of their defense, and the court ruled to reject the challenge of jurisdiction of the three Defendants according to the law. The three Defendants dissatisfied with the ruling and filed an appeal to the Shandong High People’s Court. On March 13, 2012, Shandong High People’s Court ruled that the appeal was dismissed and the original ruling was affirmed. In July 2012, the Supreme People’s Court of the People’s Republic of China brought a case of jurisdiction to trial and ruled to suspend the trial of the case. On November 30, 2012, the Supreme People’s Court of the People’s Republic of China made a final ruling, affirming the civil ruling of the Shandong High People’s Court, and the case was resumed. Agents ad litem of the Plaintiff, ZHAI Xuemei and JIANG Peihai, joint agents ad litem of the Defendants Wartsila Shanghai and Wartsila, LIU Haitao and LI Lei, agents ad litem of the Defendant SPLIETHOFF, LUO Congrui and SHEN Yinlin, appeared in court to attend the hearing. Now the case has been concluded. The Plaintiff claimed that: the Plaintiff and the Defendant SPLIETHOFF concluded a ship construction contract on June 3, 2006, and according to SPLIETHOFF’s requirements, concluded the agreement on purchase of a set of main engine with technical specifications “01,194,823-ME” H and “01,194,816-CPP” H which was applicable to the propulsion system with the Defendant Wartsila on

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January 17, 2007. During the trial voyage in March 2011, it was found that the oil pressure of the main engine was lower than the normal operating pressure. After testing, it was recognized that the engine and propulsion system were used old machines. The Plaintiff held that the three Defendants deliberately concealed facts during the transaction, installation and commissioning process, and sold the Plaintiff using the old machine as a new machine. Their actions constituted commercial fraud and violated the Plaintiff’s legal rights and interests. Therefore, in order to protect the safety of normal transactions and safeguard the Plaintiff’s legal rights and interests, the lawsuit was brought to the court, and claimed that the Defendant should provide a set of the same main engine and propulsion system as agreed in the contract; compensate for ship damage and other loss of the Plaintiff approximately RMB9 million yuan, the specific amount was to be determined after evaluation; the three Defendants were jointly liable for each other and should bear the litigation fee of the case. During the trial, the Plaintiff stated that the specific loss were 10,462,840.85 yuan for replacement of main engine, 13,148,678.88 yuan for ship value depreciation, additional trial voyage fee 365,080 yuan, and berthing fee 2,490,318 yuan, tug berthing and service fee 4,803,096 yuan, crew fee 1,155,600 yuan, fuel fee 630,000 yuan, electricity and transformer usage fee 2,344,584 yuan, appraisal fee 378,400 yuan, the interest loss 8,094,542 yuan, and the above total was RMB43,803,138.88 yuan. To support its claims, the Plaintiff provided the following evidence: Evidence 1, ship construction contract No.XXK06-039, to prove that the Plaintiff and the Defendant SPLIETHOFF concluded the ship construction contract on June 3, 2006, and the ship involved was a new ship under construction. Evidence 2, summary of 12,500 Multi-purpose Ship Technical Specification and the list of manufacturers, to prove that the Plaintiff purchased the specified type of main engine and propulsion system from the Defendant Wartsila according to the instructions and requirements of the Defendant SPLIETHOFF. Evidence 3, Main Engine Supply Contract, the Plaintiff concluded Main Engine Supply Contract with Wartsila as required by SPLIETHOFF, to prove that the Defendant Wartsila was obliged to provide the Plaintiff with a complete set of brand new main engine and propulsion system. Evidence 4, main engine invoice and remittance certificate on February 7, 2010, to prove that the Plaintiff paid all price according to the contract. Evidence 5, the e-mail describing the background of the main engine involved, to prove that the engine involved was old, and the three Defendants knew that the main engine sold to the Plaintiff was a second-hand refurbished machine. They concealed the truth from the Plaintiff and caused huge economic loss to the Plaintiff. Their fraudulent behavior constituted a joint tort. Evidence 6, main engine installation manual, explaining the crank pin standard data under the new state of the main engine with model involved, to prove that the actual size of the crank pin of the involved main engine was different, which exceeded the allowable tolerance range of 33.3 times, which was seriously unqualified according to the factory standard.

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Evidence 7, inspection report of Qingdao Shuangcheng Ship Technology Consulting Co., Ltd., to prove that the main engine that the Defendant actually sold to the Plaintiff was obviously damaged by use. It was refurbished. It was obviously an old main engine. The main engine involved was installed to the ship No.038, the Plaintiff obviously suffered fraud and suffered loss. Evidence 8, technical consulting report of Qingdao Sanjie Maritime Technology Consulting Co., Ltd., to prove that the cost of the Plaintiff’s replacement of a new main engine was 10,392,840 yuan. Evidence 9 (supply evidence 1), 038 Lloyd’s Register of Shipping certificate, to prove that SPLIETHOFF was the “client” of Lloyd’s Register of Shipping, namely, the applicant for the inspection of the main engine, and Wartsila as the inspection applicant of part of the main engine parts, was fully aware of the true condition of the main engine when applying to Lloyd’s Register of Shipping for inspection of the main engine, but all of them concealed the truth from the Plaintiff, and there was a subjective intention of joint fraud. Evidence 10 (supply evidence 2), acceptance inspection report of No.038 ship main engine factory, sourced from the Defendant Wartsila, and the evidence was the same as evidence 9. Evidence 11 (supply evidence 3), mail notarization that the Defendant Wartsila Shanghai asked for overtime service fee, to prove that the Defendant Wartsila Shanghai had provided after-sales service. Evidence 12 (supply evidence 4), a notarized certificate, to prove that No.038 ship was moored at the wharf of the east area of Longyan Port; No.039 ship was moored at the wharf of the west area of Longyan Port. Evidence 13 (supply evidence 5), the drawings of the main engine, sourced from the Defendant Wartsila, to prove that the main engine involved of No.038 ship was identical to the main engine involved of No.039 ship, and the serial numbers were connected, which should be the same batch of products. Evidence 14 (supply evidence 6), evidence related to ship depreciation and other loss caused by the second-hand main engine, to prove the Plaintiff’s loss due to the second-hand main engine, such as ship depreciation fee, additional trial voyage fee, berthing fee, and electricity fee. Evidence 15 (supply evidence 7), appraisal fee receipts, to prove that the Plaintiff’s appraisal fee due to the second-hand main engine was 378,400 yuan. Evidence 16 (supply evidence 8), two documents, one was the Agreement, the Announcement of the Ministry of Transport 2008 No.15 and the amendments of the Safety Convention in its annex, to prove that the Defendant’s claim that “the Plaintiff did not have the right to claim loss due to the change in ownership of No.038 ship” was wrong, the evidence was made to prove that it avoided expanding the loss, the rights and obligations of No.038 ship were still exercised and born by the Plaintiff. Evidence 17 (supply evidence 9), Xixiakou Ship Repair Co., Ltd. business license of the legal person, to prove that the local area of the Plaintiff had enterprises with the corresponding ship repair ability and did not need to go to other places to repair the ship, which could reduce unnecessary expenses.

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Evidence 18, two interrogation transcripts of SU Bo and CAO Xu, to prove that the three Defendants negotiated with the Plaintiff to facilitate the conclusion of the engine supply contract, so as to achieve the purpose of tort of providing the Plaintiff with the second-hand refurbished engines and collecting new engine payments. The three Defendants had no objection to the form of the Plaintiff’s evidence 1, 2, 3, 4, 6, 9, 10, 11, 13, and 18. They had objection to the content of the evidence and did not recognize it; they had objection to other forms of evidence and the content of the evidence and did not recognize it. The Defendant Wartsila Shanghai and Wartsila jointly argued that: firstly, as the supplier, Wartsila provided equipment to the Plaintiff. The Plaintiff referred to it as second-hand equipment without evidence. Wartsila Shanghai had neither a contractual relationship with the Plaintiff nor the fact that it received fee, and the staff who provided service was assigned by Wartsila. In order to perform the commissioning of the contract between the Plaintiff and Wartsila, and it did not know clearly about the purchase and sale of equipment; secondly, judging from the evidence held by the Defendant, the Plaintiff was no longer the owner of the ship involved. In terms of ownership, the Plaintiff was not a qualified subject of the litigation; thirdly, the loss claimed by the Plaintiff were based on the contract between Wartsila and the Plaintiff, the cost of commissioning should be born by the Plaintiff. Because the cost of supporting the commissioning was agreed in the contract, the Plaintiff should bear the cost and could not claim the cost from the Defendant; fourthly, according to the contract, EUR3.0193 million was the price of the entire equipment, including the price of the main engine and supporting equipment. The payment for the main engine was only EUR1.81 million. Therefore, the Plaintiff claimed that the payment of the main engine was EUR3.0193 million, which did not meet the agreement. In support of its pleas, the Defendants Wartsila Shanghai and Wartsila provided evidence as follows: Evidence 1, certificate of ownership and encumbrance, to prove the name of No.038 ship was M.V. DONGTAIBAOHONG, which was owned by Rongzhi International Shipping Co., Ltd. Evidence 2, website information, content of evidence was the same as evidence 1. Evidence 3, engine certificate issued by Lloyd’s Register of Shipping, to prove that the engine installed on No.038 ship was a qualified product. Evidence 4, email and attachments on November 10, 2010, to prove on November 10, 2010, the Plaintiff sent a notice to the Defendant Wartsila by mail, claiming that almost all preparations had been completed and the engine installation was completed by the Plaintiff, not the Defendant Wartsila Shanghai or Wartsila. Evidence 5, installation plan description, to prove that on June 20, 2007, Wartsila sent the relevant installation plan instructions of the engine to the Plaintiff by mail, stating that the normal value of lubricating oil pressure was 4.0 Pa. Evidence 6, mails on September 5, 2007, to prove that the Plaintiff replied to the Defendant Wartsila by mail on September 5, 2007, clearly stating that: it recognized the approval data of the main engine installation and controllable propeller part.

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Evidence 7, propulsion system test report on July 18, 2011 and related report work schedule, to prove that on July 18, 2011, the lubricating oil pressure value of the engine installed on No.038 ship reached the requirements of the installation plan specification. Evidence 8, mail and attachments on August 1, 2011, to prove that the Plaintiff sent a notice to Wartsila by mail, recognizing that the oil pressure improved, and claiming that it had suffered a loss RMB381,840 yuan, which was far less than the Plaintiff proposed a compensation amount of RMB9 million yuan in the case. Evidence 9, email about the price of the main engine and related attachments, to prove on March 21, 2008, the Plaintiff claimed the Defendant Wartsila to provide part of the quotation for the main engine installed on No.038 ship. On March 27, 2008, Wartsila notified the Plaintiff by mail that the unit price of the main engine was EUR1,818,077, and in the invoice provided to the Plaintiff on August 20, 2008, it was also clearly stated that the unit price of the main engine part was EUR1,818,077. Evidence 10, master drawing of the engine frame, to prove that the 0516 number on the engine frame installed on No.038 ship was the internal engine frame master drawing number of the Defendant Wartsila. The engine frame master drawing was still used by Wartsila today to produce the engine frame. Evidence 11, International Air Pollution Prevention Certificate for Diesel Engines, to prove that 11,101 and 11,102 were IMO numbers assigned by the International Maritime Organization to the connecting rods of the engines installed on No.038 ship. The Plaintiff had no objection to the forms of above-mentioned evidence 1, 2, 3, 4, 6, and 9, had objection to the content of the evidence and did not recognize; it had objection to the form and content of other evidence and it did not recognize. The Defendant SPLIETHOFF had no objection to the form and content of the above evidence. The Defendant SPLIETHOFF argued that: firstly, the Plaintiff had no evidence to prove that the main engine involved was an old machine; secondly, the Plaintiff had no evidence to prove that SPLIETHOFF had any involvement in supplying the old main engine. The relationship between the Plaintiff and SPLIETHOFF was a shipbuilding contract relationship, in which the Plaintiff should have the responsibility and obligation to provide good main engine equipment on the ship. So SPLIETHOFF could not have had an interest in engaging in fraud. After selecting main engine supplier, SPLIETHOFF would no longer be involved in the supply of the main engine, and there was no possibility of any tort or fraud; thirdly, the Plaintiff’s claim for damages had no factual or legal basis, the main engine supply contract that existed between the Plaintiff and Wartsila was effective, and about the issue of main engine claim, should be settled by the Plaintiff and Wartsila according to the contract, SPLIETHOFF was not the party of the contract, thus it should not bear joint and several liability for claims related to main engine problems; fourthly, as for the replacement of the main engine listed in the lawsuit by the Plaintiff, SPLIETHOFF held that the existing evidence could not show that the

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main engine involved had problems and needed to be replaced. The Plaintiff’s evidence also showed that the No.038 ship main engine had achieved the technical requirements, and there was no factual or legal basis for the replacement of the main engine; finally, with regard to the Plaintiff’s claim for compensation for the main engine, SPLIETHOFF held that in fact the Plaintiff had not replaced the mainframe so far, so the loss did not happen, and the Plaintiff had no right to ask the three Defendants to bear the liability for the payment of the main engine. The price claimed by the Plaintiff was the total amount of the supply contract for the main engine. SPLIETHOFF agreed with the defense opinions of Wartsila Shanghai and Wartsila on this. As for other loss claimed by the Plaintiff should not be recognized. The Defendant SPLIETHOFF submitted the following evidence to support its pleas: Evidence 1, the shipbuilding contract (No.XXK06-038 and No.XXK06-039), to prove that according to the shipbuilding contract of XXK06-038 and XXK06-039 between the Plaintiff and the Defendant, main engine supply was the Plaintiff’s obligation and responsibility, the Plaintiff was obliged to design and manufacture according to the requirements of technical specification (including the requirement to the mainframe) and to deliver the ship to the third Defendant. Evidence 2, supplementary agreement to the shipbuilding contract, to prove that the Plaintiff and SPLIETHOFF had jointly recognized the selection of Wartsila as the main engine supplier according to the supplementary agreement. Evidence 3, technical specifications annexed to the shipbuilding contract, to prove that according to No.XXK06-039 shipbuilding contract between the Plaintiff and SPLIETHOFF, main engine supply was the Plaintiff’s obligations and responsibilities, the Plaintiff was obliged to design, manufacture and deliver the ship to the shipowner according to the requirements of technical specification (including the requirement to the main engine).. Evidence 4, manufacturer’s list, to prove that the Plaintiff agreed with SPLIETHOFF that Wartsila was the preferred main engine supplier. Evidence 5 (supply evidence 1), London arbitration materials, to prove that concerning No.039 ship, the Plaintiff went to arbitration with SPLIETHOFF in London, and the case was one case, two actions. Evidence 6 (supply evidence 2), there was three evidence: 1. technical analysis and evaluation consulting report on the replacement of main engine project and cost estimation; 2. China Association of the National Shipbuilding Industry, 2001, the Ship Repair Price List; 3. on July 6, 2012, quotation from Damen Shipyard in the Netherlands for No.038/039 ship replacement of the main engine, introduction to Damen Shipyard, the exchange rate of EUR published by Bank of China on July 6, 2012, No.XXK 06-041 shipbuilding contract, letter of nomination and power of authorization on July 14, 2009, to prove that: (1) the report of Qingdao Sanjie Maritime Technology Consulting Co., Ltd. could not be used as the basis for the project, cost, man-hour and construction period of the replacement of the main engine; (2) the Plaintiff did not estimate the replacement cost of the main engine according to the ship repair standard, and the coefficient and price estimation were wrong; (3) the quotation for main engine replacement project of No.038/039 ship of

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Damen Shipyard in the Netherlands was only EUR273,500 (equivalent to RMB2,143,036.60 yuan), which was far lower than the estimation in the report submitted by the Plaintiff to Qingdao Sanjie Maritime Technology Consulting Co., Ltd. Evidence 7 (supply evidence 3), there was two evidence: 1. enterprise information of Shanghai Shuangxi Maritime Development Co., Ltd., to prove that the project of replacing the main engine. Qingdao Sanjie Maritime Technology Consulting Co., Ltd was not qualified to conduct price evaluation, so the report was invalid; 2. files of Rongcheng Municipal Administration for Industry and Commerce, to prove that the Plaintiff changed its business scope on March 1, 2010 and deleted the business scope of ship repair. Therefore, the expert of the Plaintiff conducting evaluation based on production capacity had no basis. Evidence 8 (supply evidence 4), there was two evidence: 1. certificate of registration of ownership of No.038 ship after being notarized, to prove that the owner of No.038 ship was RongZhi International Shipping Co., Ltd. (hereinafter referred to as RongZhi International) and not the Plaintiff. 2. notarized enterprise registration certificate, to prove that RongZhi International was a company registered in the Republic of the Marshall Islands. The Plaintiff had no objection to the above forms of evidence 1, 2, 3, 4, and 5, but did not recognize the content of the evidence. The Plaintiff had objection to the forms and the content of evidence 6, 7, and 8, and did not recognize the evidence. The Defendant Wartsila disputed neither the form nor the content of the evidence. After trial, the court finds out that: on June 3, 2006, the Plaintiff and the Defendant SPLIETHOFF concluded two shipbuilding contracts No.XXK06-038 and XXK06-039 at the same time. The Plaintiff was the ship producer and SPLIETHOFF was the ship buyer. In 12500D WT Technical Specification and List of Manufacturer concluded at the same time, the Defendant SPLIETHOFF claimed the Plaintiff to accept preferred engine supplier by SPLIETHOFF when selecting the engine supplier for No.038 ship and to designate Wartsila as its sole preferred engine supplier in the technical specification. Meanwhile, 12,500 DWT Technical Specification Article 2.3.1 (the technical specification clause required by the Defendant SPLIETHOFF for No.038 ship engine), the brand of the engine was directly written as Wartsila and the model was indicated as W6L46. On January 9, 2007, the Defendant SPLIETHOFF concluded a supplementary agreement with the Plaintiff, which explicitly required that the ship main engine must use Wartsila main engine, and pointed out that the supplementary agreement was more effective than the (shipbuilding) contract. On January 17, 2007, the Plaintiff and the Defendant Wartsila concluded two purchase agreements for the main engine and propulsion system No. XXK06-038-001 and No.XXK06-039-001) at the same time, which were signed by SU Bo, the general manager of the Plaintiff at the time, and CAO Xu, the representative of the Defendant, Wartsila (Sales Manager of Wartsila in Shanghai), with the price of EUR3,019,300. On April 30, 2008, the Plaintiff paid to the Defendant, Wartsila, the full amount of EUR3,019,300.

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According to the engine nameplate, in July 2008, the engine with model of WartsilaW6L46 (serial number was PAAE082740) was produced by Wartsila Holland. In October 2008, the engine was consigned by the Defendant Wartsila to the Plaintiff. On July 13, 2009, the Defendant SPLIETHOFF gave notice to the Plaintiff to abandon No.038 ship. In April 2011, YANG Naifan, an engineer in charge of installation and commissioning of Wartsila Shanghai, after No.038 ship failed to meet the required oil pressure during its trial voyage, it emailed the Plaintiff, which stated that: “We checked the engine records. SPLIETHOFF bought an old Wartsila engine from somewhere and refurbished it at its plant in the Netherlands. In the end, SPLIETHOFF sold the engine to Wartsila and that’s how the engine came to be.” In order to solve the problem of too low oil pressure, the Defendant Wartsila found that the model was wrong when replacing the bearing bush for the Plaintiff twice. Finally, according to the data of the crankshaft, the bearing bush was re-ordered and installed on the third time. In July 2011, the Plaintiff commissioned Qingdao Shuangcheng Ship Technical Consulting Co., Ltd. to board the ship for inspection. After measuring the crank pin diameter of the main engine and the thickness of the bearing liner, as well as a close inspection of the frame paint and connecting rod, it was concluded that the W6L46 engine was a second-hand main engine after renovation. After that, the Plaintiff commissioned Qingdao Sanjie Maritime Technology Consulting Co., Ltd. to evaluate the replacement of the main engine and the amount of related loss, and concluded that the direct cost of replacement of the main engine was 103,928,400,000 yuan. A total of 378, 400 yuan of related appraisal cost was generated. In September 2012, the Plaintiff reported the case to the Rongcheng Public Security Bureau on the grounds that SU Bo and CAO Xu were suspected of fraud by reselling used engines. The Economic Investigation Brigade of Rongcheng Public Security Bureau interviewed SU Bo, the general manager of the Plaintiff at the time. According to the Inquisition Record, when the Defendant SPLIETHOFF was negotiating with the Plaintiff about the shipbuilding contract, it clearly stated that “it would rather not use the Plaintiff’s shipbuilding than give up the use of Wartsila’s ship engine”. The Economic Investigation Brigade of Rongcheng Public Security Bureau interviewed CAO Xu. Inquisition Record showed that: the Dutch shipowner (the Defendant SPLIETHOFF) was to build several ships in Xixiakou, China, the shipowner had negotiated with Wartsila about quantity, price and delivery time, Wartsila commissioned Wartsila China to conclude the contract on behalf. On January 17, 2007, it concluded the two Main Engine Supply Contracts with the Plaintiff for No.038 and No.39 ships on behalf of the Defendant Wartsila. At that time, a set of new main engine and propulsion system of Wartsila cost more than EUR3,000,000. In the trial, the Plaintiff claimed that for the fraud of the Defendant second-hand engine, asked the three Defendants to bear joint compensation of 10,392,840 yuan for replacement of main engine, 13,148,678.88 yuan for ship value depreciation,

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additional trial voyage fee 365,080 yuan, and berthing fee 2,490,318 yuan, tug berthing and service fee 4,803,096 yuan, crew fee 1,155,600 yuan, fuel fee 630,000 yuan, electricity and transformer usage fee 2,344,584 yuan, appraisal fee 378,400 yuan, the interest loss 8,094,542 yuan, and the above total was RMB43,803,138.88 yuan. Interpreted together as that: ship value depreciation, according to the Ministry of Communications specified in the Regulations on the Management of Old Transport Ships, the mandatory scrapping period for such ships was 25 years. The ship involved had been docked for two years due to the problem of second-hand refurbished main engine, it had not been put into operation but had become old. Based on the ship contract price USD20,490,000 and the average exchange rate of RMB against USD on June 2, 2006, the depreciation fee for ship involved could be concluded; additional trial voyage fee, the Plaintiff had sent a fax to the Defendant Wartsila Shanghai on or about July 30, 2011. The fax clearly stated that the Plaintiff was forced to carry out an additional trial voyage due to the replacement of the main engine tiles, and the additional trial would certainly incur expenses, which was an indisputable fact. No.038 ship involved was docking at Longyan Wharf. As Longyan Wharf was a wharf in normal operation, it was inevitable that the ship would pay the berthing and service fees to the wharf when it docked here; No.038 ship was docking in the wharf, but due to the wharf was in normal operation, No.038 ship could not be stopped on a location without any change, when the berthing position of No.038 ship affected the normal operation of wharf (such as the impact of other ships to lean off), the ship involved needed to be shifted to make way for other ships that were operating normally, from May 1, 2011 to February 1, 2013, No.038 ship shifted 15 times in all, in the case, more costs was incurred. It was necessary for the crew to look at the ship when the ship was parked at the wharf, so the crew cost would be generated inevitably. In order to avoid the corrosion and aging of some equipment and parts caused by the long time berthing in the dock, it was necessary to carry out regular operation of the mechanical equipment of the ship. It was necessary to arrange personnel to carry out regular operation on the ship’s equipment, which would inevitably incur labor costs and fuel and moisture material costs, and it was also necessary and reasonable to carry out essential regular operation on No.038 ship to reduce the further expansion of losses; in order to maintain the normal docking of the ship in the dock, the water pump, fan, lighting, heating and other facilities on the ship must maintain normal operation, and at the same time to life electricity of crew who monitored the ship was also essential. In addition, the voltage of No.038 ship was 450 V, which was not consistent with the voltage provided by the wharf. Therefore, the original power supply of the ship must go through the variable voltage before the normal power supply could be achieved. As for the appraisal fee 378,400 yuan, the Plaintiff claimed that: in order to safeguard their own rights and interests, hiring appraisal institutions appraisal, would inevitably produce corresponding appraisal fee; about the loan interest loss fee 8,094,542 yuan, the Plaintiff clearly stated as follows: the Defendant SPLIETHOFF only paid 60% of the No.038 ship, there were USD8,196,000 ship money not paid to the Plaintiff, on July 13, 2009, after the Defendant SPLIETHOFF abandoned ship, to complete shipbuilding project, the

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Plaintiff loaned, resulting in corresponding interest, the amount of loan interest loss was calculated based on the average exchange rate of RMB against USD on June 2, 2006 and the annual loan interest rate of 7%. For the above loss, the Plaintiff provided the corresponding bills, which were cross-examined by the parties to the case. The court also finds out that: M.V. DONGTAIBAOHONG (No.XXK06-038) involved was built by the Plaintiff. Th ship was a multi-purpose ship with a load of 12,500 tons, a length of 136.64 m, a width of 18.9 m and a depth of 11.65 m. On July 13, 2009, after SPLIETHOFF abandoned the ship under construction, the Plaintiff named the ship M.V. DONGTAIBAOHONG and registered it under the name of Rongzhi International in the Republic of the Marshall Islands. However, the ship was docking in Longyan Port Wharf, and it was that the Plaintiff in fact managed, possessed. Because long engine lawsuit, if the delivery date later than July 1, 2012, according to the international maritime organization revised amendment to the 1974 International Convention on Safety of Life at Sea, and other relevant provisions, No.038 ship would fail to finish international navigation, thus, on October 18, 2011, the Plaintiff with an outsider Rongzhi international in Qingdao, Shandong, concluded an agreement, in article 6 of the agreement expressly agreed that: in view of the requirements of the navigation safety convention and other reasons, M.V. DONGTAIBAOHONG (No.XXK06-038) was ready to be registered in the name of Rongzhi International, but “all rights (including but not limited to possession, use, income, disposal, right of recourse to creditor’s rights) related to No.038 ship were exercised by Xixiakou Ship Industry”. It was not registered with the Republic of the Marshall Islands until December 2, 2011, more than a month after the agreement came into effect. For the ship involved, the Plaintiff never delivered it to Rongzhi International, and Rongzhi International never actually managed, possessed, used, benefited or disposed of the ship. In the engine certificate issued by Lloyd’s Register of Shipping provided by the Defendants Wartsila Shanghai and Wartsila, the manufacturer was clearly named as Wartsila Holland Co., Ltd. and the client was the Defendant SPLIETHOFF. According to the rules and practices of the industry, the client was the applicant surveyor or the consignor of classification society. Qingdao Shuangcheng Ship Technical Consulting Co., Ltd. was a professional institution authorized by Qingdao Ship Inspection Bureau of the People’s Republic of China to carry out “impartial inspection of ships and marine facilities”, and was also a professional judicial appraisal institution listed in the list of judicial appraisers of the Shandong High People’s Court. Qingdao Sanjie Maritime Technology Consulting Co., Ltd. approved by the Shandong High People’s Court, was a professional judicial appraisal organization, which was listed in the judicial appraiser list of the Qingdao Maritime Court, and was a specialized company specializing in “maritime and maritime technology inspection and consultation” approved by the state. Shanghai Shuangxi Maritime Development Co., Ltd. had the qualification of price appraisal, but it did not have the qualification of “ship appraisal” and “judicial

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appraisal”. The registered business scope of Shanghai Science and Technology Consulting Service Center was also engaged in “judicial appraisal”, and judicial appraisal was only limited to “scientific and technological consulting”. The above facts are supported by the shipbuilding contract, the purchase contract of the main engine and propulsion system provided by the parties, the evidence obtained by the court, e-mails, notarial certificate, appraisal report and relevant documentary evidence, and the ruling documents of the court, and upon the completion of the cross-examination by the parties, it can be used as the basis for the conclusion of the case and are sufficient to be confirmed. The court holds that the case is a dispute over ship equipment sale fraud tort related to foreign factors. After the court accepted the case, the three Defendants raised an objection to jurisdiction on the grounds that the Plaintiff and the Defendant had arbitration clauses in both the shipbuilding contract and the main engine supply contract during the submission of defense. After the trial, the court ruled to reject its objection to jurisdiction according to law. The three Defendants refused to accept the ruling and appealed to the Shandong High People’s Court, which issued (2012) Lu Min Xia Zhong Zi No.62 Civil Ruling on March 13, 2012, dismissing the appeal and affirming the original ruling. The three Defendants still refused to accept and applied to the Supreme People’s Court for a retrial. After the retrial, the court held that: according to the claims of Xixiakou Ship Industry, it could be confirmed that the lawsuit brought by Xixiakou Ship Industry against Wartsila Shanghai, Wartsila and SPLIETHOFF as the co-defendants was a necessary joint lawsuit. As the arbitration clause under the supply contract concluded by Xixiaokou Ship Industry and Wartsila could not bind SPLIETHOFF, Wartsila was not bound by the arbitration clause under the shipbuilding contract concluded between Xixiakou Ship Industry and SPLIETHOFF, as one of the co-defendants, Wartsila Shanghai was neither a party to the main engine supply contract nor a party to the shipbuilding contract, and the two arbitration agreements involved were not binding on it. Accordingly, neither of the two arbitration agreements in the case could not bind all the parties to the joint tort dispute in the case. The Qingdao Maritime Court accepted the case, which was proper. The application for retrial of Wartsila Shanghai, Wartsila and SPLIETHOFF was untenable. For this, the Supreme People’s Court made (2012) Min Ti Zi No.130 Civil Ruling on November 30, 2012: affirm Shandong Supreme People’s Court (2012) Lu Min Xia Zhong Zi No.62 Civil Ruling. Whereas the tort in the case was in Xixiakou Village, Rongcheng, was a necessary joint tort lawsuit, according to the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China, Article 44, “tort liability shall be governed by the law at the place where the tort is committed”, the General Principles of the Civil Law of the People’s Republic of China Article 146, “the law of the place where the tort act is committed shall apply to compensation for damage caused by the infringing act”, the court will handle the substantive disputes in the case according to the laws of the People’s Republic of China. During the trial, the court has explained to the Plaintiff and the Defendant, and all parties were clear about this.

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According to the claims and pleas of the Plaintiff and the Defendant, the issues of the case are that: whether the litigation subject of the Plaintiff is eligible; whether the three Defendants’ joint fraud tort is established; whether the amount of each loss of the Plaintiff is justified. Firstly, whether the Plaintiff is the eligible subject of litigation. According to the facts found out: No.XXK 06-038 ship was built by the Plaintiff. On July 13, 2009, the Defendant SPLIETHOFF gave notice of abandoning ship. The Plaintiff acquired ownership of the ship based on the building of the ship, namely, the actual owner of the ship. The Plaintiff never actually delivered the ship to Rongzhi International, the registrant of the flag of convenience, for management and operation since the Defendant SPLIETHOFF abandoned the ship. In addition, the Plaintiff and Rongzhi International clearly agreed in the agreement that all rights (including but not limited to possession, use, income, disposal, right of recourse to creditor’s rights) related to No.038 ship should be exercised by the Plaintiff. On July 25, 2012, experts hired by the Defendant SPLIETHOFF boarded the ship at the east side of Lonyan Port Wharf and conducted an actual inspection on the site. Now the ship due to the replacement of engines and other legal issues, was docking in Lonyan Port Wharf. Therefore, the issue of registered ship owner as Rongzhi International of flag of convenience claimed by the Defendant could not replace the Plaintiff’s litigation status because it had no real connection and relevancy with the case arising from dispute over ship equipment sale fraud tort. Further, in the case, a series of shipbuilding, ship equipment sales contracts, installation and commissioning of the three Defendants all formed corresponding legal relations with the Plaintiff. The Plaintiff was the victim of the engine fraud tort case, and had the right to claim joint fraud tort compensation against the infringer and other parties, and had the legal subject qualification of the Plaintiff. Therefore, the court does not support the three Defendants’ argument that Xixiakou Ship Industry was not a qualified Plaintiff. Secondly, whether the three Defendants’ joint fraud tort is established. 1. By concluding the shipbuilding contract and the relevant supplementary agreement with the Plaintiff, the Defendant SPLIETHOFF designated the Plaintiff to purchase the engine and other equipment of the corresponding model from the Defendant Wartsila. Although the Plaintiff concluded the corresponding agreement with Wartsila, it was designated by the Defendant SPLIETHOFF and the Plaintiff did not have any choice. 2. The Plaintiff concluded the purchase contract of the main engine and propulsion system with the Defendant Wartsila as required by the Defendant SPLIETHOFF. SU Bo and CAO Xu signed the agreement as the representatives of the two parties. In October 2008, the corresponding equipment also was delivered to the Plaintiff; according to the agreement between the Plaintiff and Wartsila, the installation and commissioning should be directed and implemented by Wartsila. SU Bo and CAO Xu both stated that the Defendant SPLIETHOFF had reached an agreement with Wartsila on the supply of engines to the Plaintiff when concluding Shipbuilding Contract and 12,500

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DWT Technical Specification concerning the technical requirements of the ship with the Plaintiff. The signature of CAO Xu, then the sales manager of Wartsila Shanghai on Main Engine Supply Contract was obviously an act of duty, which indicated that Wartsila Shanghai where he worked, was aware of the provision of second-hand refurbished engines. In the case of equipment sale fraud tort of No.039 ship handled in another case, all the evidence was mutually verified: Wartsila Shanghai signed two purchase agreements for the main engine at the same time, and the engine models were exactly the same, the serial numbers were linked, and the price was completely the same. It is sufficient to prove that the three Defendants had subjective joint fraudulent intention, objectively carried out joint fraudulent behavior, and knowingly and intentionally sold the two second-hand engines to the Plaintiff. When the engine was installed and carried out trial voyage, they found the oil pressure was too low, the Defendant Wartsila Shanghai sent engineers debugging repeatedly to the Plaintiff, which still could not solve this problem, the engineers YANG Naifan found out the problem, and sent an email to the Plaintiff explicitly pointed out that, No.xxk06-038 ship’s engine was a second-hand engine purchased by the Defendant SPLIETHOFF then refurbished at the Dutch factory of the Defendant Wartsila and then sold to the Plaintiff through the Defendant Wartsila”. At least, the Defendants SPLIETHOFF and Wartsila were aware of this; The Plaintiff then hired Qingdao Shuangcheng Ship Technical Consulting Co., Ltd. to inspect the main engine of No.XXK06-038 ship. After measuring the crank pin diameter of the main engine and the thickness of the bearing liner, as well as a close inspection of the frame paint and connecting rod, it was concluded that the W6L46 engine was the second-hand main engine after renovation. To solve the problem of too low oil pressure, the Defendant Watsila found that the model was wrong when replacing the bearing bush for the Plaintiff twice, finally, according to the fact that according to the data of the crankshaft, the bearing bush was re-made and installed, which could prove the fact that Qingdao Shuangcheng Ship Technical Consulting Co., Ltd. after the inspection of the main engine of No.XXK06-038 ship found that “the crank pin diameter was one millimeter less than the specification size”, thus it had no choice but to re-made the bearing bush for the third time installation according to the data of crankshaft. The engine certificate issued by Lloyd’s Register of Shipping (LR) provided by the Defendant Wartsila Shanghai and Wartsila specified that the manufacturer was Wartsila Holland Co., Ltd. and the client, the applicant surveyor or the consignor, was the Defendant SPLIETHOFF. The manufacturer listed in the engine certificate issued by Lloyd’s Register of Shipping was Wartsila Holland, which corroded the fact mentioned in YANG Naifan’s email, which proved that the main engine was purchased by SPLIETHOFF and refurbished by Wartsila Holland, and then sold directly to the Plaintiff through Wartsila Shanghai and

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Wartsila. Lloyd’s Register of Shipping, the Defendant Wartsila and the Defendant SPLIETHOFF were fully aware of this. The above facts and evidence mutually proved the fact that the Defendants Wartsila Wartsila Shanghai and SPLIETHOFF jointly sold the second-hand main engine to the Plaintiff posing as new main engine and installed them on the new ship. The three Defendants subjectively had the intention of joint fraud, objectively jointly carried out the illegal and fraudulent acts, and there was a direct and inevitable causal relationship between them and the damage results, so they should bear joint and several tort liability. Thirdly, how to confirm the amount of each loss. According to the Tort Liability Law of the People’s Republic of China Article 6, “actor fault for civil rights and interests of other people shall bear tort liability”, Article 8, “two or more persons jointly implementing tort causes damage to others, shall bear joint and several liability”, such as the three Defendants joint tort caused corresponding loss to the Plaintiff, the Plaintiff should have the right to demand compensation according to the law. According to the General Principles of the Civil Law of the People’s Republic of China, Article 117, “if property of the state, a collective or another person is damaged, it shall be restored to its original state or compensation shall be reduced in value. If the victim suffers other heavy loss, the infringer shall also compensate for the loss”, the Plaintiff claimed that the three Defendants should replace the Plaintiff with a new set of main engine and propulsion system of the same model, which had a clear legal basis. It must be emphasized that the three Defendants’ opinion that “even if the engine was second-hand, the main engine was completely normal after commissioning and had even reached all the indicators stipulated in the contract, so the Plaintiff had nothing to lose and that there was no reason to demand a new main engine and a replacement” could not be supported. The Plaintiff spent more than EUR3,000,000 to buy a new set of main engine, rather than a second-hand refurbished one. Therefore, no matter whether the second-hand main engine had reached the indicators, it was not the Plaintiff’s requirements, hope of the subject matter, completely against the Plaintiff’s true will. Considering that the main engine of the same model was a kind of product and was limited to the integrity of the main engine and the propulsion system, the Plaintiff’s claim for the Defendant to provide a new main engine of the same model and a set of the propulsion system was justified according to law, and the replacement fee arising should be born by the joint infringing party according to law. Because there is no legal basis, the court does not support the pleas of the three Defendants that it only needed to replace the main engine or only compensate the main engine with EUR1,810,000. About the Plaintiff’s claim that the replacement of the main engine fee 10,392,840 yuan. The evaluation report of Qingdao Sanjie Maritime Technology Consulting Co., Ltd. (hereinafter referred to as Sanjie) was used to prove that the replacement fee of the main engine was 10, 392,840 yuan. The Defendant submitted a report to Shanghai Science and Technology Consulting Service Center (hereinafter referred to as the Shanghai Report) to prove that the report of Sanjie

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was unscientific and unreasonable, and recommended that the court not accept the report of Sanjie. As for the two reports, firstly, the court examines the registration of Shanghai Science and Technology Consulting Service Center with the Industrial and Commercial Bureau. Within the registered business scope, it only engaged in “judicial appraisal”, and the judicial appraisal was only limited to “scientific and technological consulting”, which was neither clear nor definite; secondly, after the trial to find out and the two sides confronted, it indicated that the cross-examination opinion on the Sanjie report in the Shanghai report is lack of factual and legal basis, it is not scientific, the content of the project plan in the report is incomplete, and there was no material support for the project plan and price, no specific shipyard direction, no concrete implementation, and no operability. Therefore, the report of Shanghai Science and Technology Consulting Service Center has no legal reference value for the case. In addition, when confronted by the experts in court, the experts entrusted by the Defendant SPLIETHOFF all admitted that the scheme of replacing the main engine in the report of Sanjie was the optimization scheme put forward after technical analysis according to the actual situation of the ship. At the same time, the expert also admitted that “the Sanjie report had done to ensure that the technology and process should be feasible, safe and reliable, to ensure the safety of the original machine disassembly, the new main engine installation quality was reliable. Sanjie report gave specific dimensions, quantities, shapes, accessories and other characteristics for each project that may be involved due to main engine replacement, to ensure that labor and material costs could be saved during the scope of the project. In order to ensure the completion of the construction scope, to ensure the scientific and reasonable arrangement of construction, the reasonable construction period was estimated”. Qingdao Sanjie Maritime Technology Consulting Co., Ltd., that approved by state, specializes in “maritime, maritime commercial technology inspection and consultation”. It has been included in the list of judicial appraisal of maritime courts. Sanjie report is of objectivity, relevancy and legality. If the Defendant failed to provide sufficient evidence to deny the report, it could be used as the basis for the conclusion of the case according to law. As a result of the ship equipment sale fraud, the Plaintiff claimed that the replacement of the main engine fee 10,392,840 yuan, and it was also recognized by Sanjie report, no matter whether to use the same type of new main engine, it must replace the second-hand main engine system all out, its fee was direct, inevitable, should be supported according to law. In regard to ship value depreciation fee, according to the Regulations on the Management of Old Transport Ships stipulated by the Ministry of Communications, the mandatory scrapping period of such ship is 25 years. The ship was actually derogated for 2 years, according to the total ship price 164,358,486 yuan (contract price USD20,490,000), and the service life of the ship is 25 years. The derogatory amount of 4% per year is 6,574,339.44 yuan, and the loss is 13,148,678.88 yuan, which should be supported according to the law. With regard to other direct economic loss such as installation difficulties, delay in shipping date, delay in commissioning and judicial appraisal caused by the Defendant SPLIETHOFF after abandoning ship and installing second-hand main engine, it mainly included the

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daily expenses for the ship to dock such as dock berthing fee, service fee, labor fee, fuel and moisture material fee, electricity fee, loan interest loss. The specific amount was: additional trial voyage fee 365,080 yuan, and berthing fee 2,490,318 yuan, tug berthing and service fee 4,803,096 yuan, crew fee 1,155,600 yuan, fuel fee 630,000 yuan, electricity and transformer usage fee 2,344,584 yuan, appraisal fee 378,400 yuan. In addition, with respect to the loan interest loss 8,094,542 yuan, the reason was that the Defendant SPLIETHOFF had only paid 60% of the amount of No.038 ship, and there was still USD8,196,000 that had not been paid. After the Defendant SPLIETHOFF abandoned ship on July 13, 2009, the Plaintiff took out the loan to complete the shipbuilding project, and the corresponding interest was generated accordingly. If it was not because the second-hand main engine affected the Plaintiff to sell the ship, the Plaintiff could sell the ship and reduced the loan interest loss, the fault of the loss was in the Defendant, so the Plaintiff asked the three Defendants to bear the loan interest loss caused by their fault to the Plaintiff, which was reasonable and legal. As for the above expenses, since the three Defendants failed to submit effective evidence to refute them, and the legality and rationality of the above fee cannot be denied, the court supports them according to the principle of full compensation and actual compensation for tort damages, and the above total amount is RMB43,803,138.88 yuan. Pulling the threads together, the Defendants in the case, Wartsila Shanghai, Wartsila, and SPLIETHOFF, violated the principle of good faith and the obligation of truthful notification at the stage of concluding and fulfilling the contract, and concealed the facts of second-hand refurbished engines, which caused the Plaintiff to purchase second-hand refurbished engines, which greatly damaged the company’s property rights. The Defendant’s actions constitute a joint tort and fraud; secondly, when SPLIETHOFF decided to abandon the ship, both SPLIETHOFF and the informed Wartsila had a legal obligation to truthfully inform the Plaintiff about the second-hand engine and take remedial and rescue measures to avoid further expansion of the loss, but the Defendant continued to conceal the fraud, and its subjective and deliberate fault is obvious. Furthermore, when the second-hand refurbished engine was installed and commissioned to the new ship, the three Defendants continued to conceal the fraud. In the end, the old engine was installed on the new ship, which caused huge economic losses to the Plaintiff. For this, after the trial committee of the court studied, according to the General Principles of the Civil Law of the People’s Republic of China Article 4 and Article 117, and the Tort Liability Law of the People’s Republic of China Article 6, Article 8, Article 15 and Article 19, the judgment is as follows: 1. The Defendant Wartsila Finland Oy shall provide the Plaintiff Rongcheng Xixiakou Ship Industry Co., Ltd. with a set of main engines and propulsion systems of the same model, which shall be fulfilled within 60 days after the judgment comes into effect; if the performance is not fulfilled within the time limit, it shall compensate with the original main engine and propulsion system purchase price EUR3.0193 million (at the exchange rate of RMB to EUR on April 30, 2008), and the interest shall be calculated according to the bank loan

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interest rate for the same period from April 30, 2008 to the date of payment confirmed by the judgment, and the Defendants Wartsila Engine (Shanghai) Co., Ltd. and SPLIETHOFF’S BEVRACHTINGSKANTOOR B.V. shall bear joint and several liability for this; 2. The Defendants Wartsila Engine (Shanghai) Co., Ltd., Wartsila Finland Oy and SPLIETHOFF’S BEVRACHTINGSKANTOOR B.V. jointly compensate the Plaintiff Rongcheng Xixiakou Ship Industry Co., Ltd. various loss totaling RMB43,803,138.88 yuan, and bear the bank loan interest for the same period from the date of the action to the date of payment confirmed by the judgment. The above-mentioned obligation to pay money shall be performed within 10 days after the judgment comes into effect. If overdue payment happened, it shall double the payment of interest on the debt during the period of delay according to the Civil Procedure Law of the People’s Republic of China Article 253. Court acceptance fee in amount of 412,756 yuan, shall be jointly born by the Defendants Wartsila Engine (Shanghai) Co., Ltd., Wartsila Finland Oy and SPLIETHOFF’S BEVRACHTINGSKANTOOR B.V. If not satisfied with the judgment, the Plaintiff Rongcheng Xixiakou Ship Industry Co., Ltd., the Defendant Wartsila Engine (Shanghai) Co., Ltd., within 15 days of the date of the judgment is served, and the Defendant Wartsila Finland Oy and the Defendant SPLIETHOFF’S BEVRACHTINGSKANTOOR B.V. within 30 days of the date of the judgment is served, can submit appeal together with copies according to the number of the other parties to the Shandong High People’s Court. Presiding Judge: WANG Limin Judge: DING Qixue Acting Judge: LI Junfeng April 9, 2013 Clerk: TAN Tianjiao

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Shandong High People’s Court Civil Judgment Rongcheng Xixiakou Ship Industry Co., Ltd. v. Wartsila Engine (Shanghai) Co., Ltd. et al. (2013) Lu Min Si Zhong Zi No.87 Related Case(s) This is the judgment of second instance, and the judgment of first instance and the judgment of retrial are on page 1113 and page 1157 respectively. Cause(s) of Action 246. Dispute over maritime fraud. Headnote Affirming lower court decision holding ship buyer and engine manufacturer liable to shipbuilder for fraudulently providing old, refurbished, engine to be installed in new ship being built by plaintiff for buyer; reversing lower court decision holding engine manufacturer's Chinese subsidiary jointly liable. Summary The Plaintiff shipbuilder contracted to make two brand new vessels for one of the Defendants, Spliethoff. Spliethoff required Plaintiff to use engines manufactured by Defendant Wartsila Engine. The technical specifications stated the Wartsila engine type and model. During the sea trials of the first ship, the engine oil pressure was found to be low and the report stated that the engine was an old refurbished engine from a Dutch Company, which Wartsila Shanghai, Wartsila Finland, and Spliethoff knew about and deliberately required to be installed anyway. The Plaintiff sued the Defendants. The court of first instance ruled in favor of the Plaintiff and awarded damages for the costs associated with the ship’s dockage and cost of repairs. The Defendants appealed. The appeal court affirmed in part and reversed in part the lower court’s decision. The appeal court affirmed that Defendants Wartsila Finland and Spliethoff were jointly liable to Plaintiff shipbuilder because they provided it with a refurbished main engine for a newly built vessel. The court reversed the decision that Defendant-Appellant Wartsila Engine Shanghai was liable. The Court affirmed that Defendants Wartsila Finland and Spliethoff must provide Plaintiff with a new main engine according to the technical specifications in the contract. In addition, the court held that Wartsila Finland and Spliethoff would be liable for a new propulsion system, in addition to a new main engine, only if the propulsion system is not compatible with the replacement engine.

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Judgment The Appellant (the Defendant of first instance): Wartsila Engine (Shanghai) Co., Ltd. Domicile: No.55 (Plot FM5-1, Area F) Xiya Road, Waigaoqiao Free Trade Zone, Shanghai. Legal representative: JamesHan, general manager of the company. Agent ad litem: LIU Haitao, lawyer of King&Wood Mallesons Law Firm Shanghai Branch. Agent ad litem: QIU Yue, lawyer of King&Wood Mallesons Law Firm Shanghai Branch. The Appellant (the Defendant of first instance): Wartsila Finland Oy. Domicile: P. 0. Box252, Tarhaajantie 2, FIN-65101 VAA SA, FI NLAND. Legal representative: Ensio Juhani Halkivaha, chief contracts manager of the company; Sten Johan Hansten, sales director of the company. Agent ad litem: LIU Haitao, lawyer of King&Wood Mallesons Law Firm Shanghai Branch. Agent ad litem: QIU Yue, lawyer of King&Wood Mallesons Law Firm Shanghai Branch. The Appellant (the Defendant of first instance): SPLIETHOFF’S BEVRACHTINGSKANTOOR B.V. Domicile: Radarweg36, 1042AA Amsterdam, The Netherlands. Legal representative: M. Fransen and F. Louwers, executive directors of the company. Agent ad litem: LU Min, lawyer of Shanghai Rolmax Law Office. Agent ad litem: LUO Congrui, lawyer of Shanghai Rolmax Law Office. The Respondent (the Plaintiff of first instance): Rongcheng Xixiakou Ship Industry Co., Ltd. Domicile: Xixiakou Village, Rongcheng, Shandong, China. Legal representative: TIAN He, general manager of the company. Agent ad litem: ZHAI Xuemei, lawyer of Beijing Huacheng Law Firm. Agent ad litem: QI Jiao, lawyer of Shandong Shunxiong Law Firm. With respect to the case arising from dispute over ship equipment sale fraud tort between the Appellant Wartsila Engine (Shanghai) Co., Ltd. (hereinafter referred to as Wartsila Shanghai), the Appellant Wartsila Finland Oy (hereinafter referred to as Wartsila), the Appellant SPLIETHOFF’S BEVRACHTINGSKANTOOR B.V. (hereinafter referred to as SPLIETHOFF) and the Respondent Rongcheng Xixiakou Ship Industry Co., Ltd. (hereinafter referred to as Xixiakou Ship Industry), the Appellants disagreed with the Qingdao Maritime Court of the People’s Republic of China (2011) Qing Hai Fa Hai Shang Chu Zi No.271 Civil Judgment, and appealed to the court. After the court accepted the case, a collegiate panel was formed according to the law, and the hearing was held in public. Joint agents ad litem of the

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Appellant Wartsila Shanghai and the Appellant Wartsila, LIU Haitao and QIU Yue, agents ad litem of the Appellant SPLIETHOFF, LU Min and LUO Congrui, and agents ad litem of the Respondent Xixiakou Ship Industry, ZHAI Xuemei and QI Jiao, appeared in court to attend the hearing. Now the case has been concluded. Xixiakou Ship Industry claimed to the court of first instance that: Xixiakou Ship Industry and SPLIETHOFF concluded a ship construction contract on June 3, 2006, and according to SPLIETHOFF’s requirements, concluded the agreement on purchase of a set of main engine with technical specifications “01194823-ME” H and “01194816-CPP” H which was applicable to the propulsion system with Wartsila on January 17, 2007. During the trial voyage in March 2011, it was found that the oil pressure of the main engine was lower than the normal operating pressure. After testing, it was recognized that the engine and propulsion system were used old machines. Xixiakou Ship Industry held that Wartsila Shanghai, Wartsila and SPLIETHOFF deliberately concealed facts during the transaction, installation and commissioning process, and sold Xixiakou Ship Industry using the old machine as a new machine. Their actions constituted commercial fraud and violated Xixiakou Ship Industry’s legal rights and interests. It claimed that the Defendant should provide a set of the same main engine and propulsion system as agreed in the contract; compensate for ship damage and other loss of Xixiakou Ship Industry approximately RMB9 million yuan, the specific amount was to be determined after evaluation; Wartsila Shanghai, Wartsila and SPLIETHOFF were jointly liable for each other and should bear the litigation fee of the case. During the trial, Xixiakou Ship Industry stated that the specific loss were 10,462,840.85 yuan for replacement of main engine, 13,148,678.88 yuan for ship value depreciation, additional trial voyage fee 365,080 yuan, and berthing fee 2,490,318 yuan, tug berthing and service fee 4,803,096 yuan, crew fee 1,155,600 yuan, fuel fee 630,000 yuan, electricity and transformer usage fee 2,344,584 yuan, appraisal fee 378,400 yuan, the interest loss 8,094,542 yuan, and the above total was RMB43,803,138.88 yuan. The court of first instance found out that: on June 3, 2006, Xixiakou Ship Industry and SPLIETHOFF concluded two shipbuilding contracts No.XXK06-038 and XXK06-039 at the same time. Xixiakou Ship Industry was the ship producer and SPLIETHOFF was the ship buyer. In 12500D WT Technical Specification and List of Manufacturer concluded at the same time, SPLIETHOFF claimed Xixiakou Ship Industry to accept preferred engine supplier by SPLIETHOFF when selecting the engine supplier for No.038 ship and to designate Wartsila as its sole preferred engine supplier in the technical specification. Meanwhile, 12500 DWT Technical Specification Article 2.3.1 (the technical specification clause required by SPLIETHOFF for No.038 ship engine), the brand of the engine was directly written as Wartsila and the model was indicated as W6L46. On January 9, 2007, SPLIETHOFF concluded a supplementary agreement with Xixiakou Ship Industry, which explicitly required that the ship main engine must use Wartsila main engine, and pointed out that the supplementary agreement was more effective than the (shipbuilding) contract. On January 17, 2007, Xixiakou Ship Industry and Wartsila concluded two purchase agreements for the main engine and propulsion system No.

