THE DIFFERENT APPROACHES TO RECENT DEVELOPMENTS IN CHINESE AND US SHIP ARREST LAWS[1I Jimmy Ng and Sik Kwan Tai(Hong Kong Polytechnic University 2] Readers are reminded that this work is protected by copyright While they are free to use the ideas expressed in it, they may not copy, distribute or publish the work or part of it, in any form, printed, electronic or otherwise, except for reasonable quoting, clearly indicating the source. Readers are permitted to make copies, electronically or printed, for personal and classroom use Contents I Introduction II Historical development of courts, jurisdiction, and approaches I LA Maritime courts IL.A I The establishment of the uS maritime courts ILA. 2 The establishment of the Chinese maritime courts Il. B Maritime jurisdiction Il. B I Jurisdiction of the US Congress in maritime industry I LB 2 Jurisdiction of the us federal courts in maritime cases Il. B 3 Jurisdiction of the Chinese maritime courts Il. C Chinese and US approaches to maritime court jurisdiction III Maritime arrest IILA Nature and definition Ill. B Approach to solving the conflicts of law in maritime arrest: The law of the flag IIL B. 1 Article 3 of the Maritime Procedural La IlL. B 2 Article 276 of China's Maritime Code IV International developments IV A Maritime claims IVB Maritime lien IV. C The ranking of maritime lien and mortgage IV.C. I Chinas approach to ranking IV.C. 2 The US approach to ranking IV.C. 3 Evaluation PRocedure VA In personam action VB In rem action VI Approaches to new issues VI A Container lessors' right of ship arrest VI B Freights in bank account as the subject of maritime arrest VII Legislative reviews of the 2003 New Practice direction
THE DIFFERENT APPROACHES TO RECENT DEVELOPMENTS IN CHINESE AND US SHIP ARREST LAWS[1] Jimmy Ng and Sik Kwan Tai (Hong Kong Polytechnic University)[2] Readers are reminded that this work is protected by copyright. While they are free to use the ideas expressed in it, they may not copy, distribute or publish the work or part of it, in any form, printed, electronic or otherwise, except for reasonable quoting, clearly indicating the source. Readers are permitted to make copies, electronically or printed, for personal and classroom use. Contents I Introduction II Historical development of courts, jurisdiction, and approaches II.A Maritime courts II.A.1 The establishment of the US maritime courts II.A.2 The establishment of the Chinese maritime courts II.B Maritime jurisdiction II.B.1 Jurisdiction of the US Congress in maritime industry II.B.2 Jurisdiction of the US federal courts in maritime cases II.B.3 Jurisdiction of the Chinese maritime courts II.C Chinese and US approaches to maritime court jurisdiction III Maritime arrest III.A Nature and definition III.B Approach to solving the conflicts of law in maritime arrest: The law of the flag III.B.1 Article 3 of the Maritime Procedural Law III.B.2 Article 276 of China’s Maritime Code IV International developments IV.A Maritime claims IV.B Maritime lien IV.C The ranking of maritime lien and mortgage IV.C.1 China’s approach to ranking IV.C.2 The US approach to ranking IV.C.3 Evaluation V Procedure V.A In personam action V.B In rem action VI Approaches to new issues VI.A Container lessors’ right of ship arrest VI.B Freights in bank account as the subject of maritime arrest VII Legislative reviews of the 2003 New Practice Direction
VIl. A Arrest of property by the maritime courts VILD Auction of the arrested vessel I Introduction In the last decade or two, the range of inquiry and the kinds of approaches used in the academic research circles of maritime law have broadened astonishingly. However, comparative longitudinal research concerning ship arrest laws is engaged in relatively infrequently. One reason may be that maritime law researchers in academic circles are attracted to the study of legal phenomena that are conveniently and quickly accessible through the existing literature. As the two most powerful maritime nations in the international trade arena, the us and China have become popular forums for ship arrest proceedings. This article argues that, the international admiralty communities would benefit from a comparative longitudinal study of these countries'court practices concerning ship arrest. The aim of this article is twofold: (D) to provide an overview of the developments in ship arrest law in todays US and China, and (ii) to contribute to the comparative study of the different approaches adopted in Chinese and US ship arrest laws by filling a gap in the existing literature in this area Commercial lending in the maritime field is frequently based on a creditors ability to enforce unpaid debts by applying for a ship arrest order from a maritime court. [3 