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XXK06-038-001 and No.XXK06-039-001) at the same time, which were signed by SU Bo, the general manager of the Plaintiff at the time, and CAO Xu, the representative of the Defendant, Wartsila (Sales Manager of Wartsila in Shanghai), with the price of EUR3,019,300. On April 30, 2008, the Plaintiff paid to the Defendant, Wartsila, the full amount of EUR3,019,300. According to the engine nameplate, in July 2008, the engine with model of WartsilaW6L46 (serial number was PAAE082740) was produced by Wartsila Holland. In October 2008, the engine was consigned by Wartsila to Xixiakou Ship Industry. On July 13, 2009, SPLIETHOFF gave notice to Xixiakou Ship Industry to abandon No.038 ship. In April 2011, YANG Naifan, an engineer in charge of installation and commissioning of Wartsila Shanghai, after No.038 ship failed to meet the required oil pressure during its trial voyage, it emailed Xixiakou Ship Industry, which stated that: “We checked the engine records. SPLIETHOFF bought an old Wartsila engine from somewhere and refurbished it at its plant in the Netherlands. In the end, SPLIETHOFF sold the engine to Wartsila and that’s how the engine came to be.” In order to solve the problem of too low oil pressure, Wartsila found that the model was wrong when replacing the bearing bush for Xixiakou Ship Industry twice. Finally, according to the data of the crankshaft, the bearing bush was re-ordered and installed on the third time. In July 2011, Xixiakou Ship Industry commissioned Qingdao Shuangcheng Ship Technical Consulting Co., Ltd. to board the ship for inspection. After measuring the crank pin diameter of the main engine and the thickness of the bearing liner, as well as a close inspection of the frame paint and connecting rod, it was concluded that the W6L46 engine was a second-hand main engine after renovation. After that, Xixiakou Ship Industry commissioned Qingdao Sanjie Maritime Technology Consulting Co., Ltd. to evaluate the replacement of the main engine and the amount of related loss, and concluded that the direct cost of replacement of the main engine was 103,928,400,000 yuan. A total of 378, 400 yuan of related appraisal cost was generated. In September 2012, Xixiakou Ship Industry reported the case to the Rongcheng Public Security Bureau on the grounds that SU Bo and CAO Xu were suspected of fraud by reselling used engines. The Economic Investigation Brigade of Rongcheng Public Security Bureau interviewed SU Bo, the general manager of Xixiakou Ship Industry at the time. According to the Inquisition Record, when SPLIETHOFF was negotiating with Xixiakou Ship Industry about the shipbuilding contract, it clearly stated that “it would rather not use Xixiakou Ship Industry’s shipbuilding than give up the use of Wartsila’s ship engine”. The Economic Investigation Brigade of Rongcheng Public Security Bureau interviewed CAO Xu. Inquisition Record showed that: the Dutch shipowner (the Defendant SPLIETHOFF) was to build several ships in Xixiakou, China, the shipowner had negotiated with Wartsila about quantity, price and delivery time, Wartsila commissioned Wartsila China to conclude the contract on behalf. On January 17, 2007, it concluded the two Main Engine Supply Contracts with the Plaintiff for No.038 and No.39 ships on behalf of the Defendant Wartsila. At that

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time, a set of new main engine and propulsion system of Wartsila cost more than EUR3,000,000. In the trial, Xixiakou Ship Industry claimed that for the second-hand engine of the Defendant, it caused corresponding loss and specified the amount: 10,392,840 yuan for replacement of main engine, 13,148,678.88 yuan for ship value depreciation, additional trial voyage fee 365,080 yuan, and berthing fee 2,490,318 yuan, tug berthing and service fee 4,803,096 yuan, crew fee 1,155,600 yuan, fuel fee 630,000 yuan, electricity and transformer usage fee 2,344,584 yuan, appraisal fee 378,400 yuan, the interest loss 8,094,542 yuan, and the above total was RMB43,803,138.88 yuan. Interpreted together as that: ship value depreciation, according to the Ministry of Communications specified in the Regulations on the Management of Old Transport Ships, the mandatory scrapping period for such ships was 25 years. The ship involved had been docked for two years due to the problem of second-hand refurbished main engine, it had not been put into operation but had become old. Based on the ship contract price USD20,490,000 and the average exchange rate of RMB against USD on June 2, 2006, the depreciation fee for ship involved could be concluded; additional trial voyage fee, Xixiakou Ship Industry had sent a fax to Wartsila Shanghai on or about July 30, 2011. The fax clearly stated that Xixiakou Ship Industry was forced to carry out an additional trial voyage due to the replacement of the main engine tiles, and the additional trial would certainly incur expenses, which was an indisputable fact. No.038 ship involved was docking at Longyan Wharf. As Longyan Wharf was a wharf in normal operation, it was inevitable that the ship would pay the berthing and service fees to the wharf when it docked here; No.038 ship was docking in the wharf, but due to the wharf was in normal operation, No.038 ship could not be stopped on a location without any change, when the berthing position of No.038 ship affected the normal operation of wharf (such as the impact of other ships to lean off), the ship involved needed to be shifted to make way for other ships that were operating normally, from May 1, 2011 to February 1, 2013, No.038 ship shifted 15 times in all, in the case, more costs was incurred. It was necessary for the crew to look at the ship when the ship was parked at the wharf, so the crew cost would be generated inevitably. In order to avoid the corrosion and aging of some equipment and parts caused by the long time berthing in the dock, it was necessary to carry out regular operation of the mechanical equipment of the ship. It was necessary to arrange personnel to carry out regular operation on the ship’s equipment, which would inevitably incur labor costs and fuel and moisture material costs, and it was also necessary and reasonable to carry out essential regular operation on No.038 ship to reduce the further expansion of losses; in order to maintain the normal docking of the ship in the dock, the water pump, fan, lighting, heating and other facilities on the ship must maintain normal operation, and at the same time to life electricity of crew who monitored the ship was also essential. In addition, the voltage of No.038 ship was 450 V, which was not consistent with the voltage provided by the wharf. Therefore, the original power supply of the ship must go through the variable voltage before the normal power supply could be achieved. As for the appraisal fee 378,400 yuan, Xixiakou Ship Industry claimed that: in order to safeguard their own rights and interests,

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hiring appraisal institutions appraisal, would inevitably produce corresponding appraisal fee; about the loan interest loss fee 8,094,542 yuan, Xixiakou Ship Industry clearly stated as follows: SPLIETHOFF only paid 60% of the No.038 ship, there were USD8,196,000 ship money not paid to Xixiakou Ship Industry, on July 13, 2009, after SPLIETHOFF abandoned ship, to complete shipbuilding project, Xixiakou Ship Industry loaned, resulting in corresponding interest, the amount of loan interest loss was calculated based on the average exchange rate of RMB against USD on June 2, 2006 and the annual loan interest rate of 7%. For the above loss, Xixiakou Ship Industry provided the corresponding bills, which were cross-examined by the parties to the case. The court of first instance also found out that: M.V. DONGTAIBAOHONG (No. XXK06-038) involved was built by Xixiakou Ship Industry. The ship was a multi-purpose ship with a load of 12,500 tons, a length of 136.64 m, a width of 18.9 m and a depth of 11.65 m. On July 13, 2009, after SPLIETHOFF abandoned the ship under construction, Xixiakou Ship Industry named the ship M.V. DONGTAIBAOHONG and registered it under the name of Rongzhi International in the Republic of the Marshall Islands. However, the ship was docking in Longyan Port Wharf, and it was that Xixiakou Ship Industry in fact managed, possessed. Because long engine lawsuit, if the delivery date later than July 1, 2012, according to the international maritime organization revised amendment to the 1974 International Convention on Safety of Life at Sea, and other relevant provisions, No.038 ship would fail to finish international navigation, thus, on October 18, 2011, Xixiakou Ship Industry with an outsider Rongzhi international in Qingdao, Shandong, concluded an agreement, in article 6 of the agreement expressly agreed that: in view of the requirements of the navigation safety convention and other reasons, M.V. DONGTAIBAOHONG (No.XXK06-038) was ready to be registered in the name of Rongzhi International, but “all rights (including but not limited to possession, use, income, disposal, right of recourse to creditor’s rights) related to No.038 ship were exercised by Xixiakou Ship Industry”. It was not registered with the Republic of the Marshall Islands until December 2, 2011, more than a month after the agreement came into effect. For the ship involved, Xixiakou Ship Industry never delivered it to Rongzhi International, and Rongzhi International never actually managed, possessed, used, benefited or disposed of the ship. In the engine certificate issued by Lloyd’s Register of Shipping provided by Wartsila Shanghai and Wartsila, the manufacturer was clearly named as Wartsila Holland Co., Ltd. and the client was SPLIETHOFF. According to the rules and practices of the industry, the client was the applicant surveyor or the consignor of classification society. Shuangcheng was a professional institution authorized by Qingdao Ship Inspection Bureau of the People’s Republic of China to carry out “impartial inspection of ships and marine facilities”, and was also a professional judicial appraisal institution listed in the list of judicial appraisers of the Shandong High People’s Court. Sanjie approved by the Shandong High People’s Court, was a professional judicial appraisal organization, which was listed in the judicial appraiser list of the

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Qingdao Maritime Court, and was a specialized company specializing in “maritime and maritime technology inspection and consultation” approved by the state. Shanghai Shuangxi Maritime Development Co., Ltd. had the qualification of price appraisal, but it did not have the qualification of “ship appraisal” and “judicial appraisal”. The registered business scope of Shanghai Science and Technology Consulting Service Center was also engaged in “judicial appraisal”, and judicial appraisal was only limited to “scientific and technological consulting”. The court of first instance held that: the case was a dispute over ship equipment sale fraud tort related to foreign factors. After the court accepted the case, Wartsila Shanghai, Wartsila and SPLIETHOFF raised an objection to jurisdiction on the grounds that Xixiakou Ship Industry and they had arbitration clauses in both the shipbuilding contract and the main engine supply contract during the submission of defense. After the trial, the court of first instance ruled to reject its objection to jurisdiction according to law. Wartsila Shanghai, Wartsila and SPLIETHOFF refused to accept the ruling and appealed to the Shandong High People’s Court, which issued (2012) Lu Min Xia Zhong Zi No.62 Civil Ruling on March 13, 2012, dismissing the appeal and affirming the original ruling. Wartsila Shanghai, Wartsila and SPLIETHOFF still refused to accept and applied to the Supreme People’s Court for a retrial. After the retrial, the court of first instance held that: according to the claims of Xixiakou Ship Industry, it could be confirmed that the lawsuit brought by Xixiakou Ship Industry against Wartsila Shanghai, Wartsila and SPLIETHOFF as the co-defendants was a necessary joint lawsuit. As the arbitration clause under the supply contract concluded by Xixiaokou Ship Industry and Wartsila could not bind SPLIETHOFF, Wartsila was not bound by the arbitration clause under the shipbuilding contract concluded between Xixiakou Ship Industry and SPLIETHOFF, as one of the co-defendants, Wartsila Shanghai was neither a party to the main engine supply contract nor a party to the shipbuilding contract, and the two arbitration agreements involved were not binding on it. Accordingly, neither of the two arbitration agreements in the case could not bind all the parties to the joint tort dispute in the case. The Qingdao Maritime Court accepted the case, which was proper. The application for retrial of Wartsila Shanghai, Wartsila and SPLIETHOFF was untenable. For this, the Supreme People’s Court made (2012) Min Ti Zi No.130 Civil Rule on November 30, 2012: affirm Shandong Supreme People’s Court (2012) Lu Min Xia Zhong Zi No.62 Civil Ruling. Whereas the tort in the case was in Xixiakou Village, Rongcheng, was a necessary joint tort lawsuit, according to the Law of the Application of Law for Foreign-related Civil Relations of the People Republic of China, Article 44, “tort liability shall be governed by the law at the place where the tort is committed”, the General Principles of the Civil Law of the People’s Republic of China, Article 146, “the law of the place where the tort act is committed shall apply to compensation for damage caused by the infringing act”, the court of first instance would handle the substantive disputes in the case according to the laws of the People’s Republic of China. According to the claims and pleas of the Plaintiff and the Defendant, the issues of the case were that: whether the litigation subject of the Plaintiff was eligible;

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whether the three Defendants’ joint fraud tort was established; whether the amount of each loss of the Plaintiff was justified. Firstly, whether Xixiakou Ship Industry was the eligible subject of litigation. According to the facts found out: No.XXK 06-038 ship was built by Xixiakou Ship Industry. On July 13, 2009, SPLIETHOFF gave notice of abandoning ship. Xixiakou Ship Industry acquired ownership of the ship based on the building of the ship, namely, the actual owner of the ship. Xixiakou Ship Industry never actually delivered the ship to Rongzhi International, the registrant of the flag of convenience, for management and operation since SPLIETHOFF abandoned the ship. In addition, Xixiakou Ship Industry and Rongzhi International clearly agreed in the agreement that all rights (including but not limited to possession, use, income, disposal, right of recourse to creditor’s rights) related to No.038 ship should be exercised by Xixiakou Ship Industry. On July 25, 2012, experts hired by SPLIETHOFF boarded the ship at the east side of Lonyan Port Wharf and conducted an actual inspection on the site. Now the ship due to the replacement of engines and other legal issues, was docking in Lonyan Port Wharf. Therefore, the issue of registered ship owner as Rongzhi International of flag of convenience claimed by the Defendant could not replace Xixiakou Ship Industry’s litigation status because it had no real connection and relevancy with the case arising from dispute over ship equipment sale fraud tort. Further, in the case, a series of shipbuilding, ship equipment sales contracts, installation and commissioning of Wartsila Shanghai, Wartsila and SPLIETHOFF all formed corresponding legal relations with Xixiakou Ship Industry. Xixiakou Ship Industry was the victim of the engine fraud tort case, and had the right to claim joint fraud tort compensation against the infringer and other parties, and had the legal subject qualification of the Plaintiff. Therefore, the court of first instance did not support Wartsila Shanghai, Wartsila and SPLIETHOFF’ argument that Xixiakou Ship Industry was not a qualified Plaintiff. Secondly, whether Wartsila Shanghai, Wartsila and SPLIETHOFF’ joint fraud tort was established. 1. By concluding the shipbuilding contract and the relevant supplementary agreement with Xixiakou Ship Industry, SPLIETHOFF designated Xixiakou Ship Industry to purchase the engine and other equipment of the corresponding model from Wartsila. Although Xixiakou Ship Industry concluded the corresponding agreement with Wartsila, it was designated by SPLIETHOFF and Xixiakou Ship Industry did not have any choice. 2. Xixiakou Ship Industry concluded the purchase contract of the main engine and propulsion system with Wartsila as required by SPLIETHOFF. SU Bo and CAO Xu signed the agreement as the representatives of the two parties. In October 2008, the corresponding equipment also was delivered to Xixiakou Ship Industry; according to the agreement between Xixiakou Ship Industry and Wartsila, the installation and commissioning should be directed and implemented by Wartsila. SU Bo and CAO Xu both stated that SPLIETHOFF had reached an agreement with Wartsila on the supply of engines to Xixiakou Ship

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Industry when concluding Shipbuilding Contract and 12,500 DWT Technical Specification concerning the technical requirements of the ship with Xixiakou Ship Industry. The signature of CAO Xu, then the sales manager of Wartsila Shanghai on Main Engine Supply Contract was obviously an act of duty, which indicated that Wartsila Shanghai where he worked, was aware of the provision of second-hand refurbished engines. In the case of equipment sale fraud tort of No.039 ship handled in another case, all the evidence was mutually verified: Wartsila Shanghai signed two purchase agreements for the main engine at the same time, and the engine models were exactly the same, the serial numbers were linked, and the price was completely the same. It was sufficient to prove that Wartsila Shanghai, Wartsila and SPLIETHOFF had subjective joint fraudulent intention, objectively carried out joint fraudulent behavior, and knowingly and intentionally sold the two second-hand engines to Xixiakou Ship Industry. When the engine was installed and carried out trial voyage, they found the oil pressure was too low, Wartsila Shanghai sent engineers debugging repeatedly to the Plaintiff, which still could not solve this problem, the engineers YANG Naifan found out the problem, and sent an email to Xixiakou Ship Industry explicitly pointed out that, No.xxk06-038 ship’s engine was a second-hand engine purchased by SPLIETHOFF then refurbished at the Dutch factory of Wartsila and then sold to the Xixiakou Ship Industry through Wartsila”. At least, SPLIETHOFF and Wartsila were aware of this; Xixiakou Ship Industry then hired Qingdao Shuangcheng Ship Technical Consulting Co., Ltd. to inspect the main engine of No.XXK06-038 ship. After measuring the crank pin diameter of the main engine and the thickness of the bearing liner, as well as a close inspection of the frame paint and connecting rod, it was concluded that the W6L46 engine was the second-hand main engine after renovation. To solve the problem of too low oil pressure, Watsila found that the model was wrong when replacing the bearing bush for Xixiakou Ship Industry twice, finally, according to the fact that according to the data of the crankshaft, the bearing bush was re-made and installed, which could prove the fact that Qingdao Shuangcheng Ship Technical Consulting Co., Ltd. after the inspection of the main engine of No.XXK06-038 ship found that “the crank pin diameter was one millimeter less than the specification size”, thus it had no choice but to re-made the bearing bush for the third time installation according to the data of crankshaft. The engine certificate issued by Lloyd’s Register of Shipping (LR) provided by Wartsila Shanghai and Wartsila specified that the manufacturer was Wartsila Holland Co., Ltd. and the client, the applicant surveyor or the consignor, was SPLIETHOFF. The manufacturer listed in the engine certificate issued by Lloyd’s Register of Shipping was Wartsila Holland, which corroded the fact mentioned in YANG Naifan’s email, which proved that the main engine was purchased by SPLIETHOFF and refurbished by Wartsila Holland, and then sold

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directly to Xixiakou Ship Industry through Wartsila Shanghai and Wartsila. Lloyd’s Register of Shipping, Wartsila and SPLIETHOFF were fully aware of this. The above facts and evidence mutually proved the fact that Wartsila Shanghai, Wartsila and SPLIETHOFF jointly sold the second-hand main engine to Xixiakou Ship Industry posing as new main engine and installed them on the new ship. Wartsila Shanghai, Wartsila and SPLIETHOFF subjectively had the intention of joint fraud, objectively jointly carried out the illegal and fraudulent acts, and there was a direct and inevitable causal relationship between them and the damage results, so they should bear joint and several tort liability. Thirdly, how to confirm the amount of each loss. According to the Tort Liability Law of the People’s Republic of China Article 6, “actor fault for civil rights and interests of other people shall bear tort liability”, Article 8, “two or more persons jointly implementing tort causes damage to others, shall bear joint and several liability”, such as Wartsila Shanghai, Wartsila and SPLIETHOFF’s joint tort caused corresponding loss to Xixiakou Ship Industry, Xixiakou Ship Industry should have the right to demand compensation according to the law. According to the General Principles of the Civil Law of the People’s Republic of China Article 117, “if property of the state, a collective or another person is damaged, it shall be restored to its original state or compensation shall be reduced in value. If the victim suffers other heavy loss, the infringer shall also compensate for the loss”, Xixiakou Ship Industry claimed that Wartsila Shanghai, Wartsila and SPLIETHOFF should replace Xixiakou Ship Industry with a new set of main engine and propulsion system of the same model, which had a clear legal basis. It must be emphasized that Wartsila Shanghai, Wartsila and SPLIETHOFF’s opinion that “even if the engine was second-hand, the main engine was completely normal after commissioning and had even reached all the indicators stipulated in the contract, so the Plaintiff had nothing to lose and that there was no reason to demand a new main engine and a replacement” could not be supported. Xixiakou Ship Industry spent more than EUR3,000,000 to buy a new set of main engine, rather than a second-hand refurbished one. Therefore, no matter whether the second-hand main engine had reached the indicators, it was not Xixiakou Ship Industry’s requirements, hope of the subject matter, completely against Xixiakou Ship Industry’s true will. Considering that the main engine of the same model was a kind of product and was limited to the integrity of the main engine and the propulsion system, Xixiakou Ship Industry’s claim for the Defendant to provide a new main engine of the same model and a set of the propulsion system was justified according to law, and the replacement fee arising should be born by the joint infringing party according to law. Because there was no legal basis, the court of first instance did not support the pleas of Wartsila Shanghai, Wartsila and SPLIETHOFF that it only needed to replace the main engine or only compensate the main engine with EUR1,810,000. About Xixiakou Ship Industry’s claim that the replacement of the main engine fee 10,392,840 yuan. The evaluation report of Sanjie was used to prove that the

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replacement fee of the main engine was 10, 392,840 yuan. The Defendant submitted a report to Shanghai Science and Technology Consulting Service Center (hereinafter referred to as the Shanghai Report) to prove that the report of Sanjie was unscientific and unreasonable, and recommended that the court of first instance not accept the report of Sanjie. As for the two reports, firstly, the court of first instance examined the registration of Shanghai Science and Technology Consulting Service Center with the Industrial and Commercial Bureau. Within the registered business scope, it only engaged in “judicial appraisal”, and the judicial appraisal was only limited to “scientific and technological consulting”, which was neither clear nor definite; secondly, after the trial to find out and the two sides confronted, it indicated that the cross-examination opinion on the Sanjie report in the Shanghai report was lack of factual and legal basis, it was not scientific, the content of the project plan in the report was incomplete, and there was no material support for the project plan and price, no specific shipyard direction, no concrete implementation, and no operability. Therefore, the report of Shanghai Science and Technology Consulting Service Center had no legal reference value for the case. In addition, when confronted by the experts in court, the experts entrusted by SPLIETHOFF all admitted that the scheme of replacing the main engine in the report of Sanjie was the optimization scheme put forward after technical analysis according to the actual situation of the ship. At the same time, the expert also admitted that “the Sanjie report had done to ensure that the technology and process should be feasible, safe and reliable, to ensure the safety of the original machine disassembly, the new main engine installation quality was reliable. Sanjie report gave specific dimensions, quantities, shapes, accessories and other characteristics for each project that may be involved due to main engine replacement, to ensure that labor and material costs could be saved during the scope of the project. In order to ensure the completion of the construction scope, to ensure the scientific and reasonable arrangement of construction, the reasonable construction period was estimated”. Sanjie that approved by state, specializes in “maritime, maritime commercial technology inspection and consultation”. It had been included in the list of judicial appraisal of maritime courts. Sanjie report was of objectivity, relevancy and legality. If the Defendant failed to provide sufficient evidence to deny the report, it could be used as the basis for the conclusion of the case according to law. As a result of the ship equipment sale fraud, Xixiakou Ship Industry claimed that the replacement of the main engine fee 10,392,840 yuan, and it was also recognized by Sanjie report, no matter whether to use the same type of new main engine, it must replace the second-hand main engine system all out, its fee was direct, inevitable, should be supported according to law. In regard to ship value depreciation fee, according to the Regulations on the Management of Old Transport Ships stipulated by the Ministry of Communications, the mandatory scrapping period of such ship was 25 years. The ship was actually derogated for 2 years, according to the total ship price 164,358,486 yuan (contract price USD20,490,000), and the service life of the ship was 25 years. The derogatory amount of 4% per year was 6,574,339.44 yuan, and the loss was 13,148,678.88 yuan, which should be supported according to the law. With regard to other direct

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economic loss such as installation difficulties, delay in shipping date, delay in commissioning and judicial appraisal caused by SPLIETHOFF after abandoning ship and installing second-hand main engine, it mainly included the daily expenses for the ship to dock such as dock berthing fee, service fee, labor fee, fuel and moisture material fee, electricity fee, loan interest loss. The specific amount was: additional trial voyage fee 365,080 yuan, and berthing fee 2,490,318 yuan, tug berthing and service fee 4,803,096 yuan, crew fee 1,155,600 yuan, fuel fee 630,000 yuan, electricity and transformer usage fee 2,344,584 yuan, appraisal fee 378,400 yuan. In addition, with respect to the loan interest loss 8,094,542 yuan, the reason was that SPLIETHOFF had only paid 60% of the amount of No.038 ship, and there was still USD8,196,000 that had not been paid. After SPLIETHOFF abandoned ship on July 13, 2009, Xixiakou Ship Industry took out the loan to complete the shipbuilding project, and the corresponding interest was generated accordingly. If it was not because the second-hand main engine affected Xixiakou Ship Industry to sell the ship, Xixiakou Ship Industry could sell the ship and reduced the loan interest loss, the fault of the loss was in the Defendant, so Xixiakou Ship Industry asked Wartsila Shanghai, Wartsila and SPLIETHOFF to bear the loan interest loss caused by their fault to Xixiakou Ship Industry, which was reasonable and legal. As for the above expenses, since Wartsila Shanghai, Wartsila and SPLIETHOFF failed to submit effective evidence to refute them, and the legality and rationality of the above fee could not be denied, the court of first instance supported them according to the principle of full compensation and actual compensation for tort damages, and the above total amount was RMB43,803,138.88 yuan. Pulling the threads together, Wartsila Shanghai, Wartsila and SPLIETHOFF violated the principle of good faith and the obligation of truthful notification at the stage of concluding and fulfilling the contract, and concealed the facts of second-hand refurbished engines, which caused Xixiakou Ship Industry to purchase second-hand refurbished engines, which greatly damaged the company’s property rights. Wartsila Shanghai, Wartsila and SPLIETHOFF’s actions constituted a joint tort and fraud; secondly, when SPLIETHOFF decided to abandon the ship, both SPLIETHOFF and the informed Wartsila had a legal obligation to truthfully inform Xixiakou Ship Industry about the second-hand engine and take remedial and rescue measures to avoid further expansion of the loss, but the Defendant continued to conceal the fraud, and its subjective and deliberate fault was obvious. Furthermore, when the second-hand refurbished engine was installed and commissioned to the new ship, Wartsila Shanghai, Wartsila and SPLIETHOFF continued to conceal the fraud. In the end, the old engine was installed on the new ship, which caused huge economic losses to Xixiakou Ship Industry. For this, after the trial committee of the court studied, according to the General Principles of the Civil Law of the People’s Republic of China Article 4 and Article 117, and the Tort Liability Law of the People’s Republic of China Article 6, Article 8, Article 15 and Article 19, the judgment was as follows: 1. Wartsila should provide Xixiakou Ship Industry with a set of main engines and propulsion systems of the same model, which should be fulfilled within 60 days after the judgment came into effect; if the performance was not fulfilled within the time limit, it should compensate with the original main

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engine and propulsion system purchase price EUR3.0193 million (at the exchange rate of RMB to EUR on April 30, 2008), and the interest should be calculated according to the bank loan interest rate for the same period from April 30, 2008 to the date of payment confirmed by the judgment, and Wartsila Shanghai and SPLIETHOFF should bear joint and several liability for this; 2. Wartsila Shanghai, Wartsila and SPLIETHOFF should jointly compensate Xixiakou Ship Industry various loss totaling RMB43,803,138.88 yuan, and bear the bank loan interest for the same period from the date of the action to the date of payment confirmed by the judgment. The above-mentioned obligation to pay money should be performed within 10 days after the judgment comes into effect. If overdue payment happened, it should double the payment of interest on the debt during the period of delay according to the Civil Procedure Law of the People’s Republic of China Article 253. Court acceptance fee of first instance in amount of 412,756 yuan, should be jointly born by Wartsila Shanghai, Wartsila and SPLIETHOFF. The Appellant SPLIETHOFF appealed that: firstly, procedures of the judgment of first instance was illegal. 1. The judgment of first instance was inconsistent with Xixiakou Ship Industry’s claims. Xixiakou Ship Industry’s claims was for the provision of a new main engine, but did not include the provision of a propulsion system; it sought compensation for loss, and did not claim interest on the loss; it claimed that the main engine payment be converted into RMB at the exchange rate of EUR to RMB on May 13, 2012. However, the judgment of first instance calculated at the exchange rate on April 30, 2008. 2. Except for the hearing on May 14, 2012, the court of first instance only had one member of collegiate panel attending and presiding over the other hearings of first instance. 3. On March 20, 2013, Xixiakou Ship Industry changed and increased its claims in court, and added 7 claims including ship value depreciation fee. The court of first instance did not give other parties a defense period and a period of proof. 4. Regarding the hearing on March 20, 2013, the court of first instance’s notice of opening was only served on March 18 to the Appellant’s agent, which did not comply with the legal requirements of three days’ notice advance. 5. The court of first instance failed to select a judicial appraisal agency according to legal procedures. 6. The amount of property preservation in the case was much higher than the claim amount of Xixiakou Ship Industry and the amount of judgment of the court of first instance. Secondly, the basic facts of the judgment of first instance were unclear or wrong, and the evidence was insufficient. 1. Xixiakou Ship Industry did not have the qualifications for the litigation subject in the case. There was no concept of “actual owner” in Chinese law, and Xixiakou Ship Industry was not the owner of the ship involved. The main engine involved was an integral part of the ship, and only the owner of the ship registration had the right to bring a tort lawsuit on the main engine. 2. Xixiakou Ship Industry did not provide evidence to prove that the engine involved was a second-hand refurbished main engine. The authenticity of YANG Naifan’s mail was denied by Wartsila and Wartsila Shanghai. The inspector of Shuangcheng only JIANG Mingming boarded No.038 ship and his signature was forged; JIANG Mingming only quoted the data measured by Xixiakou Ship

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Industry; the conclusion of the report on the bare car was the subjective guess of the inspector; on the connecting rod, the engraved number was the IMO number, which of course would not be the same as the number marked on the manual for the convenience of explanation, and the report also described the drawing number as the mainframe number; the report recognized that the machine was an old machine for that the crank pin diameter was 1 mm smaller than the technical specifications, which had no basis. 3. There was no basis and facts for joint fraud and tort in the case. The ship equipped with the main engine involved was originally to be delivered to SPLIETHOFF. Because Xixiakou Ship Industry did not deliver the ship within the agreed time limit, SPLIETHOFF notified the abandonment of the ship. SPLIETHOFF, Wartsila Shanghai, and Wartsila were unlikely to have fraudulent intentions when concluding Shipbuilding Contract or the Supply Contract. In the contract, SPLIETHOFF and Xixiakou Ship Industry determined the main engine supplier and main engine brand and model, not a specific main engine. YANG Naifan’s email was not authentic; SPLIETHOFF never (and unlikely) purchased any main engine; the content of the email was not YANG Naifan’s personal experience or witness, but was based solely on his misunderstanding, and he did not appear in court to accept inquiries. In the engine certificate issued by Lloyd’s Register of Shipping, the client column was filled in by SPLIETHOFF. The judgment of first instance held that the client was usually the applicant or the consignor, and there was no basis. The judgment of first instance was based on the fact that SPLIETHOFF had violated its statutory obligation to inform Xixiakou Ship Industry of its “knowingly” second-hand main engine facts, and recognized that it constituted a joint fraud against Xixiakou Ship Industry, which had no legal basis. Even if the Xixiakou Ship Industry suffered loss, it was not caused by others’ “not reporting”. The public security agency’s Inquisition Record against CAO Xu and SU Bo were witness testimonies, but the two did not appear in court to accept cross-examination. CAO Xu stated that he heard that the business manager of Wartsila Shanghai informed that the Dutch shipowner had negotiated with Wartsila Holland on quantity, price and delivery time. The part of the content was a rumor. CAO Xu also made it clear that the engine was a new machine. 4. The various loss claimed by Xixiakou Ship Industry lacked evidence support. (1) Regarding the provision of a set of main engines and propulsion systems of the same model, or compensation for them. a. The technical status of the main engine involved reached the requirements stipulated in the contract, and Xixiakou Ship Industry had no loss. b. Even if it needed to be replaced, only the main engine needed to be replaced, and the propulsion system did not need to be replaced. c. The court of first instance judged that Wartsila provided the same type of main engine and propulsion system to Xixiakou Ship Industry, so SPLIETHOFF should not be liable for compensation. d. The court of first instance judged Wartsila to provide the main engine and propulsion system to Xixiakou Ship Industry within 60 days after the judgment comes into effect, which was not operability. e. The judgment of first instance did not issue a judgment on the refund or discount of the main engine

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installed on the ship involved. (2) Regarding the fee of replacing the new main engine. Xixiakou Ship Industry did not carry out the replacement of the main engine, and the loss and fee was not incurred and was uncertain. The main engine replacement fee estimation consultation report issued by Sanjie (hereinafter referred to as Fee Report) could not be used as the basis for the possible fee of the main engine replacement involved. Shanghai Science and Technology Consulting Service Center and its experts hired by SPLIETHOFF were qualified to issue professional opinions, and its conclusions referred to data from several shipyards; Sanjie did not have the qualification for price evaluation; Xixiakou Ship Industry did not have the experience to change the main engine, and Xixiakou Ship Industry no longer had the qualification and business scope to repair ships, Sanjie should not use Xixiakou Ship Industry as a reference to make fee assessment; Sanjie used the method of increasing the coefficient to adjust the price of 2001 Ship Repair Price List, but it was not clear on the basis of the adjustment. Fee Report split the disassembly and assembly works into disassembly and assembly works for secondary double billing, which was inconsistent with the basic principle that the ship repair project treated the disassembly and assembly works as a project to calculate the fee; regarding the tariffs caused by the import of new engines, Sanjie did not consider the tariff refunds generated by the return of the original engine, the tax refunds generated for export sales of ships, and the value-added tax deduction generated by domestic sales and other factors. If the main engine was replaced in the shipyard of the port city, the freight and insurance of the main engine could be avoided, and the fee of borrowing floating cranes from Dalian could be avoided; Sanjie held that the fee could not be estimated by estimating the working hours and materials, and Sanjie estimated the fee by the method of shipbuilding engineering, which was wrong. The fee per working hour of every worker of Xixiakou Ship Industry calculated by the experts of Sanjie and the labor rate shown on the internal statement provided by Xixiakou Ship Industry was hugely different; Sanjie did not refer to the actual freight and insurance fee incurred for two pieces of equipment of Xixiakou Ship Industry. (3) Xixiakou Ship Industry’s claim on the dock berthing fee, service fee and electricity fee, crew fee, fuel fee, main engine fuel fee, appraisal fee and loan interest loss of advance payment of the ship was due to that SPLIETHOFF abandoned the ship for the failure of Xixiakou Ship Industry to delivered the ship as scheduled, the court of first instance judged that it should bear the aforementioned loss because of the abandonment of the ship of SPLIETHOFF, which lacked factual basis. The judgment of first instance in support of Xixiakou Ship Industry’s various claims for loss also lacked factual basis. a. Regarding additional trial voyage fee, dock berthing fee, service fee, electricity fee, berthing fee, Xixiakou Ship Industry did not provide proof of payment or invoices recognized by the national tax authority, and could not prove that the fee was actually incurred or paid. If the ship involved anchored at an anchorage outside the port, the fee would be greatly reduced. Sanjie estimated that the power supply was 200 degrees per day, but Xixiakou Ship Industry advocated 1520 degrees per day. As for the fee of the transformer, Sanjie did not mention it. b. Regarding crew fee, fuel fee and main engine fuel fee, Xixiakou Ship Industry did not provide ship logs, ship

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fuel consumption records and payment vouchers, and the agent of SPLIETHOFF boarded No.038 ship on July 25, 2012. At that time, Xixiakou Ship Industry only sent one crew to accompany it. c. Regarding ship depreciation fee, the depreciation of fixed assets was only a theoretical cost analysis, not actual depreciation. Xixiakou Ship Industry neither considered the cost of its shipbuilding nor the final residual value of the ship. The calculation itself was also wrong. The Regulations on the Management of Old Transport Ships on which Xixiakou Ship Industry calculated its ship value depreciation fee did not apply to the case, and the 25-year mandatory scrapping period was for high-speed passenger ships over 10 years old. d. Regarding the appraisal fee, there was no judicial appraisal in the case. Xixiakou Ship Industry did not provide payment voucher, invoice and contract basis recognized by the tax authority, and the amount was obviously unreasonable. Among them, there was so-called travel expense paid to Sun Mingliang 160,000 yuan. (5) Regarding the loan interest on the advance payment of the ship, firstly, the claim was in contradiction with Xixiakou Ship Industry’s claim that it was the owner of the ship involved. According to the London arbitration award, SPLIETHOFF had the right to abandon the ship, and Xixiakou Ship Industry should complete the construction of the ship involved at its own expense; secondly, Xixiakou Ship Industry did not provide evidence of the loan and loan interest; thirdly, XiXiakou Ship Industry did not have any evidence to prove that the loss of loan interest was caused by the problem of second-hand main engine which affected the sale of the ships involved. Thirdly, the application of law in the judgment of first instance was wrong. Xixiakou Ship Industry claimed that the ownership of the asset was damaged and needed prove that it was the owner of the ship involved. The court of first instance confirmed that Xixiakou Ship Industry had the right to the main engine involved, which confused the distinction between property rights and creditor’s rights. The principle of good faith and the obligation of truthful notification were both essential elements for judging whether or not a contract was breached under the Contract Law. All indicators of the main engine involved were in compliance with technical specifications, and there was no fact of damage under the Tort Liability Law. The ship involved reached the various indicators agreed in the contract and had operational capability. The berthing of the ship had nothing to do with the condition of the ship and the main engine itself. SPLIETHOFF claimed that the case should be sent back for retrial, or the judgment was changed to reject all claims of Xixiakou Ship Industry against SPLIETHOFF. The Appellant Wartsila’s grounds for appeal were basically the same as those of SPLIETHOFF. Meanwhile, it also held that Xixiakou Ship Industry’s advancement for shipbuilding had nothing to do with it; even if the ship was completed and operated normally after construction, Xixiakou Ship Industry would also must bear the interest. Wartsila claimed that the judgment of first instance should be revoked and Xixiakou Ship Industry’s claims should be rejected. The Appellant Wartsila Shanghai’s grounds for appeal were basically the same as those of Wartsila. Meanwhile, it also held that its company did not participate in the sale, installation or commissioning of the engine involved, subjectively did not

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have any intention of tort, and objectively did not implement any tort. Firstly, when CAO Xu concluded Supply Contract with Xixiakou Ship Industry, he was the authorized representative of Finland Wartsila. From the content of CAO Xu’s Inquisition Record, it was impossible to conclude that Wartsila Shanghai knew the main engine involved was the second-hand refurbished main engine. The public security department should not intervene in this case. Inquisition Record was illegal evidence. Secondly, the installation of the main engine involved was completed by Xixiakou Ship Industry. Wartsila Shanghai claimed that the judgment of first instance should be revoked and Xixiakou Ship Industry’s claims were rejected. The Respondent Xixiakou Ship Industry argued that: firstly, the procedure of first instance of the case was legal. The judgment of first instance of the case was made based on Xixiakou Ship Industry’s claims, and Xixiakou Ship Industry’s determination of the amount of loss stated in claims on March 20, 2013 was a clear indication of the amount of the claim, not an increase or change in the claim. At the same time, the judgment of first instance claimed that the three Appellants should be compensated based on the purchase price and the corresponding interest should be paid if failing to provide a set of main engine and propulsion systems of the same model within the time limit. This was a selective performance, and the interest involved was statutory interest. The court had the right to make a ruling according to the law. Secondly, Xixiakou Ship Industry was a eligible litigation subject. The cause of the case was that the three Appellants maliciously colluded to commit joint tort and provided Xixiakou Ship Industry with second-hand refurbished engines, which violated the legal civil rights of Xixiakou Ship Industry and caused huge loss to Xixiakou Ship Industry. Xixiakou Ship Industry, as the buyer of the second-hand refurbished engine, the owner of the No.038 ship equipped with the second-hand refurbished engine, and the actual rights and obligations bearer, had a direct interest in the case and was the naturally eligible litigation subject. Even from the perspective of the ownership of No.038 ship, Xixiakou Ship Industry was the owner of No.038 ship equipped with second-hand engines and had actual rights and obligations, it was still the eligible subject of the case. Thirdly, the three Appellants conspired and committed tort. The evidence in the case could prove the fact that the engine involved was a second-hand refurbished engine, and the fact of joint tort of the three Appellants maliciously colluded to provide Xixiakou Ship Industry with a second-hand refurbished engine. 1. Inspection Report issued by Shuangcheng, Additional Report issued by Sanjie, the e-mail of the staff YANG Naifan of the Appellant Wartsila Shanghai, and the main engine certificate issued by Lloyd’s Register of Shipping mutually recognized. This proved the fact that the engine provided by the Appellant Wartsila to Xixiakou Ship Industry was a second-hand refurbished engine. 2. Facts and evidence such as the designation of the engine supplier by the Appellant SPLIETHOFF in the contract with Xixiakou Ship Industry, the certificate issued by Lloyd’s Register of Shipping, Inspection Report obtained by the court, and YANG Naifan’s mail mutually proved the joint tort of the three Appellants in malicious collusion to provide Xixiakou Ship Industry with second-hand refurbished engines. 3. The three Appellants had

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the intention of joint tort subjectively, and objectively carried out the infringement of joint tort, namely, conspired to provide second-hand refurbished engines. Xixiakou Ship Industry suffered huge loss due to the joint tort of the three Appellants. The loss had a direct causal relationship with joint tort of the three Appellants. Therefore, the acts of the three Appellants constituted a joint tort, and Xixiakou Ship Industry should be compensated for its loss. Fourthly, the Appellant should compensate Xixiakou Ship Industry for economic loss according to law. The three Appellants should provide Xixiakou Ship Industry with a new engine and a set of propulsion systems or refund the engine payment and interest paid by Xixiakou Ship Industry. At the same time, the loss 43,803,138.88 yuan claimed by Xixiakou Ship Industry to the court was due to the tort of the three Appellants. The calculation of various loss was reasonable and should be supported. 1. According to the General Principles of the Civil Law of the People’s Republic of China, the Tort Liability Law of the People’s Republic of China and other relevant laws, the three Appellants should bear the tort liability to Xixiakou Ship Industry, and provide Xixiakou Ship Industry with new engines and their one set of propulsion system or refund the engine payment that Xixiakou Ship Industry paid and pay the corresponding interest. 2. Whether it was to replace the engine for Xixiakou Ship Industry or refund the payment of engine, No.038 ship was needed to be replaced with the engine. Xixiakou Ship Industry submitted to the court the fee report of engine replacement issued by Sanjie, which objectively and fairly listed the fee of engine replacement. The three Appellants should bear the fee of replacement of the engine caused by their joint tort and evaluate the fee of replacing the engine. 3. Due to the joint tort of the three Appellants, the additional trial voyage fee, dock berthing fee, tug fee, crew fee, ship value depreciation fee, and interest loss of the No.038 ship equipped with a second-hand refurbished engine should be born by the three Appellants. For other loss not claimed in the case and subsequent loss, Xixiakou Ship Industry reserved the right to claim compensation in another lawsuit. Fifthly, the three Appellants should bear joint and several liability for compensation. According to the General Principles of the Civil Law of the People’s Republic of China, the Tort Liability Law of the People’s Republic of China and other relevant laws, the three Appellants should bear joint and several tort liability to Xixiakou Ship Industry and compensate Xixiakou Ship Industry the loss suffered by the joint tort of the three Appellants. Sixthly, the engine and propulsion system involved should be replaced together. The engine involved was a second-hand refurbished engine, and the propulsion system involved was designed and manufactured according to the technical performance and technical parameters of the engine involved. The technical performance and parameters of the engine of the same model of the engine involved produced by Wartsila in the later period shew great differences and could not be completely matched with the original propulsion system. Therefore, the propulsion system involved must be replaced at the same time as the engine involved. Due to the loss incurred by the replacement of the propulsion system, Xixiakou Ship Industry would claim in a separate case.

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In summary, the three Appellants conspired to maliciously collude to defraud Xixiakou Ship Industry by providing second-hand refurbished engines to Xixiakou Ship Industry. The facts of filling the old with new ones were conclusive and the evidence was sufficient. The actions of the three Appellants constituted a joint tort. The joint tort of the three Appellants infringed the legal civil rights and interests of Xixiakou Ship Industry, resulting in increased difficulty in ship construction, complicated construction procedures, lengthened construction period, and No.038 ship, equipped with second-hand refurbished engines, docked after the completion of the construction. No one cared about it, causing huge property loss to Xixiakou Ship Industry. Xixiakou Ship Industry, as the buyer of second-hand engines and the owner and actual rights and obligations of No.038 ship, after suffering huge loss, the claims to the court had factual and legal basis. Xixiakou Ship Industry claimed to affirm the judgment of first instance. The evidence submitted by SPLIETHOFF in second instance: 1. certificate issued by Lloyd’s Register of Shipping, which stated that in the branch of Lloyd’s Register of Shipping in the Netherlands, it was not able to find the record that SPLIETHOFF entrusted investigation on the two main engines involved and issued certificates, but no record of invoices issued by Lloyd’s Register of Shipping to SPLIETHOFF to issue the above certificates was found. SPLIETHOFF wanted to prove that it had not commissioned Lloyd’s Register of Shipping to inspect the main engine involved. Xixiakou Ship Industry held that the certificate was not sufficient to overturn the contents of the certificate issued by Lloyd’s Register of Shipping before the dispute arose in the case, and it was not new evidence. Wartsila and Wartsila Shanghai agreed with the views of SPLIETHOFF. 2. No.038 ship arbitration award and its supplementary arbitration award, to prove that, according to the shipbuilding contract between SPLIETHOFF and Xixiakou Ship Industry and British law, SPLIETHOFF had the right to terminate the No.038 shipbuilding contract. If Xixiakou Ship Industry suffered loss due to the termination of the contract, it should be born by it. Xixiakou Ship Industry held that the award was a question of whether the ship would be delivered before the date of delivery agreed in the contract and had no relevancy to this case. Wartsila and Wartsila Shanghai agreed with the opinion of SPLIETHOFF. The evidence submitted by Xixiakou Ship Industry in second instance included that: Report on the Inspection and Troubleshooting of No.038 Ship Main Engine Startup (Additional Report) issued by Sanjie and notarial certificate of Rongcheng Notary Office on the inspection process of No.038 ship main engine by Sanjie, to prove that No.038 main engine involved was a second-hand refurbished engine. Wartsila and Wartsila Shanghai held that the evidence was not new, and the judgment of the steel seal was not confirmed by the relevant classification society, and the conclusions on certain phenomena were also uncertain. SPLIETHOFF held that the evidence was not new evidence, and Xixiakou Ship Industry’s inference was not established. In second instance of the case, Xixiakou Ship Industry also submitted Relevant Opinions on No.038/039 Ships Main Engine and Propulsion System issued by Sanjie and the notarization of Wartsila’s website by the Qingdao Municipal Notary

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Office, to prove that after replacing the main engine, the propulsion system needed to be replaced at the same time. SUN Mingliang, an engineer from Sanjie, appeared in court as an expert assistant. SUN Mingliang held that the main engine and propulsion system together constituted the ship’s power propulsion system, and the ship’s power propulsion system was matched and designed according to the performance of the main engine; the propulsion system of the ship involved was matched according to the technical parameters of the second-hand main engine; the technical performance and technical parameters of the second-hand main engine involved were lower than that of the main engine currently produced by Wartsila, and the dimensions of the two were also different. The main engine produced now was no longer suitable for the original propulsion system. Wartsila and Wartsila Shanghai applied for Shanghai Maritime University professor ZHAN Yulong to appear in court as an expert assistant. ZHAN Yulong held that the order of ship propulsion device design and selection was ship-propeller-machine instead of the machine to determine the propeller. The operating point of the matching between the main engine and the propeller was a range. For example, the main engine of the same model of Wartsila could be matched with the original propulsion system because of the same power (or torque), speed and size. Wartsila submitted its product catalog to illustrate the main parameters of its various main engines. SPLIETHOFF applied for XU Xiaoxin, associate professor of Shanghai Jiaotong University, to appear in court as an expert assistant. XU Xiaoxin held that Wartsila could technically calibrate the output power of the main engine to be replaced so that its power and speed were the same as the original main engine, so there was no need to replace the current propulsion system. The dimensions mentioned by the expert assistants of Xixiakou Ship Industry were external dimensions, and these dimensions were not closely related to the connection between the main engine and the propulsion system. The coordination between the machine, the propeller and the ship was the coordination of parameters. The ship trial voyage results in the case showed that the design of the machine, propeller and ship was good. The court finds out that: Xixiakou Ship Industry’s claims in the complaint included the provision of a new engine and propulsion system, and since then it did not give up the claim for the provision of a new propulsion system. On May 14, 2012, Xixiakou Ship Industry proposed a loss list and calculation method, the Sub-paragraph 1 of which was “main engine payment EUR3.0163 million … (or provide new main engine)”. On March 20, 2013, Xixiakou Ship Industry listed the loss calculation details, and did not involve the provision of new main engines and propulsion systems. Xixiakou Ship Industry’s claims included judging the three Appellants to compensate for loss, but did not claim interest on the aforementioned loss. On May 14, 2012, Xixiakou Ship Industry claimed to use the exchange rate of May 13, 2012 to convert the price of the main engine involved into RMB. On October 18, 2011, Xixiakou Ship Industry and Rongzhi International Shipping Co., Ltd. concluded an agreement, which stated that in order to avoid further loss in Xixiakou Ship Industry, the two parties agreed to register No.038 ship to Rongzhi International Shipping. Co., Ltd.; Xixiakou Ship Industry promised

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that all obligations, responsibilities, debts and fee related to No.038 ship would be born by Xixiakou Ship Industry; Rongzhi International Shipping Co., Ltd. promised that all rights related to No.038 ship would be exercised by Xixiakou Ship Industry. The other facts confirmed by the court are the same as those confirmed in the judgment of first instance. The court holds that: the case is a dispute over ship equipment sale fraud tort, and the tort location is in China. According to the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China Article 44, the substantive dispute in the case should be handled according to the laws of the People’s Republic of China. The issues of the dispute between the parties in the case are as follows: 1. whether the judgment of first instance violates legal procedures. 2. Whether Xixiakou Ship Industry has the qualification of the Plaintiff as the subject of litigation. 3. Whether the three Appellants in the case constituted a joint tort. 4. The tort liability that Wartsila and SPLIETHOFF should bear. 1. Whether the judgment of first instance violates legal procedures. (1) Regarding whether the judgment of first instance judged as claimed. a. Regarding whether Xixiakou Ship Industry abandoned the claim for the Defendant to provide a new propulsion system. On May 14, 2012, Xixiakou Ship Industry submitted a loss list and calculation method, including “main engine payment EUR3.0163 million (or provide new main engine)”. The above loss list and calculation method only involve loss calculation from the name, and the claimed main engine payment EUR3.0163 million is the sum of the price of the main engine and the propulsion system involved. Therefore, from the expression “or provide a new main engine”, it could not be concluded that Xixiakou Ship Industry no longer claimed Wartsila to provide the propulsion system. After Xixiakou Ship Industry filed a claim for the provision of a new propulsion system, it did not give up this claim. The appeal of the Appellant SPLIETHOFF on the issue has no factual and legal basis, and the court does not support it. b. Whether the interest loss exceeds the judgment. In first instance of the case, Xixiakou Ship Industry did not claim interest on its various loss. The first and second of the judgment of first instance judged the three Appellants to pay interest, which exceeds Xixiakou Ship Industry’s claim and should be corrected. The appeal claim of the Appellant has factual basis and the court supports it. c. Regarding the exchange rate conversion date. Xixiakou Ship Industry claimed that the exchange rate of May 13, 2012 should be used to convert the price of the main engine involved into RMB. The judgment of first instance used the exchange rate of February 7, 2010 to converted, which was inconsistent with Xixiakou Ship Industry’s claim, which should be corrected. The appeal claim of the Appellant has factual basis and the court supports it. (2) Whether there are defects in the original trial procedure and whether it affects the substantial justice. a. Regarding the Appellant’s claim, except for the trial on May 14, 2012, only one collegiate panel member participated in the other

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hearings. According to the record of the trial of first instance, all the members of the collegiate panel participated in the previous trials. The Appellant claimed that only one member of the collegiate panel participated in the trial. There was no basis. The court does not support the Appellant’s claim. b. Regarding the issue of the improper time limit for evidence specified by the court of first instance. The court of first instance did not specify a period of evidence for the “ship value depreciation fee” and other items claimed by Xixiakou Ship Industry, and the hearing of the case was in public on March 20, 2013, and the parties were not notified three days before the opening of the hearing, which does not affect the outcome of the judgment. The court does not support the claim that the Appellant claimed that the case should be sent for retrial. c. Regarding the Appellant’s failure to participate in the selection of Shuangcheng and Sanjie as appraisal agencies. The relevant reports of Shuangcheng and Sanjie submitted by Xixiakou Ship Industry were made by above-mentioned agencies it unilaterally entrusted. Therefore, there is no problem of the appraisal agency being selected by all parties. As for this claim of the Appellant, the court does not support it. d. Regarding the issue that the amount of property preservation claimed by the Appellant SPLIETHOFF is much higher than that claimed by Xixiakou Ship Industry, it does not fall within the scope of the second instance of the case and does not affect the substantial judgment of this case. 2. Regarding whether Xixiakou Ship Industry has the qualification of the Plaintiff as the subject of litigation. The court holds that Xixiakou Ship Industry has the qualifications of the Plaintiff as the subject of the litigation. The reasons are that: 1. Xixiakou Ship Industry is the buyer of the ship equipment involved and the infringee of the tort involved. 2. No.038 ship involved was registered under the name of Rongzhi International Shipping Co., Ltd., but Xixiakou Ship Industry submitted the agreement concluded with Rongzhi International Shipping Co., Ltd. in first instance, and when the Appellant did not submit evidence to the contrary, the authenticity of the agreement should be confirmed. According to the agreement, the obligations, responsibilities, debts and fee related to No.038 ship should be born by Xixiakou Ship Industry, and all rights related to No.038 ship should be exercised by Xixiakou Ship Industry. Xixiakou Ship Industry as the bearer of related loss of No.038 ship enjoys the qualification of the Plaintiff in the case. 3. Regarding whether the three Appellants in the case constituted a joint tort. The court confirms that SPLIETHOFF and Wartsila constituted a joint tort. (1) The main engine involved was a second-hand refurbished main engine. In first instance, Xixiakou Ship Industry submitted Inspection Report issued by Shuangcheng, and in second instance, Report on the Inspection and Troubleshooting of No.038 Ship Main Engine Startup (Additional Report) issued by Sanjie was submitted and the notarial certificate issued by the Rongcheng notary office for the process of inspection of the main engine of No.038 ship by Sanjie. The Appellant did not submit contrary evidence to overturn the above report’s description of the main engine’s status and analysis

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conclusions. Therefore, the court confirms the validity of the above two reports, and the above two reports can be used as effective evidence. As an engineer assigned by Wartsila to install and debug the engine involved, emails sent by YANG Naifan have authenticity, legality and relevancy, and his emails can also prove that the main engine involved is a second-hand host. Based on the above two reports and YANG Naifan’s mail, it can be confirmed that the main engine sold by Wartsila to Xixiakou Ship Industry is a second-hand refurbished main engine. (2) SPLIETHOFF and Wartsila have a common intention to provide Xixiakou Ship Industry with second-hand refurbished main engine, and the court confirms that both SPLIETHOFF and Wartsila constitute a joint tort. Firstly, the transcript made by the public security agency to CAO Xu is effective evidence. The transcript can prove that before Xixiakou Ship Industry and Wartsila concluded the purchase contract, Wartsila and SPLIETHOFF agreed that they would use Wartsila’s main engine. Secondly, the email sent by YANG Naifan can prove that SPLIETHOFF delivered the second-hand engine to the Dutch factory for refurbishment and sold it to Xixiakou Ship Industry by Wartsila. The above two pieces of evidence are consistent with the record on the engine certificate issued by Lloyd’s Register of Shipping that the client was SPLIETHOFF and the origin of the main engine was the Netherlands, and can be used as a basis for the confirmation. The above two pieces of evidence can prove that after the second-hand engine was handed over to the Dutch factory for refurbishment by SPLIETHOFF, it was sold by Wartsila to Xixiakou Ship Industry. Wartsila and SPLIETHOFF jointly committed fraud to Xixiakou Shipping, the buyer of the agreement on the main engine purchase agreement. (3) There is a causal relationship between the loss of Xixiakou Ship Industry and the fraudulent activities of Wartsila and SPLIETHOFF. After SPLIETHOFF abandoned the ship, the damage caused by the ship’s main engine being a second-hand main engine was born by Xixiakou Ship Industry. The fraudulent activities of Wartsila and SPLIETHOFF had a causal relationship with the damage that Xixiakou Ship Industry bore. Wartsila and SPLIETHOFF should bear the tort liability for Xixiakou Ship Industry. (4) Wartsila Shanghai should not take joint responsibilty. a) CAO Xu was entrusted by Wartsila to conclude the main engine purchase contract involved, and the consequences of his actions should be born by the client Wartsila. At the time of concluding the contract, although CAO Xu was the sales manager of Wartsila Shanghai, because Xixiakou Ship Industry did not submit evidence to prove that CAO Xu knew or should have known that the main engine involved was a second-hand main engine when concluding the contract, it can not be confirmed that Wartsila Shanghai had deliberate fraud when concluding the contract. b) Even if Wartsila Shanghai was appointed by Wartsila to participate in the commissioning of the main engine involved, it cannot be confirmed that Wartsila Shanghai participated in the tort of Xixiakou Ship Industry, and Wartsila Shanghai should not be liable for tort.

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4. Regarding the tort liability that Wartsila and SPLIETHOFF should bear. (1) Wartsila should provide Xixiakou Ship Industry with a new main engine. If it fails to provide it, it should compensate the price of the main engine, and the joint infringer, SPLIETHOFF should bear joint and several liability for compensation. What Xixiakou Ship Industry purchased from Wartsila and installed on the ship involved should be a new main engine. The two parties did not agree to purchase second-hand main engine. Xixiakou Ship Industry had no prior knowledge of the sale of second-hand main engine by Wartsila. Regardless of whether the various indicators of the second-hand main engine met the requirements during the trial voyage of the ship, there will be substantial differences compared with the new main engine, which does not conform to the purchase intention of Xixiakou Ship Industry. Because of the joint tort of Wartsila and SPLIETHOFF, the second-hand main engine was installed on the ship involved, Xixiakou Ship Industry has the right to claim the two infringing parties to bear the liability for tort, so that Xixiakou Ship Industry can obtain a new main engine, and install the new main engine on the ship involved. Specifically, Wartsila should provide Xixiakou Ship Industry with a new main engine. If it is unable to provide it, it should compensate the price of the main engine, and the joint infringer, SPLIETHOFF, should bear joint and several liability for compensation. The fee of replacing the main engine is the fee that must be paid to install the new main engine on the ship involved, and should also be born by the two infringers. (2) Whether to compensate the price of the propulsion system depends on the replacement of the main engine. From the opinions of various expert assistants, the main engine and the propulsion system should cooperate with each other. Therefore, if the new main engine provided by Wartsila meets the agreement of the main engine purchase contract concluded by Xixiakou Ship Industry and Wartsila and other documents, and can match the existing propulsion system, the propulsion system does not need to be replaced combined with the main engine; if the replaced main engine does not comply with the above agreement and does not match the existing propulsion system, the two infringers should compensate Xixiakou Ship Industry for the price of the propulsion system. (3) The fee of replacing the main engine should be born by Wartsila and SPLIETHOFF. For the fee of replacing the main engine, Sanjie issued Fee Report. The report listed the main engine replacement plan, engineering items, fee and billing standards and reference market, price standards revision coefficients and replacement project fee. The conclusions of the report have sufficient basis. Sanjie is a professional judicial appraisal agency engaged in maritime and maritime commercial technical inspection and consulting, and has the qualification to evaluate the fee of replacing the host in the case. Regarding the report, although the three Appellants raised multiple objection, they did not submit evidence to the contrary. The court confirms its validity. The loss 10,392,840 yuan involved in Fee Report should be supported. The court does not support the Appellant’s claim.

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(4) Wartsila and SPLIETHOFF should compensate Xixiakou Ship Industry for additional sea trial voyage fee, dock berthing fee, depreciation loss, appraisal fee and interest on advance payment. Wartsila’s and SPLIETHOFF’s joint tort caused the ship involved to be equipped with second-hand engine, which led to disputes between Xixiakou Ship Industry and both parties, resulting in litigation, and the ship could not be sold, and the ship was suspended, which incurred additional sea trial voyage fee, berthing fee and ship depreciation loss. There is a causal relationship between the above-mentioned loss and fee and the tort of Wartsila and SPLIETHOFF, and the two companies should be liable for compensation to Xixiakou Ship Industry. Xixiakou Ship Industry claimed additional trial voyage fee, dock berthing fees, tugboats and service fee, crew fee, fuel fee, electricity fee and transformer usage fee totaling 11,788,678 yuan, and submitted corresponding evidence. The above-mentioned fee was inevitably incurred during the additional trial voyage and berthing of the ship. In the case that Wartsila and SPLIETHOFF did not submit evidence to the contrary, the above-mentioned fee of Xixiakou Ship Industry should be supported. The ship has a certain useful life, and the value of the ship will inevitably depreciate over time. The judgment of first judgement confirmed that the depreciation fee 13,148,678.88 yuan at a depreciation rate of 4% per year, which was reasonable and should be affirmed. Xixiakou Ship Industry spent a total of 378,400 yuan of appraisal fee in necessary to determine the tort facts and the amount of loss. This is also a loss of Xixiakou Ship Industry and should be compensated by Wartsila and SPLIETHOFF. Regarding the loan interest for the advance payment of the ship, Xixiakou Ship Industry claimed in second instance that the aforesaid interest was generated by borrowing from other entities, but did not submit evidence of the loans that occurred between it and the bank or other entities within the proof period. The court does not support its claim for calculating interest at an annual loan interest rate of 7% from May 1, 2011 to February 1, 2013. Since the ship has not been sold, Xixiakou Ship Industry was unable to recover the 65,743,394 yuan of the price of the shipbuilding in advance from selling the ship. It has the right to claim the loss of interest on advance payments from Wartsila and SPLIETHOFF from May 1, 2011 to February 1, 2013, the interest should be calculated based on the benchmark loan interest rate for the same period published by the People’s Bank of China. Pulling the threads together, the Appellant Wartsila Shanghai’s grounds for its appeal for not committing tortious acts are established, and Xixiakou Ship Industry’s claims against Wartsila Shanghai should be rejected by the court. The judgment of first instance partially exceeded Xixiakou Ship Industry’s claims, and the excess should not be supported. The court will adjust it. The interest on advance shipbuilding payments claimed by Xixiakou Ship Industry should be calculated at the benchmark loan interest rate for the same period published by the People’s Bank of China. The other grounds of appeal of the Appellant Wartsila and the Appellant SPLIETHOFF are not established and the court does not support it.

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According to the Civil Procedure Law of the People’s Republic of China Article 170 Paragraph 1 Sub-paragraph 2, the judgment is as follows: 1. Change the first item of the Qingdao Maritime Court (2011) Qing Hai Fa Hai Shang Chu Zi No.271 Civil Judgment as that: Wartsila Finland Oy shall provide Rongcheng Xixiakou Ship Industry Co., Ltd. with one engine as agreed by both parties, which shall be within 60 days after the judgment comes into effect; if it is not fulfilled within the time limit, it shall be reimbursed equal to the purchase price of original engine and propulsion system as EUR3.0193 million (at the exchange rate of RMB to EUR on May 13, 2012). SPLIETHOFF’S BEVRACHTINGSKANTOOR B.V. shall bear joint and several liability for this; 2. Change the second item of the Qingdao Maritime Court (2011) Qing Hai Fa Hai Shang Chu Zi No.271 Civil Judgment as that: Wartsila Finland Oy and SPLIETHOFF’S BEVRACHTINGSKANTOOR B.V. shall jointly compensate Rongcheng Xixiakou Ship Industry Co., Ltd. various loss RMB35,708,596.88 yuan, and the interest loss of Rongcheng Xixiakou Ship Industry Co., Ltd. in advance of the shipbuilding payment (the interest loss is based on 65,743,394 yuan, from May 1, 2011 to February 1, 2013, the actual amount should be calculated according to the benchmark loan interest rate for the same period published by the People’s Bank of China); 3. Reject other claims of Rongcheng Xixiakou Ship Industry Co., Ltd. against Wartsila Finland Oy and SPLIETHOFF’S BEVRACHTINGSKANTOOR B.V.; 4. Reject other claims of Rongcheng Xixiakou Ship Industry Co., Ltd. against Wartsila Engine (Shanghai) Co., Ltd. The above-mentioned obligation to pay money shall be performed within 10 days after the judgment comes into effect. If overdue payment happened, it shall double the payment of interest on the debt during the period of delay according to the Civil Procedure Law of the People’s Republic of China Article 253. Court acceptance fee offirst instance in amount of 412,756 yuan, shall be jointly born by Wartsila Finland Oy and SPLIETHOFF’S BEVRACHTINGSKANTOOR B.V. Court acceptance fee of second instance in amount of 412,756 yuan, Wartsila Finland Oy and SPLIETHOFF’S BEVRACHTINGSKANTOOR B.V. shall jointly bear 371,480 yuan and Rongcheng Xixiakou Ship Industry Co., Ltd. shall bear 41,276 yuan. The judgement is final. Presiding Judge: YANG Jie Judge: DONG Bing Acting Judge: FENG Yuhan April 2, 2014 Clerk: CHI Ning

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The Supreme People’s Court of the People’s Republic of China Civil Judgment Rongcheng Xixiakou Ship Industry Co., Ltd. v. Wartsila Engine (Shanghai) Co., Ltd. et al. (2016) Zui Gao Fa Min Zai No.15 Related Case(s) This is the judgment of retrial, and the judgment of first instance and the judgment of second instance are on page 1113 and page 1131 respectively. Cause(s) of Action 246. Dispute over maritime fraud. Headnote Lower courts held that the purchaser of a ship under construction and the supplier of engines to be used in the ship were liable to the shipyard for supplying a defective engine, the Supreme Court reversed their decision on the ground that the lower courts had treated the claim as one in tort, when it was properly regarded as a contract claim and thus subject to arbitration. Summary This case was a petition for retrial heard before The Supreme People’s Court of the People’s Republic of China. The retrial applicants were Wartsila Finland Oy and Spliethoff’s Bevrachtingskantoor B.V. and the respondent was Xixiakou Ship Industry Co., Ltd. On January 17, 2007, Xixiakou (the original plaintiff) signed two agreements of purchase for main engines and propulsion systems for ships they were building for Spliethoff. Spliethoff insisted in the construction contract that the engines be purchased from Wartsila through their agent in China, Ying Qin Engine, the other two defendants in the original trial. During the first vessel’s (M/V 038) sea trials, the main engine failed to maintain the appropriate oil pressure for operation. Upon warranty and repair inspections provided by Ying Qin Engine, it was discovered that both the main engine and the crank shaft were second hand and refurbished by either Spliethoff or Wartsila. As Wartsila’s agent, Ying Qin Engine manufactured new parts for repairs for the Wartsila engine, but Xixiakou Shipping claimed the main engine failed to ever maintain the appropriate oil pressure. As the vessel construction time had already surpassed the contracted timeline, Spliethoff gave notice of contract rescission and abandoned the vessel. Xixiakou Shipping petitioned the court of first instance accusing all three defendants of maliciously conspiring to sell Xixiakou the second-hand engine, constituting business fraud and infringement upon the lawful rights and interests of Xixiakou Shipping.

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The court of first instance found for the plaintiff and decided that Wartsila should have provided the same main engine and propulsion systems as originally agreed upon by contract or else compensate Xixiakou the original purchase price of 3,019,300 EUR plus interest according to the interest rate for the corresponding time period. Ying Qin Engine and Spliethoff should be jointly and severally liable. The three entities were held to be jointly and severally liable to Xixiakou for the corresponding losses of 43,803,138.88 RMB with interest and the court costs of 412,756 RMB. The court of second instance modified the ruling regarding compensation for the main engine and propulsion system to make Spliethoff jointly and severally liable. The court also chose to eliminate liability for Ying Qin Engine after finding insufficient evidence to prove that Ying Qin knew or should have known about the refurbished status of the main engine or that they conspired in any way against Xixiakou. The retrial court considered four separate issues raised by the applications for retrial. First, they analyzed the litigation qualification of Xixiakou. They found that Xixiakou instituted their appeal because they believed Wartsila provided an old engine that resulted in them suffering loss. Therefore, Xixiakou had an interest in the case and was the competent subject. The relevant agency and registration entities and relationships were inconsequential: all debts and liabilities still fell to Xixiakou, therefore their litigation qualification stands. Next, the Retrial court considered the legality of procedure for the original trials. They discussed a change in the loss calculation and decided it did not constitute a waiver of Xixiakou’s right to claim actual compensation in the form of a main engine and propulsion system from Wartsila. They determined that the decisions of the courts of first and second instances not to demand that Xixiakou return the original second hand main engine and propulsion system did not constitute unjust enrichment. The proper procedure would be for the Wartsila or Spliethoff to file a separate appeal to claim the return of the engine. The Retrial court denied the objection by Spliethoff and Wartsilla to the short notification timeline for one of the hearings, finding that the petitioners could not claim insufficient time to introduce evidence if there was no specific evidence to introduce or an indication that the decision may have been adversely affected. Lastly the court dismissed a claim that the court of second instance failed to appropriately attribute probative force to evidence introduced by Spliethoff because the evidence lacked the ability to confirm the particular relevant facts. The court chose not to address the jurisdiction of the court of first instance due to a previous ruling affirming the jurisdictional claim as proper. In a six-point discussion, the court addressed the fraud claim. First, they determined that according to the evidence presented regarding Spliethoff’s relative interest in the main engine of their own ship being operational and of high quality, the court could not affirm that Spliethoff and Wartsila colluded maliciously in choosing a refurbished main engine. Secondly, they determined that Xixiakou caused the termination of the contract by late construction and it was therefore

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illogical to assume that Spliethoff had the intention of collaborating with Wartsila to provide the old main engine on the speculative chance that they could abandon the contract when Xixiakou failed to finish construction on time. Thirdly, they held that the survey reports offered as evidence prove simply that the engine was a refurbished engine, but indicate nothing about collusion or intent to defraud. Fourthly, the certificates of inspection offered by the parties confirmed dates that cast suspicion on Xixiakou’s insistence that all parties knew and should have known far prior to the main engine’s delivery that there were problems or even that the engine was a second-hand engine. Fifth, the court found the Factory Acceptance Inspection report had no probative force, as it merely confirmed that the main engine may be second hand and not the intent of any party to defraud another. Finally, the e-mail from the first repair and inspection team from the sea trials lacked the conclusive ability to prove Xixiakou’s accusations because although the team leader made reference to “looking up the engine data”, the record to which he referred could not be produced and he was not present at the trial. The retrial court therefore refused to uphold the previous rulings finding Spliethoff, Wartsila, and Ying Qin Engine jointly and severally liable for a fraud and infringement tort. Finally, the court determined that the courts of first and second instance improperly applied the Tort Liability Law when the entire dispute clearly centered around a contractual issue. The list of civil rights and interests central to the Tort Liability Law does not extend to breaches of contract. The mere creditor’s right of contract between the counterparts of the contract fall under the broad range of Chinese Contract Law, and this issue should have been addressed as a dispute over performance interests, and therefore litigated under the contract’s arbitration provision. For the reasons outlined above, the court chose to abrogate the 2013 ruling of the Shangdong Superior People’s Court, abrogate the 2011 ruling of the Qingdao Maritime Court and dismiss all claims by Xixiakou, who will be liable for the acceptance fees of all three trials.

Judgment The Claimant of Retrial (the Defendant of first instance, the Appellant of second instance): Wartsila Finland Oy. Domicile: P. O. Box 252, Tarhaajantie 2, FIN-65101Vaasa, the Republic of Finland. Representatives: Leena Syrjala, chief contracts manager of the company; Riitta Jarvi, chief financial officer of the company. Agent ad litem: NIU Lei, lawyer of Beijing Zhonglun Law Firm Shanghai Branch. Agent ad litem: XU Tao, lawyer of Beijing Zhonglun Law Firm Shanghai Branch.

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The Claimant of Retrial (the Defendant of first instance, the Appellant of second instance): Spliethoff’s Bevrachtingskantoor B.V. Domicile: Radarweg 36, 1042AA Amsterdam, the Kingdom of the Netherlands. Representatives: M. Fransen, F. Louwers, executive directors of the company. Agent ad litem: LU Min, lawyer of Shanghai Rolmax Law Office. Agent ad litem: LUO Congrui, lawyer of Shanghai Rolmax Law Office. The Respondent of Retrial (the Plaintiff of first instance, the Respondent of second instance): Rongcheng Xixiakou Ship Industry Co., Ltd. Domicile: Xixiakou Village, Rongcheng, Shandong, China. Legal representative: TIAN Minfeng, executive director of the company. Agent ad litem: CHEN Bin, lawyer of Beijing Anjie Law Firm. Agent ad litem: ZHAO Qian, lawyer of Beijing Anjie Law Firm. The Defendant of first instance, the Appellant of second instance: Yingqin Engine (Shanghai) Co., Ltd. Domicile: No.55 (Plot FM5-1, Area F) Xiya Road, the People’s Republic of China (Shanghai) Pilot Free Trade Zone. Legal representative: James Han, general manager of the company. Agent ad litem: NIU Lei, lawyer of Beijing Zhonglun Law Firm Shanghai Branch. Agent ad litem: XU Tao, lawyer of Beijing Zhonglun Law Firm Shanghai Branch. With respect to the case arising from dispute over ship equipment sale fraud tort between the Claimants of Retrial, Wartsila Finland Oy (hereinafter referred to as Wartsila), Spliethoff’s Bevrachtingskantoor B.V. (hereinafter referred to as SPLIETHOFF), and the Respondent Rongcheng Xixiakou Ship Industry Co., Ltd. (hereinafter referred to as Xixiakou Ship Industry) and the Defendant of first instance, the Appellant of second instance Yingqin Engine (Shanghai) Co., Ltd. (formerly Wartsila Engine (Shanghai) Co., Ltd., hereinafter referred to as Yingqin), the Claimants disagreed with the Shandong High People’s Court (hereinafter referred to as the court of second instance) (2013) Lu Min Si Zhong Zi No.87 Civil Judgment, and filed an application for retrial before the court. On December 14, 2015, the court made (2014) Min Shen Zi No.1722 Civil Ruling to try the case. The court formed a collegiate panel according to the law and held a hearing in pubic on March 2, 2016. Agents ad litem of all parties appeared in court to attend the hearing. Now the case has been concluded. Xixiakou Ship Industry claimed to the Qingdao Maritime Court (hereinafter referred to as the court of first instance) on June 17, 2011 that: Xixiakou Ship Industry and SPLIETHOFF concluded a shipbuilding contract on June 3, 2006, and according to SPLIETHOFF’s requirements, concluded the agreement on purchase of a set of main engine (also known as the main engine) with Wartsila on January 17, 2007. Yingqin, Wartsila and SPLIETHOFF deliberately concealed facts during the transaction, installation and commissioning process, and sold Xixiakou Ship Industry using the old machine as a new machine. Their actions constituted commercial fraud and violated Xixiakou Ship Industry’s legal rights and interests. It claimed that Yingqin, Wartsila and SPLIETHOFF should provide a set of the same

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main engine and propulsion system as agreed in the contract; compensate for ship devaluation loss and other loss RMB43,803,138.88 yuan (the currencies in the judgment are all RMB, unless they are specifically specified as foreign currencies); Yingqin, Wartsila and SPLIETHOFF were jointly liable for each other and should bear the litigation fee of the case. The court of first instance found out that: on June 3, 2006, the ship producer Xixiakou Ship Industry and the ship buyer SPLIETHOFF concluded two shipbuilding contracts No.XXK06-038 and XXK06-039. In 12500D WT Technical Specification and List of Manufacturer concluded at the same time, SPLIETHOFF claimed Xixiakou Ship Industry to accept preferred engine supplier by SPLIETHOFF when selecting the engine supplier for No.038 ship and to designate Wartsila as its sole preferred engine supplier in the technical specification. Meanwhile, 12,500 DWT Technical Specification Article 2.3.1 (the technical specification clause required by SPLIETHOFF for the engine), the brand of the engine was directly written as Wartsila and the model was indicated as W6L46. On January 9, 2007, SPLIETHOFF concluded a supplementary agreement with Xixiakou Ship Industry, which explicitly required that the ship main engine must use Wartsila main engine, and pointed out that the supplementary agreement was more effective than the (shipbuilding) contract. On January 17, 2007, Xixiakou Ship Industry and Wartsila concluded two purchase agreements for the main engine and propulsion system No. XXK06-038-001 and No.XXK06-039-001) (hereinafter referred to as engine supply contract) at the same time, which were signed by SU Bo, the general manager of Xixiakou Ship Industry at the time, and CAO Xu, the representative of Wartsila (Sales Manager of Yingqin), with the price of EUR3,019,300. On April 30, 2008, Xixiakou Ship Industry paid to Wartsila, the full amount of EUR3,019,300. According to the engine nameplate, in July 2008, the engine with model of Wartsila W6L46 (serial number was PAAE082740) was produced by Wartsila Holland. In October 2008, the engine was consigned by Wartsila to Xixiakou Ship Industry. On July 13, 2009, SPLIETHOFF gave notice to Xixiakou Ship Industry to abandon xxk06-038 No.038 ship (hereinafter referred to as No.038 ship). In April 2011, YANG Naifan, an engineer in charge of installation and commissioning of Yingqin, after No.038 ship failed to meet the required oil pressure during its trial voyage, it emailed Xixiakou Ship Industry, which stated that: “we checked the engine records. SPLIETHOFF bought an old Wartsila engine from somewhere and refurbished it at its plant in the Netherlands. In the end, SPLIETHOFF sold the engine to Wartsila and that’s how the engine came to be.” In order to solve the problem of too low oil pressure, Wartsila found that the model was wrong when replacing the bearing bush for Xixiakou Ship Industry twice. Finally, according to the data of the crankshaft, the bearing bush was re-ordered and installed on the third time. In July 2011, Xixiakou Ship Industry commissioned Qingdao Shuangcheng Ship Technical Consulting Co., Ltd. (hereinafter referred to as Shuangcheng) to board the ship for inspection. After measuring the crank pin diameter of the main engine

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and the thickness of the bearing liner, as well as a close inspection of the frame paint and connecting rod, it was concluded that the W6L46 engine was a second-hand main engine after renovation. After that, Xixiakou Ship Industry commissioned Qingdao Sanjie Maritime Technology Consulting Co., Ltd. (hereinafter referred to as Sanjie) to evaluate the replacement of the main engine and the amount of related loss, and concluded that the direct cost of replacement of the main engine was 103,928,400,000 yuan. A total of 378,400 yuan of related appraisal cost was generated. In September 2012, Xixiakou Ship Industry reported the case to the Rongcheng Public Security Bureau on the grounds that SU Bo and CAO Xu were suspected of fraud by reselling used engines. The Economic Investigation Brigade of Rongcheng Public Security Bureau interviewed SU Bo, the general manager of Xixiakou Ship Industry at the time. The Inquisition Record showed that: “it would rather not use Xixiakou Ship Industry’s shipbuilding than give up the use of Wartsila’s ship engine”. The Economic Investigation Brigade of Rongcheng Public Security Bureau interviewed CAO Xu. The Inquisition Record showed that: the Dutch shipowner (SPLIETHOFF) was to build several ships in Xixiakou, China, the shipowner had negotiated with Wartsila Holland about quantity, price and delivery time, Wartsila commissioned Wartsila China to conclude the contract on behalf. In the trial of first instance, Xixiakou Ship Industry claimed that for the second-hand engine of the Defendant, it caused corresponding loss and specified the amount: 10,392,840 yuan for replacement of main engine, 13,148,678.88 yuan for ship value depreciation, additional trial voyage fee 365,080 yuan, and berthing fee 2,490,318 yuan, tug berthing and service fee 4,803,096 yuan, crew fee 1,155,600 yuan, fuel fee 630,000 yuan, electricity and transformer usage fee 2,344,584 yuan, appraisal fee 378,400 yuan, the interest loss 8,094,542 yuan, and the above total was RMB43,803,138.88 yuan. Interpreted together as that: the aforesaid ship value depreciation fee, additional trial voyage fee, dock berthing fee, berthing tug and service fee, crew fee, fuel and material fee, electricity fee and transformer usage fee are all depreciation fee and normal maintenance fee caused by the problem of the second-hand refurbished main engine which caused the ship to dock at the terminal for two years and in a long time not put into operation; in order to safeguard their own rights and interests, hiring appraisal institutions appraisal, would inevitably produce corresponding appraisal fee; SPLIETHOFF only paid 60% of the No.038 ship, there were USD8,196,000 ship money not paid to Xixiakou Ship Industry, on July 13, 2009, after SPLIETHOFF abandoned ship, to complete shipbuilding project, Xixiakou Ship Industry loaned, resulting in corresponding interest, the amount of loan interest loss was calculated based on the average exchange rate of RMB against USD on June 2, 2006 and the annual loan interest rate of 7%. For the above loss, Xixiakou Ship Industry provided the corresponding bills, which were cross-examined by the parties to the case. No.038 ship was built by Xixiakou Ship Industry. The ship was a multi-purpose ship with a load of 12,500 tons, a length of 136.64 m, a width of 18.9 m and a depth of 11.65 m. On July 13, 2009, after SPLIETHOFF abandoned the ship under construction, Xixiakou Ship Industry named the ship M.V. DONGTAIBAOHONG

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and registered it under the name of Rongzhi International Shipping Co., Ltd. (hereinafter referred to as Rongzhi) in the Republic of the Marshall Islands. However, the ship was docking in Longyan Port Wharf, and it was that Xixiakou Ship Industry in fact managed, possessed. On October 18, 2011, Xixiakou Ship Industry with Rongzhi in Qingdao, Shandong, concluded an agreement: in view of the requirements of the navigation safety convention and other reasons, M.V. DONGTAIBAOHONG (No.038 ship) was ready to be registered in the name of Rongzhi, but “all rights (including but not limited to possession, use, income, disposal, right of recourse to creditor’s rights) related to the ship were exercised by Xixiakou Ship Industry. Rongzhi registered the ship with the Republic of the Marshall Islands on December 2, 2011 after the agreement came into effect. Xixiakou Ship Industry never delivered the ship to Rongzhi, and Rongzhi never actually managed, possessed, used, benefited or disposed of the ship. In the engine certificate issued by Lloyd’s Register of Shipping provided by Yingqin and Wartsila, the manufacturer was clearly named as Wartsila Holland Co., Ltd. and the client was SPLIETHOFF. According to the rules and practices of the industry, the client was the applicant surveyor or the consignor of classification society. Shuangcheng was a institution authorized by Qingdao Ship Inspection Bureau of the People’s Republic of China to carry out inspection of ships and marine facilities, and was also a professional judicial appraisal institution listed in the list of judicial appraisers of the court of second instance. Sanjie approved by the court of second instance, was a professional judicial appraisal organization, which was listed in the judicial appraiser list of the court of first instance, and was a specialized company specializing in maritime and maritime commercial technology inspection and consultation approved by the state. The court of first instance held that: the case was a dispute over ship equipment sale fraud tort related to foreign factors, the substantive disputes in the case should be handled according to the laws of the place where the tort was committed, namely the People’s Republic of China. Xixiakou Ship Industry was the infringed in the engine fraud and tort case, and enjoyed the legal qualification of the Plaintiff. The facts and evidence in the case were sufficient to prove the fact that Yingqin, Wartsila and SPLIETHOFF jointly implemented that the second-hand main engine was sold to Xixiakou Ship Industry as a new main engine and installed on the new ship. Yingqin, Wartsila, and SPLIETHOFF subjectively had joint fraudulent intentions, and objectively carried out fraudulent acts together. There was a direct and inevitable causal relationship with the damage result, and they should bear joint tort liability. Xixiakou Ship Industry claimed that, Yingqin, Wartsila, and SPLIETHOFF should replace a set of new main engine and propulsion system of the same model for Xixiakou Ship Industry, and bear the resulting replacement fee 10,392,840 yuan, which was not improper. According to that the Regulations on the Management of Old Transport Ships stipulated by the Ministry of Communications (now the Ministry of Transport) stated that the mandatory scrapping period of such ship was 25 years, the ship was actually derogated for 2 years, Xixiakou Ship Industry claimed according to the total ship price 164,358,486 yuan (contract price USD20,490,000), and the service life of the ship was 25 years and the derogatory

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amount of 4% per year was 6,574,339.44 yuan, and the loss was 13,148,678.88 yuan. With regard to other direct economic loss such as installation difficulties, delay in shipping date, delay in commissioning and judicial appraisal caused by SPLIETHOFF after abandoning ship and installing second-hand main engine, it mainly included the daily expenses for the ship to dock such as dock berthing fee, service fee, labor fee, fuel and moisture material fee, electricity fee, loan interest loss. The specific amount was: additional trial voyage fee 365,080 yuan, and dock berthing fee 2,490,318 yuan, tug berthing and service fee 4,803,096 yuan, crew fee 1,155,600 yuan, fuel fee 630,000 yuan, electricity and transformer usage fee 2,344,584 yuan, appraisal fee 378,400 yuan. SPLIETHOFF had only paid 60% of the amount of No.038 ship, and there was still USD8,196,000 that had not been paid. After SPLIETHOFF abandoned ship on July 13, 2009, Xixiakou Ship Industry took out the loan to complete the shipbuilding project, and the corresponding interest 8,094,542 yuan was generated accordingly. The above total amount was 43,803,138.88 yuan. Xixiakou Ship Industry claimed compensation and should be supported according to the law. In summary, after the trial committee of the court of first instance studied, according to the General Principles of the Civil Law of the People’s Republic of China Article 4 and Article 117, and the Tort Liability Law of the People’s Republic of China Article 6, Article 8, Article 15 and Article 19, (2011) Qing Hai Fa Hai Shang Chu Zi No.271 Civil Judgement was made as follows: 1. Wartsila should provide Xixiakou Ship Industry with a set of main engines and propulsion systems of the same model, which should be fulfilled within 60 days after the judgment came into effect; if the performance was not fulfilled within the time limit, it should compensate with the original main engine and propulsion system purchase price EUR3.0193 million (at the exchange rate of RMB to EUR on April 30, 2008), and the interest should be calculated according to the bank loan interest rate for the same period from April 30, 2008 to the date of payment confirmed by the judgment, and Yingqin and SPLIETHOFF should bear joint and several liability for this; 2. Yingqin, Wartsila and SPLIETHOFF should jointly compensate Xixiakou Ship Industry various loss totaling 43,803,138.88 yuan, and bear the bank loan interest for the same period from the date of the action to the date of payment confirmed by the judgment. Court acceptance fee of first instance in amount of 412,756 yuan, should be jointly born by Yingqin, Wartsila and SPLIETHOFF. SPLIETHOFF, Wartsila and Yingqin appealed to the court of second instance to revoke the judgment of first instance and reject Xixiakou Ship Industry’s claims. The court of second instance found out that: Xixiakou Ship Industry’s claims in the complaint included the provision of a new engine and propulsion system, and since then it did not give up the claim for the provision of a new propulsion system. On May 14, 2012, Xixiakou Ship Industry proposed a loss list and calculation method, the Sub-paragrph 1 of which was “main engine payment EUR3.0163 million … (or provide new main engine)”. On March 20, 2013, Xixiakou Ship Industry listed the loss calculation details, and did not involve the provision of new main engines and propulsion systems. Xixiakou Ship Industry’s claims included judging SPLIETHOFF, Wartsila and Yingqin to compensate for loss, but did not

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claim interest on the aforementioned loss. On May 14, 2012, Xixiakou Ship Industry claimed to use the exchange rate of May 13, 2012 to convert the price of the main engine involved into RMB. On October 18, 2011, Xixiakou Ship Industry and Rongzhi concluded an agreement, which stated that in order to avoid further loss in Xixiakou Ship Industry, No.038 ship would be registered to Rongzhi; all obligations, responsibilities, debts and fee related to No.038 ship would be born by Xixiakou Ship Industry; all rights related to No.038 ship would be exercised by Xixiakou Ship Industry. The other facts confirmed by the court of second instance were the same as those confirmed in the judgment of first instance. The court of second instance held that: the case was a dispute over ship equipment sale fraud tort, and the tort location was in China. According to the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China Article 44, the substantive dispute in the case should be handled according to the laws of the People’s Republic of China. No.038 ship was registered under the name of Rongzhi. However, according to the agreement concluded by Xixiakou Ship Industry and Rongzhi, the obligations, responsibilities, debts and fee related to No.038 ship should be born by Xixiakou Ship Industry. Xixiakou Ship Industry was the buyer of the ship equipment involved and the infringed of the tort involved, and had the qualifications of the Plaintiff. On May 14, 2012, Xixiakou Ship Industry submitted a loss list and calculation method, including “main engine payment EUR3.0163 million (or provide new main engine)”. The above loss list and calculation method only involve loss calculation from the name, and the claimed main engine payment EUR3.0163 million is the sum of the price of the main engine and the propulsion system involved. Therefore, from the expression “or provide a new main engine”, it could not be concluded that Xixiakou Ship Industry no longer claimed Wartsila to provide the propulsion system. After Xixiakou Ship Industry filed a claim for the provision of a new propulsion system, it did not give up this claim. SPLIETHOFF’s claim that Xixiakou Ship Industry had waived its claim to provide a new propulsion system had no factual and legal basis. Xixiakou Ship Industry did not claim the interest on its various loss. The court of first instance judged that SPLIETHOFF, Wartsila and Yingqin paid interest, which exceeded Xixiakou Ship Industry’s claims and should be corrected. Xixiakou Ship Industry claimed the exchange rate of May 13, 2012 to convert the price of the main engine involved into RMB. The judgment of first instance converted it at the exchange rate of February 7, 2010, which was inconsistent with Xixiakou Ship Industry’s claims, which should be corrected. The failure of the court of first instance to specify the period of proof for the ship value depreciation fee claimed by Xixiakou Ship Industry and the failure to notify the parties three days before the hearing on March 20, 2013 did not affect the outcome of the judgment. According to Inspection Report issued by Shuangcheng submitted in first instance by Xixiakou Ship Industry, Report on the Inspection and Troubleshooting of No.038 Ship Main Engine Startup (Additional Report) issued by Sanjie submitted in second instance and the notarial certificate issued by Rongcheng Notary

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Office on the process of inspection on main engine of No.038 ship by Sanjie and YANG Naifan’s email, it could be confirmed that the main engine sold by Wartsila to Xixiakou Ship Industry was a second-hand refurbished engine. The transcript of the inquiries made by the public security agency to CAO Xu could prove that before Xixiakou Ship Industry and Wartsila concluded the main engine supply contract, Wartsila and SPLIETHOFF reached an agreement on the use of Wartsila main engine. The e-mail sent by YANG Naifan could prove that SPLIETHOFF delivered the second-hand engine to the Dutch factory for refurbishment and sold it to Xixiakou Ship Industry by Wartsila. The above two pieces of evidence were consistent with the record on the engine certificate issued by Lloyd’s Register of Shipping that the client was SPLIETHOFF and the origin of the main engine was in the Netherlands. It could prove that SPLIETHOFF delivered the second-hand engine to the Dutch factory for refurbishment and it was sold to Xixiakou Ship Industry by Wartsila, and Wartsila and SPLIETHOFF jointly committed fraud against Xixiakou Ship Industry, the buyer of the main engine supply contract. CAO Xu was entrusted by Wartsila to conclude the contract for the supply of the main engine involved, and the consequences of his actions should be born by the client Wartsila. At the time of concluding the contract, although CAO Xu was the sales manager of Yingqin, Xixiakou Ship Industry did not submit evidence to prove that CAO Xu knew or should have known that the main engine involved was a second-hand one when concluding the contract. Therefore, it could not be confirmed that Yingqin committed fraud intentionally at the time of concluding the contract. Even if Yingqin was assigned by Wartsila to participate in the commissioning of the main engine involved, it could not be confirmed that Yingqin had participated in the tort of Xixiakou Ship Industry, and Yingqin should not be liable for tort. The main engine purchased by Xixiakou Ship Industry from Wartsila and installed on the ship involved should be a new main engine, and Wartsila should provide a new main engine. If not, it should compensate the price of the main engine and the joint infringer SPLIETHOFF should bear joint and several liability for compensation. The fee of replacing the main engine was the fee that must be paid to install the new main engine on the ship involved, and should also be born by the two infringers Wartsila and SPLIETHOFF. Whether the two infringers should compensate the price of the propulsion system depended on the replacement of the main engine. Xixiakou Ship Industry claimed additional trial voyage fee, dock berthing fee, berthing tug and service fee, crew fee, fuel and material fee, electricity and transformer usage fee totaling 11,788,678 yuan, all of which were inevitable fee during the additional trial voyage and berthing of the ship. It submitted corresponding evidence, and should be supported. The ship had a certain useful life, and the value of the ship would inevitably depreciate over time. The judgment of first judgement confirmed that the depreciation fee 13,148,678.88 yuan at a depreciation rate of 4% per year, which was reasonable. Xixiakou Ship Industry spent a total of 378,400 yuan of appraisal fee in necessary to determine the tort facts and the amount of loss. This was also a loss of Xixiakou Ship Industry and should be compensated by Wartsila and SPLIETHOFF. Regarding the loan interest for the advance payment of the ship, Xixiakou Ship Industry claimed in second instance

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that the aforesaid interest was generated by borrowing from other entities, but did not submit evidence of the loans that occurred between it and the bank or other entities within the proof period. The court of second instance did not support the interest of the loan. Since the ship was not sold, Xixiakou Ship Industry was unable to recover the 65,743,394 yuan of the price of the shipbuilding in advance from selling the ship. It had the right to claim the loss of interest on advance payments from Wartsila and SPLIETHOFF from May 1, 2011 to February 1, 2013. In summary, according to the Civil Procedure Law of the People’s Republic of China Article 170 Paragraph 1 Sub-paragraph 2, the court of second instance (2013) Lu Min Si Zhong Zi No.87 Civil Judgement was as follows: 1. change the first item of the judgment of first instance as that: Wartsila should provide Xixiakou Ship Industry with one engine as agreed by both parties, which should be performed within 60 days after the judgment came into effect; if it was not fulfilled within the time limit, it should be reimbursed equal to the purchase price of original engine and propulsion system as EUR3.0193 million (at the exchange rate of RMB to EUR on May 13, 2012). SPLIETHOFF should bear joint and several liability for this; 2. change the second item of the judgment of first instance as that: Wartsila and SPLIETHOFF should jointly compensate Xixiakou Ship Industry various loss RMB35,708,596.88 yuan, and the interest loss of Xixiakou Ship Industry in advance of the shipbuilding payment (the interest loss was based on 65,743,394 yuan, from May 1, 2011 to February 1, 2013, the actual amount should be calculated according to the benchmark loan interest rate for the same period published by the People’s Bank of China); 3. reject other claims of Xixiakou Ship Industry against Wartsila and SPLIETHOFF; 4. reject other claims of Xixiakou Ship Industry against Yingqin. Court acceptance fee of first instance in amount of 412,756 yuan, should be jointly born by Wartsila and SPLIETHOFF. Court acceptance fee of second instance in amount of 412,756 yuan, Wartsila and SPLIETHOFF should jointly bear 371,480 yuan and Xixiakou Ship Industry should bear 41,276 yuan. Wartsila refused to accept the judgment of second instance and applied to the court for a retrial, claiming that: (1) Xixiakou Ship Industry did not have the qualifications to bring a lawsuit in the case. The ownership of ships should be subject to registration, and Xixiakou Ship Industry was not the owner of the ship. Even if the agreement concluded with Rongzhi was true, it could not be entitled to litigation status. Otherwise, the constraints of ship registration could be easily evaded, and the laws and regulations on ship registration would be meaningless. (2) Wartsila and SPLIETHOFF did not constitute joint tort. The main engine involved was not a second-hand refurbished main engine, and the conclusion drawn by the inspection agency unilaterally commissioned by Xixiakou Ship Industry should not be used as the basis for the confirmation. The ship was operating normally, even if the quality of the main engine did not meet the agreement, this was only a breach of contract and not a tort. In the case, there was not enough evidence to prove that Wartsila and SPLIETHOFF had a common fraud against Xixiakou Ship Industry, and that SPLIETHOFF, as the ultimate user of the ship, could not deliberately install defective main engines for its ships. There was no

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causal relationship between the loss of Xixiakou Ship Industry and the delivery of the main engine of the ship. SPLIETHOFF’s abandonment of the ship was the reason for the berthing of the ship. If the ship was delivered on time, Xixiakou Ship Industry would not suffer any loss; and before the main engine involved was installed and used, the construction of the ship exceeded the agreed delivery deadline, and the abandonment of SPLIETHOFF had nothing to do with the main engine issue. (3) The people’s court had no jurisdiction over the case. The parties agreed on an arbitration clause. Regardless of whether Xixiakou Ship Industry was sued for breach of contract or tort, the court had no jurisdiction. Xixiakou Ship Industry once filed an arbitration against Wartsila according to the arbitration clause and put forward the same claims as in the case, indicating that it also recognized the validity of the arbitration clause and recognized that the disputes between the parties in the case were not indivisible. If the court finally confirmed that the case did not constitute a joint tort, it should entirely be based on that the shipbuilding contract and the main engine supply contract were governed by the arbitration agreement and reject Xixiakou Ship Industry’s claims. (4) The loss claimed by Xixiakou Ship Industry was unreasonable. The main engine involved had complete certificates and up to standard performance, which did not cause any damage to the property of Xixiakou Ship Industry. The loss claimed by Xixiakou Ship Industry was at best a direct or indirect loss caused by breach of contract, and the corresponding compensation claim did not comply with the way of bearing the tort liability under the Tort Liability Law of the People’s Republic of China. The replacement fee of the main engine was not incurred, and the ship started operating, indicating that it was not necessary to replace the main engine. For other loss, Xixiakou Ship Industry only provided a small amount of internal documents or vouchers, which were not enough to prove the authenticity of the loss. The main engine supply contract involved specifically stipulated a liability limitation clause, and all claims of Xixiakou Ship Industry were items that were explicitly excluded from this clause. In summary, Wartsila’s claim to revoke the judgments of first and second instance, and to reject Xixiakou Ship Industry’s claims, the litigation fee of first and second instance should be born by Xixiakou Ship Industry. SPLIETHOFF refused to accept the judgment of second instance and applied to the court for a retrial, claiming that: (1) there was no evidence in the case to prove that SPLIETHOFF committed or participated in the fraud against Xixiakou Ship Industry. As the buyer and owner of the two ships involved, SPLIETHOFF chose the internationally renowned Wartsila as the main engine supplier for its own interests, nearly three years before the latest delivery date was agreed. It complied with international practice and was agreed to and written into the shipbuilding contract for Xixiakou Ship Industry, which obviously did not constitute fraud. There was no evidence in the case to prove the intentional and objective behavior of SPLIETHOFF to provide second-hand main engine to harm Xixiakou Ship Industry. Based on the facts discovered by the court, Xixiakou Ship Industry recognized that it had no intention to delay the construction or delivery of the ship from the beginning. And if Xixiakou Ship Industry could strictly fulfill the contract to build and deliver the ship as scheduled, the ship involved (including the main

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engine in dispute) was long owned by SPLIETHOFF, and SPLIETHOFF would obviously not deceive itself on the main engine. The reports of Shuangcheng and Sanjie and the crankshaft certificate of Lloyd’s Register of Shipping could at most prove that the parts of the main engine involved were old parts, and the part that could be proved with the email of YANG Naifan was limited to this, but these evidence materials could not prove the connection between the old parts and SPLIETHOFF. The transcripts of the public security authorities’ inquiries to SU Bo and CAO Xu only involved the fact that SPLIETHOFF had selected the main engine of Wartsila brand. The Lloyd’s Register of Shipping’s main engine certificate did not contain any record of fraud by SPLIETHOFF. The content of the main engine source stated in YANG Naifan’s email was not proved by any evidence. (2) The loss claimed by Xixiakou Ship Industry was not true and objective, and had nothing to do with fraud. The trial voyage report submitted by Xixiakou Ship Industry was sufficient to prove that the main engine involved was in good condition and fully operational. There was no need to replace it, let alone compensate for it. Xixiakou Ship Industry had no right to claim replacement of the main engine. The fact that the ship involved obtained various certificates and was already in operation also proved that the ship involved could operate normally and had commercial value. Moreover, the main engine replacement fee was not actually incurred and should not be supported. Even if the engine involved needed to be replaced, the engine to be replaced should meet the technical parameters agreed in the contract, and main engine would be replaced should comply with the technical parameters agreed in the contract, the technical parameters agreed complying with the contract meant that it could match the propeller, so Xixiakou Ship Industry had no basis for claiming the replacement of the propeller. The shipbuilding contract involved was completely terminated by SPLIETHOFF according to the law due to Xixiakou Ship Industry’s breach of the contract (delayed construction and delivery). Therefore, all fee related to the construction, inspection, and berthing of the involved ship and the depreciation loss of the ship belonged to the default cost of Xixiakou Ship Industry and should be born by Xixiakou Ship Industry on its own, which had nothing to do with SPLIETHOFF. The ship involved was in good condition, and the suspension or non-resale was obviously not causally related to the main engine involved. SPLIETHOFF should not bear the berthing fee, appraisal fee, depreciation loss, and interest on advance payment as claimed by Xixiakou Ship Industry. Moreover, Xixiakou Ship Industry did not provide evidence to prove that the loss claimed by it actually occurred. (3) Replacing the main engine was not a way to bear tort liability. Compared with the method of civil liability under the General Principles of the Civil Law of the People’s Republic of China Article 134, the Tort Liability Law of the People’s Republic of China Article 15 excluded the “repair, production, and replacement” liability method, which was the way of bearing for liability for breach of contract, not the way of bearing tort liability. Xixiakou Ship Industry’s claims and the main content of judgment of second instance was to provide a set of the same engine and propulsion system according to the contract. This was obviously a lawsuit of liability for breach of contract. The joint liability that Xixiakou Ship Industry claimed SPLIETHOFF to bear was also

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liability for breach of contract, not liability for tort. SPLIETHOFF was not a party to the main engine supply contract involved and should not be liable for breach of contract under the contract. (4) There were serious violations of the procedure in judgments of first and second instance. The court of first instance did not grant SPLIETHOFF defense period (jurisdiction challenge period) and time limit for proof. Although the court of second instance tried it, it did not make any confirmation in the judgment. Since March 20, 2013, Xixiakou Ship Industry did not file a claim for compensation for the price of the main engine. The judgment of first judgement exceeded the claim and judged to reimburse and the court of second instance did not correct the error. The court of second instance knew that in order to evade the arbitration clause, Xixiakou Ship Industry used tort liability litigation to conduct breach of contract liability litigation. However, it did not directly reject Xixiakou Ship Industry’s claims for breach of contract liability. It supported Xixiakou Ship Industry’s claim for replacement of the main engine and compensation for the main engine and propulsion system. The procedure seriously violated the law. The courts of first and second instance failed to add outsiders CEIEC Shandong Branch and the (UK) Lloyd’s Register of Shipping as co-Plaintiffs and co-Defendants in the case, which was a procedural violation. The judgment of second instance did not make any confirmation on the new evidence such as the certificate issued by Lloyd’s Register of Shipping submitted by SPLIETHOFF in second instance. The court of second instance did not make any judgment on the disposal of the original main engine and propulsion system after the exchange, which resulted in the improper profit of Xixiakou Ship Industry, which was obviously a major omission. In summary, SPLIETHOFF claimed to revoke judgments of first and second instance, and changed to reject Xixiakou Ship Industry’s claims against SPLIETHOFF. Xixiakou Ship Industry argued that: (1) the courts of first and second instance had jurisdiction over the case. The case was a dispute over ship equipment sale fraud tort. The rulings of first, second instance and the retrial all confirmed that the court of first instance had jurisdiction over the dispute. Wartsila and SPLIETHOFF again claimed that the court of first instance did not have jurisdiction on the same facts and reasons, which should not be accepted. The case was a necessary joint action filed by Xixiakou Ship Industry with Yingqin, Wartsila and SPLIETHOFF as the co-Defendants. The court of second instance confirmed that Yingqin did not constitute a joint tort, which did not affect the jurisdiction of the court of first instance. Regardless of whether Xixiakou Ship Industry filed any arbitration application with International Chamber of Commerce International Court of Arbitration, and the result of the award, it would not affect the jurisdiction of the Chinese court in the case. Xixiakou Ship Industry did not authorize anyone to file an arbitration application against Wartsila to International Chamber of Commerce International Court of Arbitration. (2) Xixiakou Ship Industry had the qualifications to file an action in this case. Xixiakou Ship Industry had the ownership of the ship involved. It was the buyer and victim of the ship’s engine and propulsion system, and had the right to file an action in its own name. (3) The courts of first and second instance confirmed that SPLIETHOFF and Wartsila’s joint tort had factual and legal

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basis. The evidence in the case fully proved that Wartsila provided second-hand refurbished engine to Xixiakou Ship Industry. In the contract with Xixiakou Ship Industry, SPLIETHOFF’s designation of the engine supplier, the certificate issued by Lloyd’s Register of Shipping, the transcript of the public security agency’s inquiries on SU Bo and CAO Xu, and YANG Naifan’s email and other evidence and facts could proves each other that SPLIETHOFF and Wartsila’s malicious collusion to provide Xixiakou Ship Industry with second-hand refurbished engines, which constituted a joint tort. The loss of Xixiakou Ship Industry had a causal relationship with the tort of SPLIETHOFF and Wartsila, and should be compensated by the two companies. The replacement of the engine claimed by Xixiakou Ship Industry, was a stop tort in the form of bearing tort liability under the Tort Liability Law of the People’s Republic of China. (4) The procedures of first and second instance were legal. Xixiakou Ship Industry did not change or increase the claims in the first instance, but clarified the amount involved in the claims. Whether it was necessary to add Lloyd’s Register of Shipping as a co-Defendant in the case belonged to the right of Xixiakou Ship Industry, and no one else had the right to interfere. As for whether CEIEC Shandong Branch, an outsider in the case, should be added as the Plaintiff in the case, the people’s court should decide on the merits of the case. In the second instance, SPLIETHOFF submitted a certificate from Lloyd’s Register of Shipping. The so-called “failure to find relevant records” did not mean that it did not entrust Lloyd’s Register of Shipping to inspect. The evidence was not related to the case. In second instance, Wartsila submitted no new facts and reasons except for a piece of new evidence not related to the case. In summary, the court of second instance confirmed the facts clearly and applied the law correctly. Xixiakou Ship Industry claimed to dismiss the retrial applications of Wartsila and SPLIETHOFF and affirm the judgment of second instance. Yingqin’s statement was the same as Wartsila’s retrial application claim: during the retrial, Xixiakou Ship Industry, Wartsila and Yingqin did not provide new evidence. SPLIETHOFF provided a Chinese translation of the English word “grind” (past participle “ground”) in Oxford Advanced English-Chinese Dictionary during the public hearing of retrial, to prove the Chinese translation of the crankshaft certificate of Lloyd’s Register of Shipping provided by Xixiakou Ship Industry, “the journal and crank pin (449 mm) of the crankshaft wear (ground down to) below the normal size”, among of it the English word “ground” was improperly translated as “wear” and should be translated as “polished”. After cross-examination, Wartsila and Yingqin agreed to the probative force of the evidence, but Xixiakou Shipping denied it. Upon review, the Chinese translation of the English word “grind” in the evidence contained the meanings of “polishing” and “friction” but did not specify the word “wear”, but in view of the broad meaning of the word “friction”, the crankshaft involved was an old crankshaft that was used, and the dimensions of the journal and crank pin of the crankshaft fell below the normal standard. Combined with the context contained in the Lloyd’s Register of Shipping crankshaft certificate, Xixiakou Ship Industry translated the English word “ground” in the certificate as “wear” is not improper, so the court does not confirm the probative force of the evidence.

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On May 10, 2016, Xixiakou Ship Industry applied in written to the court for a investigation to collect records of the production, renovation, inspection and testing as well as the entrustment contract, payment vouchers and other evidence of the main engine involved by Wartsila, Wartsila Holland Co., Ltd., Lloyd’s Register of Shipping Amsterdam Office and Lloyd’s Register of Shipping Rotterdam Office. The court holds that Xixiakou Ship Industry’s application does not comply with the Civil Procedure Law of the People’s Republic of China Article 64 Paragraph 2 and the Interpretation of the Supreme People’s Court concerning the Application of the Civil Procedure Law of the People’s Republic of China Article 94. On August 19, 2016, the court served the notice not to permit the application of investigation and collection of evidence. The facts found out by the court of first instance and second instance are corroborated by relevant evidence, and none of the parties raised objection. The court confirms them. The court also finds out that: on June 3, 2006, Xixiakou Ship Industry and CEIEC Shandong Branch (as the seller) and SPLIETHOFF (as the buyer) concluded two shipbuilding contracts, respectively agreeing that: the date of delivery of No.038 ship was September 30, 2008, and the date of delivery of No.039 ship was January 31, 2009. Both contracts agreed that disputes under or related to the contract should be submitted to London for arbitration. Until the deadline agreed in the shipbuilding contract on April 28, 2009 (210 days after the agreed delivery date of September 30, 2008), No.038 ship was not delivered yet, and the buyer, SPLIETHOFF, on July 13, 2009 notified Xixiakou Ship Industry to terminate the sale and purchase contract of No.038 ship. The seller Xixiakou Ship Industry and CEIEC Shandong Branch appointed arbitrators on November 9, 2009, and initiated the British arbitration procedure. The award was made on April 15, 2008: the delivery date was September 30, 2008; the buyer had the right to terminate the contract on April 28, 2009, and the termination of No.038 ship contract on July 13, 2009 was legal; the seller (Xixiakou Ship Industry and CEIEC Shandong Branch) should return the total amount of USD12.294 million and its interest to the buyer. CEIEC Shandong Branch (as the buyer), Xixiakou Ship Industry (as the client) and Wartsila (as the supplier) on January 17, 2007 on the construction of No.038 ship and No.039 ship, concluded two main engine supply contracts, each of which agreed that the buyer would purchase 1 Wartsila W6L46 main engine, propulsion system and related equipment, and the supplier would sell and deliver the equipment according to the contract and its accessories. Both contracts contained two appendices, appendix 1 was “General Terms and Conditions of Contract-Maritime (2003)”, and appendix 2 was “Technical Specifications 01,194,823-ME Amendment H Applicable on the Main Engine and Technical Specifications 01,194,816-CPP Revision H Applicable on Propulsion System on January 17, 2007”. The two main engine supply contracts did not specifically agree that the main engine supplied by Wartsila should be a new main engine. The relevant clauses in appendix 1 of the main engine supply contract involved “General Terms and Conditions of Contract-Maritime (2003)” stated that: the equipment warranty period was from the date of delivery to 12 months after the

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ship was handed over to the owner or the installation certificate was issued or ended 18 months after the delivery date, whichever was earlier should prevail, the supplier should repair or replace (as determined by the supplier) any parts of the equipment or due to defective design, materials or production processes, any defects appeared within the warranty period as soon as possible (Article 3.4); the contract was bound by the effective law of the supplier’s registration place and interpreted according to it (Article 7.1); if necessary, the parties agreed to seek assistance from International Chamber of Commerce International Court of Arbitration International Technical Accreditation Center according to the ICC Technical Accreditation Rules (Article 7.3); all disputes related to the contract should be finally settled by one or more arbitrators appointed by the International Chamber of Commerce mediation and arbitration rules according to the foregoing rules. The arbitration procedure should be in English and conducted in Paris, France (Article 7.4). Appendix 1 Article 6.2 “Severability of Liability Clause, Compensation Clause and Contract Clause” also specified the supplier’s liability and scope of compensation. According to the description of the main engine installation plan sent by Wartsila to Xixiakou Ship Industry on June 20, 2007, the pressure of the main engine lubricating oil system involved before entering the engine was nominally 400 kPa [4.0 bar]. Inspection Report issued by Shuangcheng on August 12, 2011 for No.038 ship stated that: Xixiakou Ship Industry conducted a trial voyage for the ship on March 16 and 17, 2011, and found that the main engine lubricant pressure was 0.39 to 0.42 Mpa, lower than the ideal working pressure; because the main engine was an old one after refurbishment, they could not adjust the lubricating oil pressure of the main engine normal operation to the ideal pressure, and it was recommended to replace the big end bearing bush of the three connecting rods to solve this problem completely. The email sent by YANG Naifan to Xixiakou Ship Industry on April 28, 2011 regarding the low oil pressure of the main engine of No.38 ship not only reflected that the main engine was the old Wartsila main engine, but also stated that the lubricating oil pressure of the main engine was too low which was discovered during the commissioning. There were 3 end bearings that needed to be replaced with new type bearings to completely solve it; before replacement, there were some special operations to ensure that the lubricating oil pressure of the main engine must exceed 4.0 bar. According to the records of the trial voyage test results of No.038 ship issued by its quality inspectors on July 19, 2011 submitted by Xixiakou Ship Industry in first instance, the pressure of lubricating oil entering the machine during the trial voyage of No.038 ship on July 18, 2011 was 0.5 MPa at 90% load and the main engine speed of 500 r/min, and 0.48 MPa at 100% load and the main engine speed of 500 r/min. Sanjie was commissioned by Xixiakou Ship Industry to issue Technical Consulting Report on February 8, 2012. The report stated that: according to the introduction of the commissioning party Xixiakou Ship Industry, it found that the main engine oil pressure was too low during the trial voyage, which did not meet the requirements of the lubricating oil pressure specified in the description of the main engine, and the main engine could not be used for a normal trial voyage and stopped; although the main engine lubricating oil pressure was adjusted several times by Wartsila’s

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after-sales service, it could not meet the lubricating oil pressure specified in the manual of the main engine; the journal size of the large-end bearing bush of the main engine connecting rod was 1 mm smaller than the diameter specified in the manual of the main engine; after inspection by the surveyor of Shuangcheng, the main engine was a second-hand refurbished main engine. Sanjie issued Additional Report on July 31, 2013, which stated that: the cause of the start-up failure of the main engine of No.038 ship was identified and the failure was eliminated. At the same time, the report reminded that: Xixiakou Ship Industry was requested to attach great importance to the second-hand refurbishment of the main engine to avoid the possibility of other serious failures and damages in future use and maintenance. In the litigation, Xixiakou Ship Industry provided the Lloyd’s Register of Shipping engine certificate (No.AMS0803365/01) for the main engine of No.038 ship, which stated that: the manufacturer Wartsila Holland Co., Ltd.; the client “SPLIETHOFF” (the certificate was recorded as “Spliethoff” in English); used for “SPLIETHOFF”; inspection start date January 11, 2008; inspection end date June 27, 2008; engine serial number PAAE082740; manufacture trade name Wartsila W6L46; crankshaft LRROT0710400; the certificate was signed on June 16, 2010 by A.J.FdeWeerd, an EMEA inspector from the Amsterdam Office of Lloyd’s Register of Shipping, and issued to the above-mentioned client to prove that the production of the main engine complied with requirements for the classification specifications and rules. The certificate did not indicate whether the main engine was a second-hand refurbished main engine. In the litigation, Xixiakou Ship Industry provided the Lloyd’s Register of Shipping crankshaft certificate (No.ROTO710400) for the main engine of No.038 ship, which stated that: the name of the project “SPLIETHOFF’S BEVRACHTINGSKANTOOR B.V. Rongcheng Xixiakou Shipyard-Shipyard No. XXK06-038”; client Wartsila Holland Co., Ltd.; office in Rotterdam, Netherlands; client order number 4500624983; date January 18, 2008; order status complete; the first inspection date was November 26, 2007; the last time was November 26, 2007; at the request of the above-mentioned client, Lloyd’s Register of Shipping EMEA inspector R.J.vaniersel personally visited the factory in Schiedam, Netherlands of the subcontractor Mark van Schaick B.V. on the above-mentioned date and inspected the old diesel engine parts and issued a report A second-hand refurbished solid old crankshaft. The specific situation was that: the crankshaft journal and crank pin (449 mm) were worn out below the normal size; the processing quality of the parts was high and fully conformed to the standard; the crankshaft could continue to be used if the conditions listed in the certificate were met. When the court of first instance held its first hearing on May 14, 2012, Xixiakou Ship Industry answered the question of the judge “whether the Plaintiff has any additional or modified claims” as that: “the claim is changed to 4,189,892 yuan (specifically including the main engine price EUR3,019,300)”. The court of first instance held its fourth hearing on March 20, 2013. At the hearing, Xixiakou Ship Industry clearly claimed compensation of the loss 43,803,138.88 yuan (not including the purchase of main engine and propulsion system price EUR3.0193 million). Before the fourth hearing, the court of first instance served the court

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summons and notice to agents ad litem of SPLIETHOFF, Yingqin and Wartsila on March 18 and 19, 2013 respectively, and agents ad litem of the three companies appeared in court and claimed a period of defense and period of proof. The court of first instance still held the hearing. Based on Xixiakou Ship Industry’s claim to change the claims during the hearing, SPLIETHOFF filed an objection that the court of first instance did not give a period of defense and period of proof, which violated legal procedures. In second instance, SPLIETHOFF provided to the court of second instance a written certificate (certified by notary) issued by Lloyd’s Register of Shipping. The evidence stated that A.G.Deen, the chief inspector of Lloyd’s Register of Shipping EMEA Branch declared on June 12, 2013 that: in the branch of Lloyd’s Register of Shipping in the Netherlands, no record of that SPLIETHOFF entrusted it to carry out the inspection of the main engine involved and the issuance of certificates was found, no record of that Lloyd’s Register of Shipping issued invoices to SPLIETHOFF for issuing above-mentioned certificate was found. The court of second instance organized all parties to cross-examine the evidence, but did not clearly confirm the probative force of the evidence. After the court of first instance accepted the case, when Yingqin, Wartsila, and SPLIETHOFF submitted their defenses, they filed a challenge of jurisdiction on the grounds that the shipbuilding contract and the main engine supply contract between Xixiakou Ship Industry and it contained arbitration clauses. On November 21, 2011, the court of first instance made (2011) Qing Hai Fa Hai Shang Chu Zi No.271-2 Civil Ruling, and rejected its challenge of jurisdiction. Yingqin, Wartsila, and SPLIETHOFF appealed against the ruling. On March 13, 2012, the court of second instance issued (2012) Lu Min Xia Zhong Zi No.62 Civil Ruling: dismiss the appeal and affirm the original ruling. Yingqin, Wartsila and SPLIETHOFF were still dissatisfied and applied to the court for a retrial. After the retrial, the court held that neither of the two arbitration agreements involved could bind all parties to the joint tort dispute in the case. (2012) Min Ti Zi No.130 Civil Ruling was made on November 30, 2012: affirm the Shandong High People’s Court (2012) Lu Min Xia Zhong Zi No.62 Civil Ruling. The court holds that: Xixiakou Ship Industry insisted on filing a tort liability action over the dispute involved, because Wartsila and SPLIETHOFF were companies registered in Finland and the Netherlands respectively, and the marine main engine and propulsion system involved were imported from the Netherlands. There are foreign-related factors in the case. The place of tort claimed by Xixiakou Ship Industry is within the territory of the People’s Republic of China. According to the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China Article 44 on the application of tort liability was the law of the place of tort, the courts of first and second instance applied the laws of the People’s Republic of China to handle the dispute in the case, which was correctly. According to the retrial application of Wartsila and SPLIETHOFF and the defense opinions of Xixiakou Ship Industry, the retrial of the case mainly involves the confirmation for the qualification of litigation subject of Xixiakou Ship Industry, the legality of the trial procedure of first instance, fraud, tort liability and loss and other issues.

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Firstly, regarding the qualification of litigation subject of Xixiakou Ship Industry. Xixiakou Ship Industry filed an action for the case on the grounds that Wartsila provided the old main engine to it and caused it to suffer loss. Xixiakou Ship Industry was the buyer of the main engine and had a stake in this case, and it was a eligible subject for the case. Although the main engine involved was installed on No.038 ship, Xixiakou Ship Industry and Rongzhi concluded an agreement to register No.038 ship under the name of the company, but the two parties agreed that all rights of the ship would still be exercised by Xixiakou Ship Industry. Xixiakou Ship Industry would bear the related debts and liabilities of the ship. As the actual owner of the ship, Xixiakou Ship Industry would still suffer property loss due to the problem of the old main engine involved. Therefore, the registration of No.038 ship under the name of Rongzhi did not affect the confirmation of its stake of Xixiakou Ship Industry. The Maritime Code of the People’s Republic of China Article 9 Paragraph 1 on the acquisition, transfer and elimination of the ship ownership would not be against third parties without registration was the regulation on the effectiveness of ship ownership registration. The dispute arising from the problem of the main engine is not directly related to the registration status of No.038 ship. Wartsila and SPLIETHOFF denied the qualification of Xixiakou Ship Industry as the subject of the litigation on the grounds that No.038 ship was registered under the name of Rongzhi, which has no factual and legal basis, and the court does not support it. Secondly, regarding the legality of the trial procedure of first instance. At the fourth hearing of the court of first instance on March 20, 2013, Xixiakou Ship Industry clearly claimed compensation for the loss amount 43,803,138.88 yuan, which was a change in the loss amount in its claim, and it did not give up claiming Wartsila to provide a set of the main engine and propulsion system of the same model. When the court of first instance judged, it concluded that its claim was not improper. Xixiakou Ship Industry submitted a loss list and calculation method to the court of first instance on May 14, 2012, expressly claiming compensation for the main engine price EUR3.0193 million or providing a new main engine. Only in terms of whether the judgments of first and second instance exceed the scope of the claims of the parties, the courts of first and second instance, while judging to support Xixiakou Ship Industry’s claim for delivery of the new main engine, also confirmed the compensation liability for the discount when the new main engine could not be delivered, which did not exceed Xixiakou Ship Industry’s claims. When the court of second instance judged that Wartsila and SPLIETHOFF provided the same type of main engine to Xixiakou Ship Industry, it did not judge that Xixiakou Ship Industry would return the main engine. Only in terms of procedure, if Wartsila held that Xixiakou Ship Industry’s failure to return the main engine constituted an improper profit, and it can be sued in another case to claim Xixiakou Ship Industry to return it. Therefore, it should not be confirmed that the judgments of first and second instance had omitted claims. The court of first instance held its fourth hearing on March 20, 2013. It failed to notify SPLIETHOFF, Wartsila, and Yingqin three days in advance, and failed to

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give proper period for proof to SPLIETHOFF, Wartsila and Yingqin as they required under the circumstances of Xixiakou Ship Industry’s change claims, all violated legal procedures. However, SPLIETHOFF raised an objection in the retrial, but did not explain that it had available evidence at the time and failed to provide it or suffered other specific adverse effects for it. The court of second instance did not confirm that the procedure defect in first instance had an impact on the outcome of the judgment, which is not improper. Xixiakou Ship Industry entrusted CEIEC Shandong Branch as the buyer to conclude a main engine supply contract with Wartsila. The main engine was actually bought by Xixiakou Ship Industry. CEIEC Shandong Branch had no direct stake in the dispute over tort liability in the case, SPLIETHOFF proposed that the court of first instance failed to add the outsider, CEIEC Shandong Branch, as the co-Plaintiff in the case, which was in violation of legal procedures, and it had no factual and legal basis. Lloyd’s Register of Shipping was the inspector of the main engine involved. SPLIETHOFF claimed that the court of first instance should add it as a co-Defendant in the case, but SPLIETHOFF did not provide any factual basis to show that Lloyd’s Register of Shipping should be the necessary joint Defendant in the case. The court does not support it. The written certificate issued by Lloyd’s Register of Shipping submitted by SPLIETHOFF in second instance stated that the classification society had not found its records of inspection and the issuance of certificates of the main engine involved, but this does not indicate that the classification society did not carry out relevant inspection and issuance of the certificate and it cannot deny the authenticity of the Lloyd’s Register of Shipping’s engine certificate. Although the court of second instance did not directly confirm the probative force of the evidence, it was not improper to confirm the facts based on the evidence. Regarding the jurisdiction of the court of first instance in the case, the court already issued (2012) Min Ti Zi No.130 Civil Ruling, and no further confirmation will be made. Thirdly, regarding the confirmation of fraud. Xixiakou Ship Industry claimed that SPLIETHOFF, Wartsila, and Yingqin maliciously colluded to provide the old main engine and provided a series of evidence in the litigation to try to prove it. After examination, Xixiakou Ship Industry could not prove that SPLIETHOFF and Yingqin had the above intention. The specific analysis and confirmation are as follows: 1. The shipbuilding contract and related supplementary agreement involved, main engine supply contract, and the public security organ’s inquiries to SU Bo and CAO Xu, intensively prove that SPLIETHOFF clearly required that the ship built by SPLIETHOFF must use the main engine produced by Wartsila in the process of concluding the shipbuilding contract with Xixiakou Ship Industry. In view of the fact that the main engine of a ship is one of the most critical parts of the ship, it has a greater impact on the performance and value of the ship. In ship construction, it is common for the buyer or the entrusting party to specify the supplier and model of the main engine for the ship. Therefore, it cannot be

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confirmed based on the above evidence that when SPLIETHOFF and Wartsila concluded the shipbuilding contract and the main engine supply contract with Xixiakou Ship Industry, they colluded to provide the old main engine. After Wartsila’s delivery of the main engine to Xixiakou Ship Industry, SPLIETHOFF chose to terminate the contract based on the fact that Xixiakou Ship Industry could not deliver the ship within the contractual time limit, and the ship construction progress was determined by Xixiakou Ship Industry. SPLIETHOFF could not foresee that it could terminate the contract on the grounds that the ship construction was overdue several years later when it concluded the shipbuilding contract, so as to avoid accepting the ship with the old main engine, which was unfavorable to itself. It is also unreasonable to confirm that SPLIETHOFF had the intention of colluding with Wartsila to provide the old engine to Xixiakou Ship Industry at the time of the contract. Inspection Report issued by Shuangcheng, Report on the Inspection and Troubleshooting of No.038 Ship Main Engine Startup (Additional Report) issued by Sanjie and notarial certificate issued by Rongcheng Notary Office on the process of inspection on main engine of No.038 ship by Sanjie can prove the objective fact that the main engine involved was an old main engine (its crankshaft was a second-hand refurbished part), but it cannot reflect whether the party concerned had a deliberate and subjective mental state. Although the engine certificate of Lloyd’s Register of Shipping stated that the client was “SPLIETHOFF”, the certificate issuance date (June 16, 2010) was after the delivery date of the main engine involved (October 2008), and there was no record of whether the main engine was a second-hand refurbished main engine, the certificate does not prove that SPLIETHOFF knew that the main engine was an old engine at that time. Although the Lloyd’s Register of Shipping crankshaft certificate stated that the crankshaft was a second-hand refurbished crankshaft, it stated that the client was Wartsila Holland Co., Ltd. The date of issuance of the certificate was January 18, 2008, which can prove that Wartsila knew or should have been known from date that the main engine involved was a second-hand refurbished engine, but it can not prove that SPLIETHOFF was aware of it. A main engine factory acceptance inspection report provided by Xixiakou Ship Industry contained 11 inspection sheets, except for the eighth inspection sheet, one person signed it in the name of a staff of Wartsila Holland Co., Ltd. as a participant. No one signed the inspection sheet in the name of the participant or the issuer, and the source is unknown, and its authenticity cannot be confirmed; and there is no record of the main engine involved containing old parts in every inspection sheet, nor can it prove that the personnel of SPLIETHOFF participated in the acceptance inspection on inspection date stated in the receipts (June 20, 2008), so the main engine factory acceptance inspection report has no probative force in the case. Although YANG Naifan’s email to Xixiakou Ship Industry stated that he had “checked the engine records” and suggested that the engine was an old main engine refurbished by SPLIETHOFF to Wartsila, the email was anecdotal

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evidence. YANG Naifan also did not appear in court for investigation and questioning, and from the evidence in the case, such as the inspection certificate and inspection report, YANG Naifan’s judgment that the main engine was an old engine is proved by other evidence, but it cannot be concluded from this that SPLIETHOFF refurbished the old engine and sold it to Wartsila, YANG Naifan’s source of knowledge for judging the engine circulation process “checked the engine records”, which has no effective evidence to prove it, so it should not be confirmed. After comprehensive analysis, the relevant evidence in the case can prove that SPLIETHOFF insisted on choosing the engine produced by Wartsila, the engine involved is a second-hand refurbished main engine, and Wartsila knew or should know the three relatively isolated facts, but it cannot prove SPLIETHOFF and Yingqin knew or should have known that the engine was a refurbished old engine before Wartsila’s delivery of the engine and propulsion system in October 2008, it can not prove that SPLIETHOFF, Yingqin and Wartsila had situation of malicious collusion. Xixiakou Ship Industry claimed SPLIETHOFF and Yingqin to bear joint tort liability, which has no factual and legal basis, and the court does not support it. Thirdly, regarding the confirmation of tort liability and loss. In the main engine supply contract involved, Xixiakou Ship Industry and Wartsila specifically agreed on the technical specifications of the main engine and other equipment, equipment parts warranty (repair and replacement), liability for breach of contract and scope of compensation, dispute resolution methods, and governing laws for handling disputes. During the performance of the contract, Wartsila provided the main engine containing second-hand refurbished crankshafts to Xixiakou Ship Industry. At that time, there was a problem of low lubricating oil pressure of the main engine, and the fault was finally corrected through debugging. The disputes caused by this involved whether it was possible for Wartsila to provide the main engine with some old parts as agreed in the contract, whether the entire main engine should be replaced or only the old crankshaft, whether the old crankshaft must be replaced, and how to bear liability, which are all within the scope of the contract between the parties. Both parties to the contract should abide by the contract, perform the contract in full, and deal with contract disputes according to the contract. It cannot only require the supplier to provide the main engine according to the contract, and not deal with the warranty of flaws of the main engine or its parts and components according to the contract. The repair and replacement of the main engine involved needs to be handled according to the contract. Xixiakou Ship Industry claimed Wartsila “to provide one set of the same main engine and propulsion system as agreed in the contract”, which was obviously the request based on the contract. Xixiakou Ship Industry’s claim for compensation for main engine replacement fee, ship depreciation and maintenance fee is also the fee based on its claim to provide the same main engine as agreed in the contract and the additional fee and the loss of available benefits arising from defects of that Wartsila provided the old main engine it claimed, which both belong to the category of default loss (contract performance benefits) and are contractual claims in nature.

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Although Wartsila might deliberately provide the old main engine in the process of performing the contract, the delivery claimed by Xixiakou Ship Industry has the nature of performance of the contract is not changed by this. There is no evidence in the case that Wartsila’s provision of the old main engine caused Xixiakou Ship Industry to suffer damages other than the contractual creditor’s rights such as the performance of the contract itself and the available benefits. The Tort Liability Law of the People’s Republic of China Article 2 stipulates that: “those who infringe upon civil rights and interests shall be subject to the tort liability according to this Law. Civil rights and interests used in this Law shall include the right to life, the right to health, the right to name, the right to reputation, the right to honor, right to self image, right of privacy, marital autonomy, guardianship, ownership, usufruct, security interest, copyright, patent right, exclusive right to use a trademark, right to discovery, equities, right of succession, and other personal and property rights and interests.” The Tort Liability Law of the People’s Republic of China does not include contract creditor’s rights in the scope of protection of the law, namely, the Tort Liability Law does not regulate breaches of contract. Unless the behavior of one party to the contract violates the contract and at the same time infringes the civil rights and interests protected by the Tort Liability Law, which constitutes a concurrence of liability for breach of contract and liability for tort, the other party to the contract has no right to bring a tort liability lawsuit against one party’s breach of contract. The purely contractual creditor’s rights between the counterparties of the contract belong to the adjustment scope of the Contract Law, not to the adjustment scope of the Tort Liability Law. For the interests of pure contract performance, in principle, protection should be maintained according to the Contract Law, and the parties should not be supported in seeking relief from tort liability. Xixiakou Ship Industry claimed Wartsila, the counterparty of the contract, to bear the tort liability for the loss of interest in the performance of the contract. The courts of first and second instance supported it, which had no legal basis and should be corrected. In view of the fact that Xixiakou Ship Industry’s claim for compensation for tort damages has no legal basis, the court will no longer analyze and confirm the various loss claimed by it. Pulling the threads together, the judgments of first and second instance are wrong in that confirmation of basic facts is lack of evidence and the application of the law is wrong. They supported Xixiakou Ship Industry’s claim for compensation for tort damages, which is incorrect and should be corrected. According to the Tort Liability Law of the People’s Republic of China Article 2, the Civil Procedure Law of the People’s Republic of China Article 207 Paragraph 1, and Article 170 Paragraph 1 Sub-Paragraph 2, the judgment is as follows: 1. Revoke the Shandong High People’s Court (2013) Lu Min Si Zhong Zi No.87 Civil Judgment; 2. Revoke the Qingdao Maritime Court (2011) Qing Hai Fa Hai Shang Chu Zi No.271 Civil Judgment; 3. Reject claims of Rongcheng Xixiakou Ship Industry Co., Ltd.

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Court acceptance fee of first instance and second instance respectively in amount of 412,756 yuan, shall be born by Rongcheng Xixiakou Ship Industry Co., Ltd. The judgement is final. Presiding Judge: WANG Shumei Judge: GUO Zhonghong Judge: YU Xiaohan October 9, 2016 Clerk: LI Na

Shanghai Maritime Court Civil Judgment Shanghai Changying Industry Co., Ltd. v. Pacific International Lines (Pte) Ltd. (2014) Hu Hai Fa Shang Chu Zi No.1159

Related Case(s) None. Cause(s) of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote The Defendant carrier held liable for damage occurring after the end of its period of responsibility because the damage was caused by defective container supplied by the Defendant carrier. Summary In a dispute over liability for damages to a cargo load of fruit that was transported from the Port of Panabo, Philippines, to the Port of Shanghai, China, the Plaintiff, Shanghai Changying Industry Co., Ltd., alleged that the Defendant, Pacific International Lines (Pte) Ltd., failed to maintain a steady temperature and safe transport conditions during shipping. This was alleged to have caused the damage to the fruit during transport. The Plaintiff sued, asking the court to order the Defendant to indemnify the Plaintiff for the loss valued at USD10,465.50. The Defendant argued the damage to the fruit had occurred only after its period of responsibility had passed and the goods were with the consignee, rendering the Defendant not liable. The court held that the Defendant provided the refrigeration unit and container as a part of its contractual promise to the Plaintiff. Therefore, the Defendant was obligated to maintain a working unit. The applicable law does not exempt the liability of the carrier when the goods are lost or damaged due to the cause of the carrier beyond its responsibility period. In this case, the cargo damage occurred after the carrier’s period of responsibility expired, but the cause of the damage was identified, namely functional fault of the refrigerated container provided by the Defendant. The Defendant as the refrigerator supplier, failed to fulfill the obligation to ensure the refrigerated container suitable for the storage of the goods, it therefore has to bear the liability for the cargo’s damage.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_39

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Judgment The Plaintiff: Shanghai Changying Industry Co., Ltd. Domicile: Room C, Floor 1, Building 3, No.701 Gonglu Road, Pudong New Area, Shanghai City, the People’s Republic of China. Legal representative: FANG Xishun, executive director. Agent ad litem: LUO Benjian, lawyer of Shanghai Kaizheng Law Firm. The Defendant: Pacific International Lines (Pte) Ltd. Domicile: 140 Cecil Street #03-00, PIL Building, Singapore. Representative: ZHENG Jianfan (William Tay Kian Phuan), executive director. Agent ad litem: WANG Hongyu, lawyer of Wangjing & Co (Shanghai) Law Firm. Agent ad litem: XIE Yihan, attorney of Wangjing & Co (Shanghai) Law Firm. With respect to the case arising from dispute over contract of the carriage of goods by sea, the Plaintiff, Shanghai Changying Industry Co., Ltd. filed a lawsuit against the Defendant Pacific International Lines (Pte) Ltd. before the court on September 5, 2014. After entertaining this case on the same day, the court organized a collegiate panel to try this case in accordance with law. The court organized the two parties to exchange evidence on January 30, 2014 and held a hearing in public on January 10, 2014. LUO Benjian, agent ad litem of the Plaintiff, WANG Hongyu and XIE Yihan, agents ad litem of the Defendant, appeared in court to attend the trial. After trial, this case has been concluded. The Plaintiff claimed that on April, 2014, the Defendant was entrusted by the Plaintiff to transport a batch of bananas from Panabo port, Philippine to Shanghai Port, China and issued clean on-board bills of lading numbered with No. DCTSHAXXXXXXXXX. On April 29, the goods were sent to the warehouse of the Plaintiff, the bananas were found to be damaged due to freezing.The Plaintiff requested the court to order the Defendant to indemnify the loss for the goods in amount of USD10,465.50, and bear the litigation costs. The Defendant defended that the damage to the goods did not occur during its period of responsibility, and it had exercised due diligence and properly handled the goods in question, it had no fault for the damage, therefore the Defendant should not undertake liability for compensation. So it requested the court to reject the claims of the Plaintiff. In terms of the facts of this case, the Plaintiff adduced the following evidence, the cross-examination of the Defendant and the opinions of the court are as follows: 1. Bill of lading, to prove the establishment of the contract of carriage of goods by sea between the Plaintiff and the Defendant. The Defendant confirmed the authenticity, legality, relevancy and probative force thereof; 2. Container interchange inquiry records, to prove the transport process of the goods in question. The Defendant confirmed the authenticity thereof, but it argued that only the container interchange situation from April 2 to 22 was related to the facts to be proved in this case;

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3. Survey records and pictures, to prove that the goods were frozen and totally damaged. The Defendant had no objection to the authenticity thereof, and accordingly argued that the temperature of the container was normal; 4. Customs declaration, to prove the cargo loss was in sum of USD10,465.50. The Defendant confirmed the authenticity, legality, relevancy and probative force thereof; 5. Invoice of the garbage disposal fee; 6. fact illustration, to prove the total loss of the goods caused garbage disposal fee in sum of CNY5,000. The Defendant confirmed the authenticity of the two pieces of evidence, but it argued that the garbage disposal fee was not directly related to the cargo loss; 6. Import VAT payment instrument, to prove the loss of import VAT loss suffered by the Plaintiff due to cargo loss in sum of CNY8,346.91. The Defendant confirmed the authenticity thereof, but held that the tax had nothing to do with the cargo loss; 7. Invoice of customs declaration, to prove the loss of custom clearance fee suffered by the Plaintiff due to cargo loss in sum of CNY8,346.91. The Defendant confirmed the authenticity thereof, but held that the custom clearance fee was the normal trade cost and had nothing to do with the cargo loss: 8. E-mails, to prove the process that the Plaintiff notified the Defendant about the damage to the goods, request of arrangement of survey, consultation of suggestion on disposal of the goods and claim for compensation. The Defendant confirmed the authenticity thereof, but it argued that the Defendant had never confirmed responsibility for compensation in the e-mails. The court holds that evidence 1–9 can corroborate each other, the Defendant confirmed the authenticity of all the evidence, and the evidence was related to the facts to be proved, so the court confirms the authenticity, legality, relevancy and probative force of evidence 1–9. In terms of the facts of this case, the Defendant adduced the following evidence, the cross-examination of the Plaintiff and the opinions of the court are as follows: 1. Equipment interchange receipt of loading port; 2. equipment interchange receipt of unloading port; 3. pre-trip inspection record (hereinafter referred to as “PTI inspection”) on March 30, 2014; 4. PTI inspection on May 8, 2014, to prove that the container in question was in good condition before the subject voyage, during the voyage and at the end of the voyage. The Plaintiff held that the four sets of evidence were not original, and the evidence formed in foreign territory had not been notarized. From the content, evidence 2 container interchange inquiry records submitted by the Plaintiff indicated that the container was damaged in the container yard on May 6, 2014, but evidence 4 submitted by the Defendant did not reflect the fact, the Plaintiff did not confirm the authenticity of the above four sets of evidence. 5. Container temperature record, to prove that the container in question ran well and the temperature inside the container met the requirement of the goods during the period of the consignee taking delivery of the container from April 14 to 22, 2014, the temperature decreased after the consignee took delivery of the container. The Plaintiff argued that the form of the evidence was text format which could be

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tampered easily. The Plaintiff did not confirm the authenticity of the evidence. Although the Defendant showed the original data in the computer, the Plaintiff did not confirm the authenticity thereof either. The Plaintiff also argued that the temperature in the container had declined since April 25, according to the evidence, it could prove the container was in abnormal working condition. 6. Automatic maintenance record of the container, to prove the failure of the transmitter temperature sensor when the PTI inspection was conducted on May 8, 2014. The Plaintiff argued that there was no Chinese translation of the evidence and the content of the evidence was contradicted with evidence 7 submitted by the Defendant, so it did not confirm the authenticity, legality or relevancy thereof. 7. Unit repair certificate issued by Minjun Container Service (Shanghai) Co., Ltd. (hereinafter referred to as MinJun Company), to prove the broken temperature sensor was replaced on May 8, 2014. The Plaintiff confirmed the authenticity, legality and relevancy thereof. 8. Testimony of the witness DANG Moumou, to prove the PTI inspection, exporting process of the temperature record and other automatic storage data as well as the situation of maintenance. The Plaintiff confirmed the authenticity, legality and relevancy of the testimony, but it held that the statement of the witness belonged to personal knowledge which could be referred but could not play a decisive role in determining facts. The court holds that evidence 3 and 5 was data automatically stored by the recorder of the container, the original data could only be exported through specific software provided by the container manufacturer, and these data could only be read through specific software provided by container manufacturer and could not be modified, the original data could be modified only when they converted to the text format, the Defendant showed the original data of the two pieces of evidence through specific software of the manufacturer on computer, after comparison, the data was consistent with the text format file submitted by the Defendant, and the Plaintiff did not point any inconsistency, accordingly the confirms the authenticity, legality and relevancy thereof, but the court will determine the probative force of the evidence about the container in good condition combined with other evidence material. Evidence 7 and 8 can corroborate other evidence material, and the Plaintiff raised no objection to the authenticity, legality or relevancy of two evidence, so it confirmed the authenticity, legality and relevancy of the evidence. Evidence 1 formed in foreign territory had not been notarized, evidence 2 was only a copy and could only reflect the facial condition of container when it was delivered, it had nothing to do with the refrigeration condition of the container and the running condition of the sensor, evidence 4 and 6 was the printout of the electronic data, the Defendant did not demonstrated the original data, so the authenticity thereof shall not be confirmed, accordingly the authenticity, legality or relevancy thereof shall not be confirmed. The court finds out: In April 2014, the Plaintiff imported a batch of fresh bananas from Philippines. The goods were carried by the Defendant. To fulfill this shipment, the Defendant provided a 40-foot refrigerated container numbered with No.PCIUXXXXXXX.

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On April 2, the empty container was picked up to load goods. When the container was being picked up, the temperature was set at 13.5 °C. After that, the temperature remained 13.5 °C till the container was returned. On April 13, the container with goods fully loaded was transported to the container yard at the port of loading. The refrigerator temperature data remained normal during the period from the loading into the container to delivering at the container yard. On April 14, the goods were loaded on ship, the Defendant issued No. DCTSHAXXXXXXXXX bill of lading. According to the bill of lading, the shipper was LIBERTY BANANA GROWERS MULTIPURPOSE COOPERATIVE, the consignee was the Plaintiff, the name of the ship was M.V. “KOTA KAMIL KMI 089”, the goods were bananas, the quantity thereof was 1,540 cases, the total weight was 22,330 kg, the delivery place was Panao container yard, the loading port was Panabo Port, the unloading port was Shanghai Port, the delivery place was Shanghai container yard, and the trade terms was CY/CY. The bill of lading also stateted that the temperature should be set at 13.5 °C. During the maritime transport, the temperature remained normal. But at 0500 on April 18, the refrigerated container showed code “H006”, which reminded to check the temperature sensor, then the recorder air supplying temperature was 16.3 °C, the recorder air returning temperature was 15.3 °C, the immediate air supplying temperature was 13.5 °C and the immediate air returning temperature was 15.1 °C. At 0509 on the same day, the code eliminated itself. During the period from that time to the time when the goods was delivered at the container yard of the unloading port, the temperature inside the container remained within the normal range and had no obvious abnormality. On April 21, the goods were unloaded at Shanghai Port. On April 22, the goods were delivered to the Plaintiff at container yard of Shanghai Port. After that, the goods still were loaded in the refrigerated container provided by the Defendant and were sent to the warehouse of the Plaintiff after import inspection. At 1200 on April 25, the immediate air supplying temperature code was abnormal showing “***”, which means the temperature detected by the immediate air supplying temperature sensor inside the container was very high. After that, the immediate air returning temperature, recorder air returning temperature, the immediate air supplying temperature and other temperature data were declined constantly and remained around 0 °C since 0100 on April 28. On April 29, the goods arrived at the warehouse of the Plaintiff, and the bananas were found frozen when the container was opened. On April 30, the Defendant entrusted Shanghai Yisheng Insurance Survey Co., Ltd. to carry out a survey of the goods, and found that there were frost and ice beads on the surface of the bananas, the internal temperature of the bananas was below 0 °C, and there was serious frostbite, the frozen bananas were finally disposed as waste. On May 5, the empty container was returned to the container yard. The court also finds out that on March 30, 2014, before picking up the container in question, the Defendant had carried out a PTI inspection on the refrigerated container and the result was “pass”. After returning the container, on May 6, the Defendant carried out a PTI inspection on the refrigerated container and the result is “not pass”. On May 8, Minjun Company fixed the refrigerated container and issued

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a unit repair certificate, which recorded that the fault was J121 alarm, SPOTSS showed 83.5, the repair method was replacing a supplying air temperature sensor. As for the reason caused damage to the goods, the Plaintiff and the Defendant confirmed it was due to frostbite. According to the testimony submitted by the Defendant, if the air supplying temperature sensor failed, the sensor would continue to send out refrigeration instruction. Combined with the temperature records submitted by the Defendant, it can be confirmed that since 1200 on April 25, the supplying air temperature sensor was broken and unable to detect the actual temperature inside the container, so the sensor mistakenly took the temperature inside the container was high and constantly issued instruction of refrigeration, and the temperature inside the refrigerated container dropped to around 0 °C, caused the goods frostbite. As for the value of the goods, the Plaintiff and the Defendant agreed with the CIF price recorded in the customs declaration form in sum of USD10,465.50. The court holds that this case is arising from dispute over contract of carriage of goods by sea. This case involved with foreign-related elements since the Defendant is an foreign legal person and the loading port of the goods is in Philippines. According to Chinese law, the parties involved in foreign-related cases may choose the applicable law to deal with the case. During the trial, both the Plaintiff and the Defendant chose to apply Chinese law to deal with the case, so this case shall be governed by Chinese law. According to Chinese law, the contract of carriage of goods between the Plaintiff and the Defendant is valid, and the Plaintiff is the consignee and the Defendant is the carrier. The issue in this case is whether the Defendant should bear the liability of compensation. The Defendant argued that the transport method in question was refrigerated container, the goods were fresh fruit. In this case, the refrigerated container was an important means and place for the custody of the goods. During the transport, the quality of the goods depended on proper operation of the refrigerated container. Under the contract of carriage, the Defendant is both the carrier and the provider of the refrigerated container at the same time, The behavior of the Defendant to provide the refrigerated container is the consideration of soliciting the business and earning the freight, thus ensuring that the refrigerated container keep in compliance with the purpose of the contract of carriage is a part of fulfilling the contract of carriage. Now the failure of the part of the refrigerated container causes abnormal operation, and eventually led to frostbite, the Defendant should bear the liability for breach of contract. The Defendant, in accordance with Article 46 of the Maritime Code of the People’s Republic of China (hereinafter referred to as the Maritime Law), argued that the damage to the goods did not occur during carrier’s responsibility period, so it should not be liable for the damage. The article provides that “during the period the carrier is in charge of the goods, the carrier shall be liable for the loss of or damage to the goods, except as otherwise provided for in this Section”. The court holds that it is known from the article that if cargo damage occurs during the responsibility period, the Plaintiff shall not be required to bear the burden to prove the cause of the cargo damage, and the carrier shall be liable for the damage unless

Shanghai Changying Industry Co., Ltd. v. Pacific International …

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the carrier can prove that there is a exemption in accordance with the Maritime Law. But this article does not exempt the liability of the carrier when the goods are lost or damaged due to the cause of the carrier beyond its responsibility period. In this case, the cargo damage occurred after the carrier’s period of responsibility expired, but the cause of the damage has been identified, namely functional fault of the refrigerated container provided by the Defendant, the Defendant as the refrigerator supplier, failed to fulfill the obligation to ensure the refrigerated container suitable for the custody of the goods, it should bear the liability for cargo damage. Take a step back, the Defendant, as the carrier, did not fulfill the obligation to properly take care of cargo as provided in Article 48 of the Maritime Law during its responsibility period, should be liable for the loss of cargo occurred after the carrier’s responsibility period expired. During that period when the goods was under the control of the carrier, the refrigerator temperature recorder showed code which prompt to check the temperature sensor, but the carrier did not check, and did not take other effective measures to avoid functional fault or replace the container, and did not prompt the consignee the failure of the sensor either, finally the goods was frostbitten, the carrier did not fulfill the obligation to properly take care of cargo during the responsibility period and should be liable for the damage to the goods occurred after the carrier’s responsibility period expired. So the court does not support the allegation of the Defendant. In addition, the Defendant, in accordance with Article 47 of the Maritime Law, argued that it has exercised due diligence to check the refrigerated container before usage, but it failed to submit sufficient evidence to prove it has carefully taken proper measures to inspect, maintain and fix the refrigerated container, so the court shall not support the allegation of the Defendant. In summary, according to Paragraph 1 of Article 60, Article 107 of the Contract Law of the People’s Republic of China, Article 46, Article 47, Article 48, Paragraph 1 and 2 of Article 55 of the Maritime Code of the People’s Republic of China, Paragraph 1 of Article 64 of the Civil Procedure Law of the People’s Republic of China, the judgment is rendered as follows: The Defendant, Pacific International Lines (Pte) Ltd., shall compensate the Plaintiff Shanghai Changying Industrial Co., Ltd. USD10,465.50 within 10 days upon the service of this judgment. If the Defendant Pacific International Lines (Pte) Ltd. fails to fulfill the obligation of payment within the period ascertained by this judgment, according to Article 253 of the Civil Procedure Law of the People’s Republic of China, the Defendant shall double pay the interest for the delayed period. Court acceptance fee of this case in amount of CNY1,509 shall be born by the Defendant Pacific International Lines (Pte) Ltd. In case of dissatisfaction with this judgment, the Plaintiff Shanghai Changying Industrial Co., Ltd. may within 15 days upon the service of this judgment, the Defendant Pacific International Lines (Pte) Ltd. may within 30 days upon the

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service of this judgment, submit a statement of appeal to the court, together with duplicates in accordance with the number of the opposite parties, to lodge an appeal with Shanghai High People’s Court. Presiding Judge: QIAN Xu Acting Judge: XU Wei People’s Juror: ZHANG Yi February 5, 2016 Clerk: TANG Qin

Appendix: Relevant Laws 1. Contract Law of the People’s Republic of China Article 60 Each party shall fully perform its own obligations as agreed upon. Article 107 If a party fails to perform its obligations under a contract, or its performance fails to satisfy the terms of the contract, it shall bear the liabilities for breach of contract such as to continue to perform its obligations, to take remedial measures, or to compensate for losses. 2. Maritime Code of the People’s Republic of China Article 46 The responsibilities of the carrier with regard to the goods carried in containers covers the entire period during which the carrier is in charge of the goods, starting from the time the carrier has taken over the goods at the port of loading, until the goods have been delivered at the port of discharge. The responsibility of the carrier with respect to non-containerized goods covers the period during which the carrier is in charge of the goods, starting from the time of loading of the goods onto the ship until the time the goods are discharged therefrom. During the period the carrier is in charge of the goods, the carrier shall be liable for the loss of or damage to the goods, except as otherwise provided for in this Section. The provisions of the preceding paragraph shall not prevent the carrier from entering into any agreement concerning carrier’s responsibilities with regard to non-containerized goods prior to loading onto and after discharging from the ship. Article 47 The carrier shall, before and at the beginning of the voyage, exercise due diligence to make the ship seaworthy, properly man, equip and supply the ship and to make the holds, refrigerating and cool chambers and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage and preservation.

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Article 48 The carrier shall properly and carefully load, handle, stow, carry, keep, care for and discharge the goods carried. Article 55 The amount of indemnity for the loss of the goods shall be calculated on the basis of the actual value of the goods so lost, while that for the damage to the goods shall be calculated on the basis of the difference between the values of the goods before and after the damage, or on the basis of the expenses for the repair. The actual value shall be the value of the goods at the time of shipment plus insurance and freight. From the actual value referred to in the preceding paragraph, deduction shall be made, at the time of compensation, of the expenses that had been reduced or avoided as a result of the loss or damage occurred. 3. Civil Procedure Law of the People’s Republic of China Article 64 A party shall have the burden to provide evidence for its claims.

Shanghai Maritime Court Civil Judgment Shanghai Kairun Shipping Co., Ltd. et al. v. Dalian Guorun Shipping Agency Co., Ltd. et al. (2014) Hu Hai Fa Shang Chu Zi No.753

Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 1202. Cause(s) of Action 242. Dispute over general average. Headnote The Defendant cargo owner held not obliged to make general average contribution after ship’s steering gear failed, because failure was due to shipowner’s fault; also, shipowner had not declared general average after the incident, depriving cargo of the opportunity to make its own investigation. Summary M.V. “Jin Tai 7” lost control of its steering because the vessel lost its rudder at sea. The Plaintiffs, ship owners and charterers, sued the Defendants, cargo owners, seeking general average contribution. It was later determined that the ship’s rudder was improperly constructed during the shipbuilding process. The court held that the Defendants were not obliged to pay general average contribution as the cause of the incident was the ship owner’s fault and there was no force majeure or other uncontrollable incident. Additionally, the Plaintiffs did not declare general average after the salvage operations, so the Defendants were unaware and thus unable to perform their own investigations. Therefore, the claims of the Plaintiffs were rejected.

Judgment The Plaintiff: Shanghai Kairun Shipping Co., Ltd. Domicile: XXX Room, No.XXX, Mudanjiang Road, Baoshan District, Shanghai, China. Legal representative: ZHANG Jianping, chairman of the company. Agent ad litem: LU Xiaowen, lawyer of Shanghai Guoce Law Firm. Agent ad litem: DAI Peihong, lawyer of Shanghai Guoce Law Firm. © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_40

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The Plaintiff: Wuhan Juntai Logistics Co., Ltd. Domicile: Second of No.14, XXX building, No.109, Castle Street, Qingshan District, Wuhan City, Hubei Province. Legal representative: YANG Ƶhu, general manager. Agent ad litem: RONG Tianming, lawyer of Shanghai SG & CO Lawyers Law Firm. Agent ad litem: CHEN Xuena, lawyer of Shanghai SG & CO Lawyers Law Firm. The Plaintiff: Huangshi Shengxing Shipping Co., Ltd. Domicile: No.887 Huangshi Road, Huangshi City, Hubei Province. Legal representative: PI Wenming, executive director. Agent ad litem: RONG Tianming, lawyer of Shanghai SG & CO Lawyers Law Firm. Agent ad litem: CHEN Xuena, lawyer of Shanghai SG & CO Lawyers Law Firm. The Defendant: Dalian Guorun Shipping Agency Co., Ltd. Domicile: 1-7-2, No.5 Gang Jing Garden, Zhongshan District, Dalian City, Liaoning Province, China. Legal representative: JIANG Zhiqun, general manager. Agent ad litem: TAN Jie, lawyer of Shanghai Feihang Law Firm. Agent ad litem: XIE Jing, lawyer of Liaoning Feiran Law Firm. The Defendant: Benxi Iron & Steel (Group) Guomao Tengda Co., Ltd. Domicile: No.XXX, Dongming Road, Pingshan District, Benxi City, Liaoning Province. Legal representative: WANG Peng, chairman of the company. Agent ad litem: MENG Lingyan, vice general manager. Agent ad litem: LI Yongjun, lawyer of Liaoning Huayu Law Firm. With respect to the case arising from dispute over general average, the Plaintiffs Shanghai Kairun Shipping Co., Ltd. (hereinafter referred to as Kairun Company), Wuhan Juntai Logistics Co., Ltd. (hereinafter referred to as Juntai Company), Huangshi Shengxing Shipping Co., Ltd. (hereinafter referred to as Shengxing Company) filed an action against the Defendants Dalian Guorun Shipping Agency Co., Ltd. (hereinafter referred to as Guorun Company), Benxi Iron & Steel (Group) Guomao Tengda Co., Ltd. (hereinafter referred to as Tengda Company),Yingkou Benxi Steel Guomao Logistics Co., Ltd. (hereinafter referred to as Guomao Logistics) on May 26, 2014, the court after entertaining this case on the same day, formed a collegiate panel according to the law. During the trial, the Defendant Guorun Company challenged jurisdiction, the court rendered a ruling to reject it on June 20, 2014. The Defendant Guorun Company refused to accept the ruling and instituted an appeal, on August 7, 2014, Shanghai High People’s Court dismissed the appeal and affirmed the original ruling. For the reason that the registration of the Defendant Guomao Logistics was canceled, the court decided that Guomao Logistics should quit the proceeding on June 27, 2014. Then, the collegiate panel members were altered because of change on work. On August 18, 2015, the court conducted evidence exchange. On September 9, 2015, the court held a hearing in

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public, LU Xiaowen, agent ad litem entrusted by the Plaintiff Kairun Company, Chen Xuena, the attorney jointly entrusted by the Plaintiffs Juntai Company and Shengxing Company, TAN Jie, agent ad litem entrusted by the Defendant Guorun Company, MENG Lingyan and LI Yongjun, agents ad litem entrusted by the Defendant Tengda Company, appeared in court to attend the trial. After trial, this case has been concluded. The Plaintiffs claimed that the Plaintiff Kairun Company chartered the M.V. “Jin Tai 7” by bareboat from the Plaintiff Juntai Company, and the operator of the ship was Plaintiff Shengxing Company. At 2030 on February 21, 2012, M.V. “Jin Tai 7” lost control and was unable to restore due to loss of steerage when sailing from Dandong port to Shanghai port. The next day, for the reason of weather and to ensure the safety of crew, cargo and ship, it was decided to salve M.V. “Jin Tai 7” with external assistance, Donghai Rescue Bureau assigned a tug to tow the M.V. “Jin Tai 7” from the Yellow Sea (the accident scene) to Shanghai Estuary of Yangtze River, salvage fee in sum of CNY2,765,016 arose therefrom. Shanghai Longxiang Shipping Co., Ltd. (hereinafter referred to as Longxiang Company) salvaged the subject ship during the Yangtze River section, the salvage in sum of CNY1,385,820 arose therefrom; Shanghai Chenxiang Shipping Co., Ltd. (hereinafter referred to as Chenxiang Company) salvaged the subject ship during the Huangpu River section, salvage fee in sum of CNY163,000 arose therefrom; Shanghai Haiping Water Security Technology Consulting Service Co., Ltd. (hereinafter referred to as Haiping Company) provided consultation service and service charge in sum of CNY100,000 arose therefrom; the total amount was CNY4,413,836, which was all paid by Kairun Company. Such payment by Kairun Company aimed to ensure the safety of M.V. “Jin Tai 7”, and the crew and cargo thereon, thus the resulting expenses constituted general average. The Plaintiffs were entitled to request the two Defendants to contribute the general average according to the proportion of the cargo value. Therefore, the Plaintiffs requested the court to order: 1. the Defendant Tengda Company to contribute the salvage fee in sum of CNY3,578,120.34 with Kairun Company, Juntai Company and Shengxing Company; 2. the Defendant Guorun Company to bear joint and several liability; and 3. the two Defendants to bear the court acceptance fee. The Defendant Guorun Company argued as follows: the lawsuit lodged by the Plaintiff exceeded the statute of limitations, it was more than two years from the date of accident to the date of prosecution. Steering failure as alleged by the Plaintiff did not constitute general average, they could not prove the cause of the accident, and did not announce general average within the stipulated time. The subject ship was unseaworthy, the consignee was entitled to refuse to bear the resulting expenses. Guorun Company as the shipping agency was not beneficiary of the cargo salved, and had no obligation in contribution of general average, there was no factual or legal basis for the claim of the Plaintiff to request the Defendant to bear joint and several liability to compensate. The general average adjustment report provided by the Plaintiffs was not issued through illegal procedure, the contents thereof lacked factual basis. Therefore, the Defendants requested the court to reject the claims of the three Plaintiffs.

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The Defendant Tengda Company agreed with Guorun Company, but Tengda Company argued the Defendant Guorun Company got benefit from cargo salved, and was obliged to contribute general average. The three Plaintiffs submitted the following evidence materials to support their claims: 1. Sea protest, statement of accident and logbook, to prove the happening of the accident. 2. Nationality certificate of the subject ship, inspection certificate, marine oil pollution prevention certificate, cargo ship seaworthiness certificate (including maintenance records on the dock), ship tonnage certificate, ship load line certificate, ship exemption certificate, to prove the seaworthiness of the ship. 3. Bareboat charter party, the contract of carriage of goods by sea, cargo delivery sheet, unloading list, agent sheet, unit price of steel, to prove the basis of general average contribution. 4. Rescue task, rescue situation, quotation list, charge notice, electronic receipt, to prove the general average expenses and the payment situation of rescue by Plaintiff Kairun Company. 5. Tug agreement, charge notice, electronic receipt, to prove the payment situation of rescue by the Plaintiff Kairun Company. 6. General average report, to prove the amount of general average contribution. 7. Postal courier receipt and inquiry record, to prove the Plaintiff Kairun Company filed the action by courier before Wuhan Maritime Court on February 19, 2014, the statute of limitations interrupted thereon. The two Defendants raised no objection to the authenticity, legality or relevancy of evidence 1–5, but denied the purpose of proof of evidence 1 and 2. In evidence 1, they argued the sea protest and logbook were made by the Plaintiff unilaterally, and could not reflect the actual circumstances of the accident, and could not prove that it constituted general average as well. As for evidence 2, it could not prove the ship was seaworthy during the sailing, and could not prove the Plaintiff could exempt the liability for this accident. They had no objection to other evidence. As for evidence 6, China Council for the Promotion of International Trade (hereinafter referred to as CCPIT) accepted the entrustment for the adjustment after two years later of the accident, which was an illegal adjustment, and assessed a low valuation of the ship. As for evidence 7, about the express on mail list should be bareboat charter party dispute rather than general average dispute which had no relation to this case. The court holds evidence 1 and 2 can reflect the objective circumstances of the accident and the certificate of the ship, but cannot prove that the cause of the accident or the subject ship was seaworthy. That CCPIT accepted the entrustnment of general average adjustment did not violate the regulation and the calculation procedure is legal, in the situation of no opposite evidence was submitted, it shall be adopted. Evidence 7 can be adopted as facial evidence to prove that the Plaintiff submitted action filing materials by courier under the situation where the Defendants did not provide opposite evidence, the action filing date should be identified as the day when the materials were delivered to courier. Therefore, the

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court confirms the effectiveness of evidence of the aforementioned evidence and the probative force of evidence 3 to evidence 7. The two Defendants submitted the following evidence materials to support their defenses: 1. Civil complaint of the case (2014) Wu Hai Fa Shi Zi No.19, to prove the Plaintiff Kairun Company confessed that M.V. “Jin Tai 7” was unseaworthy. 2. Statement issued by Lixin Shipyard, to prove the rudder of M.V. “Jin Tai 7” broke off during the sailing, the ship was unseaworthy. 3. Assessment report and assessment license, certificate of assessment and other accessories, to prove the M.V. “Jin Tai 7”’s rudder losing was caused by lack of maintenance, the ship was unseaworthy. 4. Case docketing registration form of Wuhan Maritime Court, information table of trial process management, to prove the Plaintiff’s lawsuit did not exceed the statute of limitations. The three Plaintiffs had no objection to the authenticity, legality or relevancy of above evidence, but disagreed with the purpose of proof. As for evidence 1, the Plaintiffs argued it could not constitute confession; evidence 2 could only explain the drawings used by the shipyard and the construction of the subject ship did not match, it could not prove the fallen rudder of M.V. “Jin Tai 7” was constructed in accordance with the drawings. The assessment report of evidence 3 focused on the loss of cargo, it could not arrive at the conclusion of ship’s seaworthiness; evidence 4 cannot prove the lawsuit has exceeded the statute of limitations,, and the statute of limitations is one year, calculating from the complement date of repair or adjustment, M.V. “Jin Tai 7” finished repair on April 24, 2012. The court ascertains the effectiveness of the above evidence since the parties had no objection thereto. In respect of the probative force, as for evidence 1, the Plaintiff’s statement in another case do not constitute confession due to different litigation angle and purposes; evidence 2 and 3 could not prove unseaworthiness directly, but can prove the ship rudder’s breaking off was not caused by external force; as for evidence 4 interruption of shall be calculated from the day when the case filing materials were posted rather than the day when the court docketed the case. Therefore, the court does not admit the probative force of the evidence. The court finds the following facts: On February 20, 2012, M.V. “Jin Tai 7”, which loaded 10,569.12 tons of steel, sailed from Dandong port to Shanghai port. The ship is a bulk carrier, gross tonnage thereof is 7,120 tons, the Plaintiff Juntai Company was registered as the ship owner, the Plaintiff Kairun Company was registered as the bareboat charterer and the Plaintiff Shengxing Company was registered as ship operator. At 1950 on February 21, 2012, when the ship sailed on the Yellow Sea, namely north latitude 35°11′959, east longitude 122°45′762, the ship deviated off the course, the automatic rudder failed, and the hand rudder had no response, the ship was out of control. At 2030 on that day, the captain called the shipping company for assistance, and anchored the ship and waited to rescue as soon as possible.

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At 0645 on February 22, 2012, the M.V. “Dong Hai 111” from the east China Sea Rescue Bureau arrived at the position of M.V. “Jin Tai 7” and started the salvage operation. Because the sea wind increased gradually, upon the request of the captain of M.V. “Dong Hai 111”, the East China Sea Rescue Bureau sent another ship called M.V. “Dong Hai Pai 116” to cooperate. At 1220 on February 24, the rescue tug arrived at the position of M.V. “Jin Tai 7”, with the assistance of the two ships above, M.V. “Jin Tai 7” has been towed to the designated position of Yangtze River Shanghai Estuary (north latitude 30°56′5 and east longitude 122°39′ 8), and incurred towage salvage fee in sum of CNY2,765,016. According to relevant provisions of Shanghai Maritime Bureau and the division of the rescue jurisdiction, as the guarder of M.V. “Dong Hai 111” and M.V. “Dong Hai Jiu 116”, M.V. “Jin Tai 7” anchored at the south channel of Yangtze River temporarily, and waited for the M.V. “Dong Gang Tug 3001” and the M.V. “Hai Xiu 121” from Longxiang Company assigned by Shanghai Maritime Search and Rescue Center to implement towage. In the wee hours on February 26, the M.V. “Dong Gang Tug 3001” and the M. V. “Hai Xiu 121” started to implement the towage operation in the south channel of Yangtze River. At 1840 on that day, when the ship towed near the channel 50# buoy, because there were lots of sailing ships, to ensure the safety of towage, Shanghai maritime traffic management center send one more ship namely M.V. “Dong Gang Tug 4001” from Longxiang Company to assist in towage temporarily, at 2245 on that day, the M.V. “Jin Tai 7” safely and properly arrived at No.80 berth of Shanghai Ferry Pier. At 2355 on February 27, the M.V. “Jin Tai 7” finished the work of discharging cargo, and left the berth with the help of M.V. “Dong Gang Tug 4001” and M.V. “Hai Repair 121”, and towed to Baoshan North Anchorage anchored for the repair. To this end, totally incurred salvage expenses in sum of CNY1,385,820. On March 1, the M.V. “Jin Tai 7” towed by the M.V. “Longhai Tug 5” and the M.V. “Zhong Hai Tug 2” from Chenxiang Company at Lixin Shipyard in Huangpu River to repair, and incurring towage fee in sum of CNY1,630,000, and CNY100,000 was paid to Haiping Company in terms of technical consultation service for towage in Huangpu River. The M.V. “Jin Tai 7” was repaired in Lixin Shipyard from March 2 to April 24, incurred repair charges CNY1,113,352.82. During the repair, it was found that the whole rudder blade of M.V. “Jin Tai 7” broke off. After filing an action, the Plaintiffs entrusted the Average Adjustment Department of China Council for the Promotion of International Trade to conduct the general average adjustment. After the department accepted the entrustment, it identified the total amount of general average loss and expenses is CNY4,084,464.75; the value of the subject ship is CNY7,524,000, after deducting the amount CNY6,161,000 which does not fall into general average, the value of the cargo in question is CNY450,56,476.90, and the freight is CNY215,000, after the adjustment, the general average contributory amount of the consignees is CNY3,578,120.34.

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It is also found M.V. “Jin Tai 7” finished reconstruction in Fujian Yihe Ship Heavy Industry Co., Ltd. (hereinafter referred to as Yihe Company) on December 29, 2009, Hubei Province Huangshi Ship Inspection Office inspected and issued an inspection certificate, and passed ship’s annual inspection in the office on December 16, 2009 and December 16, 2011. The court holds this case is arising from dispute over general average, according to the legal provision, general average means the extraordinary sacrifice or expenditure intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the ship, cargo or other property involved in a common maritime adventure. In this case, owing to the rudder broke off and made the M.V. “Jin Tai 7” lose steerage and then lose control, the ship and cargo encountered common danger. Therefore, the ship requested for assistance, the towage fee and the salvage fee occurred before discharging belong to general average. But if the accident incurring general average special sacrifice and special expense may be caused by one party’s fault in the voyage, the opposite party is entitled to defend against the claim for such loss. In respect of the reason of general average accident, since the general average accident was caused by loss of ship rudder, the Plaintiffs as the ship party should bear the burden to prove the cause of the accident. The Plaintiffs never declared general average after the accident, the consignee (the Defendants) did not know they need contribute the general average, so they could not join the process of investigation and collect evidence in time, and lost the ability to prove the cause of the general average accident, the Plaintiffs should bear a heavier burden to prove the cause of the subject accident. However, the Plaintiffs did not prove the cause was ship collision, natural disaster, force majeure or any other factors, and during the period of repair they found the ship’s rudder blade broke off, therefore, the court holds that the subject ship existed heavy defect in the construction, so the ship party should bear the blame for this. Since the transport involved is coastal transport, which shall not apply to exemptions of carrier as provided in the Maritime Code of the People’s Republic of China, the Plaintiffs, as the carrier should comprehensively fulfill the obligation of the transport, ensure seaworthiness of the ship, cargo intact and no extra fees, so the Defendants as the consignee are entitled to make a defense against the Plaintiffs for the fault and negligence occurring in the general average voyage, and thus refuse to contribute the general average expenses, so the court does not support the claims of the three Plaintiffs to request the two Defendants to contribute the general average expenses. Besides, the Defendant Guorun Company is not the owner of the cargo, and not the beneficiary of general average, thus, it shall not bear the responsibility to contribute general average expenses. In conclusion, according to Article 311 of the Contract Law of the People’s Republic of China, Paragraph 2 of Article 2, Paragraph 1 of Article 193, Article 194 and Article 197 of the Maritime Code of the People’s Republic of China, Paragraph 1 of Article 64 of the Civil Procedure Law of the People’s Republic of China, the judgment is rendered as follows:

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Reject the claims of the Plaintiffs Shanghai Kairun Shipping Co., Ltd., Wuhan Juntai Logistics Co., Ltd., and Huangshi Shengxing Shipping Co., Ltd. Court acceptance fee in amount of CNY50,490 shall be jointly born by the Plaintiffs Shanghai Kairun Shipping Co., Ltd., Wuhan Juntai Logistics Co., Ltd. and Huangshi Shengxing Shipping Co., Ltd. In case of dissatisfaction with this judgment, the Plaintiffs and the Defendants can submit statements of appeal within fifteen days upon service of the judgment to the court, together with duplicates in accordance with the number of the opposite parties, to lodge an appeal with Shanghai High People’s Court. Presiding Judge: JI Gang Acting Judge: LIN Yan Acting Judge: LI Jian November 25, 2015 Clerk: SUN Ye

Appendix: Relevant Laws 1. Contract Law of the People’s Republic of China Article 311 The carrier is liable for damages in case of damage to or loss of the cargoes in the course of carriage, provided that it is not liable for damages if it proves that such damage to or loss of the cargoes is caused by force majeure, the intrinsic characteristics of the cargoes, reasonable depletion, or the fault of the consignor or consignee. 2. Maritime Code of the People’s Republic of China Article 2 The provisions concerning contracts of carriage of goods by sea as contained in Chapter IV of this Law shall not be applicable to the maritime transport of cargo between the ports of the People’s Republic of China. Article 193 General average means the extraordinary sacrifice or expenditure intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the ship, cargo or other property involved in a common maritime adventure. …… Article 194 When a ship, after having been damaged in consequence of accident, sacrifice or other extraordinary circumstances, shall have entered a port or place of refuge or returned to its port or place of loading to effect repairs which are necessary for the safe prosecution of the voyage, then the port charges paid, the wages and maintenance of the crew incurred and the fuel and stores consumed during the extra period of detention in such port or place, as well as the loss or damage and charges arising from the discharge, storage, reloading and handling of the cargo, fuel, stores and other property on board in order to have the repairs done shall be allowed as general average.

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Article 197 Rights to contribution in general average shall not be affected, though the event which gave rise to the sacrifice or expenditure may have been due to the fault of one of the parties to the adventure. However, this shall not prejudice any remedies or defences which may be open against or to that party in respect of such fault. 3. Civil Procedure Law of the People’s Republic of China Article 64 A party shall have the burden to provide evidence for its claims.

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Shanghai High People’s Court Civil Judgment Shanghai Kairun Shipping Co., Ltd. et al. v. Dalian Guorun Shipping Agency Co., Ltd. et al. (2016) Hu Min Zhong No.38 Related Case(s) This is the judgment of second instance and the judgment of first instance is on page 1193. Cause(s) of Action 242. Dispute over general average. Headnote Shipowner not entitled to recover general average contribution from cargo owners because it failed to prove that incident giving rise to the need for repairs was not caused by its fault or unseaworthiness of its vessel. Summary This is an appeal by Kairun Shipping Co., Ltd. in a lawsuit that arose from a general average claim. The claim was denied by the lower court because the general average accident was caused by loss of the ship’s rudder and the Appellants should bear the burden to prove the cause of the accident. The Appellants never declared general average after the accident, the consignee (the Respondents) did not know they would need to contribute the general average, so they could not join the process of investigation and collect evidence in time, thus losing the ability to prove the cause of the general average accident. Therefore, the Appellants should bear a heavier burden to prove the cause of the subject accident. However, the Appellants did not prove the cause was ship collision, natural disaster, force majeure or any other factors, and during the period of repair they found the ship’s rudder blade broke off. No exemptions apply for the carrier as provided in the Maritime Code of the People’s Republic of China. The Appellants, as the carrier should comprehensively fulfill the obligation of the transport, ensure seaworthiness of the ship, intact cargo and no extra fees. That is why the Respondents as the consignee are entitled to make a defense against the Appellants for the fault and negligence occurring in the general average voyage, and thus refuse to contribute the general average expenses. The court of first instance did therefore not support the claims of the three Appellants to request the two Respondents to contribute the general average expenses. Here the appellate court affirms the judgment of the lower court. The court agrees that Kairun Company cannot claim the exemption from liability for the cause of the general average claim. Because Kairun Company failed to meet the burden of proof in showing that the cause of the general average accident lies in force majeure, the nature of cargo, inherent defects or wear and tear and some other reason caused by carrier or consignee’s fault. There were significant discrepancies

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in the evidence introduced by the Appellant. Hence the court decided that the Appellant’s claim does not have a factual or legal basis.

Judgment The Appellant (the Plaintiff of first instance): Shanghai Kairun Shipping Co., Ltd. Domicle: XXX Room, No: XXX, Mudanjiang Road, Baoshan District, Shanghai, China. Legal representative: ZHANG Jianping, Chairman of the company. Agent ad litem: LU Xiaowen, lawyer of Shanghai Guoce Law Firm. The Appellant (the Plaintiff of first instance): Wuhan Juntai Logistics Co., Ltd. Domicle: Second of No. 14, XXX building, No. 109, Castle Street, Qingshan District, Wuhan City, Hubei Province. Legal representative: YANG Ƶhu, general manager. Agent ad litem: RONG Tianming, lawyer of Shanghai SG & CO Lawyers Law Firm. Agent ad litem: CHEN Xuena, lawyer of Shanghai SG & CO Lawyers Law Firm. The Appellant (the Plaintiff of first instance): Huangshi Shengxing Shipping Co., Ltd. Domicle: No. 88, Huangshi Road, Huangshi City, Hubei Province. Legal representative: PI Wenming, executive director. Agent ad litem: RONG Tianming, lawyer of Shanghai SG & CO Lawyers Law Firm. Agent ad litem: CHEN Xuena, lawyer of Shanghai SG & CO Lawyers Law Firm. The Respondent (the Defendant of first instance): Dalian Guorun Shipping Agency Co., Ltd. Domicile: 1-7-2, No. 5 Gang Jing Garden, Ƶhongshan District, Dalian City, Liaoning Province, China. Legal representative: JIANG Ƶhiqun, general manager. Agent ad litem: YAN Shengmin, lawyer of Shanghai Feihang Law Firm. Agent ad litem: TAN Jie, lawyer of Shanghai Feihang Law Firm. The Respondent (the Defendant of first instance): Benxi Iron & Steel (Group) Guomao Tengda Co., Ltd. Domicile: No. XXX, Dongming Road, Pingshan District, Benxi City, Liaoning Province. Legal representative: WANG Peng, Chairman of the company. Agent ad litem: MENG Lingyan, vice general manager. Agent ad litem: LI Yongjun, lawyer of Liaoning Huayu Law Firm. With respect to the case arising from dispute over general average filed by the Appellant Shanghai Kairun Shipping Co., Ltd. (hereinafter referred to as Kairun

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Company), the Appellant Wuhan Juntai Logistics Co., Ltd. (hereinafter referred to as Juntai Company), the Appellant Huangshi Shengxing Shipping Co., Ltd. (hereinafter referred to as Shengxing Company) against the Respondent Dalian Guorun Shipping Agency Co., Ltd. (hereinafter referred to as Guorun Company), the Respondent Benxi Iron & Steel (Group) Guomao Tengda Co., Ltd. (hereinafter referred to as Tengda Company), the Appellants dissatisfied with (2014) Hu Hai Fa Shang Chu Zi No.753 Civil Judgment rendered by Shanghai Maritime Court, and lodged an appeal before the court. The court, after entertaining this case on February 17, 2016, organized a collegiate panel according to law, and held a hearing in public on March 9, 2016. LU Xiaowen, agent ad litem entrusted by Kairun Company, CHEN Xuena, agent ad litem jointly entrusted by Juntai Company and Shengxing Company, TAN Jie, agent ad litem entrusted by Guorun Company, MENG Moumou and LI Yongjun, agents ad litem entrusted by Tengda Company, appeared in court to attend the trial. After trial, this case has been concluded. Kairun Company, Juntai Company and Shengxing Company filed an action in the first instance on May 26, 2014. During the first instance, Guorun Company challenged the jurisdiction and the court of first instance ruled to dismiss it on June 20, 2014. Guorong Company was not satisfied with the ruling and lodged an appeal, and the court made a ruling on August 7, 2014 to dismiss the appeal and affirm the original ruling. In the first instance, the Appellants argued that Kairun Company chartered the M.V. “Jin Tai 7” by bareboat from Juntai Company, and the operator of the ship was Shengxing Company. At 20:30 on February 21, 2012, M.V. “Jin Tai 7” lost control and was unable to restore due to loss of steerage when sailing from Dandong port to Shanghai port. The next day, for the reason of weather and to ensure the safety of crew, cargo and ship, it was decided to salve M.V. “Jin Tai 7” with external assistance, Donghai Rescue Bureau assigned a tug to tow the M.V. “Jin Tai 7” from the Yellow Sea (the accident scene) to Shanghai estuary of Yangtze River, salvage fee in sum of CNY2,765,016 arose therefrom. Shanghai Longxiang Shipping Co., Ltd. (hereinafter referred to as Longxiang Company) salvaged the subject ship during the Yangtze River section, the salvage in sum of CNY1,385,820 arose therefrom; Shanghai Chenxiang Shipping Co., Ltd. (hereinafter referred to as Chenxiang Company) salvaged the subject ship during the Huangpu River section, salvage fee in sum of CNY163,000 arose therefrom; Shanghai Haiping Water Security Technology Consulting Service Co., Ltd. (hereinafter referred to as Haiping Company) provided consultation service and service charge in sum of CNY100,000 arose therefrom; the total amount was CNY4,413,836, which was all paid by Kairun Company. Such payment by Kairun Company aimed to ensure the safety of M.V. “Jin Tai 7”, and the crew and cargo thereon, thus the resulting expenses constituted general average. The Appellants were entitled to request the two Respondents to contribute the general average according to the proportion of the cargo value. Therefore, the Appellants requested the court of first instance to order: 1. the Respondent Tengda Company to contribute the salvage fee in sum of CNY3,578,120.34 with Kairun Company, Juntai Company and Shengxing Company; 2. the Respondent Guorun Company to bear joint and several liability; and 3. the two Respondents to bear the court acceptance fee.

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Guorun Company argued as follows: the lawsuit lodged by the Appellant exceeded the statute of limitations, it was more than two years from the date of accident to the date of prosecution. Steering failure as alleged by the Appellants did not constitute general average, they could not prove the cause of the accident, and did not announce general average within the stipulated time. The subject ship was unseaworthy, the consignee was entitled to refuse to bear the resulting expenses. Guorun Company as the shipping agency was not beneficiary of the cargo salved, and had no obligation in contribution of general average, there was no factual or legal basis for the claim of the Appellant to request the Respondent to bear joint and several liability to compensate. The general average adjustment report provided by the Appellant was not issued through illegal procedure, the contents thereof lacked factual basis. Therefore, the Respondents requested the court to reject the claims of the three Appellants. Tengda Company agreed with Guorun Company, but Tengda Company argued Guorun Company got benefit from cargo salved, and was obliged to contribute general average. The court of first instance found the following facts: On February 20, 2012, M.V. “Jin Tai 7”, which loaded 10,569.12 tons of steel, sailed from Dandong port to Shanghai port. The ship was a bulk carrier, gross tonnage thereof was 7,120 tons, the Appellant Juntai Company was registered as the ship owner, the Appellant Kairun Company was registered as the bareboat charterer and the Appellant Shengxing Company was registered as ship operator. At 1950 on February 21, 2012, when the ship sailed on the Yellow Sea, namely north latitude 35°11′959, east longitude 122°45′762, the ship deviated off the course, the automatic rudder failed, and the hand rudder had no response, the ship was out of control. At 2030 on that day, the captain called the shipping company for assistance, and anchored the ship and waited to rescue as soon as possible. At 0645 on February 22, 2012, the M.V. “Dong Hai 111” from the east China Sea Rescue Bureau arrived at the position of M.V. “Jin Tai 7” and started the salvage operation. Because the sea wind increased gradually, upon the request of the captain of M.V. “Dong Hai 111”, the East China Sea Rescue Bureau sent another ship called M.V. “Dong Hai Pai 116” to cooperate. At 1220 on February 24, the rescue tug arrived at the position of M.V. “Jin Tai 7”, with the assistance of the two ships above, M.V. “Jin Tai 7” had been towed to the designated position of Yangtze River Shanghai Estuary (north latitude 30°56′5 and east longitude 122°39′ 8), and incurred towage salvage fee in sum of CNY2,765,016. According to relevant provisions of Shanghai Maritime Bureau and the division of the rescue jurisdiction, as the guarder of M.V. “Dong Hai 111” and M.V. “Dong Hai Jiu 116”, M.V. “Jin Tai 7” anchored at the south channel of Yangtze River temporarily, and waited for the M.V. “Dong Gang Tug 3001” and the M.V. “Hai Rescue 121” from Longxiang Company assigned by Shanghai Maritime Search and Rescue Center to implement towage. In the wee hours on February 26, the M.V. “Dong Gang Tug 3001” and the M. V. “Hai Xiu 121” started to implement the towage operation in the south channel of Yangtze River. At 1840 on that day, when the ship towed near the channel 50#

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buoy, because there were lots of sailing ships, to ensure the safety of towage, Shanghai maritime traffic management center send one more ship namely M.V. “Dong Gang Tug 4001” from Longxiang Company to assist in towage temporarily, at 2245 on that day, the M.V. “Jin Tai 7” safely and properly arrived at No.80 berth of Shanghai Ferry Pier. At 2355 on February 27, the M.V. “Jin Tai 7” finished the work of discharging cargo, and left the berth with the help of M.V. “Dong Gang Tug 4001” and M.V. “Hai Repair 121”, and to the court d to Baoshan North Anchorage anchored for the repair. To this end, totally incurred salvage expenses in sum of CNY1,385,820. On March 1, the M.V. “Jin Tai 7” towed by the M.V. “Longhai Tug 5” and the M.V. “Zhong Hai Tug 2” from Chenxiang Company at Lixin Shipyard in Huangpu River to repair, and incurring towage fee in sum of CNY1,630,000, and CNY100,000 was paid to Haiping Company in terms of technical consulation service for towage in Huangpu River. The M.V. “Jin Tai 7” was repaired in Lixin Shipyard from March 2 to April 24, incurred repair charges CNY1,113,352.82. During the repair, it was found that the whole rudder blade of M.V. “Jin Tai 7” broke off. After filing an action, the Appellants entrusted the Average Adjustment Department of CCPIT to conduct the general average adjustment. After the department accepted the entrustment, it identified the total amount of general average loss and expenses was CNY4,084,464.75; the value of the subject ship was CNY7,524,000, after deducting the amount CNY6,161,000 which does not fall into general average, the value of the cargo in question was CNY450,56,476.90, and the freight was CNY215,000, after the adjustment, the general average contributory amount of the consignees was CNY3,578,120.34. It was also found M.V. “Jin Tai 7” finished reconstruction in Fujian Yihe Ship Heavy Industry Co., Ltd. (hereinafter referred to as Yihe Company) on December 29, 2009, Hubei Province Huangshi Ship Inspection Office inspected and issued an inspection certificate, and passed ship’s annual inspection in the office on December 16, 2009 and December 16, 2011. The court of first instance held this case was arising from dispute over general average, according to the legal provision, general average means the extraordinary sacrifice or expenditure intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the ship, cargo or other property involved in a common maritime adventure. In this case, owing to the rudder broke off and made the M.V. “Jin Tai 7” lose steerage and then lose control, the ship and cargo encountered common danger. Therefore, the ship requested for assistance, the towage fee and the salvage fee occurred before discharging belong to general average. But if the accident incurring general average special sacrifice and special expense may be caused by one party’s fault in the voyage, the opposite party was entitled to defend against the claim for such loss. In respect of the reason of general average accident, since the general average accident was caused by loss of ship rudder, the Appellants as the ship party should bear the burden to prove the cause of the accident. The Appellants never declared general average after the accident, the consignee (the Respondents) did not know

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they need contribute the general average, so they could not join the process of investigation and collect evidence in time, and lost the ability to prove the cause of the general average accident, the Appellants should bear a heavier burden to prove the cause of the subject accident. However, the Appellants did not prove the cause was ship collision, natural disaster, force majeure or any other factors, and during the period of repair they found the ship’s rudder blade broke off, therefore, the court of first instance held that the subject ship existed heavy defect in the construction, so the ship party should bear the blame for this. Since the transport involved was coastal transport, which should not apply to exemptions of carrier as provided in the Maritime Code of the People’s Republic of China, the Appellants, as the carrier should comprehensively fulfill the obligation of the transport, ensure seaworthiness of the ship, cargo intact and no extra fees, so the Respondents as the consignee are entitled to make a defense against the Appellants for the fault and negligence occurring in the general average voyage, and thus refuse to contribute the general average expenses, so the court of first instance did not support the claims of the three Appellants to request the two Respondents to contribute the general average expenses. Besides, the Respondent Guorun Company is not the owner of the cargo, and not the beneficiary of general average, thus, it should not bear the responsibility to contribute general average expenses. In conclusion, according to Article 311 of the Contract Law of the People’s Republic of China, Paragraph 2 of Article 2, Paragraph 1 of Article 193, Article 194 and Article 197 of the Maritime Code of the People’s Republic of China, Paragraph 1 of Article 64 of the Civil Procedure Law of the People’s Republic of China, the judgment was rendered as follows: reject the claims of the Appellants. Court acceptance fee in amount of CNY50,490 should be jointly born by the Appellants. Kairun Company, Juntai Company and Shengxing Company appealed and requested the court to revoke the original judgment, and support their claims in the court of first instance. The main reasons are as follows: 1. The ascertainment of the court of first instance that the main component of subject ship existed serious defects was seriously wrong in logic. When the subject ship occurred general average accident, the ship had relevant certificate of seaworthiness, so Kairun Company, Juntai Company and Shengxing Company had fulfilled their obligation to ensure the seaworthiness. 2. The ship’s logbook and general average adjustment report had definitely stated there was some noise when the rudder blade fell down, and the court of first instance had no objection to the adjustment report, it was admitted as evidence, but not affirm that the noise was the main reason of rubber blade fell down. The first trial arrived at the conclusion the subject ship existed serious defects in construction without relevant investigation, which was a serious logical error. Secondly, the court of first instance determined both of the sea protest and the average adjustment report indicated that the reason of rubber blade fell down was collided by unknown object. However, the court of first instance considered Kairun Company, Juntai Company and Shengxing Company did not prove the accident was caused by ship collision, which was a clear error.

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Guorun Company argued that all the relevant evidence submitted by Kairun Company, Juntai Company and Shengxing Company showed that the failure of rudder effect was due to the rudder blade losing or rudder breaking. But till the second instance, Guorun Company did not submit any evidence to support which was the accident reason, and even not provide the photo of rudder and rudder blade transported to Lixin Shipyard for the repair to prove the rudder blade fell off or the broken rudder. After the accident, Kairun Company, Juntai Company and Shengxing Company as the ship party had the obligation to investigate the specific reason of the accident and declare the general average promptly, but the three companies did not declare general average promptly and led to loss of the opportunity to investigate the cargo loss. Secondly, the case was involved with coastal transport, the carrier should bear the liability for the loss as long as the carrier failed to provide evidence to prove the accident was caused by force majeure, natural disaster or any other reasons that cannot be attributed to the ship party. Thirdly, Guorun Company is not the beneficiary party of general average, Kairun Company, Juntai Company and Shengxing Company have no legal basis to request Guorun Company to bear joint and several liability. In summary, the facts found by the court of first instance were clear and the application of law was correct, thus Guorun Company requested the court to dismiss the appeal and affirm the original judgment. Tengda Company argued as follows: firstly, the rudder blade was an important part in ship’s control course, which would not fall off under normal situation, according to the evidence submitted by Lixin Shipyard and the conclusion of survey report, it could prove the reason that the rudder blade falling off and losing was not caused by external force at all. After the accident, Kairun Company, Juntai Company and Shengxing Company had the condition and should declare the general average promptly and also should entrust relevant survey institution to find out the true reason of accident, but Kairun Company, Juntai Company neither Shengxing Company declared the general average, nor entrusted survey institution to inspect and identify. In this situation, the court of first instance reasonably held Kairun Company, Juntai Company and Shengxing Company should bear the consequences of failing to perform the burden of proof in terms of the allegation that the rudder blade’s falling off was caused by unknown object collision. Secondly, as for the real reason of loss of rudder in this case, the parties provided corresponding evidence to support their allegations. Guorun Company and Tengda Company provided the statement issued by Lixin Shipyard and survey report issued by a third party. Lixin Shipyard was the repairing unit entrusted by Kairun Company, Juntai Company and Shengxing Company. Thus, compared with the sea protest made by Kairun Company, Juntai Company and Shengxing Company and average adjustment report made by average adjustment organization which had no no authority or no condition to confirm, the evidence provided by Guorun Company and Tengda Company has higher probative force. On this grounds, the court of first instance, after comprehensive analysis and comparison of the probative force of the two groups, made the final determination that Kairun Company, Juntai Company and Shengxing Company existed no problem in failing to prove the accident was

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caused by ship’s collision. Thus, the facts found by the court of first instance were clear, application of law was correct and procedure was undergone legally, so the judgment of first instance should be affirmed. Kairun Company, Juntai Company and Shengxing Company submitted a test and measurement record of the subject ship made by the quality inspection department of Yihe Company (a total of 5 pages). In second instance court, Kairun Company, Juntai Company and Shengxing Company withdrew the above-mentioned evidence, and submitted a quality certificate made by Fuzhou Baozhong Ship Engineering Co., Ltd. (hereinafter referred to as Baozhong Company) on May 19, 2010 (a total of 5 pages), to prove the subject ship did not have serious defect as identified in the court of first instance. Guorun Company argued as follows: first of all, the above evidence formed in 2010, which was not new evidence in the second instance, and should not be adopted. Then, Guorun Company had no objection to the pro forma authenticity of the material, but contested the legality and relevancy thereof. 1. The seal of inspection department of Baoshan Company could not represent Baoshan Company. 2. Baoshan Company did not have the quality to prove the safety of ship’s rudder system. 3. The quality certificate provided by Baoshan Company and the evidence withdrawn by Kairun Company, Juntai Company and Shengxing Company and the test and measurement record issued by Yihe Company existed contradiction. So, Guorun Company questioned the legality of the record content in these two materials. These two materials issued by Kairun Company, Juntai Company and Shengxing Company could not effectively prove the subject ship was seaworthy before and during the period of sailing, and Kairun Company, Juntai Company and Shengxing Company could exempt liability. On the contrary, it further proved the fact that the ship’s rudder size of subject ship did not match the original drawing confirmed by Lixin Shipyard. Thus, Guorun Company resolutely opposite Kairun Company, Juntai Company and Shengxing Company to withdraw the quality certificate issued by Yihe Company since this evidence plays an important role to identify whether Kairun Company, Juntai Company and Shengxing Company should bear the liability for ship’s unseaworthiness. Tengda Company held that its opinions were consistent with Guorun Company, the withdrawn measurement record submitted by Kairun Company, Juntai Company and Shengxing Company could prove the subject ship was unseaworthy. After the period of adducing evidence expired, Kairun Company, Juntai Company and Shengxing Company did not have the right to withdraw the evidence optionally. The court holds, compared with the quality certificate issued by Baoshan Company submitted by Kairun Company, Juntai Company and Shengxing Company, the test and measurement record which was issued by Yihe Company, submitted in the second instance withdrawn in the hearing, and there are obvious differences in rudder shaft system’s measurement record, especially in the rudder part. Rudder blade as an important part of ship has a close relevancy with the subject accident, Kairun Company, Juntai Company and Shengxing Company submitted the above materials of rudder system record are contradictory, they did not make any valid explanation or submit any further evidence to prove the fact, the

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court does not admit the authenticity or effectiveness of the above evidence materials. Guorun Company and Tengda Company submitted no new evidence materials in the second instance. The facts found in the first instance have relevant evidence to prove, in the condition that all the parties did not submit any new evidence, the court confirms the facts found in the court of first instance. The court holds this case is arising from dispute over general average. To find out the reason of general average is the key to correctly ascertain whether Kairun Company, Juntai Company and Shengxing Company can exempt liability and whether they are entitled to require Guorun Company and Tengda Company to contribute the general average. According to Article 196 of the Maritime Code of the People’s Republic of China, “the burden of proof shall be the party claiming in general average to show that the loss or expense claimed is properly allocated as general average.” Kairun Company, Juntai Company and Shengxing Company insisted the steering failure of the subject ship was caused by collision between rudder blade and unknown object under-water during the ship sailing from Dandong port to Shanghai port. However, according to the evidence materials of sea protest, logbook and average adjustment report submitted by Kairun Company, Juntai Company and Shengxing Company, these materials identify the cause of accident is “it is speculated the rudder blade failure may be caused by loss of rudder or breaking down”. On the contrary, Guorun Company and Tengda Company submitted the certificate to prove differences between the original drawing and actual size of the subject ship’s lost rudder issued by Lixin Shipyard, which is a relevant party entrusted to repair of subject ship by Guorun Company, Juntai Company and Shengxing Company, and combined with the two piece of evidence of quality certificate and test measurement record of related rudder system test record data submitted by Guorun Company, Juntai Company and Shengxing Company in second instance exist differences. After Guorun Company and Tengda Company provided the above defenses, Guorun Company, Juntai Company and Shengxing Company did not provide corresponding and valid evidence to prove the immediate cause of general average accident. Guorun Company, Juntai Company and Shengxing Company fail to perform the burden of proof to prove the reason of the rudder blade’s falling off, so they should bear the legal consequences of failure of proof. Since this case is relating coastal transport of China, relevant provisions in Chapter 4 of carrier’s liability in the Maritime Code of the People’s Republic of China shall not be applicable, but relevant provisions in Article 370 of the Contract Law of the People’s Republic of China and Article 48 of the Inland Waterway Cargo Transport Rules shall be the legal provisions to decide whether Kairun Company, Juntai Company and Shengxing Company can exempt the liability for the reason of general average or not. Because Kairun Company, Juntai Company and Shengxing Company failed to perform the burden of proof of the cause of the general average accident, they failed to prove the accident was caused by force majeure, the nature of cargo, inherent defects or wear and tear and some other

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reason caused by carrier or consignee’s fault. The request of Kairun Company, Juntai Company and Shengxing Company that Guorun Company and Tengda Company should contribute general average do not have factual or legal basis. In conclusion, the court of first instance do not have misconduct in result. The appeal lodged by Kairun Company, Juntai Company and Shengxing Company lacks factual and legal basis, so the court does not support it. According to the provisions of Paragraph 1 of Article 170 and Article 175 of the Civil Procedure Law of the People’s Republic of China, the judgment is rendered as follow: Dismiss the appeal and affirm the original judgment. Court acceptance fee of the second instance in amount of CNY35,425 shall be joint and severally born by the Appellant Shanghai Kairun Shipping Co., Ltd., the Appellant Wuhan Juntai Logistics Co., Ltd. and the Appellant Huangshi Shengxing Shipping Co., Ltd. The judgment is final. Presiding Judge: SUN Chenwen Judge: ZHOU Yi Acting Judge: XU Yijin May 3, 2016 Clerk: CHEN Xi

Appendix: Relevant Laws 1. Civil Procedure Law of the People’s Republic of China Article 170 After trying a case on appeal, the people’s court of second instance shall, in the light of the following situations, dispose of it accordingly: (1) If the facts were clearly ascertained and the law was correctly applied in the original judgment, the appeal shall be rejected in the form of judgment and the original judgment shall be affirmed; (2) If the facts were wrongly ascertained or the application of law was incorrect in the original judgment, the said judgment shall be amended according to the law; (3) If the basic facts were not clearly ascertained in the original judgment, the people’s court of second instance shall make a written order to revoke the original judgment and remand the case to the original people’s court for retrial, or the people’s court of second instance may amend the judgment after investigating and clarifying the facts; or (4) If there was serious violation of legal procedures such as omitting any party or making an illegal absentee judgment in the original judgment, the said judgment shall be revoke by a written order and the case remanded to the original people’s court for retrial.

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If the party files an appeal against the judgment made in the retrial by the court originally tried the case, the people’s court of second instance shall make a judgment according to the law. Article175 The judgment and ruling rendered by second instance court shall be final.

Ningbo Maritime Court Civil Judgment Shanghai Sanhang Benteng Construction Engineering Co., Ltd. v. Zhoushan Alpha Yacht Club Development Co., Ltd. (2013) Yong Hai Fa Shang Chu Zi No.306 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 1226. Cause(s) of Action 236. Dispute over contract for construction of dock or harbor. Headnote The Defendant held liable to pay the Plaintiff the outstanding contract price for construction of pier and breakwater, rejecting the Defendant’s claims for delay and poor construction of pier, but accepting the Defendant’s counterclaim that the Plaintiff should pay damages for losses suffered as a result of poor construction of breakwater. Summary The Plaintiff construction company brought suit against the Defendant to collect the outstanding balance owed to the Plaintiff following the construction of a pier and breakwater after the Defendant refused to pay the agreed price. The Defendant counterclaimed, arguing that it had suffered loss as a result of unreasonable delay in construction and poor construction quality. The court held that the Defendant did not provide sufficient evidence to prove that the damage caused to the pier was due solely to the Plaintiff’s construction, however, the damage which occurred to the breakwater did occur as a result of the Plaintiff’s construction; the Plaintiff’s delay was not unreasonable; therefore, the Defendant should pay the Plaintiff the outstanding balance due on the contract plus interest and the Plaintiff should reimburse the Defendant for the costs of repairing the broken breakwater.

Judgment The Plaintiff (the counterclaim Defendant): Shanghai Sanhang Benteng Construction Engineering Co., Ltd. Domicile: No.2816 Yixian Road, Baoshan District, Shanghai City. Organization code: 13347008-1. © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_41

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Legal representative: WANG Xiuchun, chairman. Agent ad litem: LI Hongwei, male, vice general manager of the company. Agent ad litem: SONG Xiaoming, lawyer of Shandong Kaien Law Firm. The Defendant (the counterclaim Plaintiff): Zhoushan Alpha Yacht Club Development Co., Ltd. Domicile: No.70 Datong Road, Zhujiajian Street, Putuo District, Zhoushan City, Zhejiang Province. Organization code: 79963732-7. Legal representative: YANG Shijie, chairman. Agent ad litem: YANG Shihe, male, general manager. Agent ad litem: ZHANG Dingbiao, lawyer of Zhejiang Heyi Guanda Law Firm. With respect to the case arising from dispute over the wharf construction contract, the Plaintiff Shanghai Sanhang Benteng Construction Engineering Co., Ltd. (hereinafter referred to as Sanhang Benteng Company) filed an action on April 19, 2013 to the court against the Defendant Zhoushan Alpha Yacht Club Development Co., Ltd. (hereinafter referred to as Alpha Company). Since the Plaintiff provided additional materials, the court formed a collegiate bench according to the law after accepting the case on May 2, 2013. The Defendant Alpha Company filed a counterclaim on June 13, 2013, and the court accepted it and made a joint trial of the separate case. For the application of the Plaintiff and the Defendant, the court entrusted Zhejiang Zhongda Engineering Costs Co., Ltd. (hereinafter referred to as Zhongda Office), Zhejiang Ruibang Construction Engineering Inspection Co., Ltd. (hereinafter referred to as Ruibang Company) to assess and identify the total cost of the terminal project and the quality problems of the project. To define the construction quality of the wharf, the court organized the hearing twice respectively between each party on April 10 and June 16, 2014, and agent ad litem SONG Xiaoming of the Plaintiff, the expert XU Zhongkun hired by it, agent ad litem ZHANG Dingbiao of the Defendant, the appraiser YANG Wenmei of Ruibang Company attended the hearing. Then the court according to the Defendant’s application, entrusted Guangzhou Harbor Engineering Quality Inspection Co., Ltd. to identify the reason of the sedimentation of wharf. The court stopped the identification on August 10, 2015, because the Defendant clearly stated that it would not pay the cost for identification in advance. The court held hearings in public twice respectively on June 5, 2014 and December 16, 2015. Agent ad litem of the Plaintiff, SONG Xiaoming, agents ad litem of the Defendant, YANG Shihe and ZHANG Dingbiao, appeared in court to attend the trial. The legal representative of Zhongda Office, HUA Zhongxin, and the appraiser HAN Xianwei, and the appraiser of Ruibang Company, WANG Peng, appeared in court to accept interpellation of the court. The court checked the spot of the terminal in the middle of October, 2013, before January 12, 2016. Now the case has been concluded after hearing.

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The Plaintiff Sanhang Benteng Company claimed that: In November, 2009, the Plaintiff and the Defendant signed Construction Contract, which stipulated the Plaintiff contracted the marina project of the Defendant locating in Zhangzhou Bay, Putuo Zhujiajian, in Zhoushan City. On January 22, 2010, the project started. On April 11, 2011, the Plaintiff and the Defendant signed Supplementary Agreement, which stipulated the Defendant ensured to pay the 95% of the total project payment to the Plaintiff, after the project has been inspected and accepted for one year, the Defendant should pay the another 5% as the security deposit before December 30, 2011, the Plaintiff should report for settlement and the Defendant should reply within a month, otherwise, it would be regarded that the Defendant agreed with the settlement price of contract project reported by the Plaintiff. On July 20, 2011, the project was finished. On November 14, 2011, the Plaintiff reported the payment to the Defendant of 26,222,312 yuan. The Defendant did not reply and raise any amendments after receiving the final settlement information, thus it can be seemed that the Defendant accepted the settlement price. On December 2, 2011, the project passed acceptance inspection, but the Defendant only paid engineering fund of 19,382,452 yuan till now and had default in the residual payment. So the Plaintiff claimed to the court and requested to rule that the Defendant should pay the Plaintiff engineering payment of 6,840,860 yuan and the interests, later, the Plaintiff reduced the claimed payment to 4,699,616 yuan and interests (calculated and paid from December 30, 2011 until the date of payment as provided in the judgment according to the loan interest rate of the People’s Bank of China for the same period) and required the Defendant to bear the litigation fee. The Defendant Alpha Company argued that: Firstly, the Defendant raised objection within the agreed period after receiving the settlement statement, and on that time the project has not finished and inspected, the Defendant did not used without permission; secondly, although the finishing to inspection can be seemed as a final acceptance, the Plaintiff did not provide completion data and construction report due to serious quality problem happened in main structure of the project, which led that Defendant cannot accept project and cannot further conduct investment business openly. The project payment had not been paid between both parties. Thus, the Defendant required the court to reject the claim of the Plaintiff in the principle action. The Defendant Alpha Company counterclaimed that: In November, 2009, the Plaintiff and the Defendant signed Construction Contract, stipulated the Defendant should contract the marina project, the construction period was from the end of November in 2009 to the end of November in 2010. If project was delayed because of the fault of the contractor, the contractor should pay the liquidated damages according to the contractual price and compensate the employer for the corresponding penalty of 10% daily of the total contractual penalty. The contractor should provide the Defendant with the completed drawings within 30 days upon completion data and construction summary report. After the project started, the Plaintiff cannot finish the project within the agreed duration. On April 11, 2011, the two parties signed Supplementary

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Agreement, which stipulated the Plaintiff should re-work on April 22 after receiving the project payment of 1.5 million yuan and assured that the project can satisfy the conditions of acceptance preliminarily before June 30 in the same year. After that the Defendant fulfilled the payment obligations according to contract, but the Plaintiff completed the construction of the project until November in 2011, which delayed in completion nearly 5 months to be finished. The Plaintiff did not submit the complete drawings and other materials after completion of the project, which resulted in the failure to comprehensively check of the wharf construction till now. The Defendant thus suffered huge economic losses, and there existed many quality problems of the wharf. Therefore, the Defendant counterclaimed to the court and requested for the judgment: 1. The Plaintiff should pay liquidated damages caused by the delay of 297,600 yuan to the Defendant; 2. The Plaintiff should submit the completion materials to the Defendant (including the completed drawings and data, the report of self-assessment of project quality, stage acceptance and hidden works acceptance information, test and inspection materials of construction materials and equipment, settlement and displacement observation data, the whole scale of the completion of the project measurement report, the construction report, the completion of the settlement report), and compensate the Defendant for the economic losses 2,102,400 yuan caused by the project not being checked and accepted; 3. The Plaintiff should compensate the design and repair costs to the Defendant of the anti-wave wall 512,770 yuan (among which the design cost 100,000 yuan, the repair costs 345,887 yuan, management fees 15%); 4. The quality problems of repair dock by the Plaintiff (including the main northwestern corner of the main 1-1 section of the serious fault tilt, chest wall wave wall quality problems, caisson spacing exceeding the standard, cracks in concrete members and partial pile spacing in embankment did not meet the design requirements and section inclined piles). After the interpretation of the court, the Defendant reserved the right to claim the Plaintiff to compensate for the above quality problem. According to counterclaim by the Defendant Alpha Company, the Plaintiff argued: 1. According to the provision of Supplementary Agreement, the date of June 30, 2011 is the date that both party agreed to initial acceptance rather than the completion date, if the working day is less than 25 days in the month, the duration can be delayed according to the contract, the period of June 2011 belongs to the rainy season, thus the effective working day less than 10 days, the Plaintiff completed the project on July 18, 2011, which did not exist the extension of the project.

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2. The Plaintiff has submitted the relevant completion information to the Defendant as the stimulation, the terminal has been put into use, the Defendant hosts the Zhoushan boat show every year which exists no related losses. 3. Even if the Plaintiff constituted a breach of contract, the two parties did not agree on the liquidated damages, and the loss as a commercial risk should be born by the Defendant. 4. The Plaintiff has repaired the cracking problems according to the contract, the quality problems claimed by the Defendant were caused by its own improper use or force majeure, which should not be born by the Plaintiff. The Plaintiff requested the court to reject the counterclaim of the Defendant. The Plaintiff, Sanhang Bengteng Company provided the following evidential materials to support its claims and the defense of counterclaim to the court: Evidence 1, the construction contract, to prove the Plaintiff and the Defendant had the agreement about the construction of the project. Evidence 2, the supplementary agreement, to prove the Plaintiff and the Defendant had the re-agreement on the settlement and payment method. Evidence 3, certificate of the project’s delivery inspection, to prove the terminal project reached the agreed quality standards and the Plaintiff fulfilled the contractual obligations. Evidence 4, engineering cost settlement, to prove the method of the dock project price settlement amount. Evidence 5, the receipt and payment list, to prove the situation that the Plaintiff received the corresponding amount of money from the Defendant. Evidence 6, the engineering business contact list, to prove the Plaintiff repeatedly alerted the Defendant to complete the settlement procedures but in vain. Evidence 7, the record of transcripts of the documents and the summary of the acceptance meeting, to prove the Plaintiff recognized the project has been finished on schedule and the quality within the standard. Evidence 8, the website page of the first China Zhoushan Islands International Boat Show, to prove the wharf project has been put into use since the date of delivery. Evidence 9, the record of regular meetings in the construction site, to prove the duration can be delay due to the rainy weather. The Defendant Alpha Company provided the following evidential materials to support of its defense in the principle action and its counterclaims to the court: 1. The settlement of dredging and throwing statement, to prove the Defendant received the settlement of the project price submitted by the Plaintiff and did not raise the objection within one month after the submission. 2. The live report of the breakwater site physical measurement, to prove all parties confirmed the amount of construction and engineering settlement statement of the project exist the differences with the stated amount.

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3. The advice letter of the quality, to prove the Defendant commissioned an outsider to check the dock project quantity and price review. 4. The report of quality inspection and the photos of breakwater cracks, to prove there exist the quality problems of the dock project. 5. The standard of leasing fees, the list of liquidated damages calculation, to prove the Defendant suffered a loss of liquidated damages. 6. The accounting vouchers, IOU, online bank transfer vouchers, to prove the Defendant has paid the dredging project payments of 122,052 yuan. 7. The quotation book, construction bidding documents, bidding and quotation documents, to prove the trough compaction costs include the cost of block filling. 8. Technical service contract and design fee invoice, port construction contract and repair fee invoice, to prove the Defendant paid the anti-wave wall design and repair costs. 9. The estimates of the northwestern breakwater repair project, the cost list of pier steel retaining wall removal, the pricing form of breakwater repair, to prove the budget costs of the demolition of chest wall and anti-wave wall repair. In order to ascertain the facts of the case, according to the application by the Plaintiff, the court entrusted Zhongda Office to evaluate the dock project price, and Zhongda Office issued Project Cost Consultation Document (hereinafter referred to as Price Assessment Report) on January 23, 2014. According to the Defendant’s application, the court entrusted Ruibang Company to identify if the construction quality of the project has problems. On December 18, 2013, it issued Judicial Appraisal Report (hereinafter referred to as Quality Appraisal Report) and two reply letters. After cross-examination in the court, as for evidence 1 and 5 provided by the Plaintiff, the Defendant has no objection, and the court confirms it. As for evidence 2 and 3 provided by the Plaintiff, the Defendant has no objection to the authenticity, but although the Plaintiff completed the construction in November 2011, and the quality was identified up to standard in the submission and acceptance certificate, there exists many quality problems such as cracking and piling skew in fact. Therefore, the court confirms the authenticity of this project and whether there is construction quality in the project will be confirmed with other evidence of the case and the trial comprehensively. As for the evidence 4 provided by the Plaintiff, the Defendant believes that was made by the Plaintiff unilaterally, part of the amount of the calculation was duplicated, the new construction volume and unit price has not been confirmed by the Defendant, the difference of the price of the cement does not belong to additional areas. The court believes that it is the original, the Defendant confirmed receipt of the settlement book, so the court confirms the authenticity of the surface, the specific amount of the project and the price will be combined with Price Assessment Report for comprehensive identification. As for the evidence 6 provided by the Plaintiff, the Defendant does not recognize the authenticity of the evidence. As for the evidence 7 and 8 provided by the Plaintiff, the Defendant has no objection to the authenticity but believes that the completion data far exceeds the

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inspection data submitted by the Plaintiff, and the Plaintiff will retrieve the data immediately after the project acceptance, which has not been delivered to the Defendant till now, the involving terminal was in the trial operation stage which has not really put into use, thus not recognizing it. The court believes that as for the evidence 6 of the engineering business contacts and the evidence 7 of documents evidence report were the same, so for the authenticity above shall be affirmed, and the contents of the proof shall be combined with the evidence of the whole case. As for the evidence 9 provided by the Plaintiff, the Defendant did not recognize the authenticity and believed that rainy weather in June is a normal phenomenon which cannot be a reason of delay, and the Defendant did not agree to be delayed. The court holds that, although the regular meeting record was a copy one, it was signed by YANG Shihe of the Defendant, and the Defendant did not have objection to more rainy weather in the current month, therefore it shall be confirmed. As for the evidence 1 and 6 provided by the Defendant, the Plaintiff has no objection, and the court confirms it. As for the evidence 2 provided by the Defendant, the Plaintiff has no objection to the authenticity and the court confirms the authenticity, the project price will be comprehensively identified combined with Price Assessment Report. As for the evidence 3 provided by the Defendant, the Plaintiff considered that it was made by others entrusted by the Defendant unilaterally, which cannot reflect the true amount of the project and price. Because the involving project and the amount has been assessed by the assessment agencies, which shall not be recognized. As for the evidence 4 provided by the Defendant, the Plaintiff has no objection to the authenticity of the quality inspection report submitted, but did not confirm the authenticity of the dock photos. The court holds that the dock photos matched basically with the view of the court, so it confirms the evidence’s authenticity. According to the report of quality inspection, the wharf project was completed on July 18, 2011, although the Defendant claimed that it should be completed in December 2011, but did not provide valid evidence to prove it, thus the court does not adopt the claim, and confirms according to it that the completion date of the project was on July 18, 2011. As for the evidence 5 provided by the Defendant, the Plaintiff has no objection on the authenticity of the liquidated bill, but considered that was made by the Defendant unilaterally, and there exists a mistake on calculation of the number of days, thus it did not recognize the authenticity of the leasing fees and the proof. The court holds that the rental fee was a copy and the Plaintiff did not provide any other evidence to support, so it shall not be confirmed, the liquidated damages list was the Plaintiff’s claim for the lost. As for the evidence 7, the Plaintiff did not recognize its authenticity. For the reason that the relevant materials provided by the Plaintiff outside the court are in the same as those, and the construction bidding documents are the original documents, therefore, its pro forma authenticity shall be confirmed, and the rational determination of the price of the solid foundation tamping will be combined with the evidence of the whole case and the trial. The evidence 8 submitted by the Defendant was the original, the Plaintiff has no objection to the authenticity, but considers the anti-wave wall crashing and other quality problems are caused by the force majeure or geological, design reasons, and the repair should be approved by the competent

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departments of shipping engineering, which should be determined by bidding, the cost is not reasonable, even if the related costs should be born by the Defendant. Therefore, the court confirms the authenticity of the repair, as for the rationality and the party to bear the costs will be integrated with the evidence of the whole case. As for the evidence 9 provided by the Defendant, the Plaintiff did not recognize the authenticity and considered that even if there existed the quality problems and repair costs, it is not related to the Plaintiff. The court holds that the evidence was a copy and the Defendant did not provide any other evidence to support, so it shall not be confirmed. Both Quality Appraisal Report and Price Assessment Report are selected by the court in the forensic personnel roster according to the provisions of the procedure, the provision is legal, both parties have no objection to the pro forma authenticity. Therefore, the court confirms the authenticity, and the identification of the project price and the quality of the dock construction will be combined with the comprehensive assessment of the evidence in the whole case. Based on the aforementioned confirmation of evidence and the court hearing, the court finds out the facts as follow: in November 2009, the Plaintiff and the Defendant signed Construction Contract, stipulating the Defendant should entrust the Plaintiff for the construction of Zhangzhou Bay Putuo Zhujiajian in Zhoushan City Marina Project, the main embankment was 330 m long, embankment I 68 m, embankment II 89 m, the starting date is late November in 2009 (subject to the report of commencement), the completion date was late November in 2010, the project quality standards was authorized, the total fixed price was 24 million yuan. The contractor changes the project as the notice of change issued by the engineer, and the resulting increase or decrease for the price shall be settled by contract. Article 32.1 of the third section, special clauses, of the contract, stipulates that the contractor shall provide the drawings of completed drawings and construction summary reports in triplicate within 30 days; article 33.1 stipulates that the completed documents include the completed drawings and materials in triplicate, the self-assessment of construction quality reports, stage acceptance and concealed project acceptance information, engineering materials and equipment test and inspection data, settlement and displacement observation data, the completion of the project overall scale measurement report, construction report, completion settlement report (submitted after the completion of the settlement completed); article 33.3 stipulates that the employer shall pay the interest of the project arrears within 28 days from the 29th day after receiving the completion settlement report and settlement information without any justifiable reasons and shall be liable for breach of contract. Article 35.2 stipulates that due to the reasons for the contractor lead to delays, the contractor in accordance with the contract the total one in ten thousandths to pay the liquidated damages for each day, the total contract price of 10% of the upper limit for liquidated damages, both parties also made agreements for other matters. On January 22, 2010, the pier project started. On April 11, 2011, the Plaintiff and the Defendant signed Supplementary Agreement, which stipulated that the Defendant should pay 1.5 million yuan to the Plaintiff respectively on April 22 and May 22 of the same year for securing the construction funds. The Defendant promised that 95% of the project money has been paid before December 30, 2011,

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and paid 5% after one year of inspection. After the Plaintiff reported the settlement, the Defendant granted the reply within one month, and if the Defendant did not approve the claim as the Defendant’s recognition of the Plaintiff reported the settlement price of the project. The Plaintiff and the Defendant at the end of July mutual cooperation with the organization acceptance, if not the Plaintiff cannot organize the project acceptance, or from the project a month later that the Plaintiff has completed the inspection required by the construction contract, the Plaintiff should resume the construction after receiving 1.5 million yuan, and for the resumption of work on April 22 to ensure that before June 30 with the initial acceptance conditions (effective monthly working days by 25 days, less than 25 days, the duration of delay, except for force majeure). If the Plaintiff delays and fails to start the contraction after receiving the payment, the construction fund shall be deemed as given up. If the agreement is not performed accordingly, the liability for breach of contract shall be born according to the special clause in Construction Contract. This supplementary agreement has the same legal effect with the original agreement. Where there is a inconsistency between them, this agreement shall prevail. Both parties agree not to hold each other liable for breach of contract. On April 26, 2011, the Defendant paid 1.5 million yuan. On May 20 of the same year, the Defendant paid 300,000 yuan. On May 27 of the same year, the Defendant paid 1.5 million yuan. Up to June 20, 2011, there were 12 rainy days, 8 working days during that month. On July 18 in the same year, the project was completed. On December 2, 2011, Zhoushan Traffic Engineering Quality Supervision Bureau organized the Plaintiff and the Defendant, design parties and supervision parties to conduct quality appraisal of delivery and sign Acceptance Certificate of Project Delivery, confirming that the project is gravity-type breakwater and the main embankment is 340.8 m, embankment 66.2 m, embankment II 88.45 m, the quality was qualified. On December 16, 2011, Zhoushan Traffic Engineering Quality Supervision Bureau issued Report on Quality Assurance for Breakwater Engineering, confirming that the project involved was completed on July 18, 2011 with complete completion data, various kinds of raw materials warranty certificates (single) and the test report, original record, loft positioning data, process report data and evaluation data are basically complete. The overall size control is good, the surface of the component is basically flat, and the pile stubs are densely connected with each other. However, collision damage, the surface layer of a local crack, embankment settlement obvious defects, the project identified as 100% quality, and the existence of the above-mentioned problems put forward requirements. As of January 31, 2012, the Defendant paid a total of 19,382,452 yuan for the project costs involved. The Plaintiff claimed to the court due to the remaining project price unsuccessful negotiations with the Defendant. The court also finds out that in late August 2013, the wave-breaking wall was broken by the storm with a length of about 9.6 m at the northeast corner of the main breakwater, and the Defendant commissioned others to finish the design and repair. Price Assessment Report confirms that the total project cost is 2,363,606 yuan (excluding the disputed amount of 619,062 yuan of disputed materials generated during the period of about 6 months without delay, and the cost of the dispute

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should be born by the responsible party who has extended the construction period) and the assessment cost is 188,856 yuan. Quality Appraisal Report identified the whole main pier of the pier obviously settled westward, the surface of the breakwater was not treated with preservatives, and the concrete and rock wool of the main dike and the wave-proof wall were layered and constructed with a gross content of stone more than 20%. When leaving the construction level in the concrete, the embankment stones are not exposed by half, and the following quality problems are finally confirmed: 1. the top elevation of the main embankment and the deviation of the design control elevation exceed the requirements of the specification, the main section of 1-1 exist the subsidence phenomenon. 2. 15 places of the gap distance between the caissons of the inner side of the main embankment and two sides of the embankment II among sampling 62 caissons were out of limits. 3. Pile location of the eastern side of the embankment was significantly deviated, excluding design reasons. 4. Concrete pouring construction does not meet the requirements of the specifications, cast-in-place concrete chest wall in the amount of more than the design requirements of the stone. 5. The main embankment concrete cracks, surface cracks department of rock stratification and sun exposure due to the settlement of deep cracks. 6. The northeast corner of the main embankment wall breakage and construction of cast-in-place concrete structure caused by unreasonable and unqualified concrete construction there is a causal relationship. Later, Ruibang Company further clarified that the settlement of pier involved may be caused by geological exploration, design and construction, which cannot be directly identified as the cause of construction. Due to the causal relationship between quality problems and design and other factors, the reasons for dock settlement are not within the scope of their appraisal, the appraisal fee is 140,000 yuan. The court holds that Construction Contract and Supplementary Agreement signed by the Plaintiff and the Defendant, which is the true meaning of both parties and is legal and valid and both parties should perform the contract according to the contract. Project started in late January 2010, the Plaintiff shall complete it according to the agreement in January 2011, but according to Supplementary Agreement, the two sides failed to confirm the completion of the department as scheduled due to various reasons, not to pursue the previous breach of contract liability. Then, the Defendant failed to pay the project money in a timely manner, and June is the rainy season, till June 20 in the same month there were 12 days of rain, the Plaintiff can extend the construction period according to the contract, the project was completed on July 18, 2011, the duration was basically reasonable, the Defendant claimed that the Plaintiff postponed the completion of the corresponding liquidated damages petitions, evidence and reasons are not sufficient, and the court does not protect it. The Plaintiff and the Defendant confirmed that the wharf project failed to be completed in January 2011 due to various reasons and did not pursue the breach of contract previously incurred. Therefore, the rising cost of materials arising from the delay period should be born by both parties and confirmed accordingly as 309,531 yuan. The Defendant argued that the foundation tamping project was recorded in the bidding documents as riprap and compaction, and the

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Plaintiff also applied the quota in the bidding documents. Therefore, the foundation tamping consisted of stone blocks and should not be metered repeatedly. It is considered that the bidding documents shall be settled on the procedure list rather than on the basis of the normative requirements. Therefore, the settlement of construction price shall be of the same caliber. Although the bidding documents contain the tillage stones, the unit price of the bidders is biased by consensus, the project involved was a fixed price contract, the contract price should not be adjusted, and ultimately determine the base trough compaction and foundation tiled stone filling was not double counted. The court holds that the assessment authority has made a reasonable identification and the Defendant did not submit adequate and effective evidence to overturn it, so the court adopts it, combined with the identification of bearing the increasing costs of materials in the delayed construction method, the total price of the construction involved was finally determined as 23,772,537 yuan. After completing the project construction, the Plaintiff has the right to claim the above-mentioned project price from the Defendant, after deducting the price paid by the Defendant, the Defendant still owes the project cost of 4,300,800 yuan. Based on the agreement of the two parties on the payment time and the performance of the contracts involved, the court hereby determines that the interests of the said project price shall be calculated in accordance with the loan interest rates of the People’s Bank of China over the same period starting from the date when the Plaintiff filed an action. The Defendant claimed that the Plaintiff has yet to deliver the completed drawings and construction summary report, resulting in its failure to pass the comprehensive acceptance and suffer the corresponding economic losses. For this, the Plaintiff did not recognize it. The court holds that according to the quality inspection report of the quality control department, when the administrative department organized the quality inspection of the delivery workers, it confirmed that the completion documents were basically complete and the Defendant also confirmed that the original drawings of the as-built drawings received by the court were provided by it. This can corroborate the claim of the Plaintiff that it had delivered all the aforementioned materials to the Defendant on the spot at the day of check and acceptance, therefore this item of counterclaim of the Defendant lacks evidence and reasons, which shall not be supported by the court. According to Quality Appraisal Report that the construction of cast-in-situ concrete chest wall does not meet the design requirements and the quality of concrete construction unreasonable, resulting in the pier at the northeast corner of the pier wall break, because the Plaintiff refused to repair, the Defendant hired others to design repair, the reasonable costs caused therefrom should be born by the Plaintiff. Although the Plaintiff argued that the quality problems were caused by the improper use of the Plaintiff itself or force majeure, but did not provide the corresponding evidence to prove it, which shall not be adopted. Because the Defendant did not provide sufficient and effective evidence to justify the above costs, and some of the design projects include the settlement of the northwestern corner of the main embankment, the Plaintiff did not recognize it either. Both parties failed to apply for the assessment. Therefore, the court made reference to reasonable market prices and industry practice, confirming that the

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aforementioned reasonable cost of 400,000 yuan by discretion. The position of the side piles of the embankment II occurred obvious deviation. The construction of the main embankment wall and the anti-wave wall concrete did not meet the specifications, the amount of the doping exceeded the design requirement, and the main concrete dyke caused cracks due to the layering of the concrete and the bricks. The problem above was caused by the construction of the Plaintiff, so the Plaintiff should bear the corresponding responsibility. Due to the Plaintiff refusing to repair, the Defendant shall have the right to claim the Plaintiff’s reasonable expenses incurred after it repairs by itself. There are many possible reasons for the quality problems such as pier settlement, excessive caissons spacing and deep cracks in concrete members. Although the Defendant applied for the identification of the cause of settlement of the pier, the Defendant withdraws the application for identification because it did not pre-pay the appraisal fee and did not provide with a high degree of probabilistic evidence to prove that the above-mentioned quality problems were caused by the Plaintiff’s construction, so the counterclaim of it to require the Plaintiff to repair the aforementioned quality problem or compensate for it, lacked evidence and reasons and the court does not support it. Pulling the threads together, as for the reasonable parts of the claims of the Plaintiff and the Defendant, the court confirms them. As for those in lack of evidence and reasons, the court does not support them. According to Article 77 Paragraph 1, Article 107 and Article 109 of the Contract Law of the People’s Republic of China, Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is rendered as follows: 1. The Defendant (the counterclaim Plaintiff) Zhoushan Alpha Yacht Club Development Co., Ltd. shall pay the construction fund of 4,390,085 yuan and the interest (paid and calculated according to the loan interest rate of the People’s Bank of China for the same period from April 19, 2013 to the date determined in the judgment) to the Plaintiff (the counterclaim Defendant) Shanghai Sanhang Benteng Construction Engineering Co., Ltd. within ten days from the effective date of the judgment. 2. The Plaintiff (the counterclaim Defendant) Shanghai Sanhang Benteng Construction Engineering Co., Ltd. shall pay the Defendant (the counterclaim Plaintiff) Zhoushan Alpha Yacht Club Development Co., Ltd. for a loss of 450,000 yuan in design and repair costs of the anti-wave wall within ten days from the effective date of the judgment. 3. Reject the other claims of the Plaintiff (the counterclaim Defendant) Shanghai Sanhang Benteng Construction Engineering Co., Ltd. 4. Reject the other claims of the Defendant (the counterclaim Plaintiff) Zhoushan Alpha Yacht Club Development Co., Ltd. If the obligations of monetary payment are not performed within the period specified in this judgment, the interest on the debt during the delayed period for performance shall be doubled in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China.

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Court acceptance fee of the principle action in amount of 63,500 yuan, 44,397 yuan after mitigating the claims, assessment fee in amount of 188,856 yuan, the Plaintiff (the counterclaim Defendant) Shanghai Sanhang Benteng Construction Engineering Co., Ltd. shall bear 147,313 yuan and the Defendant (the counterclaim Plaintiff) Zhoushan Alpha Yacht Club Development Co., Ltd. shall bear 85,940 yuan; court acceptance fee of the counterclaim in amount of 15,051 yuan, appraisal fee in amount of 140,000 yuan, the Plaintiff (the counterclaim Defendant) Shanghai Sanhang Benteng Construction Engineering Co., Ltd. shall bear 142,067 yuan and the Defendant (the counterclaim Plaintiff) Zhoushan Alpha Yacht Club Development Co., Ltd. shall bear 12,984 yuan; In case of dissatisfaction with this judgment, any party may submit a statement of appeal to the court within 15 days from the date of service of the judgment and according to the number of parties provides duplicates, and appeal to the Zhejiang High People’s Court [The appeal costs in amount of 59,448 yuan, (the specific amount shall be determined by the Zhejiang High People’s Court, and the extra part will be returned later) shall be prepaid when submitting the statement of appeal. If the payment is not fulfilled within 7 days after the period for appealing expires, the appeal shall be withdrawn automatically. The money shall be remitted to the non-tax revenue settlement sub-account of Finance Department of Zhejiang Province, account number: 19000101040006575401001, deposit bank: Hangzhou Xihu Branch of the Agricultural Bank]. Judge: ZHANG Jilin Judge: ZHANG Jiansheng Acting Judge: WANG Liansheng January 15, 2016 Acting Clerk: ZHENG Jing

Appendix: Relevant Laws 1. Contract Law of the People’s Republic of China Article 77 Paragraph 1 A contract may be amended if the parties have so agreed. Article 107 If a party fails to perform its obligations under a contract, or rendered non-conforming performance, it shall bear the liabilities for breach of contract by specific performance, cure of non-conforming performance or payment of damages, etc. Article 109 If a party fails to pay the price or remuneration, the other party may request it to make the payment. 2. Civil Procedure Law of the People’s Republic of China Article 64 It is the duty of a party to an action to provide evidence in support of his allegations.

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Zhejiang High People’s Court Civil Judgment Shanghai Sanhang Benteng Construction Engineering Co., Ltd. v. Zhoushan Alpha Yacht Club Development Co., Ltd. (2016) Zhe Min Zhong No.149 Related Case(s) This is the judgment of second instance and the judgment of first instance is on page 1213. Cause(s) of Action 236. Dispute over contract for construction of dock or harbor. Headnote Affirming lower court decision holding the Defendant liable to pay the Plaintiff the outstanding contract price for construction of pier and breakwater, rejecting the Defendant’s claims for delay and poor construction of pier, but accepting the Defendant’s counterclaim that the Plaintiff should pay damages for losses suffered as a result of poor construction of breakwater. Summary The Plaintiff construction company brought an action against the Defendant to collect the outstanding balance owed to the Plaintiff following the construction of a pier after the Defendant refused to pay the agreed price. The Defendant counterclaimed, arguing that it had suffered loss as a result of unreasonable delay in construction and poor construction quality. The court of first instance held that the Defendant did not provide sufficient evidence to prove that the damage caused to the pier was due solely to the Plaintiff’s construction, however, the damage which occurred to the breakwater did occur as a result of the Plaintiff’s construction; the Plaintiff’s delay was not unreasonable; therefore, the Defendant should pay the Plaintiff the outstanding balance due on the contract plus interest and the Plaintiff should reimburse the Defendant for the costs of repairing the broken breakwater. Both parties appealed. The appeal court affirmed the trial court’s judgment: the Defendant was liable to the Plaintiff for the balance owed plus interest, and the Plaintiff was liable to reimburse the Defendant for the costs of repairing the broken breakwater.

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Judgment The Appellant (the Plaintiff of first instance, the counterclaim Defendant): Shanghai Sanhang Benteng Construction Engineering Co., Ltd. Domicile: No.2816, Yixian Road, Baoshan District, Shanghai City. Legal representative: WANG Xiuchun, chairman. Agent ad litem: SONG Xiaoming, lawyer of Shandong Kaien Law Firm. The Appellant (the Defendant of first instance, the counterclaim Plaintiff): Zhoushan Alpha Yacht Club Development Co., Ltd. Domicile: No.70, Datong Road, Zhujiajian Street, Putuo District, Zhoushan City, Zhejiang Province. Legal representative: YANG Xingjian, chairman. Agent ad litem: YANG Shihe, male, general manager. Agent ad litem: ZHOU Hong, lawyer of Zhejiang Capital Equity Law Group. With respect to the case arising from dispute over wharf construction contract, the Appellant, Shanghai Sanhang Benteng Construction Engineering Co., Ltd. (hereinafter referred to as Sanhang Company) and the Appellant, Zhoushan Alpha Yacht Club Development Co., Ltd. (hereinafter referred to as Alpha Company) were neither satisfied with the Ningbo Maritime Court (2013) Yong Hai Fa Shang Chu Zi No.306 Civil Judgment and appealed to the court respectively. The court entertained the case on March 10, 2016, organized the trial bench according to the law, and held a hearing in public on June 23, 2016. Agent ad litem of the Appellant Sanhang Company, SONG Xiaoming and agents ad litem of the Appellant Alpha Company, YANG Shihe, ZHOU Hong appeared in court to attend the trial. Because of the complexity of the case, the court extended the trial. Now, the court has concluded the case. Sanhang Company sued to the court of first instance on April 19, 2013: in November 2009, Sanhang Company and Alpha Company signed Project Construction Work Contract, which agreed that Sanhang Company contracted yacht wharf engineering of Alpha Company which located in Zhangzhou Bay, Zhujiajian, Putuo District, Zhoushan City. The total cost of the project was RMB24 million, and the project started on January 22, 2010. The two sides signed Supplementary Agreement on April 11, 2011, which agreed that Alpha Company guaranteed to pay accumulative total of 95% of the project to Sanhang Company before December 30 and to pay 5% quality margin one year after project checking and accepting. Sanhang Company reported and settled account, and Alpha Company shall give replies within 1 months, or it deems that Alpha Company approved contract settlement price reported by Sanhang Company. This project was completed on July 20, 2011. Sanhang Company reported the settlement of construction payment RMB26,223,312 to Alpha Company on November 14, 2011, after receiving the completion settlement information, Alpha Company has not yet replied, and has not made any amendments, which shall be deemed as that Alpha Company approved the settlement price. On December 2, 2011, the project has

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passed the acceptance inspection, but Alpha Company has only paid RMB19,382,452 of the project, the balance is not paid in arrears. Sanhang Company requested an order: Alpha Company should pay engineering funds RMB6,840,860 and interests to Sanhang Company. In the first instance, Sanhang Company changed the claim into: Alpha Company should pay Sanhang Company for project funds RMB4,699,616 and interests (from December 30, 2011 to the performance date determined by the judgment, calculated by the loan interest rate of the People’s Bank of China in the same period), and bear the litigation costs. Alpha Company argued that in the first instance: 1. Alpha Company has lodged an objection within the stipulated period after it received the settlement of Sanhang Company, the project has not yet been completed and accepted, Alpha Company was not authorized to use it. 2. Even if the completion inspection was deemed as the completion and acceptance, due to serious quality problems of the main structure of the project, Sanhang Company has not provided the completion data and construction report, leading that Alpha Company cannot accept and fail to open public investment business, and the two sides did not settle the project payment. Alpha Company requested the court of first instance to reject the claim of Sanhang Company. Alpha Company submitted a counterclaim to the court of first instance on June 13, 2013: Project Construction Work Contract signed by the two sides agreed that time limit for a project is from late November, 2009 to late November, 2010; the contractor shall compensate the liquidated damages by the day 1% of the total contract price and compensate the contract letting party with the contract price of 10% as the upper limit of breach of contract due to the delay of the construction period; the contractor shall provide the contract letting party with drawings, materials and construction summary reports within 30 days after completion. After the start of the project, Sanhang Company cannot complete the construction in agreed period. The two sides signed Supplementary Agreement on April 11, 2011, which agreed Sanhang Company is responsible for returning to work on April 22 of the same year after receiving RMB1,500,000 project money, and assure that have preliminary acceptance conditions before June 30 of the same year. After that, Alpha Company fulfills the obligation of payment, but Sanhang Company completed the project construction until November 2011, delayed completion of nearly 5 months. Sanhang Company did not submit as-built drawings after the completion of the project, which caused wharf engineering cannot be comprehensive accepted up to now, resulting in Alpha Company suffered huge economic losses, and there were many quality problems in the wharf. So, Alpha Company lodged a counterclaim and requested an order: 1. Sanhang Company should compensate Alpha Company due to delay liquidated damages for loss of RMB297,600; 2. Sanhang Company should submit the completion documents to Alpha Company (including the completion of drawings and data, project quality self-assessment report, stage of acceptance and acceptance of concealed work materials, engineering materials and equipment testing and inspection data, settlement and

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displacement observation data, the completion of the project overall scale measurement report, construction report, completion settlement report), and compensate for Alpha Company the economic loss RMB2,102,400 due to failure of check and acceptance; 3. Sanhang Company should compensate Alpha Company for the rehabilitation expense of wave wall RMB512,770 (of which the design costs RMB100,000, the rehabilitation expense RMB345,887, the management fees 15%); and 4. Sanhang Company should repair the quality problems existing in the wharf (including severe fracture dip of the main dyke in the northwest corner of 1-1 section, the quality problem of parapet wall, caisson spacing exceeding standard, cracks in concrete structures, part of the pile spacing of embankment two does not meet the design requirements and part of the pile tilt). After the interpretation by the court of first instance, Alpha Company retained the right to claim for another compensation to Sanhang Company after the above quality problems were repaired. According to Alpha Company’s counterclaim, Sanhang Company defended in the first instance: 1. According to Supplementary Agreement agreed by the two sides, June 30, 2011 was the date of preliminary acceptance of the agreed project but not the date of completion. If the working days of the month were less than 25 days, according to the contract the time limit for a project can be extended, June 2011 was the rainy season, the effective working days were less than 10 days, Sanhang Company completed on July 18, 2011, and there is no delay. 2. Sanhang Company submitted relevant completion data to Alpha Company in accordance with the contract. The docks have already been put into use. Alpha Company hosts the Zhoushan yacht show every year, there is no related losses. 3. Even if Sanhang Company constitutes a breach of contract, the two sides have not agreed on the penalty, and the loss as business risk, which shall be undertaken by Alpha Company itself. 4. Sanhang Company has actually fixed for the engineering problem of cracking, the quality problem claimed by Alpha Company is caused by improper use or force majeure, which shall not be undertaken by Sanhang Company. In summary, Sanhang Company requested to reject the counterclaim of Alpha Company. The court of first instance found out through investigation that: in November 2009, Sanhang Company and Alpha Company signed Project Construction Work Contract, agreed Alpha Company commissioned Sanhang Company to construct Zhoushan City Zhujiajian Zhangzhou Bay yacht wharf project, the main dyke is 330 m, dike 1 is 68 m, dike 2 is 89 m, the start date of the project is late November 2009 (subject to the commencement report), the completion date is late November 2010, the project quality standard is qualified, the total price of fixed unit price is RMB24 million. The contractor in accordance with the engineer change notice given by the engineer for engineering change, the increase or decrease of the price arising therefrom will solve in accordance with the contract. Article 32.1 of the third part of the contract stipulates that the contractor shall provide three sets of completed drawings, materials and construction summary reports within 30 days after

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completion; article 33.1 agreed that the completion data was three copies, including the completion drawings and data, project quality self-assessment report, stage of acceptance and acceptance of concealed work materials, engineering materials and equipment testing and inspection data, settlement and displacement observation data, the completion of the project overall scale measurement report, construction report and completion settlement report (submitted after completion of settlement); article 33.3 stipulates that the employer has no unreasonable reasons and not pay the contracted cost of the project within 28 days after receiving completion of the settlement report and settlement information, from the twenty-ninth day onwards, the employer shall pay the interests of default on construction cost in accordance with bank lending rates at the same time as the contractor and bear the liability for breach of contract. Article 35.2 stipulates that time limit for a project delayed due to the contractor’s reasons, the contractor pays liquidated damages to the employer in accordance with 1% of the total contract price for each day of delay, 10% of the total contract price is the breach of contract limit; the two sides also agreed on other matters. On January 22, 2010, the wharf project started. On April 11, 2011, the parties signed Supplementary Agreement, which agreed that due to various reasons, Alpha Company paid Sanhang Company RMB1,500,000 respectively before April 22 and May 22 of the same year to ensure the payment for engineering construction; Alpha Company ensure to pay a cumulative total of 95% projects before December 30, 2011, and pay quality margin 5% one year after the date of acceptance; after Sanhang Company’s reporting and settling accounts, Alpha Company gives replies within 1 months, if it is overdue and not approved, it will be deemed as that Alpha Company approves the project settlement price reported by Sanhang Company; at the end of July, the two sides cooperate with each other to organize the acceptance, if not Sanhang Company cannot organize the acceptance of the project, or one month since the use of the project that Sanhang Company has passed the final acceptance according to the construction contract. On April 22, Sanhang Company is responsible for the resumption of work after received RMB1,500,000 to ensure that before June 30, the project has the preliminary acceptance conditions (effective workdays for every month by 25 days, if less than 25 days, the duration will be extended, force majeure excepted); if Sanhang Company fails to start after payment, it will be deemed as giving up project money. If not implement the contract, Sanhang Company shall bear the liability for breach of contract according to special clause of Project Construction Work Contract. This supplementary agreement has the same legal effect with the original contract. If the agreements are not consistent, this agreement shall prevail, the two parties agree not to investigate the previous liability for breach of contract. On April 26, 2011, Alpha Company paid RMB1,500,000; on May 20 of the same year, Alpha Company paid RMB300,000; on May 27 of the same year, Alpha Company paid RMB1,500,000. As of June 20, 2011, the rainy day of the month was 12 days, the working day was 8 days; on July 18 of the same year, the project was completed. On December 2, 2011, Zhoushan Traffic Engineering Quality Supervision Bureau organized the two parties, the designer and the supervisor of the quality evaluation of project completion, signed Project Acceptance Certificate, confirmed the project is a gravity

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type breakwater, the main dyke of embankment is 340.8 m, the secondary dike is 66.2 m, the secondary dike two is 88.45 m, quality qualified. On December 16, 2011, Zhoushan Traffic Engineering Quality Supervision Bureau issued Breakwater Project Delivery Quality Appraisal Report, confirmed that the project in question was completed on July 18, 2011, the completion of basic information is complete, all kinds of raw materials warranty (single) and test report, original records, lofting data, process inspection data, evaluation data basically complete; the overall size is well controlled and the basic component surface is smooth, dense pile beam between Jiecha, but edge angle of individual component has sand line, sand spot, damage and local surface cracking, dike settlement obvious defects, the quality of the project identified 100% qualified, and put forward the requirements for the above problems. As of January 31, 2012, Alpha Company paid project cost in question amounting to RMB19,382,452. Sanhang Company and Alpha Company talked over the surplus project cost but in vain, so Sanhang Company sued to the court of first instance. It was also found out that in late August 2013, the northeast corner of the main dyke engineering breakwater is about 9.6 m long by wind wave impact fracture, after Alpha Company commissioned others to complete the repair and the design. According to the application of the party, the court of first instance commissioned Zhejiang Zhongda Engineering Cost Agency Co., Ltd. (hereinafter referred to as Zhongda Company) judicial identification of the project cost, Zhongda Company issued Price Assessment Report, confirmed the total cost of the project is RMB23,463,006 (not including production delay about 6 months disputed material adjustment RMB619,062. The cost of the dispute shall be born by the responsible subject for the extension of the time limit), the assessment fee was RMB188,856. According to the application of the party, the court of first instance commissioned Zhejiang Construction Engineering Testing Co., Ltd. (hereinafter referred to as Ruibang Company) judicial appraisal of the quality of the project in question, Ruibang Company issued Quality Appraisal Report, identified the overall settlement of the main breakwater is obviously westward, the surface of breakwater was not treated with antisepsis, the main dike parapet and breakwater concrete and rubble layer construction, rubble content more than 20%; when the horizontal construction joint is embedded in the stone concrete, the embedded stone is not exposed half, the following quality problems are identified: 1. the main dike sampling top elevation and design control elevation deviation are beyond the specification requirements, there is the cause of settlement, the main dike 1-1 section of the settlement phenomenon; 2. inside the main dyke and on both sides of the secondary dike one sampling 62 caissons spacing 15 exceeded the standard; 3. obvious deviation of side pile position on the east side of the secondary dike two, excluding design reasons; 4. the main embankment construction parapet pouring concrete does not meet the standard requirements, the cast-in-place concrete parapet stone doped is more than the design requirements; 5. the main dike concrete component appears obvious cracks, the surface crack system stratification and sun exposure caused by rubble, the deep crack is caused by settlement; and 6. the wave breaking of the northeast corner of the main dyke has a causal link between

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construction caused cast in place concrete structure unreasonable and concrete construction quality is not qualified. Later, Ruibang Company further made it clear: settlement of wharf in question maybe dock geological exploration, design and construction and other reasons, it cannot be identified directly that it was caused by the construction; due to the qualification, the causal relationship between engineering quality problems and design factors, wharf settlement reasons are not within the scope of their identification, the cost of identification is RMB140,000. The court of first instance held that: Project Construction Work Contract and Supplementary Agreement signed by Sanhang Company and Alpha Company are the true meaning of the parties, which are legitimate and effective, and both sides shall fulfill. The project started in late January 2010, Sanhang Company shall complete the construction in January 2011 according to the contract, but according to Supplementary Agreement, both sides confirmed that the failure to complete the project is caused by various reasons, mutual exclusion of previous liabilities for breach of contract; since then, Alpha Company failed to timely pay the project money, and June is a plum rain season, by the end of June 20, the month of the rainy season for 12 days, Sanhang Company actually can extend the construction period, the project was completed on July 18, 2011, the project is basically reasonable, Alpha Company claimed that Sanhang Company postponed the completion and claimed for the corresponding penalty, which lacked evidence and reason. Both sides confirmed the wharf project failed to be completed in January 2011 due to various reasons, and mutual exclusion of previous liabilities for breach of contract, hereby it was confirmed as RMB309,531. Alpha Company argued that the tamp trench project was noted as riprap and tamping in the tender documents, Sanhang Company also used the quota in the tender documents, so the tamp trench contains solid filling, which shall not repeat the measurement; Zhongda Company assessed that the bidding documents are settled by the procedure preparation list, rather than compiled according to the specification requirements, so the settlement of project cost shall be adopted in the same caliber; although the bidding documents noted that the tamp trench contains stone costs, it was bidders’ group price deviation, without consensus, the project in question was the fixed price contract, so it shall not adjust the contract price, and ultimately it recognized that the tamp trench and the block stone filling foundation has no duplicate computation. The court of first instance held that the evaluation of the appraisal institution is reasonable, Alpha Company did not provide sufficient evidence to overturn, combined with the cognizance of material rising cost in the period of delay, the final confirmation of the total price of the project in question is RMB23,772,537. Sanhang Company completed construction, which has the right to claim for the above project money to Alpha Company, after deducting the paid price of Alpha Company, Alpha Company still owed the construction money RMB4,390,085. In combination with the parties’ agreement on payment time and the performance of the contract in question, the court of first instance recognized that the interest of the construction cost should be calculated in accordance with the loan interest rate of the People’s Bank of China for the same period from when Sanhang Company filed the action.

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Alpha Company claimed that Sanhang Company has not submitted construction drawings and summary report, causing that Alpha Company suffered the economic losses due to Alpha Company cannot pass the comprehensive inspection. In this regard, Sanhang Company did not recognize it. The court of first instance held that according to the recognition of Appraisal Report on Quality of Construction Delivery, administrative department organized each party to complete quality identification, which has confirmed the completion data basically complete. Alpha Company also confirmed the original drawings received by the court of first instance was provided by Alpha Company, it corroborates each other with the claim that Sanhang Company submitted that above to Alpha Company on the date of acceptance, so Alpha Company’s the counterclaim is lack of evidence and reasons. According to the recognition of Quality Appraisal Report, the construction of cast-in-situ concrete parapet does not meet the design requirements and the quality of concrete construction is not reasonable, resulting in the wall pier in the northeast corner of the main dyke break, because Sanhang Company refused to repair, Alpha Company hired others to design and repair, the reasonable expenses incurred shall be born by the Sanhang Company. Although Sanhang Company argued that the quality problem is caused by improper use of Alpha Company or force majeure, but Sanhang Company did not provide evidence to prove, so the defense shall not be adopted. Because Alpha Company did not provide sufficient evidence to prove the rationality of the above cost, and part of the design project including the settlement of the northwest corner of the main dyke, Sanhang Company did not recognize it either, both sides did not apply for the assessment, so the court of first instance made a reference to reasonable market price and industry practice, which affirmed that the above reasonable expenses is RMB400,000. The side pile position of the secondary dike has obvious deviation, the parapet wall and concrete pouring construction of the main dyke does not meet the normative requirements, the amount of stone addition exceeds the design requirements. Because of the concrete and rubble layer, causing cracks in concrete component of main dyke, the above quality problem is caused by the construction of Sanhang Company, which shall bear the corresponding responsibility. Because Sanhang Company refused to repair, Alpha company had the right to claim for the repair costs after repairing by itself to Sanhang Company. Wharf settlement, caisson spacing exceeding standard, deep cracks in concrete members and other quality problems, which may be caused by a variety of reasons. Although Alpha Company applied for identification of wharf settlement reasons, because it has not paid the fee and withdraw the application for identification of appraisal, and did not provide evidence with a high probability of evidence to prove the above quality problems was caused by the construction of Sanhang Company. So the counterclaim that Sanhang Company should repair or compensate for the quality problems mentioned above is lack of evidence and reasons, and should not be supported. Pulling the threads together, as for the reasonable parts of the claims of the parties, the court of first instance confirmed them. As for those in lack of evidence and reasons, the court of first instance did not support them. According to Article 77 Paragraph 1, Article 107 and Article 109 of the Contract Law of the People’s

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Republic of China, Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment was rendered as follows: 1. Alpha Company should pay the construction fund of 4,390,085 yuan and the interest (paid and calculated according to the loan interest rate of the People’s Bank of China for the same period from April 19, 2013 to the date determined in the judgment) to Sanhang Company within ten days from the effective date of the judgment. 2. Sanhang Company should pay Alpha Company for a loss of 450,000 yuan in design and repair costs of the anti-wave wall within ten days from the effective date of the judgment. 3. Reject the other claims of Sanhang Company. 4. Reject the other claims of Alpha Company. If the obligations of monetary payment were not performed within the period specified in this judgment, the interest on the debt during the delayed period for performance should be doubled in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee of the principle action of first instance in amount of 63,500 yuan, 44,397 yuan after mitigating the claims, assessment fee in amount of 188,856 yuan, Sanhang Company should bear 147,313 yuan and Alpha Company should bear 85,940 yuan; court acceptance fee of the counterclaim of first instance in amount of 15,051 yuan, appraisal fee in amount of 140,000 yuan, Sanhang Company should bear 142,067 yuan and Alpha Company should bear 12,984 yuan. Sanhang Company and Alpha Company were dissatisfied with the civil judgment of the court of first instance, and respectively appealed to the court. Sanhang Company appealed to the court: Firstly, the first instance found that the project in question has the construction quality problems, which is wrong. 1. The project in question has been checked and accepted by Zhoushan Traffic Engineering Quality Supervision Bureau on December 2, 2011, and the quality of the project is qualified, both parties and the designer, supervision units signed and approved it. 2. The quality appraisal report to the project in question issued by Ruibang Company does not have legality, objectivity and impartiality, which cannot be used as the basis for ascertaining facts. On the one hand, the appraisal unit and testing personnel do not have the qualification of judicial appraisal license, nor have the certificate of water transport engineering material inspection or water transport engineering structure inspection certificate. On the other hand, the test data based on the identification report is extracted without notifying Sanhang Company witness at the scene, whose transparency and impartiality cannot be guaranteed. Besides, even if the detected data was in accordance with the relevant regulations, the report did not provide clearly (especially the calculation of rubble content) on which laws and regulations or normative calculation it was based. Secondly, it is wrong that the judgment of first instance sentenced that Sanhang Company should bear the repair costs of 400,000 yuan for the anti-wave walls of the main dike. 1. The design and repair costs claimed by Sanhang Company in the court of first instance after the anti-wave walls of the main dike were burst down could not be prove for its true existence, and is also obviously not normal. The claimed damages occurred in the proceedings, but Alpha Company neither informed the court of first instance, nor applied for the court to go to the scene for

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inquest, also did not notify the supervision company to supervise the repair, but repaired and designed by itself. For the damage, it did not inform the competent department for the repair of waterway engineering design approval, nor to the restoration project bidding. The design fee and maintenance fee are obviously higher than the market price, and there is no evidence to prove that it has actually paid. 2. Even if there is a damaged part, Alpha Company did not provide evidence to prove there has a causal relationship between the loss and the construction quality of Sanhang Company. The wave wall’s damage is caused by wall design, geological overload, strong typhoon and other reasons, it has nothing to do with the construction quality; and the date has exceeded the project quality guarantee period, it shall be repaired by itself. Thirdly, problems such as settlement and fracture occurred in the project, after many hearings and expert opinions, it cannot assure that it is caused by the construction quality. That the design, geological survey has problems, that the region may be not suitable for the construction of the wharf, overload, that in order to save the construction cost, use a large number of concrete (not reinforced) etc., all can lead to the settlement and fracture occurred in the project. In summary, the original judgment wrongly found parts of the facts, request to revoke the original judgment and change to sentence Alpha Company to pay the construction funds of 4,699,616 yuan to Sanhang Company. As for the grounds of appeal of Sanhang Company, Alpha Company defended that: 1. The project in question only pass the check and acceptance for construction delivery and did not pass the final acceptance for qualification. There are specific stipulations and requirements in the second parts of the contract signed by the two sides. According to the provisions of Article 7, Article 10 of the Measures for Completion Acceptance of Port Engineering of the Ministry of Transport, combined with the facts of the case, the local traffic engineering quality supervision bureau completed the acceptance on January 24, 2011 was in accordance with Article 10 of the Measures, which was not the final acceptance, the final comprehensive acceptance should be organized and completed by the administrative department of port. 2. Appraisal report of Ruibang Company is true and legal. Sanhang Company alleged that Ruibang Company has no qualifications, which has no evidence; as for the relevant data identified in the report, Ruibang Company has already clearly clarified to the court of first instance, Ruibang Company has informed both parties to go Alpha Company’s dock for field inspection at that time. The judicial expertise report is carried out according to laws and regulations. On the stone content design requirements and Sanhang Company has regulated clearly rubble ratio does not exceed 20%, the appraisal report affirmed that the content of rubble exceed the standard which has sufficient evidence. 3. Sanhang Company shall bear the northeast corner of the main dyke wall repair costs RMB400,000. The part collapsed in the first instance of the court session, the collapse objectively existed, which was also clearly documented in the

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article 6.6 of the appraisal report of Ruibang Company. Alpha Company did repair on its own. Sanhang Company has no evidence to prove that the collapse quality problem is caused by geological survey and other reasons. The settlement, fracture problems occurred in the project in question, it has found and pointed out in the acceptance report. Now the subsidence and the fracture is becoming more and more obvious and serious. In summary, it was correct for the first instance to confirm that the construction involved had quality problems and the appeal grounds of Sanhang Company cannot be established. Request to dismiss the appeal of Sanhang Company. Alpha Company appealed that: 1. There are serious quality problems and huge security risks and threats in the main structure of the project in question caused by subjective use inferior materials and turn out substandard goods of Sanhang Company. For the five engineering quality problems that the parapet wall rubble content far exceeds the design requirements, severe inclined fracture of 1-1 section of main dyke, the caisson spacing is too large, deviation of position deviation of the secondary dike two, the northeast corner of the main dyke wall was destroyed, Sanhang Company immediate repair without condition. The first instance in the case of confirming the construction quality has obvious defects and problems, required Alpha Company first to organize the repair and then to claim the rights separately, which is unfair and unjust. 2. After Sanhang Company fully repaired the engineering quality problems, it should provide complete information on the construction project completion acceptance and cooperate with the owners to complete the project completion acceptance. Check and Acceptance Report after Construction Delivery issued by Zhoushan Traffic Quality Inspection Department on December 2, 2011 is a process of final acceptance, it was only a stage acceptance, it was not the final acceptance. The final completion acceptance should be carried out by the administrative department of the port. 3. The first instance judged that Alpha Company should pay 5% guarantee money to Sanhang Company, which has no basis. Since the quality appraisal report and the judgment of first instance affirmed breakwater engineering has serious quality problems, and in Acceptance Report after Construction Delivery, it also pointed out that the main dike 1-1 has settlement of quality defects, which required the construction units to repair. Before Sanhang Company repaired the five construction quality problems, it was wrong for the first instance to order Alpha Company to pay 5% of quality security deposit. 4. The first instance ordered Alpha Company should pay Sanhang Company the interest, which has no basis. Because the project was not completed and accepted, before Sanhang Company fully restored the quality problem of the project and before the two sides reached an agreement on the construction funds, Alpha Company did not pay the project tail money, which did not breach the contract. The dispute arose because there was a big difference on the project

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final settlement amount between the two parties and Sanhang Company overcharged. Project settlement provided by Sanhang Company itself is more than RMB16,220,000, which is much higher than the contract price RMB24 million, Alpha Company commissioned a third party to check and decide that projects money is more than RMB23,460,000, the court of first instance commissioned Zhongda Company judicial identification and affirmed that it was RMB23,460,000, repeat the calculation part of the solid foundation trench removal, the cost of judicial appraisal is basically the same as that advocated by Alpha Company. So Sanchang Company should bear the responsibility when Alpha Company refused to pay the construction tail funds. The judgment of first instance confirmed that the project balance did not exclude the project money of jerry-building in the construction process of the chest wall and anti-wave wall of the construction, which was wrong. In the construction process of main dike and parapet wall, Sanhang Company not according to the design requirements, and used rubble as rubble concrete, but in the engineering settlement Sanhang Company still calculated engineering price and quantity according to the design standard, which is obviously unfair and unreasonable. The judgment of first instance sentenced that Alpha Company should bear half of the balance payment of material price rise due to delay in construction period, which does not comply with the agreement, and the balance payment does not match with the actual. As of April 2011, the project quantity has been completed 95%, the remaining balance payment of price rise of engineering quantity material amount should not reach RMB619,062. The cost of filling stones including tamp trench, on the foundation of tamp cost audit in the project cost report issued by Zhongda Company has duplicate in the calculation of RMB658,751, which is inconsistent with the bidding documents and facts of the project. Two places of identifications of the judgment of the first instance is inconsistent with the facts. On the one hand, it is not Alpha Company’s application to make a supplementary appraisal of the cause of the rupture of the 1-1 section of the main dyke of the breakwater, there are a series of major quality problems, which can infer that the inclination of the 1-1 segment fracture is caused by construction, if Sanhang Company held that it is caused by the geological subsidence, which shall be applied by Sanhang Company for identification, but the court of first instance did not give the identification guide. On the other hand, Alpha Company counterclaimed that Sanhang Company should repair the unqualified project, but the judgment of first instance judged that “Alpha Company reserves the right to claim another compensation to Sanhang Company after repair of quality problems”, which is inconsistent with Alpha Company’s claims. To sum up, Alpha Company requested the court to order: 1. reject the claims of Sanhang Company. 2. Sanhang Company should repair the serious quality problems of the breakwater and provide comprehensive completion acceptance materials and cooperates with the owner to carry out inspection and acceptance. 3. Verify again the wrong project costs and the payable engineering balance payment and interest, and change the judgment according to the law.

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As for the grounds of appeal of Alpha Company, Sanhang Company defended that: 1. There are no problems in the construction quality of the project in question, which meets the requirements of “qualified” project quality stipulated in the contract. There has the approval of acceptance of Zhoushan Traffic Engineering Quality Supervision Bureau. Both parties and design units, supervision units signed on it and recognized it. The appraisal report of Ruibang Company does not have the legality and objectivity, which cannot be identified as the basis of engineering quality problems. Any project in the construction will have some problems, any construction unit cannot do 100% quality, this is also the reason why the contract made an agreement on the quality “qualified”. 2. As for questions about providing completion data. Zhoushan Traffic Engineering Quality Supervision Bureau has clearly documented in the written report on December 16, 2011, that the final data submitted by Sanhang Company as construction units is complete. 3. As for engineering cost. The cost of the appraisal report issued by Zhongda Company in compliance with relevant laws and regulations, in addition to the overall low of the project cost, there is no other defects. Tamp trench cost does not exist the case of duplicate computation. 4. As for 5% of the guarantee money. The project in question has no quality problems, first-instance ordered that Alpha Company should pay Sanhang Company the payment balance including guarantee money, which is not inappropriate. 5. As for the interest of the balance of the project. Alpha Company should pay the interest for the overdue payment, the starting point of interest in the judgment of first instance is the date when Sanhang Company filed an action, which is unfair to the Sanhang Company, it shall start to be calculated from the date when the project money should have been paid, not from the date of the prosecution, but Sanhang Company is no longer entangled about this. 6. There is no shoddy work in the project in question, the quality of the project is in line with the requirements of the contract, which has the basis of the recognition of administrative departments. Ruibang Company’s testing data program on the content of parapet rubble is illegal, and has no corresponding legal basis. Even if there is rubble content exceeding the standard, the site has supervision, and was recognized by the owners and supervision units, which saves the material cost for the owners of units. 7. The extension of the project was caused by Alpha Company, material price difference shall be born by Alpha Company itself, the first-instance ordered that both parties should share it, which is unfair to Sanhang Company. Alpha Company on improper evaluation of the first instance and other improper grounds of appeal also could not be established. In summary, Sanhang Company requested to dismiss the appeal of Alpha Company.

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In the second instance, the parties concerned did not submit new evidence. The court confirms the facts identified in the trial of the first instance, it is also found out that: 1. The procedural facts related to the quality appraisal of the project in question are as follows: Alpha Company filed a counterclaim on June 13, 2013, and put forward written applications to the court of first instance on June 20, 2013, requesting to identify the construction quality problems and reasonable repair costs of the wharf project in question. The court of first instance granted after the examination, and selected the Zhejiang Architectural Science Design Research Institute Co., Ltd. as the appraisal unit according to law, but the identification of the unit wrote to the court of first instance “learn from the relevant parties about the project status, the project has been completed and the water level has returned to normal, according to the current testing equipment and means, the quality of the project cannot be identified, therefore, the appraisal commission shall be returned”. The court of first instance explained to two sides, Alpha Company held that the identification results of engineering quality problems and counterclaim is crucial, requesting the court to select the identification agency again. After that, the court of first instance selected Ruibang Company which has the construction project inspection qualification as the quality identification of units of the project in question in accordance with the law. Alpha Company has no objection to the re-selection of the accreditation body. Sanhang Company raised an objection to this, it held that “the quality of the project in question has been certified as qualified, in the case of the first appraisal agency cannot identify and another agency was commissioned to identify again, it is wrong indeed”. On August 29, 2013, the court of first instance issued the judicial commission decision (2013) Yong Hai Fa Wei Jian No. 21-3 to Ruibang Company, identification requirements are as follows: whether it has the construction quality problems and reasonable repair costs in the wharf project in question. Ruibang Company identified and issued a 34-page report on forensic engineering quality on January 15, 2014, the conclusion of the appraisal shows that there are 6 quality problems in the project in question: 1. the deviation of the top elevation and design control elevation of the main dyke exceeded the standard requirements, and has settlement reasons, the 1-1 section of main dyke has settlement phenomenon; 2. the main dyke inside and both sides of the secondary dike first random inspection 62 parts, the 15 parts of the caisson spacing exceeded the standard; 3. there is obvious deviation of the side pile location of the eastern part of the secondary dike two, and the design reasons are excluded; 4. the main embankment construction of concrete pouring parapet does not conform to the standard, the cast-in-place concrete parapet stone doped is more than the design requirements; 5. obvious cracks appear in the concrete members of the main dyke, the surface crack is caused by rubble stratification and sun exposure, the deep fracture is caused by settlement; and 6. wave wall fracture of the northeast corner of the main dike and construction caused cast in

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place concrete structure is unreasonable and concrete construction quality is not qualified which has the causal relationship. The court of first instance organized the two parties to make a cross examination of the appraisal report, and listen to the opinions of appraisers. In view of the opposition of the two parties to the appraisal report, Ruibang Company gave a reply letter to the court of first instance to explain respectively on March 24 and April 30, 2014. Appraisers also presented in court of first instance on June 5, 2014, Ruibang Company stated that: the technical personnel of Ruibang Company reconnaissance at criminal scene in wharf in question on November 6, 2013, the company called the court of first instance and the parties concerned in advance. The relevant personnel of Sanhang Company did not go to the scene in the identification process, which did not affect the correctness of the identification conclusion; the identification report is made in accordance with the design drawings and requirements and Quality Inspection Standard of Waterway Engineering issued by the national transportation administration JTS257-2008DENG and other mandatory industry standards; for the reason of qualification of Ruibang Company, the causal relationship between the quality of the project and the design, the cause of the settlement of the main dike, the cost of repair, the deviation of the pile in the embankment whether affect the safety of the superstructure and the use of the function are not within the scope of the appraisal; wharf settlement may be due to geological exploration, design and construction and other reasons, which cannot be directly identified that it was caused by the construction. Because Ruibang Company has not made the appraisal opinion to the related reason which caused some project quality problems, especially the cause of the settlement of the main dyke, while Sanhang Company has always held that the main settlement of fracture should belong to design flaws, geological causes, which have nothing to do with construction. Later, Alpha Company applied for supplementary identification of the causes of settlement and fracture of the main jetty of the wharf, and recommended three qualification units with marine traffic engineering qualification to the court of first instance on August 11, 2014. Sanhang Company also recommended three identification units with marine traffic engineering qualification, of which Guangzhou Harbour Engineering Quality Testing Co., Ltd. is recommended by both sides, both sides agree to make supplementary appraisal to the cause of the settlement of the main dyke by the unit. On November 10, 2014, the court of first instance commissioned Guangzhou Harbour Engineering Quality Inspection Co., Ltd. to identify the settlement reasons of the dock project in question. But because of the company’s written reply to the court of first instance which states that it only bears the “settlement measurement, geology exploration, underwater exploration and detection project, providing objective basis for finding the settlement reason of wharf main dyke, and did not bear analysis and identification of the settlement of the main dyke of the wharf”. After the explanation clearly, Alpha Company clearly stated that the appraisal fee would not be paid in advance, on August 10, 2015, the court of first instance terminated the judicial appraisal commission for the settlement of the main dyke.

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2. On June 5, 2014, during the hearing held by the court of first instance in public, regarding to the counterclaim of Alpha Company to order Sanhang Company to repair a number of existing quality problems of projects, Sanhang Company defended that the project quality is qualified, and the cracking problem has been repaired in the warranty period stipulated in the contract, the quality of counterclaim has nothing to do with Sanhang Company. The court asked and interpreted to Alpha Company whether to claim for loss under the circumstance that Sanhang Company refused to repair. Alpha Company stated that if Sanhang Company did not repair, it would ask others to repair, and repair costs would not be claimed in this case, it would keep the follow-up right of claim to Sanhang Company. The court holds that: the fact is clear that Alpha Company contracted out of Zhangzhou Bay Yacht terminal project of Zhujiajian, Zhoushan, Putuo to Sanhang Company for contract construction. Construction Project Work Contract and Supplementary Agreement signed by both parties are true expressions of both parties, the content does not violate the mandatory provisions of laws and regulations, which are both legal and effective, and binding on both parties. After the completion of the project, the dispute was brought to court because of the payment of the project payment. Sanhang Company claimed in the principle action for the payment of remaining project funds, Alpha Company filed a counterclaim for quality problems of the project, the court of first instance made a joint trial of the two separate claims. In the lawsuit, the court of first instance has started the judicial authentication of the project cost and the judicial appraisal of the engineering quality respectively according to the application of the party. Zhongda Company and Ruibang Company respectively issued the identification report on the project cost and construction quality. Sanhang Company has objection to the construction quality appraisal report, while Alpha company has objection to the project cost appraisal report. According to the opinions of the two parties in the second instance, the court concludes and analyzes the issues of the second instance as follows: 1. Whether the construction involved has the quality problems in the project. Sanhang Company appealed that the project in question has been checked and accepted, qualified, there is no quality problems; the quality appraisal report of Ruibang Company is not legal, objective or fair. Alpha Company argued that there were serious construction quality problems in the project, the quality appraisal report of Ruibang Company is valid. The court holds that: Firstly, the quality of the project completion inspection and construction quality problems of the project are not contradictory. The quality standard of construction engineering is generally divided into two grades: “qualified” and “excellent”, the fourth item of Construction Project Work Contract signed by the two parties in November 2009 stipulates that the project quality standard is “qualified”, not “excellent”. The wharf project in question has been inspected and identified by the

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local government, namely, Zhoushan Traffic Engineering Quality Supervision Bureau, who organized the owner, construction unit, design unit and supervision unit, and issued Check and Acceptance Certificate for Construction Delivery, Quality Appraisal Report of Contraction Delivery and Meeting Minutes for Check and Acceptance for Construction Delivery in December 2011, and a series of documents and certificates issued by the bureau to Alpha Company, such as the letter Zhou Jiao Jian [2011] No.105, which can assure that the quality of the project in question is qualified. Therefore, the construction quality of the project has followed the requirements of the contract, namely, to achieve the “qualified” standard. But it cannot be denied that even qualified project and even excellent project may differ from the national engineering quality inspection standards or design requirements in varying degrees. Zhoushan City Traffic Engineering Quality Supervision Bureau recognized the quality of the project in question at the same time in Quality Appraisal Report of Contraction Delivery, and also pointed out that there are some defects in the project, such as the sand and sand lines, sand spots, impact damage in edge angle of individual component, local fine cracks in the surface layer, and obvious settlement of the dike head, and put forward that “during the period of defect, the construction unit shall be responsible for the warranty responsibility caused by the quality defects caused by the construction quality”. Secondly, the quality appraisal report issued by Ruibang Company after being entrusted by the court of first instance and conducting the inspection on the spot shall be legal and valid, Sanhang Company’s objection on quality appraisal report cannot be established, the appraisal opinion can be used as the basis for determining some quality problems in the case involving the project. 1. The procedure of the quality appraisal of the project initiated by the court of first instance is legal. The court of first instance permitted the application of Alpha Company, in accordance with the procedures of judicial expertise administration, in the case of the first accrediting agency clearly stated cannot be identified, and again according to legal procedures to separately determined the Ruibang Company as the engineering quality appraisal unit, there is nothing wrong with it. Due to qualifications, the expert opinion issued by Ruibang Company on the causal relationship between the related problems of engineering quality and design, and factors, the main reason of the settlement of embankment, embankment pile deflection whether effects the upper structure safety and using function and related quality issues, reasonable repair costs failing to issue appraisal opinions according to the requirements of entrustment, and held that wharf settlements may be caused by geological exploration, design and construction and other reasons, which cannot be directly identified that it was caused by the construction. Therefore, it is not inappropriate that Alpha Company applied for the main dyke settlement of the cause of the supplementary identification, but because the identification unit with the qualification of water transportation engineering inspection recommended by both parties replied to the court of first instance clearly expressing that it is not responsible for the settlement analysis of the main dyke of the wharf, and Alpha Company also did not prepay appraisal fees, accordingly, the court of first instance terminated the supplementary judicial expertise entrustment for the settlement of the main dyke. 2.

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The quality appraisal institution involved in the project, Ruibang Company, and its identification personnel has qualifications. Sanhang Company appealed that Ruibang Company and personnel are not identified with the judicial identification of qualification, not having the qualifications of waterway engineering either. After the examination, Ruibang Company has certificate of qualification for constructive engineering inspection, which is one of the experts that the court announced the judicial appraiser roster of fourth types of “construction engineering quality detection and identification” in 2013. WANG Peng and FAN Jieqi, who are the test personnel of the project involved in the project, both holds the corresponding examination certificate. In the list of appraisers published, there is no further detailed list of quality identification and test appraisers for the “water transport project” category, and in the case that both parties failed to reach an agreement on identification of bodies, the court of first instance according to law selected Ruibang Company for the appraisal of quality to the project in question, which is not inappropriate. 3. Regarding to relevant test data specified in the identification report. Sanhang Company held that the relevant data are extracted by the appraisal unit without informing them of the presence and the common witness, which cannot guarantee the objectivity and the fairness; in addition, Sanhang Company held that the identification unit does not provide detection data of the original survey records as well as the laws and regulations or standards on inspection methods and calculation basis, especially the measurement of the content of stone. After the investigation, about whether to notice Sanhang Company be present, Ruibang Company has clearly stated in the reply to the court of first instance, before the scene detection on November 6, 2013, it has already called the court of first instance and the parties in advance, Sanhang Company did not attend. The court holds that the statement of Ruibang Company can be accepted, the identification unit has notified the party to go to the scene, if the party concerned is not present is to give up their rights, which does not affect the identification. Regarding to the method and basis of testing data. On the one hand, the appraisal institution has the right to independently appraise the case after accepting the entrustment; on the other hand, as for detection basis and material, detection method and detection of specific data towards the relevant detection project, Ruibang Company has made the comparatively detailed record and reflect on the identification of the 34-page report, and with a photo and display chart. In summary, the quality of the wharf project is qualified by the local traffic engineering quality supervision bureau, but it is undeniable that there are still some quality problems. The procedure of the quality appraisal report issued by Ruibang Company is legal and effective, which shall be accepted. Sanhang Company appealed that the project did not have quality problems which are not consistent with the facts. At the same time, the court noticed that the judicial expertise on the quality of the wharf project in question is after more than two years of completion, while the quality appraisal report of Ruibang Company did not assure that the six quality problems are directly caused by the construction, especially for the settlement fracture reason of main dyke, Ruibang Company has clearly indicated that it may be the cause of address survey, design and construction, and cannot be directly

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identified as a result of construction. Therefore, the court of first instance according to the standard of distribution of burden of proof in civil litigation “who advocates, who shall bear the burden of proof” principle and the high degree of probability, identified that the main dyke caisson spacing exceeded the standard concrete settlement of the main embankment depth of cracks and other quality problems were caused by the construction of Sanhang Company which is lack of evidence and did not support the counterclaim of Alpha company to request Sanhang Company to assume restoration or compensation of civil liability of the three quality problems, which is not improper. 2. Whether it is correct for the court of first instance to order Sanhang Company to bear the repair costs of main dike wave wall fracture RMB40 million. Sanhang Company appealed that Alpha Company cannot prove that the rupture truly happened; even if it is true, it is also based on design, address, overload test and strong typhoon, which has nothing to do with construction quality; Alpha Company claimed the redesign cost and repair cost is higher than the market, and there is no evidence that it was actually paid. After the investigation, in late August 2013, namely the first trial period, the construction of breakwater, the northeast corner of about 9.6 m of the wall was collapsed and impact fracture. The damage facts are recorded in the appraisal report issued by Ruibang Company, identification of personnel on-site survey in the damage of concrete samples, detected ratio of rubble. The reason of Sanhang Company for the fact that the rupture is not true is inconsistent with the facts. In the quality appraisal report of Ruibang Company, the sixth conclusions are as follows: wall fracture and construction of the northeast corner of the main embankment caused by cast-in-place concrete structure unreasonable and concrete construction quality has causal relationship. Since the appraisal conclusion of Ruibang Company has clearly assured a causal relationship between the damage and the construction quality of Sanhang Company, Sanhang Company shall bear the corresponding liability for repair or compensation. In the case that Sanhang Company refused to repair, there is nothing wrong with Alpha Company’s self-repair or entrusting others to repair. Sanhang Company shall bear the reasonable cost of the collapse of the fault. Regarding to the repairing cost. The evidence provided by Alpha Company, namely the invoice and contract, specifies that the design cost is RMB100,000 and the repair cost is RMB345,887, totaling RMB445,887, in addition, the management fee is 15%. After investigation, the design fee also includes other projects, Alpha Company did not fully explain the rationality of the repair fee, and did not submit the actual payment voucher, and in the case that the two parties did not apply for assessment of the reasonable design and repair cost of the damaged fracture, the court of first instance according to reasonable market price and industry practices, ordered appropriately Sanhang Company should bear the repair costs RMB400,000, which is not obviously improper. Sanhang Company’s the grounds of appeal cannot be established.

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3. Whether it is correct for the judgment of first instance to identify that the compensation for price-rising fund of the materials during the delayed 6 months of construction period should be RMB619,062 and order the parties bear RMB309,531. Both parties appealed that they should not bear the delay of construction of makeup of a material prices. According to the investigation, the two sides have disputes over the project payment, the court of first instance, according to the application of the party, commissioned Zhongda Company to identify the project cost. Zhongda Company issued the project cost judicial appraisal opinion book on January 23, 2014, in the project cost judicial appraisal opinion book, for the material prices up expenses due to the delay of the time limit for a project as the seventh item, “the outstanding items of cost appraisal” are specially explained: “the starting date of the project is January 23, 2010. The completion date of the contract is January 23, 2011. The actual completion date is July 18, 2011, and the actual time limit is about 6 months later than the contract. The time limit for the contract is calculated from January 23, 2010 to January 23, 2011, the price of steel and cement increased to RMB533,785 (including tax), the appraisal unit held that the construction contractor should take the price hike of the material in consideration comprehensively during the bidding and should bear the risk of price increase during the period. According to the actual construction period from January 23, 2010 to July 18, 2011, the price of steel and cement increased to RMB1,152,847 (including tax). Construction contract agreed the price increase of steel and cement for 6 months beyond construction period is RMB1,152,847 − RMB533,785 = RMB619,062, which should bear main part for the material price hike due to delay of 6 months, because the identification data has not reflected the responsibility subject due to the delay of the construction period, the identification unit requests the court to hear the case according to the trial situation”. In the appraisal opinions book, Zhongda Company also attached a number of engineering materials quantity table, engineering material adjustment table, contract duration and actual duration material information price, average price calculation table and so on, which noted the difference of the steel and cement quantity, price etc.. The court holds that the cost appraisal opinion was made by the appraisal unit Zhongda Company according to the appraisal data submitted by the court of first instance and the on-site survey and measurement by organizing both parties, which finally determined that the price increase due to the construction delay of 6 months was 619,062 yuan, which has the corresponding basis, and shall be legal and valid. After the letter of appraisal was issued, it was served to both parties. Alpha Company has not raised any objection to the determination of the material price hike for 6 months in written to the feedback from the court of first instance. Although now Alpha Company objected to the amount, it did not provide sufficient evidence to overthrow it. As for the undertaker of the price rise of engineering materials due to delayed construction period. For the material price rise during the contract period, which belongs to the commercial risks which shall be taken into consideration by

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construction party in bidding, therefore Sanhang Company shall bear the cost of the rising price RMB533,785 within the contract period by itself. As for the material price increase of RMB619,062 for the period of 6 months delay, the responsibility subject shall be responsible for the delay of the construction period. After the expiration of the contract period, the parties signed Supplementary Agreement on April 11, 2011. The supplementary agreement has made it clear that the delay of the construction period is due to “the reasons of the parties concerned”, in the fifth article of the agreement, “both parties agree mutual exclusion of previous liabilities for breach of contract”. In view of the main responsibility of the delay is not Sanhang Company or Alpha Company unilateral cause, and the two sides have indicated that they would not be held responsible for each other. In accordance with the principle of fairness, the court of first instance confirmed that the material price hike for 6 months after the extension of the project should be RMB619,062, both parties should bear RMB309,531 respectively, which was correct and reasonable. The court shall not adopt the appealing grounds of Sanhang Company and Alpha Company that they respectively shall not bear the responsibility. 4. Whether Alpha Company should pay Sanhang Company 5% of the construction funds for the quality guarantee money. Alpha Company appealed that before Sanhang Company have not repaired the quality problems of related projects, the court of first instance ordered Alpha Company to pay 5% deposit to Sanhang Company, which is wrong. Sanhang Company defended that this decision of the first instance is in accordance with the contract. After investigation, the final payment of Alpha Company after the judgment of first instance RMB4,390,085, the 5% quality deposit is included in the contract. The court holds that, first of all, we should examine the payment time and conditions of the project quality bond from the contract. The fourth clauses of Construction Project Work Agreement signed by the two parties in November 2009: engineering quality standards: qualified, 5% of the total contract price is the quality guarantee of the project. The first agreement of Supplementary Agreement signed by the two sides on April 21, 2011 “…Alpha Company shall make sure to pay more than 95% of the project contract funds to Sanhang Company before December 30, 2011; one year after the date of acceptance to pay the premium quality 5%….”. Therefore, the two sides agreed upon time nodes and conditions for the payment of project quality margin is a year after the date of acceptance. Secondly, from acceptance time and results angle. On December 2, 2011, Zhoushan Traffic Engineering Quality Supervision Bureau organized project owner unit, namely, Alpha Company, design unit, supervision unit and construction unit, namely, Sanhang Company jointly signed and sealed Ckech and Acceptance Certificate of Construction Delivery, and to see the content of Zhou Jiao Jian [2011] No.105 letter issued by the Zhoushan Traffic Engineering Quality Supervision Bureau on December 16, 2011 to Alpha Company, the project has been accepted, and confirmed to be qualified. Therefore, the project acceptance time was December 2, 2011, the judgment time of the court of first instance was January 15, 2016,

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which has already beyond the period of one year after the date of acceptance. Thirdly, if there are some quality problems in the project in question, Sanhang Company need to undertake the liability for repair or compensation, which does not affect Alpha Company’s civil liability to pay the project tail money and engineering quality margin, project payment and maintenance or compensation, the two are not contradictory. Therefore, the final payment of the project to be paid by Alpha Company by the first instance includes 5% of the quality deposit, which is in accordance with the terms of payment stipulated by the two parties. 5. Whether it is correct for the judgment of first instance to order Alpha Company to pay overdue interest of the liability for breach of contract from the date when Sanhang filed an action. The dispute focuses on the existence of breach of payment for overdue payment of the project by Alpha Company; if there is, the standard of payment of liquidated damages and how to determine the starting point and so on. Alpha Company appealed that the project was without the completion and acceptance, Sanhang Company did not fully restore the quality problem, the two sides did not reach an agreement on the project price, Alpha Company did not pay the project tail money, which was not a breach of contract. The court of first instance ordered Alpha Company to pay interest on tail money of project since the date of prosecution on April 19, 2013, which had no basis. Sanhang Company defended that Alpha Company did not pay in accordance with the agreement which constituted a breach of contract, the calculation of interest should start from the date of breach of contract, while the court of first instance ordered that the calculation should start from the date of the claims, which is improper, but Sanhang Company is no longer entangled about this. The court holds that the total fixed price of the project determined by the two parties in Construction Project Work Agreement is RMB24 million, The adjustment of the project payment, payment conditions, payment amount and payment time node and liability for breach of contract all have stipulation, but the two sides on April 11, 2011 signed Supplementary Agreement to adjust and supplement the payment of project, so both parties shall assure payment time and liability for breach of contract in accordance with the supplementary agreement signed later. The first agreement of the supplementary agreement stipulates “…Alpha Company shall make sure to pay more than 95% of the project contract funds to Sanhang Company before December 30, 2011; one year after the date of acceptance to pay 5% deposit quality. After Sanhang Company reports final accounts, Alpha Company shall give reply within three months. If the contract has not been approved, it shall be deemed that the contract settlement has been approved by the employer and the contractor. At the end of July, the two sides shall cooperate with each other in organizing engineering acceptance, If not because Sanhang Company cannot organize the project acceptance, or since the project has been used for one month, which it can be deemed that the contractor has already passed the acceptance check according to the requirements of the construction contract….”.

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Firstly, based on the facts identified, as of January 31, 2012, Alpha Company has paid the project payments totaling RMB19,382,452, which account for 80.76% of contract agreed with the project price, it did not reach the agreed 95%. After the date of acceptance within a year it also did not pay 5% for the quality guarantee deposit. There existed a situation where Alpha Company failed to conform with the contract payment. Secondly, the problem of completion and the acceptance. Alpha Company has repeatedly claimed that the project only passed quality check and acceptance for construction delivery, without a comprehensive inspection and acceptance, which does not meet the payment conditions. The court holds that the reason of Alpha Company cannot be established: 1. from the payment terms of the contract agreed by both parties, there is no agreement on the premise that the project should be completed by comprehensive acceptance as the prerequisite for payment of the project. 2. Comprehensive completion acceptance of the project may involve multiple aspects of comprehensive evaluation, however, the dispute between the two parties in the case is whether the project has construction quality problems, according to the fact ascertained, after the completion and delivery of the project, the local competent government departments responsible for the construction quality, namely Zhoushan Traffic Engineering Quality Supervision Bureau has organized construction, work execution, design and supervision units for quality evaluation of the quality of the project completion on December 2, 2011, and issued Quality Appraisal Report of Construction Delivery and Check and Acceptance Certificate for Construction Delivery to verify that the project quality was qualified after appraisal. 3. Sanhang Company should not be blamed for failure of the completion and acceptance. After the completion of the project, Alpha Company has put it into use, although Alpha Company argued it has been in the trial operation and it is not really put into use. According to the regulations of the Measures for Completion Acceptance of Port Engineering of the Ministry of Transport of China: the general port project has 3 months trial run; after completion of the trial run, the port project shall be checked and accepted in time; a project legal person shall submit an application for completion acceptance to the port administrative department at the port. Part 2 item (3) “completion data review” of Quality Appraisal Report of Construction Delivery issued by Zhoushan Traffic Engineering Quality Supervision Bureau stipulates: the completed data submitted by the construction unit is basically complete, volume content is basically reasonable, all kinds of raw materials warranty (sheet) and test report, original records, lofting data, process inspection data, evaluation of funds are basically complete. During the first instance, Alpha Company also confirmed the original completion drawings submitted to the court of first instance were provided by Sanhang Company. Accordingly, under the condition that Sanhang Company has provided completion data, Sanhang Company should not be blamed for the failure of the completion and acceptance of the project. In addition, article 1 of Supplementary Agreement signed by the two parties also stipulates: … At the end of July, the two sides shall cooperate with each other to organize the project acceptance, if not because Sanhang Company cannot organize the project acceptance, or since the project has been used for one month, it shall be deemed that the contractor has already passed

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the acceptance check according to the requirements of the construction contract….”. Again, after the completion of the project in question, but before Sanhang Company filed an action of this case, the parties disputed the payment of the project, but there is no evidence that Alpha Company is challenging the quality of the project. To sum up, Alpha Company has the behavior of not completing the payment of the project according to the contract, and shall bear the corresponding liabilities for breach of contract for the part of overdue payment. Regarding to the confirmation of the payment standard and starting point for liquidated damages. Article 4 of Supplementary Agreement stipulates that “if the above three agreements have not been fulfilled or overdue, the liabilities for breach of contract shall be born according to the special clause of the contract”. However, the liability for breach of contract specified in article 33.3 of the construction contract of construction project is “after receiving the completion settlement report and the settlement information, the employer does not pay the contract price for the project within 28 days, and to pay the interest of the project arrears in accordance with the bank lending rate of the contractor at the same period from the twenty-ninth day and bear the responsibility for breach of contract”; the liability for breach of contract stipulated in article 35.2 is “the employer does not pay or delay payment of the construction price without justifiable reasons, the contractor pays liquidated damages to the contractor in accordance with 1% of the total contract price for each day delay, 10% of the total contract price is the upper limit for breach of contract”. Because the two terms have contradictions and ambiguities of payment standard of liquidated damages for overdue payment of project money by employer, the court of instance in accordance with the principle of “the lower one shall prevail, not the high one”, identified that payment standard of liquidated damages for overdue payment of project money shall be calculated “according to the loan interest rate of the People’s Bank of China for the same period”, which is not inappropriate. In addition, the court of first instance confirmed by discretion according to the situation of the actual performance of the contract that the starting point of the liquidated damages should be when Sanhang Company filed an action, namely April 19, 2013, which although does not conform to the starting time agreed in the contract, does no harm to Alpha Company. Although Sanhang Company has objection, Sanhang Company indicated that it would no longer be entangled about this. In summary, the court of first instance identified Alpha Company had default on the remaining project payments, and ordered Alpha Company to pay liquidated damages according to the loan interest rate of the People’s Bank of China for the same period from the date when Sanhang Company filed an action, which is correct. 6. Whether there is a repeated calculation of the court of first instance on the cost audit and identification of tamping the foundation trench. Alpha Company appealed that trench tamp actually includes stone filling in the project, on the foundation of tamp cost audit repeated calculation RMB658,751 in opinions on appraisal of project cost issued by Zhongda Company, which is in

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conformity with the bidding documents and facts of the project, and shall be eliminated. Sanhang Company defended that there is no repeated calculation. The court holds that on the foundation compaction and stone filling cost whether there is repeated calculation, which is one of the most controversial issues between the two parties before the first instance litigation. In the trial of the first instance, the dispute is also one of the difficult problems that the project cost appraisal unit Zhongda Company pays special attention in judicial appraisal, and five experts were invited to consider the dispute. In the tender documents compiled by Alpha Company, filled stone project list numbered 205-1, according to the order, it is divided into 205-1-b block stone filling foundation, 205-1-c solid foundation, 205-1-d trench leveling five sub projects. Alpha Company held that there was duplication in the contents of 205-1-b and 205-1-c, solid foundation trench has included the cost of filling stone. While Sanhang Company held this was two different job content, work for solid foundation is only for bedding in bidding, in theory, the cost of stone filling is not included, although the 205-1-c rench reinforces the comprehensive unit price bidding has stone charge in the group price, that is the bidding group price deviation, in accordance with the principle of fixed unit price contract, the 205-1-c shall be regarded as the comprehensive unit price items only reinforce the foundation for the scope “implementation of the contents of the solid foundation”, the foundation stone project of 205-1-b amount to 27,632 m3. At the time of appraisal of Zhongda Company, it has passed procedures such as situation introduction, expert questioning, data viewing, expert discussion and secret ballot resolution in terms of the dispute. On December 22, 2013, Zhongda Company issued Special Expert Opinion on Judicial Expertise, consensus of experts: 1. “205-1-b stone filling foundation in the bill of quantities of the project, 205-1-c, 205-1-d, leveling tamp trench 205-1-e 205-1-f diwai riprap, caisson rubble mound of stones, load distance 5 km” these 5 items have not been compiled according to the requirements of Zhejiang Port Engineering Bidding Document Model (2005) edition and Valuation Standard of Bill of Quantities for Water Transport Engineering (JTS271-2008), it uses the construction procedure to prepare the bill of quantities, therefore, the amount of engineering shall be calculated according to the quantity of the bill of quantities compiled by the construction procedure. 2. According to Construction Project Work Agreement special provisions of article 23.2 signed by two sides, this project is a fixed unit price contract, in addition to contact visa and other reasons, the contract unit price shall not be adjusted during the implementation of the contract. Although the 205-1-c foundation tamping unit valuation analysis table contains stone cost, it is the deviation of the bidder’s own price, without consensus, it shall not adjust the contract price. In summary, the 205-1-b foundation stone filling quantity shall be 27,632 cubic meters, the price of RMB71.2 m3, the 205-1-c foundation tamping amount shall be 9,252.12 m3, the price of RMB90.35/ m3. The court holds that whether there was repeated calculation problem for engineering cost audit in solid foundation, In the process of judicial appraisal, it has fully heard the dispute of the two sides, and has made special comments and confirmation, the reasons for the identification of judicial cost appraisal report and the determination of judicial appraisal report of cost and

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reasons for elaboration is clear and not inappropriate, which shall be respected and accepted. The reasons of Alpha Company to ask for deduction cannot be established, and shall not be supported. 7. Whether the engineering funds shall deduct the price that Alpha Company claimed that exceeded the standard content of main dike parapet and rubble wall. Alpha Company appealed that in the main dike parapet and breakwater construction process, Sanhang Company served the rubble as the rubble concrete not according to the design requirements, however, when the project was settled, it still calculated the engineering price and the amount of the project according to the design standard, In the judgment of first instance, the project tail money did not eliminate the jerry-building part of the project, which is wrong. Sanhang Company defended that the identification method and basis of the content of the stone added in the appraisal report are insufficient; even if the stone content is too high, there is supervision and owners of units on behalf of the scene, it is also agreed by the employer and the supervision unit, the owners saved material costs based on this. The court holds that according to the dossier, the parapet cast-in-place concrete engineering design requirements of rubble ratio does not exceed 20%. The fourth conclusions of the project quality appraisal report: the main embankment construction of concrete pouring parapet does not conform to the standard, the cast-in-place concrete parapet stone doped is more than the design requirements. The sixth conclusion opinions: there is a causal relationship between wall fracture and construction of the northeast corner of the main embankment caused by cast-in-place concrete structure unreasonable and concrete construction quality. According to the opinions of expert conclusion, the main dyke stone parapet doped exceed the design requirements, wave breaking of main embankment in the northeast corner of the facts can be confirmed, Sanhang Company shall bear corresponding civil liability, deduct part of the project money or undertake reasonable repair costs. But 1. there is no identification conclusions for the content of wall stone in opinions of expert conclusions, the fourth part of the appraisal report 4.5.1 the content of “wave rubble ratio measurement recorded” noted identification personnel on the northeast corner of a wall pier damaged by random rubble content exceed the standard detection, but only this one cannot infer the detection wave rubble content hundreds of meters long exceeded the standard. The quality problem of damage and the main dike wall fracture is reflected in the northeast corner of sixth views in the appraisal conclusion, because there is a causal relationship between fracture and wall construction, in the case that Sanhang Company refused to repair, Alpha Company has repaired broken wall on its own during the first trial, the court of first instance ordered Sanhang Company to be liable for civil liability of the compensation of repairing costs RMB400,000, Alpha Company once again claimed to deduct since the breakwater rubble content exceeded the standard, which is lack of evidence and shall not be supported. 2. The fourth opinions of expert conclusions identified the main dyke stone parapet doped exceeded the design

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requirements, but on the one hand, although Alpha company claimed to deduct part of the project money in the second instance, the calculation method and basis were not provided; and in the second instance, Alpha Company still insisted on requesting Sanhang Company immediately to unconditionally repair all quality problems. On the other hand, Alpha Company has changed the lawsuit request in the first instance, indicated that the repair fee is not advocated in the case that Sanhang Company refused to repair the quality problems, after the repair by other person or repair by itself, it reserves the right of subsequent claim. According to the Interpretation of the Supreme People’s Court on the Application of the Civil Procedure Law of the People’s Republic of China Article 328, in the second instance, Alpha Company claimed that the deduction of the project money belonged to a newly added claim, in the case that the mediation of the second instance failed, the direct judgment of the second instance had no adequate basis. The court holds that the first instance confirmed that as for problems like the main dyke with stone parapet exceeding the standard quality caused by the construction, in the case that Sanhang Company refused to repair, Alpha Company has the right to claim to Sanhang Company for the reasonable expenses after repairing by itself, which is appropriate and reasonable. 8. Whether there is improper judgment and inappropriate quality appraisal guidance. Alpha Company appealed that it in the counterclaim of first instance required Sanhang Company immediately to repair the unqualified project, but the judgment of first instance “Alpha Company retains the right of claim to Sanhang Company after repair of quality problems”, which is inconsistent with Alpha Company’s claim. After investigation, Alpha Company proposed 4 counterclaims in the first instance, the fourth required Sanhang Company to repair the quality problems of dock. Sanhang Company defended that the quality of project is qualified, and the cracking problem has been repaired in the warranty period stipulated in the contract, the quality problem of counterclaim has nothing to do with Sanhang Company, Sanhang Company refused to repair. When the court of first instance held a hearing in public on June 5, 2014, the court made interpretation and inquiry to Alpha Company, if Sanhang Company disagreed to repair, whether would it claim for loss or not. Alpha Company indicated that if Sanhang Company did not repair, Alpha Company would ask others to repair, the repair costs would not be claimed in this case, Alpha Company retained the right to claim to Sanhang Company (see the record of trial of first instance). In the case that Sanhang Company refused to repair, Alpha Company has no evidence to prove the loss and reasonable repair costs, according to Alpha Company’s opinion on the right to claim damages, the court of first instance identified that Alpha Company had the right to claim to Sanhang Company for the reasonable cost caused by the construction quality problems after self-repairing, which is not improper, there is no case of judging on not being requested.

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In addition, according to the procedural fact that the quality appraisal of the project was ascertained in the second instance, in the first instance of this case, the applier for the appraisal of the quality of the project is Alpha Company; in the case of the first appraisal unit being unable to identify, it was Alpha Company that asked to re-commission the identification; Ruibang Company has not made analysis and appraisal opinions on the reasons for the settlement of the main dyke, it was also Alpha Company that suggested that the application of supplementary identification on the settlement of the main dyke, later because Alpha Company did not pay the fees, the identification was terminated. Alpha Company appealed that it should be inferred that the fracture inclination of 1-1 section of the main dyke was caused by construction, the court of first instance did not guide for the reasons for improper application of Sanhang Company, which is inconsistent with the burden of proof in the civil lawsuit “who advocates, who bears burden of proof”. This reason for the appeal cannot be established. To sum up, through the hearing of second instance of the case, the facts of the original judgment are basically clear, the procedure is legal and the application of law is correct. The grounds of appeal of Sanhang Company and Alpha Company are not established. According to the provisions of Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is rendered as follows: Dismiss the appeal and affirm the original judgment. Court acceptance fee of second instance in amount of RMB59,448, Shanghai Sanhang Benteng Construction Engineering Co., Ltd. and Zhoushan Alpha Yacht Club Development Co., Ltd. shall each bear RMB29,724. This judgment is final. Presiding Judge: XU Xianghong Acting Judge: QIU Jianfeng Acting Judge: HUO Tong September 27, 2016 Clerk: YOU Liping

Ningbo Maritime Court Civil Judgment Shanghai Tongshun Transportation Co., Ltd. v. Zhoushan City Dongjing Shipping Co., Ltd. et al. (2015) Yong Hai Fa Shi Chong Zi No.1 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 1267. Cause(s) of Action 199. Dispute over liability for damage to property on the sea or sea-connected waters. Headnote Actual carrier of crawler crane held 30% responsible for damage caused to crane by welding it in preparation for transportation; lashing company that actually performed the welding held responsible for remaining 70%. Summary The Plaintiff Shanghai Tongshun Transportation Co., Ltd. contracted to carry a steel crawler crane weighing 400 tons from one shipyard to another. The Plaintiff subcontracted the service to another company, which contracted with the Defendant Zhoushan City Dongjing Shipping Co., Ltd. the actual carrier. The Defendant Yuantong Marine Lashing Service Co., Ltd. lashed the cargo, which was then transported on a vessel owed by the Defendants CHEN Xiaoguo and ZHUANG Xuda. When the crane arrived at its destination, its owner discovered that it had been welded, which damaged the crane. As a result, the company sued the Plaintiff and ultimately recovered RMB1,109,665 in damages. The Plaintiff subsequently brought this suit against the four Defendants, seeking compensation for its economic loss. The court held that the Defendant Yuantong Lashing was liable because it was responsible for welding the cargo and because it failed to oversee and inspect the lashing of the cargo. Additionally, the court held that the Defendant Yuantong Lashing was liable for 70% of the damages because welding the cargo violated its professional duty of care, which constituted serious negligence. The court held that the Defendant Dongjing Shipping was liable for the other 30% of the damages because it breached its duty of care when it failed to oversee

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_42

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and inspect the lashing, which violated usual business practices and constituted general negligence. Finally, the court held that the Plaintiff was entitled to recover a total of RMB609,665 in damages from the Defendants, as previously confirmed by Hubei High People’s Court. However, the court concluded that the Plaintiff was not entitled to recover the remaining RMB500,000 of the amount paid to the owner of the crane, because it had paid this amount voluntarily in mediation and failed to provide enough evidence to support compensation for this portion. Lastly, the court found that the owners of the vessel, the Defendants CHEN Xiaoguo and ZHUANG Xuda, had voluntarily agreed in the first instance to bear economic liability for the vessel, and were therefore jointly liable for the compensation for the Defendant Dongjing Shipping’s liability.

Judgment The Plaintiff: Shanghai Tongshun Transportation Co., Ltd. Domicile: No.457, Middle Fangbang Road, Shanghai. Legal representative: LI Ben, general manager. Agent ad litem: LI Yugui, staff of the company. Agent ad litem: ZHAO Bing, lawyer of Shanghai Bierens Collection Attorneys. The Defendant: Zhoushan City Dongjing Shipping Co., Ltd. Domicile: 102, No.7, Heping Road, Dinghai District, Zhoushan City, Zhejiang Province. Legal representative: CHEN Xiaoguo, general manager. The Defendant: CHEN Xiaoguo, male, born on February 21, 1966, Han, living in Daishan County, Zhejiang Province The Defendant: ZHUANG Xuda, male, born on January 18, 1973, Han, living in Daishan County, Zhejiang Province Agent ad litem jointly entrusted by the Defendants CHEN Xiaoguo and ZHUANG Xuda: DING Zhongtang, lawyer of Hubei Jingde Law Firm. The Defendant: Dalian Yuantong Marine Lashing Service Co., Ltd. Domicile: Beihai Industrial Park, Maoyingzi Village, Dalianwan Avenue, Ganjingzi District, Dalian City, Liaoning Province. Legal representative: JIANG Zhishun, general manager. Agent ad litem: JIANG Wanpeng, staff of the company. Agent ad litem: ZHANG Min, staff of the company. With respect to the case arising from dispute over liability for damage to property on sea-connected waters between the Plaintiff Shanghai Tongshun Transportant Co., Ltd. (hereinafter referred to as Tongshun) and the Defendants Zhoushan City Dongjing Shipping Co., Ltd. (hereinafter referred to as Dongjing), CHEN Xiaoguo and ZHUANG Xuda, and Dalian Yuantong Marine Lashing

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Service Co., Ltd. (hereinafter referred to as Yuantong), the court rendered the Civil Judgment (2014) Yong Hai Fa Shi Chu Zi No.37, on January 5, 2015. The Defendants Dongjing, CHEN Xiaoguo, and ZHUANG Xuda refused to accept the judgment and brought an appeal to Zhejiang High People’s Court. Zhejiang High People’s Court made the Civil Ruling (2015) Zhe Hai Zhong Zi No.52, on June 17, 2015. The judgment of first instance only relied on the fact that the master and the chief mate of the vessel M.V. “Dong Jing 29” signed and sealed an acceptance certificate that recorded the lashing operation materials to ascertain this act as an acceptance of Yuantong’s lashing operation and then ascertained Dongjing’s infringement act was unjustified. The basic facts of the judgment of first instance were not clear. For the above reasons, the case was sent back to the court for retrial. The court formed a new collegiate panel according to law to try the case. Because Dongjing was out of business and its legal representative was missing, the court carried on a service by publication to Dongjing on October 26, 2015. The court held a hearing in public on February 29, 2016. The Plaintiff Tongshun’s agents ad litem, LI Yugui and ZHAI Bing, agent ad litem of the Defendants, CHEN Xiaoguo and ZHUANG Xuda, DING Zhongtang, the Defendant Yuantong’s agents ad litem, JIANG Wanpeng, and ZHANG Min appeared in court to attend the trial. The Defendant Dongjing refused to appear in court without justified reasons after being summoned by the court. The court heard the case by default according to law. This case now has been concluded. The Plaintiff Tongshun claimed as follows: in February 2012, Tongshun accepted the entrustment of the outsider Jiangsu Huaneng Construction Group Co., Ltd. (hereinafter referred to as Huaneng) to handle a water transportation service for 400-ton steel structure equipment and a crawler crane from Dalian Changxing Island STX Shipyard to Jiangsu XX Dayang Shipyard. Then, Tongshun sub-entrusted the above transportation service to Zhoushan City Xinheng Shipping Co., Ltd. (hereinafter referred to as Xinheng). Xinheng gave it to Dongjing, the actual carrier. M.V. “Dong Jing 29” was the shipping vessel, and the actual owners of the vessel were CHEN Xiaoguo and ZHUANG Xuda. Cargoes involved were loaded on board on March 19, 2012, then Yuantong finished the lashing and the vessel left the port on March 21, 2012. When the vessel arrived at the port of discharge, Huaneng found the cargo involved had been welded and also found dozens of welding points. These caused damage to the cargo involved. For these reasons, Huaneng sued Tongshun in Wuhan Maritime Court and claimed for compensation of cargo damages totaling RMB1,741,665. After mediation, Tongshun finally compensated RMB1,109,665 to Huaneng. Tongshun claimed that the actual carrier, Dongjing, and shipowners CHEN Xiaoguo and ZHUANG Xuda, lashing party Yuantong failed to fulfill its obligations of careful management and safe protection, and that caused the damage to the cargo involved under the four Defendants’ management. The joint tort by the four Defendants led to the damages. The Plaintiff Tongshun requested the court to order the four Defendants to compensate for Tongshun’s economic loss of RMB1,109,665 jointly.

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The Defendant Dongjing did not submit any defense in written or evidentiary documents. The Defendants CHEN Xiaoguo and ZHUANG Xuda defended as follows: first, the shipper lashed the cargo involved, and the vessel M.V. “Dong Jing 29” was only responsible for transportation of cargo. The vessel did not weld the cargo involved. Yuantong, who carried on the lashing work, should be responsible for the cargo damages. Second, the evidence of economic loss that Tongshun claimed for were not strong enough. The loss that Tongshun claimed for was not an actual loss. Third, it lacked legal foundation for Tongshun to ask the four Defendants to take joint responsibility. Fourth, the vessel M.V. “Dong Jing 29” was affiliated with the name of Dongjing for operation by CHEN Xiaoguo and ZHUANG Xuda, but there is no relation between the damages of Tongshun and shipping of this vessel. CHEN Xiaoguo and ZHUANG Xuda were not at fault for infringement. It, therefore, requested the court to reject Tongshun’s claims against CHEN Xiaoguo and ZHUANG Xuda. The Defendant Yuantong defended as follows: first, this case is not a joint tort but a general tort; so, joint responsibility is not suitable in this case. Second, after Yuantong lashed the cargo involved, Dongjing signed an acceptance certificate as recognition. That act shall be deemed as proof that the cargo was in good condition after Yuantong’s work and Yuantong was not the infringer. Third, Tongshun’s claim of loss, according to the civil mediation of Hubei High People’s Court, lacked evidence. During the period of proof, the Plaintiff Tongshun submitted the following evidence to the court in order to support its claim: 1. Civil complaint, Civil Judgment of Wuhan Maritime Court, (2012) Wu Hai Fa Shang Chu Zi No.1255, civil statement of appeal, and civil mediation of Hubei High People’s Court to prove that Huaneng sued Tongshun for compensation of damages to cargo involved and Tongshun finally compensated for the damages to cargo totaling RMB1,109,665 to Huaneng; 2. Voyage ship visa application and waterway cargo waybill to prove that cargo involved was carried by Dongjing; 3. Calculation sheet of cargo lashing and acceptance certificate to prove that cargo involved was lashed by Yuantong and confirmed by Dongjing; 4. Transcript of conversation that recorded the conversation between Hubei High People’s Court and the staff of Yuantong, ZHANG Min and LI Jiajun, to prove that Yuantong knew that the cargo could not be welded directly, but it was welded and lashed during the lashing period. Yuantong should take the common tort liability; 5. Photos that describe the weld position of the cargo involved to prove that cargo involved was welded directly and damaged; 6. Minutes of the hearing of Hubei High People’s Court to prove that the cargo involved was welded before leaving the port, and the act of welding happened during the period of Dongjing and Yuantong’s responsibility;

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7. Payment agreement to prove that Yuantong had already compensated Huaneng; 8. Photos to prove that the vessel M.V. “Dong Jing 29” had AC arc welder equipment; and 9. Contract of mechanical construction, safety agreement of construction machinery, final statement, and receipt to prove the replacement expenses produced. Due to the cargo involved being damaged, Huaneng was forced to rent other crawler crane to finish the project. During the period of proof, the Defendants CHEN Xiaoguo and ZHUANG Xuda submitted the following evidence to the court in order to support its defense: 1. Nationality certificate of the vessel M.V. “Dong Jing 29” and voyage ship visa application to prove that the vessel M.V. “Dong Jing 29” was seaworthy; 2. Log book of the vessel M.V. “Dong Jing 29” to prove that the voyage involved did not encounter bad weather, and it was not necessary to weld the cargo involved; and 3. The witness, LUO Mou’s statement at the first hearing of the original court of first instance. LUO Mou’s statement was as follows: he is the second mate of the vessel M.V. “Dong Jing 29”. In this case, the shipper took the responsibility of loading, and the lashing company, which the shipper ordered, took the responsibility of lashing. About ten people came at that time. It is very dangerous to weld for lashing so the members of the ship were not allowed to keep close. The lashing work lasted for two days. After that, the staff of the maritime bureau came. The master said the visa would be given after lashing safety and submitting the list to the maritime bureau. There were no welding machines and workers on board. The ship had not welded the cargo. During the period of proof, the Defendant Yuantong submitted the following evidence to the court in order to support its defense: 1. Calculation sheet of cargo lashing to prove the calculation of lashing data; 2. Acceptance certificate to prove that, after lashing by Yuantong, the master and the chief mate of the vessel M.V. “Dong Jing 29” signed and sealed an acceptance certificate, and the cargo was in good condition at that time; 3. Power of attorney to prove that Dongjing entrusted Yuantong to carry on the naked light operation to the vessel M.V. “Dong Jing 29”; and 4. Application of master to prove that Dongjing applied for the naked light operation to the vessel M.V. “Dong Jing 29” and took safety measures, and Dongjing knew the operation of Yuantong and sent someone to supervise at the scene. The cross-examination opinions of CHEN Xiaoguo and ZHUANG Xuda against Tongshun were as follows: about evidence 1 (civil complaint, civil judgment, civil statement of appeal, civil mediation), they had no objection to the authenticity, but they had objection to the relevancy of evidence. They thought that evidence could not prove that Tongshun suffered a corresponding loss.

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About evidence 2 (voyage ship visa application and waterway cargo waybill), they had no objection to the authenticity but stated they could not achieve Tongshun’s purpose of proof. It could only prove that the vessel M.V. “Dong Jing 29” was seaworthy. About evidence 3 (calculation sheet of cargo lashing and acceptance certificate), they had no objection to the authenticity but they only proved that there was a contractual relationship of lashing between Tongshun and Yuantong. About evidence 4 (transcript of conversation), the person who was asked is the staff of Yuantong, so that should be treated as the statement of Yuantong. It could not be strong enough to prove the fact of this case. About evidence 5 (photos taken by Dalian Maritime Safety Administration), they had no objection to the authenticity. About evidence 6 (minutes of the hearing), they had no objection to the authenticity, but it only proved that the carrier should be responsible for the transportation of the cargo, not for lashing, reinforcing, loading and discharging. About evidence 7 (payment agreement), they had no objection to the pro forma authenticity, but it could not achieve Tongshun’s purpose of proof. About evidence 8 (photos of welder equipment), they objected to its authenticity. It could not prove that the welder equipment in the photo belonged to the vessel M. V. “Dong Jing 29” or that it was the welding machine used on the involved voyage. About evidence 9 (contract of mechanical construction, safety agreement of construction machinery, final statement, and receipt), they had objection. They thought they could not prove facts remaining to be proved. The cross-examination opinions of Yuantong were as follows: About evidence 1 (civil complaint, civil judgment, civil appeal and civil mediation), it had no objection to their authenticity, but they could not prove Tongshun’s purpose of proof. About evidence 2–6, they had no objection. About evidence 7 (payment agreement), they had no objection to the pro forma authenticity, but it could not achieve Tongshun’s purpose of proof. About evidence 8 (photos of welder equipment), they had objection, but it could confirm that this was not Yuantong’s welding equipment. About evidence 9 (contract of mechanical construction, safety agreement of construction machinery, final statement, and receipt), they had objection because this evidence had no relevancy with this case. As for CHEN Xiaoguo and ZHUANG Xuda’s evidence, the cross-examination opinions of Tongshun were as follows: about evidence 1 (nationality certificate of the vessel M.V. “Dong Jing 29” and voyage ship visa application), it had no objection to the authenticity. About evidence 2 (log book), it had no objection to the authenticity, but it was made by Dongjing unilaterally and could not achieve Tongshun’s purpose of proof. About evidence 3 (the witness LUO Mou’s statement). We can see that Dongjing had legal responsibility for stowage of the cargo. The acceptance certificate proved that Dongjing and Yuantong took part in the lashing process, and the

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cargo damage occurred during the period of their duty. So, both Dongjing and Yuantong should take the responsibility of the joint tort. The cross-examination opinions of Yuantong were as follows. About evidence 1 (nationality certificate of the vessel M.V. “Dong Jing 29” and voyage ship visa application), it had no objection. About evidence 2 (log book), it had no objection to the authenticity, but it could not prove that Dongjing did not weld the cargo. About evidence 3 (the witness LUO Mou’s statement). LUO Mou was a staff of CHEN Xiaoguo and ZHUANG Xuda, and he had a great stake in the case. So, his statement could not be evidence for ascertaining the facts. For Yuantong’s four pieces of evidence, the cross-examination opinions of Tongshun were as follows: they had no objection to the authenticity, but they had objection to purpose of proof. CHEN Xiaoguo and ZHUANG Xuda had no objection to the authenticity, but they thought evidence 1 and evidence 2 only proved that there was a contractual relationship of lashing between Tongshun and Yuantong, and Tongshun should take the responsibility of the fault and risk of lashing. Evidence 3 and evidence 4 were the process that the application of naked light needed. Power of attorney was written by ZHANG Min. Yuantong filled in the chart on the basis that the maritime bureau and the ship sealed it. Then, Yuantong applied to the maritime bureau. The ship only worked in with the coordinate duty. After review, the court concluded that Dongjing did not show up in court, and that would be seen as Dongjing giving up its right of cross-examination. As for evidence 1, 2, 3, 4, 6, 7 submitted by Tongshun, CHEN Xiaoguo, ZHUANG Xuda and Yuantong had no objection to the authenticity, but they had objection to purpose of proof. The court confirms all the evidence’s authenticity. As for the purpose of proof, the court will confirm that comprehensively with other evidence of the whole case. Evidence 5 (photos taken by Dalian Maritime Safety Administration) can prove the fact that cargo involved was welded before the voyage. Tongshun, CHEN Xiaoguo, ZHUANG Xuda, and Yuantong had no objection to the authenticity. The court confirms it, too. Evidence 8 (photos of the welder equipment) cannot prove that the AC arc welder equipment belonged to the vessel M.V. “Dong Jing 29”. The court does not confirm it. Evidence 9 (contract of mechanical construction, safety agreement of construction machinery, final statement, and receipt) had no relevancy to this case and the court does not confirm it. As for evidence 1 and 2 submitted by CHEN Xiaoguo and ZHUANG Xuda, Tongshun and Yuantong had no objection to the authenticity. This evidence can prove the relevant facts of the case. The court confirms it. Evidence 3 (the witness LUO Mou’s statements) will be confirmed with the whole evidence of case via comprehensively analysis. As for evidence 1–4 submitted by Yuantong, Tongshun, CHEN Xiaoguo and ZHUANG Xuda had no objection to the authenticity. The court confirms its pro forma authenticity. Among them, evidence 3 and 4 said Dongjing needed to send staff to supervise at the scene during the naked light operation of Yuantong and

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clean the workplace after that. Both of them only aimed at fire safety of the vessel M.V. “Dong Jing 29”. They cannot prove that Dongjing needed to accept the operation result of the cargo lashing. They cannot prove that any cargo damages occurred during the working of Yuantong either. On the basis of the above evidence confirmed, combined with the investigation in court, the court finds the following facts: in February 2012, Tongshun accepted the entrustment of the outsider Huaneng to ship a crawler crane, QXXXXX-1#, from Dalian Changxing Island STX Shipyard to Jiangsu Yangzhou Dayang Shipyard. After that, Tongshun sub-entrusted the above transportation service to Xinheng. Finally, the cargo was actually carried by Dongjing. M.V. “Dong Jing 29” was the shipping vessel. The cargo involved was shipped on board on March 19, 2012. Yuantong was entrusted by Tongshun to lash the cargo involved. According to the acceptance certificate, Yuantong was the file header, and M.V. “Dong Jing 29” was the name of the vessel. The date of beginning was March 19, 2012. The date of finishing was March 21, 2012. Yuantong lashed 51 pieces of equipment. The supply of materials included shackle, steel wire, chuck, westlands screw, ceiling hold, lumps of wood, bell and arris rail. The master of the vessel M.V. “Dong Jing 29”, WANG Enhai, the chief mate, LU Guoxiang, signed and sealed the above acceptance certificate. On March 29, 2012, when Huaneng received the cargo at the dock of Jiangsu Yangzhou Dayang Shipyard, Huaneng found the cargo involved was not lashed as required. The crawler crane arm was damaged by welding; so, Huaneng sued Tongshun in Wuhan Maritime Court. Huaneng asked Tongshun for compensation for all cargo damages totaling RMB1,741,665. Wuhan Maritime Court rendered Civil Judgment, (2012) Wu Hai Fa Shang Chu Zi No.01255, after the hearing. The judgment ordered Tongshun to compensate Huaneng for the repair fee of RMB263,665, the entrance fee of RMB196,000, freight totaling RMB150,000, totaling RMB609,665 but did not support the claim of Huaneng for the replacement fee of RMB1,132,000 of crawler crane damaged that Huaneng claimed for. Huaneng refused to accept the judgment and an appeal was brought to Hubei High People’s Court. Hubei High People’s Court made the Civil Mediation (2013) E Min Si Zhong Zi No.00116, and confirmed, “Huaneng shall pay the repair fee of RMB263,665, the entrance fee of RMB196,000, and the freight of RMB150,000”. Tongshun agreed to pay Huaneng RMB1,109,665 as the full and final solution to the dispute involved (namely RMB609,665 confirmed by the Civil Judgment (2012) Wu Hai Fa Shang Chu Zi No.1255 and another RMB500,000). Tongshun and Huaneng reached a payment agreement on the above payment on January 5, 2014. In addition, the court finds out that Dongjing was the registered operator of the vessel M.V. “Dong Jing 29”, and CHEN Xiaoguo and ZHUANG Xuda were the actual owners. At the first session of the original court of first instance, CHEN Xiaoguo and ZHUANG Xuda confirmed that the vessel M.V. “Dong Jing 29” was entrusted to Dongjing for management from September 16, 2011 to September 4, 2013. During the entrusted management, all the involved economic disputes, including unresolved maritime or average disputes, were assumed by the shipowner, not Dongjing.

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The court holds that this is a case arising from dispute over liability for damage to property on sea-connected waters. Although Tongshun held the waybill issued by Dongjing, it chose to sue for infringement after it found that the cargo was damaged and compensated to other. Here, the court has to review whether the four Defendants implemented an act of infringement and whether there was a causal link between the act of infringement and the damages resulting. According to the ascertained facts and the plea opinions of both parties, the court concludes the issues of the case and comments as follows: Firstly, whether Yuantong implemented an act of infringement. The cargo involved was a large mechanical arm. According to the provision of Article 23 of the Regulations on Domestic Carriage of Goods by Water, the shipper shall be responsible for special reinforcement, strapping and welding of such cargo. In this case, Tongshun entrusted a third party the professional lashing company, Yuantong, to lash cargo involved. Yuantong issued a calculation sheet of cargo lashing and actually lashed the cargo. But, the photo taken by Dalian Maritime Safety Administration showed that the cargo involved was welded before the beginning of the voyage. For that, Dongjing and Yuantong identified each other that it was the other party’s welding act that led to the damage. Moreover, Yuantong argued that the cargo lashed by them was in good condition by relying on the fact that Dongjing signed an acceptance certificate and that they were not the infringer. The court holds that Yuantong was entrusted by Tongshun to lash the cargo involved and collected related fees from Tongshun. No evidence proved that Tongshun entrusted the ship to accept the result of the lashing, and the acceptance certificate only recorded the materials of lashing. The acceptance certificate did not refer to welding and the condition of cargo. So, it cannot be evidence to prove that the ship confirmed that the cargo was in good condition. CHEN Xiaoguo, ZHUANG Xuda, and Yuantong confirmed in court that shipping large cargo needed to be lashed by a professional lashing company, and after submitting the acceptance certificate that was signed by a lashing company and the ship was verified, the maritime bureau would grant a visa. So this acceptance certificate did not have the function of acceptance as Yuantong said; instead, it was one of the procedures that was needed to be accepted when the maritime bureau granted the visa. In the hearing procedure of Hubei High People’s Court and ZHANG Min’s transcript of the conversation, Yuantong ensured that the workers on board took the welding machine with them and welded on deck. But, Yuantong argued that the welding spots on the crawler crane arm were not made by the welding machine. At the same time, in the transcript of the conversation, ZHANG Min stated “after welding by my welding machine, I proposed to master if there was something wrong, it was not my business. The master said okay”. There was a paradox in Yuantong’s statement. In view of the fact that there was no difference between the spot on deck and the spot on crane arm in the photos taken by the maritime bureau, in court Yuantong confirmed that the angle iron on the crane arm was lashing material that was offered by them. The service manager, LI Jiajun, also confirmed that the AC arc welder belonged to Yuantong when he answered the questions of

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Wuhan Maritime Court. So it can be confirmed that the welding machine that welded the crane arm of the cargo involved belonged to Yuantong. As a professional lashing company and the owner of the infringement tools involved, if Yuantong identified that Dongjing welded the cargo involved by their welding machine, they should have the abilities and qualifications to collect and provide the evidence. But, the evidence provided by them was not strong enough to prove the fact, and they shall bear adverse consequences for this. So, the court confirms that the cargo damage involved was made by Yuantong due to the act of infringement. Secondly, whether Dongjing implemented an act of infringement. CHEN Xiaoguo and ZHUANG Xuda argued that the vessel M.V. “Dong Jing 29” was only responsible for the transportation of the cargo involved, and the ship did not weld the cargo involved. The ship did not have the duty and ability to accept the lashing results. The ship should not bear the responsibility of compensation for infringement. The court holds that the cargo involved was a large mechanical equipment that weighed more than 400 tons. The cargo involved was loaded on deck directly. Lashing, successfully or not, related to the voyage safety of the vessel M.V. “Dong Jing 29” directly. According to the actual operation of the heavy cargo lashing, even if on the condition of lashing by third party, the master shall give directions to the project of lashing and fixing according to the requirements of cargo lashing and check before the beginning of the voyage. The chief mate also shall take part in the direction of cargo lashing and fixing. On the Wuhan Maritime Court’s transcript of the conversation, when the staff of Yuantong, ZHANG Min, answered “how is the operation of welding, lashing and fixing during the work”, he stated that “at the scene, it was up to me, the chief mate of the vessel took part in the decision too (according to the condition of cargo loading)” conformed more to the above actual operation. At the first session of the original court of first instance, the second mate of the vessel M.V. “Dong Jing 29”, LUO Mou, also testified, “the master said maritime bureau would grant visa after lashing safely and submitting to maritime bureau”. It also proved that the master had the responsibility of direction and inspection to the safety of cargo involved lashing. So, Dongjing should have foreseen and had the possibilities to foresee the happening of cargo damages, but it did not. Its acts also constituted an infringement to the legal interest of Tongshun. Thirdly, how should the four Defendants bear the liability for compensation. Tongshun held that the four Defendants committed joint infringement and should bear the liability for compensation. The court holds that both Yuantong and Dongjing had fault regarding the cargo damage, but Yuantong and Dongjing did not have the contact about it. That did not constitute joint infringement. According to the provision of Article 12 of the Tort Liability Law, both parties shall bear the liability to Tongshun within their respective faults. Yuantong was the direct operator of lashing, and they violated professional high duty of care, which constituted serious negligence. Dongjing did not fulfill the duty of ordering and checking the lashing work, and they violated the usual course of business practices, which constituted general negligence. The court decides according to its judgment that both parties should bear liability for compensation at the seventy-thirty ratio.

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CHEN Xiaoguo, and ZHUANG Xuda, as the owners of the vessel M.V. “Dong Jing 29”, promised voluntarily to bear the related liability for the dispute of the vessel at the first session of the original court, and they shall bear the joint liability for compensation for the Dongjing’s liability of infringement. But, the promise of CHEN Xiaoguo and ZHUANG Xuda that they would bear all economic losses related to dispute involving the vessel M.V. “Dong Jing 29” during the attachment period was only effective between the three Defendants. That cannot apply to Tongshun. Fourthly, the economic loss of cargo involved. As for the direct loss of the cargo involved, after Hubei High People’s Court’s hearing and identification, the entrance fee of RMB196,000 (twice), freight of RMB150,000, totaling RMB609,665 were owed. These fees were rational, and Tongshun had already paid to Huaneng. The court confirms it. As for the replacement fee of RMB500,000, Hubei High People’s Court did not confirm it. Because Tongshun paid Huaneng voluntarily during mediation, and Tongshun did not provide enough evidence to prove the rationality of this fee, the court does not support the claim of the replacement fee of RMB500,000. In summary, the court supports the reasonable parts that Tongshun claimed for. According to the provisions of Article 12 of the Tort Liability Law of the People’s Republic of China, Article 64 Paragraph 1 and Article 144 of the Civil Procedure Law of the People’s Republic of China, the judgment is rendered as follows: 1. The Defendant Dalian Yuantong Marine Lashing Service Co., Ltd. shall compensate for cargo damage amounting to RMB426,765.50 to the Plaintiff Shanghai Tongshun Transportation Co., Ltd. within ten days after this judgment comes into force. 2. The Defendant Zhoushan City Dongjing Shipping Co., Ltd. shall compensate for cargo damages totaling RMB182,899.50 to the Plaintiff Shanghai Tongshun Transportation Co., Ltd. within ten days after this judgment comes into force. The Defendants CHEN Xiaoguo and ZHUANG Xuda shall bear joint liability for compensation of the above loss. 3. Reject the other claims of the Plaintiff Shanghai Tongshun Transportation Co., Ltd. If the obligations of monetary payment are not performed within the period specified in this judgment, the interest on the debt in the delayed performance period shall be doubled in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB14,790, the Plaintiff Shanghai Tongshun Transportation Co., Ltd. shall bear RMB6,665, the Defendants Zhoushan City Dongjing Shipping Co., Ltd., CHEN Xiaoguo and ZHUANG Xuda shall bear RMB2,440, Dalian Yuantong Marine Lashing Service Co., Ltd. shall bear RMB5,685. Announcement fee in amount of RMB600 shall be born by the Defendant Zhoushan City Dongjing Shipping Co., Ltd.

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In case of dissatisfaction with this judgment, any party may submit a statement of appeal to the court within 15 days from the date of service of the judgment and according to the number of parties provides duplicates, and appeal to the Zhejiang High People’s Court. [The appeal costs in amount of 14,790 yuan (specific amount shall be determined by the Zhejiang High People’s Court, and the extra part will be returned later) shall be prepaid when submitting the statement of appeal. If the payment is not fulfilled within 7 days after the period for appealing expires, the appeal shall be withdrawn automatically. The money shall be remitted to the non-tax revenue settlement sub-account of Finance Department of Zhejiang Province, account number: 19000101040006575401001, deposit bank: Hangzhou Xihu Branch of the Agricultural Bank]. Presiding Judge: YAO Xuefeng Judge: LI Xianda Acting Judge: QIAN Bingbing May 6, 2016 Acting Clerk: ZHU Danying

Appendix: Relevant Laws 1. Tort Liability Law of the People’s Republic of China Article 12 If more than two persons commit a tort respectively, each one’s tort behavior could cause the total damage, then each person is jointly and severally liable by the tortious conduct. 2. Civil Procedure Law of the People’s Republic of China Article 64 A party shall have the responsibility to provide evidence in support of its own propositions. Article 144 If the defendant, having been served with summons, refuses to appear in court without justified reasons, or if he withdraws during a court session without the permission of the court, the court may make a judgment by default. Article 253 If the person subjected to execution fails to fulfill his obligations with respect to pecuniary payment within the period specified by a judgment or written order or any other legal document, he shall pay double interest on the debt for the belated payment. If the person subjected to execution fails to fulfill his other obligations within the period specified in the judgment or written order or any other legal document, he shall pay a charge for the dilatory fulfillment.

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Zhejiang High People’s Court Civil Judgment Shanghai Tongshun Transportation Co., Ltd. v. Zhoushan City Dongjing Shipping Co., Ltd. et al. (2016) Zhe Min Zhong No.561 Related Case(s) This is the judgment of second instance and the judgment of first instance is on page 1255. Cause(s) of Action 199. Dispute over liability for damage to property on the sea or sea-connected waters. Headnote Affirming lower court judgment holding actual carrier of crawler crane 30% responsible for damage caused to crane by welding it in preparation for transportation, and lashing company that actually performed the welding responsible for remaining 70%. Summary The Plaintiff Shanghai Tongshun Transportation Co., Ltd. contracted to carry a steel crawler crane weighing 400 tons from one shipyard to another. The Plaintiff subcontracted the service to another company, which contracted with the Defendant Zhoushan City Dongjing Shipping Co., Ltd. the actual carrier. The Defendant Yuantong Marine Lashing Service Co., Ltd. lashed the cargo, which was then transported on a vessel owed by the Defendants CHEN Xiaoguo and ZHUANG Xuda. When the crane arrived at its destination, its owner discovered that it had been welded, which damaged the crane. As a result, the company sued the Plaintiff and ultimately recovered RMB1,109,665 in damages. The Plaintiff subsequently brought this suit against the four Defendants, seeking compensation for its economic loss. The court of first instance held that the Defendant Yuantong Lashing was liable because it was responsible for welding the cargo and because it failed to oversee and inspect the lashing of the cargo. Additionally, the court held that the Defendant Yuantong Lashing was liable for 70% of the damages because welding the cargo violated its professional duty of care, which constituted serious negligence. The court of first instance also held that the Defendant Dongjing Shipping was liable for the other 30% of the damages because it breached its duty of care when it failed to oversee and inspect the lashing, which violated usual business practices and constituted general negligence. Finally, the court of first instance held that the Plaintiff was entitled to recover a total of RMB609,665 in

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damages from the Defendants, as previously confirmed by Hubei High People’s Court. However, the court of first instance concluded that the Plaintiff was not entitled to recover the remaining RMB500,000 of the amount paid to the owner of the crane, because it had paid this amount voluntarily in mediation and failed to provide enough evidence to support compensation for this portion. Lastly, the court of first instance found that the owners of the vessel, the Defendants CHEN Xiaoguo and ZHUANG Xuda, had voluntarily agreed in the first instance to bear economic liability for the vessel, and were therefore jointly liable for the compensation for the Defendant Dongjing Shipping’s liability. The Defendant Yuantong Lashing appealed the judgment of first instance, arguing that the court of first instance incorrectly identified the facts and evidential burdens, and incorrectly applied the law. The appeal court affirmed the judgment of the court of first instance in its entirety, finding that the facts of the original judgment were clear, and the law was correctly applied.

Judgment The Appellant (the Defendant of first instance): Dalian Yuantong Marine Lashing Service Co., Ltd. Domicile: Beihai Industrial Park, Maoyingzi Village, Dalianwan Avenue, Ganjingzi District, Dalian City, Liaoning Province. Legal representative: JIANG Zhishun, general manager. Agent ad litem: JIANG Shixian, manager. Agent ad litem: LI Wen, lawyer of Liaoning Zhong Wen Cheng Law Firm. The Respondent (the Defendant of first instance): Zhoushan City Dongjing Shipping Co., Ltd. Domicile: 102, No.7, Heping Road, Dinghai District, Zhoushan City, Zhejiang Province. Legal representative: CHEN Xiaoguo, general manager. Agent ad litem: TONG Dengyong, lawyer of Beijing Dentons (Ningbo) Law Firm. The Respondent (the Defendant of first instance): CHEN Xiaoguo, male, born on February 21, 1966, Han, living in Daishan County, Zhejiang Province The Respondent (the Defendant of first instance): ZHUANG Xuda, male, born on January 18, 1973, Han, living in Daishan County, Zhejiang Province Agent ad litem jointly entrusted by the Respondents CHEN Xiaoguo and ZHUANG Xuda: DING Zhongtang, lawyer of Hubei Jingde Law Firm.

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The Respondent (the Plaintiff of first instance): Shanghai Tongshun Transportation Co., Ltd. Domicile: No.457, Middle Fangbang Road, Shanghai. Legal representative: LI Ben, general manager. Agent ad litem: LI Yugui, staff of the company. Agent ad litem: ZHAO Bing, lawyer of Shanghai Bierens Collection Attorneys. With respect to the case arising from dispute over liability for damage to property on sea-connected waters between Shanghai Tongshun Transportation Co., Ltd. (hereinafter referred to as Tongshun) and Zhoushan City Dongjing Shipping Co., Ltd. (hereinafter referred to as Dongjing), CHEN Xiaoguo, ZHUANG Xuda, and Dalian Yuantong Marine Lashing Service Co., Ltd. (hereinafter referred to as Yuantong), Ningbo Maritime Court rendered the Civil Judgment (2014) Yong Hai Fa Shi Chu Zi No.37 on January 5, 2015. Dongjing, CHEN Xiaoguo, and ZHUANG Xuda refused to accept that judgment and brought an appeal to the court. The court made the Civil Ruling (2015) Zhe Hai Zhong Zi No.52 on June 17, 2015 to revoke the original judgment and remanded the case to Ningbo Maritime Court for retrial. Ningbo Maritime Court rendered the Civil Judgment (2015) Yong Hai Fa Shi Chong Zi No.1 on May 6, 2015. After pronouncing the judgment, Yuantong refused to accept the judgment and appealed to the court. The court accepted the appeal on August 3, 2016 and formed a collegiate panel by law. The court held a hearing in public on September 28, 2016. Because Yuantong changed its claims in court, CHEN Xiaoguo and ZHUANG Xuda applied for a new defense period. The court delayed the public hearing until October 14, 2016 after all parties agreed to it. Agents ad litem of the Appellant Yuantong, JIANG Shixian and LI Wen, agent ad litem of the Respondents CHEN Xiaoguo and ZHUANG Xuda, DING Zhongtang, agents ad litem of the Respondent Tongshun, DING Yugui and ZHAO Bing appeared in court to attend the trial. The Respondent, Dongjing, refused to appear in court without justified reasons after being summoned by the court. The court heard the case by default according to law. This case has now been concluded. Tongshun claimed to the court of first instance as follows: In February 2012, Tongshun accepted the entrustment of the outsider, Jiangsu Huaneng Construction Group Co., Ltd. (hereinafter referred to as Huaneng), to handle a water transportation service for 400 tons of steel structure equipment and crawler crane from Dalian Changxing Island STX Shipyard to Jiangsu XX Dayang Shipyard. Then, Tongshun sub-entrusted the above transportation service to Zhoushan City Xinheng Shipping Co., Ltd. (hereinafter referred to as Xinheng). Xinheng gave the transportation service to Dongjing, the actual carrier. M.V. “Dong Jing 29” was the shipping vessel, and the actual owners of the vessel were CHEN Xiaoguo and ZHUANG Xuda. Cargoes involved were loaded on board on March 19, 2012. The lashing was finished by Yuantong and the vessel left the port on March 21, 2012. When the vessel arrived at the port of discharge, Huaneng found the cargo involved had been welded and also found dozens of welding points. These caused damage to the cargo. For these reasons, Huaneng sued Tongshun in Wuhan

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Maritime Court and claimed for compensation of cargo damages totaling RMB1,741,665. After mediation, Tongshun finally compensated RMB1,109,665 to Huaneng. Tongshun claimed that the actual carrier, Dongjing, shipowners CHEN Xiaoguo and ZHUANG Xuda, lashing party Yuantong failed to fulfill its obligations of careful management and safety protection. The cargo involved was damaged under the management of Dongjing, CHEN Xiaoguo, ZHUANG Xuda and Yuantong, and the joint tort by Dongjing, CHEN Xiaoguo, ZHUANG Xuda and Yuantong led to the damage. Tongshun requested the court of first instance to order Dongjing, CHEN Xiaoguo, ZHUANG Xuda and Yuantong to jointly compensate for Tongshun’s economic loss of RMB1,109,665. Dongjing did not defense in the court of first instance. CHEN Xiaoguo and ZHUANG Xuda defended in the first-instance trial as follows: First, the shipper lashed the cargo involved, and the vessel M.V. “Dong Jing 29” was only responsible for the transportation of the cargo. The vessel did not weld the cargo involved. Yuantong, who carried on the lashing work, should be responsible for the cargo damages. Second, the evidence of the economic loss, which Tongshun claimed, were insufficient. The loss that Tongshun claimed for was not an actual loss. Third, Tongshun lacked legal foundation to ask Dongjing, CHEN Xiaoguo, ZHUANG Xuda and Yuantong to be jointly liable. Fourth, the vessel M.V. “Dong Jing 29” was affiliated with the name of Dongjing for operation by CHEN Xiaoguo and ZHUANG Xuda, but there is no relation between the damages of Tongshun and the shipping done by this vessel. CHEN Xiaoguo and ZHUANG Xuda were not at fault for infringement. It, therefore, requested the court of first instance to reject Tongshun’s claims against CHEN Xiaoguo and ZHUANG Xuda. Yuantong defended in the first-instance trial as follows: First, this case is not a joint tort but a general tort; so, joint responsibility is not suitable in this case. Second, after Yuantong lashed the cargo involved, Dongjing signed the acceptance certificate as recognition. That act should be deemed as a proof that cargo was in good condition after Yuantong’s work, and Yuantong was not the infringer. Third, Tongshun’s claim of loss, according to the civil mediation of Hubei High People’s Court, lacked evidence. The court of first instance found the following facts: In February 2012, Tongshun accepted the entrustment of the outsider Huaneng to ship a crawler crane, QXXXXX-1#, from Dalian Changxing Island STX Shipyard to Jiangsu Yangzhou Dayang Shipyard. After that, Tongshun sub-entrusted the above transportation service to Xinheng. Finally, the cargo was actually carried by Dongjing. M.V. “Dong Jing 29” was the shipping vessel. The cargo involved was shipped on board on March 19, 2012. Yuantong was entrusted by Tongshun to lash the cargo involved. On March 31, 2012 Yuantong finished the lashing work and submitted the acceptance certificate to the ship. The master of the

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vessel M.V. “Dong Jing 29”, WANG Enhai, and the chief mate, LU Guoxiang, signed and sealed the acceptance certificate. On March 29, 2012, when Huaneng received the cargo at the dock of Jiangsu Yangzhou Dayang Shipyard, Huaneng found the cargo involved was not lashed as required. Welding damaged the crawler crane arm; so, Huaneng sued Tongshun in Wuhan Maritime Court. Huaneng asked Tongshun to compensate for all the cargo damages totaling RMB1,741,665. Wuhan Maritime Court rendered the Civil Judgment (2012) Wu Hai Fa Shang Chu Zi No.01255 after the hearing. The judgment ordered Tongshun to compensate for Huaneng’s repair fee of RMB263,665, entrance fee of RMB196,000, freight of RMB150,000, totaling RMB609,665 but did not support the claim of Huaneng for the replacement fee of RMB1,132,000 of crawler crane damaged that Huaneng claimed for. Huaneng refused to accept the judgment, and an appeal was brought to Hubei High People’s Court. Hubei High People’s Court made the Civil Mediation (2013) E Min Si Zhong Zi No.00116, and confirmed “Huaneng shall pay the repair fee of RMB263,665, the entrance fee of RMB196,000, and the freight of RMB150,000”. Tongshun agree to pay Huaneng RMB1,109,665 as the full and final solution to the dispute involved (namely RMB609,665 confirmed by the Civil Judgment (2012) Wu Hai Fa Shang Chu Zi No.1255 and another RMB500,000.) Tongshun and Huaneng reached a payment agreement regarding the above payment on January 5, 2014. In addition, the court of first instance found that Dongjing was the registered operator of the vessel M.V. “Dong Jing 29”, and CHEN Xiaoguo and ZHUANG Xuda were the actual owners. At the first session of the original court of first instance, CHEN Xiaoguo and ZHUANG Xuda confirmed that the vessel M.V. “Dong Jing 29” was entrusted to Dongjing for management from September 16, 2011 to September 4, 2013. During the entrusted management, all the involved economic disputes, including unresolved maritime or average disputes, were assumed by the shipowner, not Dongjing. The court of first instance concluded as following: this was a case arising from dispute over liability for damage to property on sea-connected waters. Although Tongshun held the waybill issued by Dongjing, it chose to sue for infringement after it found that the cargo was damaged and compensated to other. Here, the court of first instance needed to review whether Dongjing, CHEN Xiaoguo, ZHUANG Xuda and Yuantong implemented an act of infringement and whether there was a causal link between the act of infringement and the damages resulting. Firstly, whether Yuantong implemented an act of infringement. The cargo involved was a large mechanical arm. According to the provision of Article 23 of the Regulations on Domestic Carriage of Goods by Water, the shipper shall be responsible for special reinforcement, strapping and welding of such cargo. In this case, Tongshun entrusted a third party, professional lashing company, Yuantong, to lash the cargo involved. Yuantong issued a calculation sheet of cargo lashing and actually lashed the cargo. But, the photo taken by Dalian Maritime Safety Administration showed that the cargo involved was welded before the beginning of the voyage. For that, Dongjing and Yuantong identified each other that

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it was the other party’s welding act that led to the damage. Moreover, Yuantong argued that the cargo they lashed was in good condition by relying on the fact that Dongjing signed on the acceptance certificate and they were not the infringers. The court of first instance held that Yuantong was entrusted by Tongshun to lash the cargo involved and collected related fees from Tongshun. No evidence proved that Tongshun entrusted the ship to accept the result of the lashing, and the acceptance certificate only recorded the materials of lashing. The acceptance certificate did not refer to welding and the condition of cargo. So, it cannot be evidence to prove that the ship confirmed that the cargo was in good condition. CHEN Xiaoguo, ZHUANG Xuda, and Yuantong confirmed to the court that shipping large cargo needed lashing by a professional lashing company. After submitting the acceptance certificate, which was signed by the lashing company and the verifying ship, the maritime bureau would grant visa. So, this acceptance certificate did not have the function of acceptance as Yuantong stated. It was one of the procedures that needed to be accepted when the maritime bureau granted the visa. In the hearing procedure of Hubei High People’s Court and ZHANG Min’s transcript of the conversation, Yuantong ensured that the workers on board took the welding machine with them and welded on deck. But, Yuantong argued that the welding machine did not make welding spots on the crawler crane arm. At the same time, in the transcript of the conversation ZHANG Min referred to contained, “after welding by my welding machine, I proposed to the master if there was something wrong, it was not my business. The master said okay”. There was a paradox in Yuantong’s statement. In view of the fact that there was no difference between the spot on deck and the spot on the crane arm in the photos taken by the maritime bureau, in court Yuantong confirmed that the angle iron on the crane arm was lashing material that was offered by them. The service manager, LI Jiajun, also confirmed that the AC arc welder belonged to Yuantong when he answered the questions of Wuhan Maritime Court. So, it can be confirmed that the welding machine that welded the crane arm of the cargo involved belonged to Yuantong. As a professional lashing company and the owner of the infringement tools involved, if Yuantong identified that Dongjing welded the cargo involved with their welding machine, they should have the abilities and qualifications to collect and provide evidence. But, the evidence provided by them were not strong enough to prove the facts of the case; so, they should bear adverse consequences for this. So, the court of first instance confirmed that Yuantong, due to the act of infringement, caused the cargo to become damaged. Secondly, whether Dongjing implemented an act of infringement. CHEN Xiaoguo, and ZHUANG Xuda argued that the vessel M.V. “Dong Jing 29” was only responsible for the transport of the cargo involved, and the ship did not weld the cargo involved. The ship did not have the duty and ability to accept the lashing results. The ship should not bear the responsibility of compensation for infringement. The court of first instance held that the cargo involved was large mechanical equipment weighed more than 400 tons. The cargo involved was loaded on deck directly. Lashing, successfully or not, related to the voyage safety of the vessel M.V. “Dong Jing 29” directly. According to the actual operation of the heavy

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cargo lashing, even if a third party facilitated the lashing, the master shall give directions to the project of lashing and fixing according to the requirements of cargo lashing and check before the beginning of the voyage. The chief mate also shall take part in the direction of cargo lashing and fixing. On the Wuhan Maritime Court’s transcript of the conversation, when the staff of Yuantong, ZHANG Min, answered, “how is the operation of welding, lashing and fixing during the work”, he stated that, “at the scene, it was up to me, the chief mate of the vessel, to take part in the decision too (according to the condition of cargo loading)” conformed more to the above actual operation. At the first session of the original court of first instance, the second mate of the vessel M.V. “Dong Jing 29”, LUO Mou, also testified that, “the master said the maritime bureau would grant a visa after safely lashing and submitting to the maritime bureau”. It also proved that the master had the responsibility of direction and inspection of the safety of the lashing of the cargo. So, Dongjing should have foreseen and had the possibilities to foresee the happening of cargo damages, but it did not. Its acts also constituted an infringement to the legal interest of Tongshun. Thirdly, how should Dongjing, CHEN Xiaoguo, ZHUANG Xuda and Yuantong bear the liability for compensation. Tongshun held that Yuantong, Dongjing, CHEN Xiaoguo and ZHUANG Xuda formed a joint infringement and should bear liability for compensation. The court of first instance held that both Yuantong and Dongjing had fault regarding the cargo damage, but Yuantong and Dongjing did not have contact about it. That did not constitute joint infringement. According to the provision of Article 12 of the Tort Liability Law, both parties should bear the liability to Tongshun within their respective faults. Yuantong was the direct operator of lashing, and they violated their professional high duty of care, which constituted serious negligence. Dongjing did not fulfill its duty of ordering and checking the lashing work, and they violated the usual course of business practices, which constituted general negligence. The court of first instance held according to its decision that both parties should bear liability for compensation as per the seventy-thirty ratio. CHEN Xiaoguo and ZHUANG Xuda, as the owners of the vessel M.V. “Dong Jing 29”, promised voluntarily to bear the related liability for the dispute of the vessel at the first session of the original court, and they should bear the joint liability for compensation for the Dongjing’s liability of infringement. But, the promise of CHEN Xiaoguo and ZHUANG Xuda to bear all economic liability for the dispute related to the vessel M.V. “Dong Jing 29” during the attachment period was only effective between the three Defendants, which cannot affect Tongshun. Fourthly, the economic loss of cargo involved. As for the direct loss of cargo involved, after Hubei High People’s Court’s hearing and identification, the entrance fee of RMB196,000 (twice) and the freight of RMB150,000, the total amount was RMB609,665. These fees were rational, and Tongshun had already paid Huaneng. The court of first instance confirmed that payment. As for the replacement fee of RMB500,000, Hubei High People’s Court did not confirm it because Tongshun paid Huaneng voluntarily during mediation, and Tongshun did not provide enough evidence to prove the fee’s rationality. So,

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the court of first instance did not support the claim of the replacement fee of RMB500,000. In summary, the court of first instance supported the reasonable parts that Tongshun claimed for. According to the provisions of Article 12 of the Tort Liability Law of the People’s Republic of China, Article 64 Paragraph 1 and Article 144 of the Civil Procedure Law of the People’s Republic of China, the judgment was rendered as follows. 1. Yuantong should compensate for cargo damage amounting to RMB426,765.50 to Tongshun within ten days after the effective date of the judgment. 2. Dongjing should compensate for cargo damages totaling RMB182,899.50 to Tongshun within ten days after the effective date of the judgment. CHEN Xiaoguo and ZHUANG Xuda should bear joint liability for compensation of the above loss. 3. Reject the other claims of Tongshun. If the obligations of monetary payment were not performed within the period specified in this judgment, the interest on the debt in the delayed performance period should be doubled in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB14,790, Tongshun should bear RMB6,665, Dongjing, CHEN Xiaoguo and ZHUANG Xuda should bear RMB2,440, Yuantong should bear RMB5,685. Announcement fee in amount of RMB600 should be born by Dongjing. Yuantong did not accept the judgment of first instance and brought an appeal to the court based on the following grounds: First, the court of first-instance was wrong in identifying the facts. 1. Identifying that the welding machine that was owned by the vessel M.V. “Dong Jing 29” and welded the cargo belonged to Yuantong violated the evidence rule. 1) The court of first instance, according to the transcript of the conversation that recorded the conversation between Hubei High People’s Court and the manager of Yuantong, LI Jiajun to identify the above facts, but LI Jiajun was only responsible for the business contacts. His statements in the transcript of the conversation was conjecture, and the modified parts to the answer were not confirmed by LI Jiajun’s signature, whose authenticity should be doubled. The staff of Yuantong, ZHANG Min, was the specific implementer of the lashing work of the cargo involved. In the transcript of the conversation recorded by Hubei High People’s Court, she denied clearly that the welding machine belonged to Yuantong. 2) Confirming that the welding machine belonged to Yuantong violated the constructive validity of the right of possession of movable property. Evidence in the case in the first-instance trial and the second-instance trial can prove that the welding machine was always under the occupation of the vessel M.V. “Dong Jing 29”. So, the court should rely on this point to identify the owner. 2. The court of first instance confirmed that Yuantong confessed that the angle iron on the crane arm belonged to it, which violated the evidence rule.

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1) All the records of trial did not have the above contents. The confirmation of the court of first instance did not have foundation. 2) The acceptance certificate that was signed by Dongjing can prove that the number of the lashing materials used by Yuantong for lashing the cargo involved was only six, not including the angle iron. 3) Tongshun stated for many times in court that the master and the chief mate of vessel M.V. “Dong Jing 29” once admitted that they welded the cargo involved. 4) Yuantong was a professional lashing company. Not welding the cargo directly was a rule for lashing the cargo on board. Combined with the statements of Dongjing and ZHANG Min about the welding spots, it can be confirmed that Dongjing solely welded the cargo involved and the cargo damages occurred due to its lacking experience with shipping the cargo involved. 3. It is wrong to deny the effectiveness of evidence to prove the good condition of the goods involved in the case on the ground that the receipt is one of the procedures to be checked by the maritime bureau when applying for the visa 1) According to the relevant provisions of the Maritime Code of the People’s Republic of China, Dongjing and the owners of the vessel M.V. “Dong Jing 29” were the actual carriers, and they had the duty to check and record the cargo condition on the waybill when receiving. The responsibility of the carrier started from the time of loading of the goods onto the ship until the time the goods were discharged therefrom. 2) Though the maritime bureau had the compulsive requirement that both the ship and the lashing party should sign the acceptance certificate, the carrier issued an acceptance certificate on the condition that he did not substantially accept the work of lashing, which cannot deny the effectiveness of acceptance certificate. 4. The court of first instance confirmed that Yuantong should collect evidence and prove that Dongjing welded the cargo involved directly, which was an abuse of discretion. According to the Maritime Code of the People’s Republic of China and other legal provisions, the carrier has a duty to accept the cargo and deliver qualified cargo to the consignee. In this case, the shipper entrusted Yuantong, who lashed the cargo involved, and he represented the shipper when delivering the cargo to the carrier. The carrier’s acceptance of lashing was treated as the acceptance of delivering. Even so, the acceptance certificate itself cannot be evidence to prove that the cargo was delivered in good condition. But, according to the relevant provisions of the Contract Law of the People’s Republic of China, Tongshun still had the legal duty to accept Yuantong’s working achievements within reasonable time. But, for more than a year, both Tongshun and Dongjing did not inform Yuantong of the cargo damage or claim their rights against Yuantong. 5. There was an error in confirming that Dongjing did not commit an infringement by welding.

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(1) The vessel M.V. “Dong Jing 29” did not have the transportation ability to ship the cargo involved. According to the vessel’s certification of seaworthiness, its navigating area was coast, not offshore. Because the ship shipped out of the navigating area, the ship welded the cargo in order to prevent safety risks. (2) The vessel M.V. “Dong Jing 29” did not have transportation qualification to ship the cargo involved. The ship was owner by CHEN Xiaoguo and ZHUANG Xuda and affiliated with the name of Dongjing for operation. It was an illegal business without qualifications and had safety risks. In this case, that was the reason for the cargo damage. (3) The vessel M.V. “Dong Jing 29” did not have the management level for shipping the cargo involved. The crews of the vessel did not have the relevant qualifications. The ship cannot ship the cargo safely, and that was the reason for the cargo damage. Second, the court of first instance was wrong in distribution of burden of proof. 1. As for tort liability, Tongshun had the burden of proof. Yuantong only needed to propose disproof letting the tort facts that were claimed by Tongshun fell within non liquet to exempt his burden of proof. Tongshun’s identification in court of the welding act of Dongjing, the fact that consignee found the welding machine on board when he found the cargo damages and other evidence can prove that Yuantong was not the infringer. 2. As mentioned earlier, according to the relevant provisions of the Maritime Code of the People’s Republic of China, the carrier shall bear the liability for compensating for cargo damage that happened during the period when the carrier is in charge of the goods. As a result, Dongjing should bear the burden of proving that the cargo’s damage was caused by Yuantong. 3. Tongshun confessed that Yuantong did not cause the tort related to this case. So, Yuantong’s burden of proof should be exempted. The court of first instance still ordered Yuantong to carry on the burden of proof and that violated the relevant provisions of the Civil Procedure Law of the People’s Republic of China. Third, the court of first instance was wrong in applying the law. The provisions of Article 23 of the Regulations on Domestic Carriage of Goods by Water quoted by the judgment of first instance was an arbitrary provision, and the evidence in this case was strong enough to prove that Dongjing welded the cargo involved. So, this provision was not applicable. At the same time, the Regulations on Domestic Carriage of Goods by Water were abolished on May 30, 2016. In summary, Yuantong requested the court to revoke the Civil judgment of Ningbo Maritime Court, (2015) Yong Hai Fa Shi Chong Zi No.1, and change the judgment to support all the claims of Yuantong in the first-instance trial. Dongjing did not defense in the second-instance trial. CHEN Xiaoguo, ZHUANG Xuda defended as follows: First, they had objection to Yuantong changing their legal status in litigation in first session of the second-instance trial as the Respondents. After the appeal period, the issues confirmed by Tongshun, CHEN Xiaoguo and ZHUANG Xuda in the

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judgment of first instance came into force. Yuantong’s act of changing its claims did not come into force regarding CHEN Xiaoguo and ZHUANG Xuda. Second, the court of first instance’s confirming Tongshun as the infringer was consistent with the facts. The legal facts are clear and well founded. Third, the first-instance trial confirmed that the master of the vessel M.V. “Dong Jing 29” should check the lashing of cargo. That imposed a duty onto Yuantong’s regarding the vessel M.V. “Dong Jing 29”. Fourth, the amount of the cargo loss confirmed by the court of first instance was reasonable. Fifth, Yuantong’s confirming that the lashing acceptance certificate was a certification that the cargo was in good condition was untenable. Sixth, Yuantong’s confirming that the vessel M.V. “Dong Jing 29” did not have the transportation ability, the transportation qualification and the management level had no relation to the cargo damage caused by welding. Also, the visa issued by the maritime bureau, ship’s certification and operation certification totally denied the above claims. In summary, request the court to dismiss the appeal and affirm the original judgment. Tongshun defended as follows: The court of first instance was correct in identifying the facts and applying law. Based on the happening of accident, Tongshun had no fault. The cargo was damaged artificially. Dongjing and Yuantong should prove their innocence by themselves. In summary, request the court to dismiss the appeal and affirm the original judgment. In the second-instance trial, Dongjing, CHEN Xiaoguo, ZHUANG Xuda and Tongshun did not submit new evidence. Yuantong submitted new evidence as follows: Evidence 1, two letters of certification issued by Dalian Ship and Port Service Industry Association; Evidence 2, several photos and records of lashing; and Evidence 3, five contracts of lashing. The above evidence 1–3 intended to prove jointly Yuantong’s creditworthy and lashing specification. Combined reference to evidence 1, this evidence intended to prove that the acceptance certificate was a copy of the written evidence that proved that the lashing work was finished and accepted. Evidence 4, marine cargo vessel’s certification of seaworthiness; Evidence 5, one piece of waterway transport license; Evidence 6, one piece of vessel registered certification; Evidence 7, one piece of letter of guarantee; and Evidence 8, one piece of qualification chart of the master and chief mate of vessel M.V. “Dong Jing 29”. The above evidence 4–6 intended to prove jointly that Dongjing did not have the ability to ship the cargo involved. Yuantong submitted following evidence for reference: 1. acceptance certificate; 2. court record of Wuhan Maritime Court; 3. court record of Ningbo Maritime

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Court (first-instance trial); 4. court record of Ningbo Maritime Court (retrial); 5. identification document on the repair of damaged cargo; 6. statement of the procurator; 7. two transcripts of conversation; 8. photos of welding machine in this case; 9. photos of AC arc welder; 10. photos of welding cargo’s steel plate; 11. photos of six lashing materials used for lashing; 12. photos of lashing material steel plate; 13. voyage ship visa application; 14. letter of commitment; 15. certificate of registry of Dalian Ship and Port Service Industry Association; and 16. scale 3A plaque assessed by social organization and issued by Dalian Civil Affairs Bureau. The above reference evidence 1–16 and the new evidence 1–8 intended to prove jointly that the cargo damaged was caused by the act of welding of Dongjing. The cross-examination opinions of Tongshun were as follows. Evidence 1’s authenticity was objected; they cannot ensure whether the Dalian Ship and Port Service Industry Association was an effective institution. About other evidence, they had no objection to the pro forma authenticity, but they thought these cannot achieve Yuantong’s purpose of proof. The cross-examination opinions of CHEN Xiaoguo and ZHUANG Xuda were as follows: they had objection to authenticity of evidence 1. They cannot ensure whether the Dalian Ship and Port Service Industry Association was an effective institution. About other evidence, they had no objection to the pro forma authenticity, but evidence 4, evidence 5, evidence 6, evidence 7, and evidence 8 had no relevancy with this case. Yuantong’s evidence cannot achieve their purpose of proof. Regarding to the evidence materials above, the court holds after investigation that: as for evidence 1–16, excepting that evidence 15 and 16 were reference evidence submitted after the second-instance trial, other evidence had been submitted and were cross-examined in the original first instance trial, the second-instance trial and retrial. The court has already confirmed the above evidence and will not go into much detail here. About the new evidence 1 combined with the reference evidence 15 and 16, those can prove the existence of Dalian Ship and Port Service Industry Association. The court confirms the pro forma authenticity. According to records of the certificate of registry, the business of association, including business training, service consulting, investment attracting, exchange and co-operation did not have the qualifications to regulate industry behavior and identify industry practices. About the new evidence 2 and 3, both of them reflected other business situations but had no relevancy with this case. Therefore, the above evidence cannot achieve Yuantong’s purpose of proof. About the new evidence 4– 8, Tongshun, CHEN Xiaoguo, and ZHUANG Xuda had no objection to the pro forma authenticity. So, the court confirms the pro forma authenticity. Marine cargo vessel’s certification of seaworthiness can prove that the vessel involved was seaworthy at the beginning of the voyage and this case was an infringement dispute. These evidence had no relevancy with this case. The above new evidence combined with the reference evidence cannot prove that the cargo damage involved was caused by the act of welding of Dongjing and cannot achieve Yuantong’s purpose of proof.

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After the second-instance trial, the facts confirmed in the first-instance trial had relevant evidence to prove, which shall be confirmed by the court. The court holds that: according to the appealing claims and grounds and defenses stated by the parties, the issues of second instance of this case were whether Yuantong should bear tort liability for the cargo damaged, and, if should, what share of liability should Yuantong bear. All the parties had no objection to the issues concluded by the court. The detailed analysis is as follows: Yuantong claimed that, as the carrier, Dongjing was liable to compensate for cargo damage caused during the period of shipment. It was based on the established contract of carriage between Tongshun and Dongjing. According to the relevant provisions of the Maritime Code of the People’s Republic of China, the carrier shall bear strict liability to the cargo in transport, which promised that the cargo was in good condition under the contract. But, this case arose from dispute over liability for damage to property on sea-connected waters, and Tongshun chose to sue for infringement. Therefore, who shall bear the liability to compensate for Tongshun’s cargo damage was determined after inspecting who implemented an act of infringement and whether there was a causal link between the act of infringement and the damages result. The cargo involved was a large mechanical arm. According to the provision of Article 23 of the Regulations on Domestic Carriage of Goods by Water, the shipper shall be responsible for special reinforcement, strapping and welding of such cargo. Although this regulation was abolished in 2016, it was still effective when the damage was caused. In this case, Tongshun entrusted a third party, professional lashing company Yuantong, to lash the cargo involved. Yuantong issued a calculation sheet of cargo lashing and actually lashed the cargo. Dongjing did not have the responsibility for lashing and loading the cargo involved. It was consistent with the provisions of the regulation. The court of first instance quoted this regulation in the reasoning section and had done nothing wrong. Yuantong was entrusted by Tongshun to lash the cargo involved and collected related fees from Tongshun. Therefore, Tongshun shall accept the lashing work. The photo taken by Dalian Maritime Safety Administration showed that the cargo involved was welded before the beginning of the voyage. The statements of the staff of Yuantong and the crew of the vessel M.V. “Dong Jing 29” confirmed that welding happened when the crew of the vessel M.V. “Dong Jing 29” signed on the acceptance certificate. The cargo was damaged during the period of lashing. Yuantong thought the signature of the crew of the vessel on the acceptance certificate represented that Tongshun received the cargo in good condition, which was an industry practice. But, it did not prove that Tongshun entrusted Dongjing to accept the work products. It did not submit effective evidence to prove the establishment of this industry practice. At the same time, the acceptance certificate only recorded lashing materials. It did not mention the condition of welding or show the condition of cargo. Therefore, this acceptance certificate cannot be proof to confirm the cargo in good condition and being accepted solely. CHEN Xiaoguo, ZHUANG Xuda, and Yuantong confirmed in the first-instance trial of this case that shipping large cargo needed lashing by a professional lashing

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company. After submitting the acceptance certificate that was signed by the lashing company and the ship and verification, the maritime bureau would grant a visa. That is to say, this acceptance certificate was a procedure that was needed to be accepted when the maritime bureau granted the visa. Therefore, it cannot, based on this point, be confirmed that Dongjing had already represented to Tongshun acceptance of the cargo. In the hearing procedure of Hubei High People’s Court, Yuantong confessed that the workers on board took the welding machine with them and did a part of welding, but it defended that welding machine of Yuantong did not make welding spots on the crawler crane arm. The service manager, LI Jiajun, confirmed that the AC arc welder belonged to Yuantong in the transcript of the conversation of Wuhan Maritime Court. In the transcript of the conversation of Wuhan Maritime Court, the staff of Tongshun, ZHANG Min, said, “after welding by my welding machine, I proposed to the master if there was something wrong, it was not my business. The master said okay”. So, it can be confirmed that the tort machine belonged to Yuantong. On this condition, Yuantong pointed that Dongjing welded the spot of arm. First of all, it had the burden of proof. Yuantong found that the cargo was damaged by the welding act of ship but it did not inform the client Tongshun, which was unconventional. In summary, the court, based on the evidence, holds that, the court of first instance confirmed that Yuantong should bear the primary responsibility for the cargo damage, and its responsibility proportion was seventy percent. At the same time, since the master had the duty of management to the vessel, and the cargo involved was a large mechanical arm that had greater impact to the vessel safety, Dongjing should bear a certain duty of instruction regarding the binding carried out by Yuangtong. The court of first instance confirmed that Dongjing should bear secondary responsibility for the cargo damage, and its responsibility proportion was thirty percent. CHEN Xiaoguo and ZHUANG Xuda, as the owners of the vessel M. V. “Dong Jing 29”, promised voluntarily to bear the related liability for the dispute of the vessel at the first session of the original court, and they should bear the joint liability of compensation for Dongjing’s liability of infringement. In addition, Tongshun in trial pointed that the crew of Dongjing once admitted to it that Dongjing welded the cargo, but there were no other evidence to prove it. It was not at the scene when the accident happened, and it had the right to sue Yuantong during the legal litigation period. So, Yuantong’s claim that the statements can exempt the burden of proof had no legal basis. Further, this case is a dispute over liability for damage to property on sea-connected waters. Both Yuantong and Dongjing had fault regarding the cargo damaged and shall bear the liability of compensation within the scope of their faults. CHEN Xiaoguo and ZHUANG Xuda voluntarily bore the joint liability of compensation for Dongjing’s liability of infringement. The facts of the original judgment are clear, and the application of law is correct. According to the provisions of Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is rendered as follows:

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Dismiss the appeal and affirm the original judgment. Court acceptance fee of second instance in amount of RMB7,701.48 shall be born by the Appellant Dalian Yuantong Marine Lashing Service Co., Ltd. The judgment is final. Presiding Judge: WANG Jianfang Acting Judge: ZHENG Enliang Acting Judge: CHU Ningyu November 14, 2016 Clerk: DING Lin (Editor’s Note: As this case was retried by the court of first instance, only the retrial judgment of first instance court rather than the initial judgment of first instance is included herein. After this second instance judgment was handed down, Dalian Yuantong Ship Securing Service Co., Ltd. made a petition to the Supreme People’s Court for retrial, but the retrial petition was dismissed.)

Ningbo Maritime Court Civil Judgment Shaoxing County Jinsidun Knitting Co., Ltd. v. Mitsui O.S.K. Lines, Ltd. (2014) Yong Hai Fa Shang Chu Zi No.730

Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 1294. Cause(s) of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote The Defendant carrier held not liable for loss of the Plaintiff’s cargo when the Defendant’s ship sank; Hague-Visby Rules not incorporated into bill of lading because incorporating clause too small to read; Chinese law applied to hold the Defendant not liable because carrying ship had been reasonably well maintained and any defects in it could not have been discovered by reasonable care. Summary The Plaintiff contracted with the Defendant to ship blankets from Ningbo, China to Jeddah, Saudi Arabia. The Defendant issued a bill of lading to the Plaintiff, applying the Hague-Visby Rules, and provided sea transport. The ship owned by the Defendant never arrived at Jeddah because it sank in the Indian Ocean. The ship sank because of structural integrity problems which caused the total loss of the Plaintiff’s goods. The court held that while the contractual terms printed on the bill of lading sought to incorporate the Hague-Visby Rules, the wording was too small and did not highlight the clause. Therefore, the court held that the Hague-Visby Rules did not apply, but rather Chinese law did. Thus, the court judged, under Chinese law, that the Defendant was not liable for the total loss because the classification society issued all relevant certificates that certified the ship was maintained and inspected appropriately, the ship did not overload the cargo and followed the loading plans accordingly, and no defects were found in a similar sister ship. Thus, the inspection of the hull that would have found the defects could not be seen by the crew or would not be known unless special equipment was used. Therefore, the Defendant did everything it could have done to remain compliant and was not liable.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_43

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Judgment The Plaintiff: Shaoxing County Jinsidun Knitting Co., Ltd. Domicile: Fujiangxia, Shanwai Country, Maan Town, Shaoxing City, Zhejiang Province, the People’s Republic of China. Organization code: 78770810-8. Legal representative: ZHANG Damin, general manager. Agent ad litem: YUAN Bin, lawyer of Beijing Denton (Ningbo) Law Firm. Agent ad litem: WEN Li, lawyer of Beijing Denton (Ningbo) Law Firm. The Defendant: Mitsui O.S.K. Lines, Ltd. Domicile: 1-1 Toranomon 2-chome, Minato-ku, Tokyo, Japan, 105-8688. Legal representative: WUTENG Guangyi, chairman. Agent ad litem: CHEN Xiangyong, lawyer of Guangdong Wang & Jing Law Firm. Agent ad litem: QIU Yuhao, lawyer of Guangdong Wang & Jing Law Firm. With respect to the case arising from dispute over contract of carriage of goods by sea between the Plaintiff Shaoxing County Jinsidun Knitting Co., Ltd. and the Defendant Mitsui O.S.K. Lines, Ltd., the Plaintiff filed an action to the court on June 16, 2014, and the court accepted this case and legally set up a collegiate panel. The Defendant lodged an objection against the court’s jurisdiction during the period of argument, and the court made the Civil Ruling (2014) Yong Hai Fa Shang Chu Zi No.730, and dismissed such objection. Subsequently, the Defendant was dissatisfied with the ruling and filed an appeal. Zhejiang High People’s Court made a ruling to dismiss the Defendant’s appeal and affirmed the original ruling. The court held hearings in public on February 10, 2015 and July 9, 2015 respectively. Agents ad litem of the Plaintiff, YUAN Bin and WEN Li, and the Defendant’s agents ad litem, CHEN Xiangyong and QIU Yuhao, appeared in court to attend the trial. The expert witness, AN Mou, applied for by the Defendant, made a statement in the court hearing. Now the case has been concluded. The Plaintiff Shaoxing County Jinsidun Knitting Co., Ltd. claimed that, the goods in dispute owned by the Plaintiff at the price of USD49,710.24 were loaded on M.V. “MOLCOMFORT” and carried from Ningbo, the People’s Republic of China to Jeddah, Kingdom of Saudi Arabia. The Defendant, as the carrier, issued the bill of lading No.MOLU11020554421 on June 1, 2013. The vessel in dispute sank in India Ocean waters; this resulted in the total loss of the goods owned by the Plaintiff in the amount of USD49,710.24. The Plaintiff held that the Defendant, as the carrier, should be liable for the cargo damage that occurred during the period of transportation and, hence, lodged a claim before the court and requested compensation for cargo damage of the Plaintiff in the amount of USD49,710.24 (RMB308,680.71 at the exchange rate of 6.2096 in accordance with the date of occurrence of accident) and interests (calculated from June 17, 2013 to the date of performance decided by the court in accordance with the loan interest rate issued by the People’s Bank of China for the same period).

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The Defendant argued that: Firstly, the reverse clause of the bills of lading evidencing the relationship, a contract of carriage of goods by sea, between the Plaintiff and the Defendant provides that contracts evidenced or concluded by these bills of lading should be interpreted according to Japanese law. According to Japanese law, the responsibilities and obligations under the contract of carriage of goods by sea evidenced by the bills of lading in dispute shall be governed by the Hague-Visby Rules. Secondly, the Defendant should not be legally liable for the following reasons: 1. The vessel in dispute is a super-Panama container vessel designed and constructed by Japan Mitsubishi Heavy Industries Group (hereinafter referred to as MHI Group), which is one of the sister vessels taking the same type of design, and its ship classification service and statutory inspection of the flag state of the ship are provided by Class NK from the period of design, construction and operation of vessel till the date of occurrence of accidence. 2. The Defendant duly inspected and maintained the vessel in dispute strictly, and the vessel is seaworthy in the ship inspection, hence, the Defendant fulfilled its obligation to exercise due diligence before and at the beginning of the voyage and failed to find the factors affecting the security of vessel. 3. Hold No.6 of the vessel in dispute suddenly broke off, which led to the ingress of seawater during the voyage. The sinking of the vessel was still inevitable even if the Defendant had conducted all diligence. 4. The strength of the vessel structure is lower than a normal vessel and failed to give full regard to the factors, including transverse load, resulting in the insufficiency of security in accordance with the maritime investigation report. Therefore, the vessel has potential defects in the aspect of design. 5. The Plaintiff failed to prove the detailed losses arising from its cargo damage and it is not entitled to file a claim against the Defendant. In conclusion, the Defendant should not be liable to the Plaintiff for the legal exemptions, and the Plaintiff’s claim should be rejected. The Plaintiff Shaoxing County Jinsidun Knitting Co., Ltd. submitted the following evidence materials in order to support its claim: 1. Original bills of lading of No.MOLU11020554421 to prove the legal relationship under the contract of carriage of goods by sea. 2. The goods declaration, sales contact and invoice to prove that the cargo in dispute has been shipped and the cargo’s value. 3. The report of the sinking vessel presented on the website of China COSCO Shipping Corporation Limited to prove the basic status of the sinking accident of M.V. “MOLCOMFORT”. The Defendant Mitsui O.S.K. Lines, Ltd. submitted the following evidence materials in order to support its arguments: First set of evidence: 1. Certificate of ship’s nationality; 2. international tonnage certificate; 3. international load line certificate; 4. cargo ship construction safety

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certificate; 5. cargo ship equipment safety certificate; 6. safety management certificate; 7. document of compliance; 8. certificate of classification; 9. container loading plan; 10. the report of the vessel before the voyage in dispute. All of the above certificates are intended to prove that all ship certificates are valid and that the carrier exercised due diligence before and at the beginning of voyage, making the ship seaworthy but failing to find the design defects of ship; Second set of evidence: 11. the statement of the master of M.V. “MOLCOMFORT”; 12. news report of the Defendant to prove that inherent vice of the vessel led to the sinking in dispute; Third set of evidence: 13. Chinese and English versions of the Hague-Visby Rules to prove the finding of foreign law; Fourth set of evidence: 14. Final Report issued by the Ministry of Land and Transport of Japan; 15. The correspondence paper of the Ministry of Land and Transport of Japan to prove that the fracture of vessel in dispute arose from the inherent vice; Fifth set of evidence: 16. general arrangement plan; 17. video of inspection of accident and double bilge; 18. script and video; 19. part of safety operation management brochure; 20. part of vessel operation procedure brochure to prove that crew members and the owner exercised due diligence to duly maintain the vessel before the voyage; Sixth set of evidence: 21. the maintenance record of holds No.5 and No.6 before the accident; 22. the inspection report (December 2012) issued by the classification society before the voyage; 23. the inspection report (May 2013) issued by the classification society before the voyage to prove that crew members found a slight distortion while inspecting, and the classification society failed to find defects necessary for amending; Seventh set of evidence: 24. AN Mou’s report as an expert in marine engineering; 25. investigation report of Class NK; 26. Mid-term Report of the Ministry of Land and Transport of Japan to prove that the fracture of the vessel in dispute arose from the inherent vice of vessel design; Eighth set of evidence: 27. news release issued by International Association of Classification Societies on March 5, 2015 and maritime safety journal report of HIS that “International Association of Classification Societies issued new rules after the accident of M.V. ‘MOLCOMFORT’” to prove that International Association of Classification Societies is studying new requirement of the vessel structure; Ninth set of evidence: 28. The email sent by MHI Group to the Defendant (notice that distortion of vessel bilge was found in sister ships of the same batch); 29. registry information of sister ships to prove that the shipyard reported to the Defendant that sister ships of the same batch had found distortions in the ship bilge; Tenth set of evidence: 30. the email issued by the Defendant (requiring inspection of sister ships again); 31. the email issued by the ship managing company (stating distortions were found in the ship bilge upon another inspection) to prove that crew members failed to find distortions before the accident in dispute while the shipyard informed the Defendant of the presence of distortions in the sister ships after the occurrence of the accident. It was according to the instruction

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of the ship managing company knowing the distortions of the sister ships that the crew members of the Defendant found distortions of the vessel bilge in vessels of the same batch; Eleventh set of evidence: 32. affidavit, notarized and legalized words, to prove that relevant evidence has been notarized and legalized; Twelfth set of evidence: 33. the statement made by the person in charge onshore of M.V. “MOLCOMFORT” to prove that measures taken by crewmembers and the shipowner were reasonable upon the detection of slight distortion. The court approves the appearance of the expert witness, AN Mou, to give his testimony in accordance with the application of the Defendant, and he stated in the hearing that: given that the strength of the steel plate outside the vessel in dispute and that its sister ships were weaker than vessel of the same type and that the designer failed to take into account the effect produced by the transverse load, the safety balance provided by the vessel is insufficient, which resulted in the distortion of the steel plate of the vessel bilge and the deterioration of the vessel with the elapse of time. Besides, this distortion of vessel may be difficult to be found during the dual inspection, and it may not be deemed as defects in design even if there is a slight distortion. However, this design defect resulted in the occurrence of this accident. Upon cross-examination during the court hearing, with regard to the evidence provided by the Plaintiff, the Defendant has no objection against the authenticity of evidence 1 and 3 but refuses to recognize evidence 2, (namely goods declaration) and considers that the authenticity of the sales contract and invoice may not be confirmed. Regarding the evidence provided by the Defendant, the Plaintiff acknowledges the authenticity of the first set while objecting to the authenticity of the second and third sets of evidence because they are not a complete system of rule and foreign law may not be found. Hence, this case should be governed by Chinese law. Regarding to the fourth set, the Plaintiff has no objection to the prima facie authenticity but takes the view that the defects may be found by exercising due diligence and avoiding the sinking accident even if such defects are present in the vessel in dispute. The Plaintiff has no objection to the prima facie authenticity of the seventh set, but it cannot prove the purpose of proof of the Plaintiff. With regard to the eighth set, no objection is raised in respect to the authenticity, but that evidence is irrelevant to this case. Regarding to the ninth and tenth sets of evidence, their authenticity may not be confirmed. The Plaintiff has no objection to the authenticity of the eleventh set of evidence but refuses to recognize the twelfth set of evidence because it is unilateral statement and was not cross-examined in the court hearing. Regarding to the testimony, the Defendant recognizes it, but the Plaintiff does not recognize it and holds that it is merely private speculation without the factual grounds. After investigation, the court holds that evidence 1 and 2 adduced by the Plaintiff are recognized by the court, and evidence 3 is also recognized by the court as the Defendant has no objection. The court confirms the first, fourth, fifth, sixth, seventh, eighth, and eleventh sets of evidence adduced by the Defendant while the court will analyze and recognize the case comprehensively with regard to whether

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potential defects, which may not be found after exercising due diligence, are present in the vessel in dispute. The court does not confirm its probative force as the second and third sets of evidence presented by the Defendant may not prove the facts to be proved. Given that the ninth, ten and twelfth sets of evidence adduced by the Defendant may be mutually proved, the court confirms their authenticity while the court will make decisions on basis of the entire case as to whether the vessel in dispute has potential vices, which may not be found after exercising due diligence. Regarding to the testimony, the court confirms its authenticity while the court will make decisions on basis of the entire case as to whether the vessel in dispute has potential vices, which may not be found after exercising due diligence. Based on the statements of both parties and effective evidence confirmed by the court, the court finds out that: the Plaintiff required the Defendant to ship the blankets that it owned in June 2013, and the Defendant, as the carrier, issued the bills of lading No.MOLU11020554421 on June 1, 2013 indicating that the shipper was the Plaintiff, the consignee was AHMEDMDALLAL-BUKHARI, the cargo value was in the amount of USD49,710.24, the dispatching port was Ningbo Port and the discharging port was Jeddah Port. On June 17, 2013, the carrying vessel, M.V. “MOLCOMFORT”, broke off in the middle of the vessel in the India Ocean resulting in the total loss of the cargo loaded aboard. The Plaintiff holds the entire original bills of lading and considers that the Defendant should bear the whole liability for the cargo damage; therefore, it filed an action before the court. It is also found out that, the Defendant failed to find the potential defects in design of the vessel in dispute during the process of dual maintenance and inspection conducted by itself or requiring the classification society to make duly inspection. Class NK and Ministry of Land and Transport of Japan organized experts to investigate, analyze and demonstrate the accident after its occurrence. In September 2014, Class NK issued the investigation report and was of the view that the load of longitudinal bending moment may have exceeded the strength limitation of the hull girder at the material time and security balance of subject vessel had a great difference with other vessels that resulted in the possibility of the distortion and deterioration. In March 2015, Ministry of Land and Transport of Japan issued the investigation report holding the view that it is inferred that the fracture of vessel started from the steel plate outside the vessel bilge and that distortions were also present in steel plates outside the vessel bilge of sister ships in the safety inspection that are large container vessel with the same design as the vessel in dispute. It may be found through simulation that the subject vessel does have the possibility of fracture, and the inspection for the steel plates outside the vessel bilge of the sister ships found that distortions may be achieved by bearing weaker loads than the strength of vessel structure, and the extent of distortion may be larger by bearing loads again and again. Other large container ships, different from the design of the subject vessel in Class NK, failed to find similar distortions of the steel plate outside vessel bilge in the safety inspection, and it is found that such ships had more sufficient balance of structure after comparing with the simulated consequence of the subject vessel and

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other sister ships. An expert witness underscores the insufficiency of the safety balance in the design system of the vessels in dispute (including sister ships) in the court hearing, which is liable to result in the distortions and fracture of the steel plates outside the vessel with the time elapsing. Such distortions are not able to be found in dual inspections conducted by crew members because they may be found by special artisans with professional tools in the targeted inspection for normal slight deformations, which are different from distortions that are widespread in large vessels and not construed as defects in design of vessels. According to the opinions of charge and defense of both parties and facts confirmed by the court, the court summarizes and comments the issues of this case as follows: Firstly, regarding to the jurisdiction and law application of this case. This case is a dispute over a foreign-related contract of carriage of goods by sea under which the place of dispatch is Ningbo, the People’s Republic of China. Therefore, the court legally has jurisdiction over this case in accordance with Article 27 of the Civil Procedure Law of the People’s Republic of China. Regarding to the application of law, the Plaintiff contends that Chinese law should be applicable, and the Defendant argues that this dispute should be governed by Japanese law according to the reverse clause in the bills of lading. In other words, Hague-Visby Rules should be applicable to the contract of carriage of goods in this case as a matter of Japanese law. The court holds that the reverse clauses in the bills of lading in dispute are standard terms made by the Defendant in advance for recurring use. Such clauses directly eliminate the right of choosing jurisdiction and governing law of the Plaintiff, which directly affects the exercise of the right of action, which is an important litigation right. Although it is remarked on the face of the bills of lading with boldface by words that the clauses in the bills of lading are also present on the reverse side, words on the reverse side of bills of lading are too small, tight and absolutely consistent in the forms of all clauses to be highlighted separately. Therefore, it may not be identified that the Defendant made special marks with words, signs and fonts for this clause sufficient enough to attract attention when concluding the contract, and no evidence proves that the Defendant negotiated with or made an explanation to the Plaintiff in respect of such clause. As a result, such clause is null and void, and it is legally groundless that the Defendant quotes such clause requiring the application of Japanese law or the Hague-Visby Rules, which shall not be adopted by the court. This case shall be governed by Chinese law in accordance with Article 2 of the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China. Secondly, regarding to the reason for sinking of M.V. “MOLCOMFORT” involved. The Defendant considers that, with regard to the vessel fracture during the voyage and sinking, loads failed to be given full regard when designing M.V. “MOLCOMFORT”, whose safety balance is insufficient compared with vessels in other design systems which maybe resulted in the distortion of the steel plate outside vessel bilge in accordance with the investigation report issued by the

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Ministry of Land and Transport of Japan. In fact, the fracture of the vessel in dispute starts from steel plates outside the vessel bilge and then leads to the fracture from the middle of the entire vessel. The shipyard of the vessel in dispute also found distortions in sister ships of the same batch after the occurrence of accident. In conclusion, it may be inferred that potential defects present in vessels resulted in its sinking. The Plaintiff holds that the investigation report merely indicates that defects in the design of the vessel may have caused the occurrence of the accident, but this possibility is too small. On the contrary, the failure to incur accidents of sister ships of the same batch precisely expounds that the inherent vice of the vessel may not necessarily cause accidents and overloading or other actions of the Defendant contributed the sinking of the vessel. Therefore, the defects in design of the vessel had no certain relationship with the sinking of the vessel, and it may not be recognized that the sinking of M.V. “MOLCOMFORT” arose from potential defects in design of the vessel. The court holds that, since the vessel has sunk and failed to be salvaged from the water, which caused the loss of data on board, the investigation report has to inspect sister ships of the same batch and design system and make an analysis and demonstration coupled with the data of simulation test. Hence, the identification of the cause of the accident is not capable of absolutely ruling out other possibilities, and it is proper for the adduction of evidence to reach the extent of advantage. Back to the analysis of the cause of accident in this case, the investigation report indicates that the safety balance of vessels of the same batch and design system, including M.V. “MOLCOMFORT”, is insufficient compared with other container ships, which may have caused the distortions of the steel plate outside the vessel bilge. The investigation report also indicates that the fracture of the vessel in dispute starts from the steel plates outside the vessel bilge in the middle of the vessel and the consequence of defects in design (distortions in the steel plates outside the vessel bilge) is highly consistent with the objective circumstances of the accident (the fracture of the steel plate outside the vessel caused the break of ship). Coupled with the facts that the vessel in dispute fails to incur fire, explosion, strike, collision, the court holds that the defects in design are the best possible cause of the sinking on the basis of currently available evidence, and both elements have causal relation. In conclusion, the court confirms that potential vices in design of M.V. “MOLCOMFORT” brings about the occurrence of sinking of vessel. Thirdly, whether the Defendant of the case should be liable. The Plaintiff holds that the loss of or damage to the cargo occurred in the period of liability of the carrier, and the Defendant should assume liability for compensation. Even if the vessel in dispute has potential defects, the Defendant also failed to fulfill its obligation to exercise due diligence. In this respect, the Defendant holds that the presence of potential defects in the vessel in dispute caused the occurrence of sinking, and the Defendant has exercised due diligence but failed to find such defects, satisfying the exemption provided by Article 51 Paragraph 1 Sub-paragraph 11 of the Maritime Code of the People’s Republic of China. Therefore, the Defendant should not be liable. The court holds that the Defendant required the classification society to duly inspect the subject vessel on time, and classification

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society never found the presence of defects in design in M.V. “MOLCOMFORT” and reminded the carrier of the presence of potential defects in such vessel. According to the record of maintenance, the Defendant also completed the dual maintenance and inspection of the vessel periodically. While crew members found slight distortion in hold No.5 in one of record of maintenance, the Defendant has exercised due diligence with the vessel in dispute in dual operation as slight distortions of the steel plates of the vessel are widespread in large vessels and even if dual inspection finds slight distortion, it may not be construed that the vessel has defects in design. Regarding hold No.6 incurring a fracture in the vessel, distortions have never been found in accordance with the statements given by the expert witness in the court hearing. According to the custody plan of the voyage and declarations of sailing, the Defendant never overloaded and also exercised due diligence to make the ship seaworthy. In conclusion, the court holds that the Defendant has exercised due diligence with M.V. “MOLCOMFORT” while the Defendant failed to find potential defects. Hence, the Defendant may be exempted from the liability accordingly. In conclusion, the carrying vessel in this case has potential defects after exercising due diligence but failed to be found, and such defects caused the sinking of the vessel and loss of and damage to cargo. Hence, the carrier shall not be liable according to law and its arguments satisfy the legal provisions, which shall be adopted by the court. As a result, the claim of the Plaintiff that the Defendant should bear liability is legally groundless and shall not be supported by the court. In accordance with Article 46, Article 51 Paragraph 1 Sub-paragraph 11 of the Maritime Code of the People’s Republic of China and Article 64 Paragraph 1 and Article 259 of the Civil Procedure Law of the People’s Republic of China, after the discussion of judicial committee of the court, the judgment is rendered as follows: Reject the claims of the Plaintiff Shaoxing County Jinsidun Knitting Co., Ltd. Court acceptance fee in amount of RMB5,930 shall be born by the Plaintiff Shaoxing County Jinsidun Knitting Co., Ltd. In case of dissatisfaction with this judgment, the Plaintiff Shaoxing County Jinsidun Knitting Co., Ltd. may within 15 days from the date of service of the judgment and the Defendant Mitsui O.S.K. Lines, Ltd. may within 30 days from the date of service of the judgment, submit a statement of appeal to the court and according to the number of opposite parties provides duplicates, and appeal to the Zhejiang High People’s Court. [The appeal costs in amount of 5,930 yuan (specific amount shall be determined by the Zhejiang High People’s Court, and the extra part will be returned later) shall be prepaid when submitting the statement of appeal. If the payment is not fulfilled within 7 days after the period for appealing expires, the appeal shall be withdrawn automatically. The money shall be remitted to the

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non-tax revenue settlement sub-account of Finance Department of Zhejiang Province, account number: 19000101040006575401001, deposit bank: Hangzhou Xihu Branch of the Agricultural Bank]. Presiding Judge: XIAO Zibo Acting Judge: XIA Guangen Acting Judge: YAO Nina May 25, 2016 Acting Clerk: ZHU Danying

Appendix: Relevant Laws 1. Maritime Code of the People’s Republic of China Article 46 The period of liability of carrier for the container cargo covers from the time when the carrier takes over the cargo at loading port to the time when the cargo is delivered at discharging port, under which the cargo is in the charge of the carrier. The period of liability of carrier for non-container cargo covers from the time when the cargo is loaded on board to the time when the cargo is discharged off the vessel, under which the cargo is in the charge of the carrier. The carrier shall be liable for the loss of or damage to the cargo during the period of liability of carrier, unless this chapter provides otherwise. The aforesaid provision shall not affect the carrier to conclude any agreement in respect of the liability of non-container cargo incurred before loading on board and discharging off vessel. Article 51 The carrier shall not be liable for the loss of or damage to the cargo during the period of liability arising from one of the following causes as below: (1) The fault of the Master, crew members, pilot or servant of the carrier in the navigation or management of vessel; (2) Fire, unless caused by actual fault of the carrier; (3) Force majeure, peril or accident of the sea or other navigable waters; (4) War or armed conflict; (5) Act of government or competent authority, quarantine restriction or seizure under legal process; (6) Strike, stoppage or restraint of labor; (7) Saving or attempting to save life or property at sea; (8) Act of shipper, owner of goods or their agents; (9) Nature characteristics or inherent vice of cargo; (10) Inadequacy of packing or insufficiency or illegibility of marks; (11) Latent defect not discoverable by due diligence; (12) Causes other than the faults of the carrier or its employee or agent.

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The carrier who is entitled to exoneration from the liability for compensation as provided for in the preceding paragraph shall, with the exception of the causes given in sub-paragraph (2), bear the burden of proof. 2. Civil Procedure Law of the People’s Republic of China Article 64 Paragraph 1 The party shall have the responsibility to provide evidence for its arguments. Article 259 Foreign-related civil litigation filed in the territory of the People’s Republic of China shall be governed by this Provision. In case of no Provision, other relevant provisions shall apply.

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Zhejiang High People’s Court Civil Judgment Shaoxing County Jinsidun Knitting Co., Ltd. v. Mitsui O.S.K. Lines, Ltd. (2016) Zhe Min Zhong No.480 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 1283. Cause(s) of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote Affirming lower court decision holding the Defendant carrier not liable for loss of the Plaintiff’s cargo when the Defendant’s ship sank; Hague-Visby Rules not incorporated into bill of lading because incorporating clause too small to read; Chinese law applied to hold the Defendant not liable because carrying ship had been reasonably well maintained and any defects in it could not have been discovered by reasonable care. Summary The Plaintiff contracted with the Defendant to ship blankets from Ningbo, China to Jeddah, Saudi Arabia. The Defendant issued a bill of lading to the Plaintiff, applying the Hague-Visby Rules, and provided sea transport. The ship owned by the Defendant never arrived at Jeddah because it sank in the Indian Ocean. The ship sank because of structural integrity problems which caused the total loss of the Plaintiff’s goods. The court of first instance held that while the contractual terms printed on the bill of lading sought to incorporate the Hague-Visby Rules, the wording was too small and did not highlight the clause. Therefore, the court of first instance held that the Hague-Visby Rules did not apply, but rather Chinese law did. Thus, the court of first instance judged, under Chinese law, that the Defendant was not liable for the total loss because the classification society issued all relevant certificates that certified the ship was maintained and inspected appropriately, the ship did not overload the cargo and followed the loading plans accordingly, and no defects were found in a similar sister ship. Thus, the inspection of the hull that would have found the defects could not be seen by the crew or would not be known unless special equipment was used. Therefore, the Defendant did everything it could have done to remain compliant and was not liable. The Plaintiff appealed. The appeal court affirmed the decision of the court of first instance, holding that the Defendant was not liable to the Plaintiff for the total loss of the Plaintiff’s goods shipped on the Defendant’s ship that sank in the Indian Ocean. The appeal court reasoned that the court of first instance applied the correct law and found that the

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Defendant performed due diligence on the vessel, performed maintenance, and had the vessel routinely inspected by a classification society, still the latent defect was not found. The Defendant also followed the proper stowage and loading plans and despite all of its efforts, the vessel had experienced a fracture along the hull of the vessel causing a cargo hold to break off and the vessel ultimately sank. The Defendant would have had no way of knowing this would occur and was not liable for the loss.

Judgment The Appellant (the Plaintiff of first instance): Shaoxing County Jinsidun Knitting Co., Ltd. Domicile: Fujiangxia, Shanwai Country, Maan Town, Shaoxing City, Zhejiang Province, the People’s Republic of China. Organization code: 78770810-8. Legal representative: ZHANG Damin, general manager. Agent ad litem: YUAN Bin, lawyer of Beijing Denton (Ningbo) Law Firm. Agent ad litem: WEN Li, lawyer of Beijing Denton (Ningbo) Law Firm. The Respondent (the Defendant of first instance): Mitsui O.S.K. Lines, Ltd. Domicile: 1-1 Toranomon 2-chome, Minato-ku, Tokyo, Japan, 105-8688. Legal representative: WUTENG Guangyi, chairman. Agent ad litem: CHEN Xiangyong, lawyer of Guangdong Wang & Jing Law Firm. Agent ad litem: QIU Yuhao, lawyer of Guangdong Wang & Jing Law Firm. With respect to the case arising from dispute over contract of carriage of goods by sea between the Appellant Shaoxing County Jinsidun Knitting Co., Ltd. (hereinafter referred to as Jinsidun Company) and Mitsui O.S.K. Lines, Ltd. (hereinafter referred to as Mitsui Company), the Appellant is dissatisfied with the Civil Judgment (2014) Yong Hai Fa Shang Chu Zi No.730 rendered by Ningbo Maritime Court and filed an appeal before the court. After accepting this case on July 4, 2016, the court legally set up a collegiate panel and held a hearing in public on September 13, 2016. Agents ad litem of the Appellant Jinsidun Company, YUAN Bin and WEN Li, and agents ad litem of the Respondent Mitsui Company, CHEN Xiangyong and QIU Yuhao, appeared in court to attend the trial. This case has now been concluded. Jinsidun Company claimed when filing an action that: the goods in dispute owned by Jinsidun Company at the price of USD49,710.24 was loaded on M.V. “MOLCOMFORT” and carried from Ningbo, the People’s Republic of China to Jeddah, Kingdom of Saudi Arabia. Mitsui Company, as the carrier, issued the bill of lading No.MOLU11020554421 on June 1, 2013. The vessel in dispute sank in the water area of the India Ocean, resulting in the total loss of the goods owned by Jinsidun Company in the amount of USD49,710.24. Jinsidun Company held that Mitsui Company, as the carrier, should be liable for the cargo damage that occurred

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during the period of transportation and hence lodged a claim before the court and required compensation for the cargo damage of Jinsidun Company in the amount of USD49,710.24 (RMB308,680.71 at the exchange rate of 6.2096 in accordance with the date of occurrence of accident) and interests (calculated from June 17, 2013 to the date of performance decided by the court in accordance with the loan rate issued by the People’s Bank of China for the same period). Mitsui Company argued that, firstly, the reverse clause of the bills of lading evidencing the relation of a contract of carriage of goods by sea between Jinsidun Company and Mitsui Company provided that contracts evidenced or concluded by these bills of lading should be interpreted according to Japanese law. According to Japanese law, the responsibilities and obligations under the contract of carriage of goods by sea evidenced by the bills of lading in dispute shall be governed by the Hague-Visby Rules; secondly, Mitsui Company should not be liable legally, and the detailed grounds as to why are specified as follows: 1. the vessel in dispute is a super-Panama container vessel designed and constructed by Japan Mitsubishi Heavy Industries Group (hereinafter referred to as MHI Group), which is one of the sisters vessel taking the same type of design, and its ship classification service and statutory inspection of flag state of ship are provided by Class NK from the period of design, construction and operation of vessel till the date of occurrence of accidence; 2. Mitsui Company duly inspected and strictly maintained the vessel in dispute, and the vessel was seaworthy in the ship inspection; hence, Mitsui Company has fulfilled its obligation of exercising due diligence before and at the beginning of the voyage and failed to find the factors affecting the security of the vessel; 3. hold No.6 of vessel in dispute suddenly broke off, causing an ingress of seawater during the voyage. The sinking of vessel was still inevitable even if Mitsui Company had conducted all diligence; 4. the strength of the vessel structure is lower than a normal vessel and fails to give full regard to the factors, including transverse load resulting in the insufficiency of security in accordance with the maritime investigation report. Therefore, the vessel has potential defects in the aspect of design; 5. Jinsidun Company failed to prove the detailed losses arising from its cargo damage, and it was not entitled to file the claim against Mitsui Company. In conclusion, Mitsui Company should not be liable to Jinsidun Company for the legal exemptions and Jinsidun Company’s claim shall be rejected. The court of first instance found the facts as follows. Jinsidun Company required Mitsui Company to ship blankets owned by itself in June 2013, and Mitsui Company, as the carrier, issued bills of lading No.MOLU11020554421 on June 1, 2013 indicating the shipper was Jinsidun Company, the consignee was AHMEDMDALLAL-BUKHARI, the cargo value was in the amount of USD49,710.24, the dispatching port was Ningbo Port and the discharging port was Jeddah Port. On June 17, 2013, the carrying vessel M.V. “MOLCOMFORT” broke off in the middle of the vessel in the India Ocean resulting in the total loss of cargo loaded aboard. Jinsidun Company held the entire original bills of lading and argued that Mitsui Company should bear the whole liability for the cargo damage. Therefore, it lodged the claim before the court of first instance. Besides, Mitsui Company failed

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to find the potential defects in design of the vessel in dispute during the process of duly maintenance and inspection conducted by itself or requiring the classification society to make duly inspection. Class NK and Ministry of Land and Transport of Japan organized a mass of experts to investigate, analyze and demonstrate the accident after the occurrence of such accident. In September 2014, Class NK issued the investigation report and held that the load of longitudinal bending moment may be in excess of the strength limitation of the hull girder at the material time and security balance of the subject vessel had a great difference with other vessels resulting in the possibility of the distortion and deterioration. In March 2015, Ministry of Land and Transport of Japan issued the investigation report holding the view that it was inferred that the fracture of vessel started from the steel plate outside the vessel bilge and distortions were also present in the steel plates outside the vessel bilge of the sister ships in the safety inspection, which were large container vessels taking the same design with the vessel in dispute. It may be found through simulation that the subject vessel did have the possibility of occurrence of fracture, and the inspection of the steel plates outside vessel bilge of the sister ships found that distortions may be achieved by bearing weaker loads than the strength of vessel structure and the extent of distortion may be larger by bearing loads again and again. Other large container ships different from the design of subject vessel in Class NK failed to be found similar distortions of steel plate outside vessel bilge in safety inspection, and it was found that such ships had more sufficient balance of structure after comparing with the simulation consequence of subject vessel and other sister ships. An expert witness underlined the insufficiency of the safety balance in the design system of the vessels in dispute (including sister ships) in the court hearing, which was likely to result in the distortions and fracture of steel plates outside the vessel with the time elapsing. Such distortions were not able to be found in inspections conducted by crew members as they may be found by special artisans with professional tools in the targeted inspection for normal or slight deformations were different from distortions, which were widespread in large vessels and not construed as defects in design of vessel. According to the opinions of charge and defense of both parties and facts confirmed by the court of first instance, the court of first instance summarized and commented the issues of this case as follows: Firstly, regarding to the jurisdiction and law application of this case. This case was a dispute over a foreign-related contract of carriage of goods by sea under which the place of dispatch was Ningbo, the People’s Republic of China. Therefore, the court of first instance legally had jurisdiction over this case in accordance with Article 27 of the Civil Procedure Law of the People’s Republic of China. Regarding to the application of law, Jinsidun Company contended that Chinese law should be applicable, and Mitsui Company argued that Japanese law, according to the reverse clauses of bills of lading, should govern this dispute. In other words, Hague-Visby Rules should be applicable to the contract of carriage of goods in this case.

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The court of first instance held that the reverse clauses on the bills of lading in dispute were standard terms made by Mitsui Company in advance for recurring use. Such clauses directly eliminated the right of choosing jurisdiction and governing law from Jinsudun Company; this directly affected the exercise of the right of action, which was an important litigation right. Although it was remarked on the face of bills of lading with boldface by wordings that clauses of bills of lading were also present on the reverse, words on the reverse of bills of lading were too small, tight and absolutely consistent in the forms of all clauses. The clause referring to constrain right of choice of other parties was not highlighted separately. Therefore, it may not be identified that Mitsui Company made special marks with words, signs and fonts for this clause sufficient enough to attract its attention when concluding the contract, and no evidence proved that Mitsui Company negotiated with or made an explanation to Jinsidun Company in respect of such clause. As a result, such clause was null and void, and it was groundless that Mitsui Company quoted such clause requiring the application of Japanese law or Hague-Visby Rules. Hence, the court of first instance rejected such contention. This case should be governed by Chinese law in accordance with Article 2 of the Law of the Application for Foreign-related Civil Relations of the People’s Republic of China. Secondly, regarding to the reason for sinking of M.V. “MOLCOMFORT” involved. Mitsui Company held that, with regard to the fracture of vessel in dispute, during the voyage resulting in the sinking accident, loads failed to be given full regard when designing M.V. “MOLCOMFORT”. Therefore, the vessel’s safety balance was insufficient compared with vessels in other design systems which was likely to result in the distortion of the steel plate outside vessel bilge in accordance with the investigation report issued by Ministry of Land and Transport of Japan. In fact, the fracture of the vessel in dispute started from steel plates outside the vessel bilge and then led to the break from the middle of the entire vessel. The shipyard of vessel in dispute also found distortions in sister ships of the same batch after the occurrence of accident. In conclusion, it may be inferred that potential defects present in vessels resulted in the sinking. Jinsidun Company held that the investigation report merely indicated that defects in design of the vessel may cause the occurrence of the accident, but this possibility was too small. On the contrary, the failure to incur accidents of sister ships of the same batch precisely expounded that the inherent vice of the vessel may not necessarily cause accidents and overload or other actions of Mitsui Company contributed to the sinking of the vessel. Therefore, the defects in the design of the vessel had no certain relation with the sinking of the vessel, and it may not be recognized that the sinking of M.V. “MOLCOMFORT” arose from the potential defects in design of vessel. The court of first instance held that, since the vessel sank and failed to be salvaged from the water, and then data of the ship lost, the investigation report had to inspect sister ships of the same batch and design system and made analysis and demonstration coupled with the data of simulation test. Hence, the identification of the cause of the accident was not capable of absolutely ruling out other possibilities, and it was proper for the adduction of evidence to reach the extent of advantage.

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Back to the analysis of the cause of accident in this case, the investigation report indicated that the safety balance of the vessel of the same batch and design system, including M.V. “MOLCOMFORT” was insufficient compared with other container ships, which was liable to cause the distortions of the steel plate outside vessel bilge. The investigation report also indicated that the fracture of the vessel in dispute started from steel plates outside vessel bilge in the middle of the vessel, and the consequence of defects in design (distortions in the steel plates outside vessel bilge) was highly consistent with the objective circumstances of the accident (the fracture of the steel plate outside the vessel causes the break of ship). Coupled with the facts that the vessel in dispute failed to incur fire, explosion, strike, or collision damage, the court of first instance held that the defects in design were the best possible cause of the sinking on the basis of currently available evidence and both elements had a causal relationship. In conclusion, the court of first instance held that potential vices in the design of M.V. “MOLCOMFORT” brought about the occurrence of the vessel sinking. Thirdly, whether Mitsui Company should be liable. Jinsidun Company held that loss of or damage to the cargo occurred in the period of liability for the carrier, and Mitsui Company should assume liability for compensation. Even if the vessel in dispute had potential defects, Mitsui Company also failed to fulfill its obligation to exercise due diligence. In this respect, Mitsui Company held that the presence of potential defects in the vessel in dispute caused the occurrence of the sinking, and Mitsui Company exercised due diligence but failed to find such defects, which satisfied the exemption provided by Article 51 Paragraph 1 Sub-paragraph 11 of the Maritime Code of the People’s Republic of China. Therefore, Mitsui Company should not be liable. The court held that Mitsui Company required the classification society to duly inspect the subject vessel on time and classification society had never found the presence of defects in design in M.V. “MOLCOMFORT” and reminded the carrier of the presence of potential defects in such vessel. According to the record of maintenance, Mitsui Company also completed the maintenance and inspection of the vessel periodically. While crew members found the slight distortion in hold No.5 in one record of maintenance, Mitsui Company had exercised due diligence to the vessel in dispute in operation as slight distortions of steel plates of the vessel were widespread in large vessels. Even if duly inspection found the slight distortion, it may not be construed that the vessel has defects in design, and hold No.6 incurring fracture of vessel has never been found distortions in accordance with the statements given by the expert witness in the court hearing. According to the custody plan of the subject voyage and declaration of sailing, Mitsui Company never overloaded and also had exercised due diligence to make the ship seaworthy. In conclusion, the court of first instance held that Mitsui Company had exercised due diligence with the M.V. “MOLCOMFORT” while Mitsui Company failed to find the potential defects. Hence, Mitsui Company may be exempted from liability accordingly. In conclusion, the carrying vessel in this case had potential defects after exercising due diligence but failed to find such defects and such defects caused the sinking of vessel and loss of and damage to cargo. Hence, the carrier should legally

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not be liable, its arguments satisfied the legal provisions, and the court of first instance accepted its arguments. As a result, the claim of Jinsidun Company that Mitsui Company should bear liability was legally groundless and should not be supported by the court of first instance. In accordance with Article 46, Article 51 Paragraph 1 Sub-paragraph 11 of the Maritime Code of the People’s Republic of China and Article 64 Paragraph 1 and Article 259 of the Civil Procedure Law of the People’s Republic of China, after the discussion of judicial committee of the court of first instance, the court of first instance rendered a judgment on May 26, 2016 to reject the claims of Jinsidun Company. Court acceptance fee in amount of RMB5,930 should be born by Jinsidun Company. Jinsidun Company was dissatisfied with the judgment of first instance and lodged an appeal to the court to clarify as follows: First, wrongful recognition of evidence in the judgment of first instance distorted the facts of the case. The evidence relied upon by the judgment of first instance to consider the presence of latent defects in the subject vessel are the investigation report and advice of expert witness issued by Ministry of Land and Transport of Japan against a vessel other than the vessel in dispute. That vessel does not have direct relation with the vessel in dispute. The conclusion of the investigation report is based on speculation and the expert witness failed to participate in the investigation of accident, that expert’s advice is merely an interpretation of the investigation report and never confirmed the legal relationship between the defects and the sinking accident. Second, the recognition of the judgment of first instance regarding the burden of proof and the utmost possibility that the carrier shall be exempted from liability for compensation incorrectly applied the law. Article 51 of the Maritime Code of the People’s Republic of China provides that the carrier shall bear the burden of proof once arguing this Article for liability exemption. Therefore, this case should not apply the utmost possibility, and Mitsui Company should prove the exemption. Given that evidence materials relevant to the accident of transportation occurred during the voyage are completely controlled by the carrier, and the incomplete fault liability system within the Maritime Code of the People’s Republic of China has given the greatest protection to the carrier, the carrier should fulfill its strict burden of proof when quoting the exemptions provided by Article 51 of the Maritime Code of the People’s Republic of China. The carrier should adduce evidence to prove the causal relationship between the defects in design and sinking and that the carrier has exercised due diligence in respect of this case. Third, the judgment holding Mitsui Company liable for compensation in this case satisfies the principle of justice. In this accident, the carrier has raised a claim against the shipyard in Japan. Under this circumstance, if this accident arises from the defects in design, the carrier may make payment to Jinsidun Company and subsequently recover its loss from the shipyard. If this accident is not caused by such defects, Mitsui Company should not be entitled to contend exemption of liability. Conversely, if this judgment held Mitsui Company to be not liable, Jinsidun Company may have no recovering channel once the cause of sinking is not defects in design or if Mitsui Company fails to fulfill its obligation of due diligence

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or if relevant defects are not latent. In conclusion, the judgment of first instance is wrong, and the Appellant applies to the second instance court to remand this case for retrial or change the judgment according to law. Mitsui Company argued as follow: Firstly, the investigation made by Japanese government and Class NK is professional and accepted widely. The judgment of first instance should not be deemed as a pure inference as it comprehended all the report and expert advice and applied the principle of utmost evidence to recognize the facts. Secondly, the Maritime Code of the People’s Republic of China balances interests of both shipping and cargo party on the basis of specificity of shipping industry, which conforms to the principle of justice and is the production of judicial practices and commercial practices. Judgments made in other states are merely regarded as part of facts while the pending cases outside Chinese territory should not affect the disposal of cases in territory of China. Thirdly, with regard to the issue whether it is proper for a Chinese court to make decisions when Japanese court has not decided temporarily in respect of the latent defects: 1. The party who filed an action in this case is a cargo party and filed a claim when a Japanese court failed to make a decision; hence, such claim itself has litigation risks. Mitsui Company has also produced similar demurrals during the period of jurisdiction objection before the substantial hearing of this case. 2. Whether the shipyard has submitted evidence in Japanese legal proceeding should be found by Jinsidun Company, and Jinsidun Company should have the burden of proof in the period of adducing evidence. In the first instance, Mitsui Company hired a famous British expert engaged in the construction of ships to appear before the court hearing to make a statement about the cause of occurrence of sinking. In the second instance, Jinsidun Company failed to submit new evidence and expert advice, and; hence, it is inappropriate to override the judgment of first instance. The judgment of first instance is correct and should be affirmed. During the second instance, both Jinsidun Company and Mitsui Company failed to submit new evidence. Upon hearing, the court confirms the facts found in the judgment of first instance because such facts are proved by relevant evidence. The court holds that Mitsui Company is a Japanese enterprise, and this case belongs to the foreign-related civil and commercial case. Both parties in this case have no demurral against the application of Chinese law by the court of first instance, and it is legally confirmed. Based on the requests of appeal and grounds of Jinsidun Company as well as the arguments of Mitsui Company, the issue of the second instance is as follows: whether Mitsui Company should be liable to Jinsidun Company for compensation. With regard to the issue, the analysis of the court is as follows: The goods shipped by Jinsidun Company incurred cargo damage arising from the sinking in dispute, and Mitsui Company, the carrier, quoted Article 51 Paragraph 1 Sub-paragraph 11 of the Maritime Code of the People’s Republic of China that “latent defects of the vessel not discoverable by due diligence to argue exemption of liability” for exemption from the liability. Therefore, Mitsui Company shall assume the burden to prove the sinking arose from latent defects, and the

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obligation of due diligence has been fulfilled by Mitsui Company with regard to such latent defects. Regarding the cause of sinking, Mitsui Company has submitted the investigation report and applies for the appearance of expert witness before the court to make statement in the first instance. Such investigation report considers that the corollary of defects in design of vessel of the same batch and design system, including the vessel in dispute (distortions of the steel plates outside the vessel bilge), is highly consistent with the objective circumstances of the accident (the fracture of the steel plate outside the vessel causes the fracture of vessel) and the expert witness also clarifies similar opinion when giving testimony in the first instance. Since the vessel in dispute sank and was not able to get out of water, the data on board was lost with such sinking. While the investigation report and testimony given by the expert witness are speculation, they comply with the standard of proof of high probability of civil evidence and shall be accepted by the court. The decision of the judgment of first instance that latent defects in the design resulted in the sinking of vessel in dispute is correct. Regarding to whether Mitsui Company, as the carrier, had performed its obligation of due diligence for such latent defects, evidence adduced by Mitsui Company in the first instance indicates that Mitsui Company required the classification society to conduct routine inspections on time, and the classification society has never found the presence of defects in design in routine inspection. Moreover, Mitsui Company has periodically conducted routine maintenance and inspection and has never overloaded cargo and exercised due diligence to the vessel in dispute in accordance with the custody plan and declaration of sailing of the subject voyage. Hence, the vessel is seaworthy. It is not improper for the judgment of first instance to consider that Mitsui Company had exercised due diligence to the vessel in dispute on the basis of the above. In conclusion, the judgment of first instance clearly found the facts, correctly applied the law and properly handled the substance. The grounds of appeal filed by Jinsidun Company in this case are untenable and shall not be supported by the court. According to Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is rendered as below. Dismiss the appeal and affirm the original judgment. Court acceptance fee of second instance in amount of RMB5,930 shall be born by Shaoxing County Jinsidun Knitting Co., Ltd. This judgment is final. Presiding Judge: HUANG Qing Judge: WANG Jianfang Acting Judge: WU Yunhui October 21, 2016 Clerk: DING Lin

Ningbo Maritime Court Civil Judgment TIAN Jiqian v. Wuhu Hengpeng Shipping, LLC. et al. (2015) Yong Hai Fa Shi Chu Zi No.99

Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 1323. Cause(s) of Action 200. Dispute over liability for personal injury at sea. Headnote Bareboat charterer of vessel, dock lessor and dock lessee held liable for head injuries suffered by worker on dock after cable broke on vessel near dock; apportionment of liability 30% to bareboat charterer, 30% to dock lessor, 40% to dock lessee; the Plaintiff entitled to maritime lien over vessel. Summary While the Plaintiff was working on a dock near the end of a pier, a wheel dock came loose on the vessel M.V. “Jinpeng 69”, which was near the dock. As a result of the wheel dock coming loose, a cable parted, which hit the Plaintiff in the head, causing a substantial brain injury. The Plaintiff sued the Defendants for medical costs and related expenses due to a head injury he sustained while at work. The Defendant Hengpeng was the owner of M.V. “Jinpeng 69”; the Defendant Huachen was the vessel’s bareboat charterer; the Defendant COSCO owned the dock, which was leased to the Defendant Xingfa. The court held that the Plaintiff had no fault in the accident and should receive compensation for his medical expenses, disability, and various living expenses, totaling to RMB456,622.78. The court found the Defendant Hengpeng not to be at fault because it had bareboat chartered M.V. “Jinpeng 69” to the Defendant Huachen before the incident. The Defendant Huachen was 30% at fault because M.V. “Jinpeng 69” had navigated astern too quickly. The Defendant Huachen’s liability entitled the Plaintiff to a maritime lien over M.V. “Jinpeng 69”. The Defendant Xingfa was 40% at fault for its lack of port certificate and lack of adherence to appropriate safety procedures. The Defendant COSCO was 30% at fault because it had allowed the dock to be used without the proper permits.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63810-1_44

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Judgment The Plaintiff: TIAN Jiqian, male, born on August 26, 1969, Tujia, living in Xiaotianwan Group, Chixi Village, Lifuta Town, Sangzhi County, Hunan. Citizen ID number: 433129196908260856 Agent ad litem: LI Yujun, legal worker in the law service center for residents in Ningbo. The Defendant: Wuhu Hengpeng Shipping, LLC. Domicile: Room 805, Floor 4, Building 1#, Linjiang Community, Jinghu District, Wuhu, Anhui. Organization code: 79642983-X. Legal representative: ZHAO Guanbao, executive director. The Defendant: Anhui Huachen Shipping Co., Ltd. Domicile: No.188, 205 National East Road, Xuzhen Town, Nanling County, Wuhu, Anhui. Organization code: 78855067-2. Legal representative: WANG Jian, executive director. Agent ad litem jointly entrusted by the two above Defendants: LI Huibin, lawyer of Zhejiang Haoshang Law Firm. Agent ad litem jointly entrusted by the two above Defendants: JIN Jie, lawyer of Zhejiang Jiance Law Firm. The Defendant: Ningbo Xingfa Materials Recycling Co., Ltd. Domicile: Tiantong Zhuang Village, Wuxiang Town, Qinzhou District, Ningbo, Zhejiang. Organization code: 71119962-6. Legal representative: ZHOU Renfa, general manager. Agent ad litem: ZHU Jianmin, lawyer of Zhejiang Yongtai Law Firm. The Defendant: COSCO Zhoushan Shipping Engineering Co., Ltd. Domicile: Longshan, Xilangzu, Liuheng Town, Putuo District, Zhoushan Zhejiang. Organization code: 79761514-0. Legal representative: LIANG Yanfeng, general manager. Agent ad litem: SHI Weiwei, staff. With respect to the case arising from dispute over the liability for personal injury at sea, the Plaintiff, TIAN Jiqian filed an action to the court against the Defendants Wuhu Hengpeng Shipping, LLC. (hereinafter referred to as Hengpeng), and Anhui Huachen Shipping Co., Ltd. (hereinafter referred to as Huachen). The court accepted the case on September 1, 2015 and applied the summary procedure to try the case by the Acting Judge YANG Shimin according to the law. The Defendant, Hengpeng, applied for the certification for the class of disability and injury in spirit using the correspondence between disease and medication loss of working time on November 9, 2015. In the same year, the Plaintiff applied for the identification of the degree of mental disability, loss of working time, and nutrition period. The court permitted the applications. In the answer to the application of the Plaintiff, the court added COSCO Zhoushan Shipping Engineering Co., Ltd. (hereinafter referred to as

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COSCO), and Ningbo Xingfa Materials Recycling Co., Ltd. (hereinafter referred to as Xingfa) as the Defendants of the case to participate in the procedures. The court arrested M.V. “JINPENG 69” of Hengpeng before litigation. The Defendants Hengpeng and Huachen applied for the release of M.V. “JINPENG 69” and offered the guarantee of 100,000 yuan in cash. An outsider, JIN jie, offered guarantee with the lien on the property of Room 202, Building 8, Jingyuan Garden, Jiaojiang District, Taizhou, Zhejiang. Upon the consent of the Plaintiff, on the same day, the court ruled that the measures for the arrest of this ship would be changed to limit the transfer, mortgage, and bareboat charter. The court held hearings to try the case respectively on March 1, 2016 and April 7, 2016. Agents ad litem of the Plaintiff TIAN Jiqian, LV Yanyan and XIE Mingming (in the first hearing, the Plaintiff canceled the agent relationship with them on April 7, 2016) and LI Yujun (in the second hearing), agent ad litem of the Defendants Hengpeng and Huachen, LI Huibin, agent ad litem of the Defendant Xingfa, ZHU Jianming, and agent ad litem of the Defendant COSCO, SHI Weiwei, appeared in court to attend the trial. During the first hearing, the witness CHEN Weiguo applied by the Plaintiff TIAN Jiqian appeared in court to make statements; during the second hearing, the witnesses CHEN Weiguo and ZHANG Jiguo applied by the Defendant Xingfa appeared in court to make statements. Now the case has been concluded. The Plaintiff, TIAN Jiqian, claimed that: on June 24, 2005, he supervised M.V. “JINPENG 69” for loading and unloading steel scrap which ported at No.9 wharf of COSCO. At about 1840 on that day, when M.V. “JINPENG 69” was untying the cable, the captain blindly backed the ship and the crew improperly untied the cable. The cable bounced to the Plaintiff, and the Plaintiff’s safety helmet flew off, causing the Plaintiff to land on the back of his head and injure himself. After the understanding, the Defendant Hengpeng was the owner of M.V. “JINPENG 69”. The Defendant Huachen was the bareboat charterer. The Defendant Xingfa failed to fulfill its obligations in safety management. The Defendant COSCO let the wharfs that were not used for docking to be used by the Defendant Xingfa. Behaviors of the Defendants caused serious torts of the personal rights of the Plaintiff and resulted in great economic loss of the Plaintiff. Therefore, an action was filed before the court and he claimed that: 1. the Defendants, Hengpeng, Huachen, COSCO and Xingfa, should compensate the Plaintiff 204,471.47 yuan for medical expenses, 27,888.29 yuan for missing work, 3,600 yuan for nutrition, 3,720 yuan for hospital meals, 297,255.20 yuan for disability compensation, 46,552.12 yuan for the living expenses of the Dependents, 1,400 yuan for evaluation, and 50,000 yuan for mental loss, totaling 634,887.08 yuan; 2. confirm that the first item of claim of RMB634887.08 was entitled to a maritime lien against M.V. “JINPENG 69”; 3. the application fee for pre-litigation property preservation of 5,000 yuan and the appraisal fee of 3,350 yuan should be born by the four Defendants. The Defendant Hengpeng and Huachen argued that: firstly, the accident happened after the loading of M.V. “JINPENG 69”. The reversal was according to the wharf command. The cable was stuck in the dock somewhere when the front cable was tightened, which led to the cable bouncing to the Plaintiff TIAN Jiqian.

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Therefore, the crew shared no fault in the process of reversing operation. Therefore, Hengpeng and Huachen should not be liable for damages. Secondly, the Defendant COSCO contracted the wharf involved to the Defendant Xingfa, which had no port operation conditions. Both should be jointly and severally liable for the compensation. Thirdly, the item and amount of compensation claimed by the Plaintiff was incorrect. The Defendant Xingfa argued: firstly, Xingfa should not bear tort liability, and the reasons were as follows: 1. the damage resulted in the case was caused by the improper location of the Plaintiff TIAN Jiqian and that M.V. “JINPENG 69” failed to fulfill its obligation of notification when it began the progress of reversing. 2. Xingfa was not the owner or user of bollards and the cable in the scenery of the accident involved. Xingfa had nothing to do with the accident involved. Secondly, the Plaintiff was the staff of Ningbo Zhenghe Holding Group Co., Ltd. (hereinafter referred as to Zhenghe), who was assigned to work temporarily by Zhenghe. Xingfa should not be regarded as “the third party outside the employer” as provided by the Interpretation of the Supreme People’s Court on Some Issues concerning the for Personal Injury Application of Law for the Trial of Cases involving Compensation Article 12. Even if Xingfa took responsibility, because of the coincidence with Zhenghe, it should not be liable for compensation. Thirdly, the items and the amounts claimed by the Plaintiff had several unreasonable parts as follows: 1. disability compensation should be calculated by rural standards rather than urban standards. 2. The living expenses of the dependents should be calculated according to the rural standard of Hunan. 3. According to the appraisal written opinion, the amount of the four outpatient bills and six receipts of Ningbo Huining Pharmacy should be deducted. They contained money totaling to 223,88.67 yuan. 4. The cost of the treatment of fatty liver and blood fat of the Plaintiff was 209.10 yuan, which had nothing to do with this case. Therefore, they should be deducted. 5. The appraisal written opinion about disability class and mental disability class showed that the appraised individual, TIAN Jiqian, sustained a traumatic brain injury due to some reasons and was now left with mild organic mental disorder and skull defect of more than 25 cm, which was comprehensively assessed as Grade 8 disability of human body injury. Combined with the two appraisal written opinions, the conclusion was that the mental disability of the Plaintiff plus the human disability should be asses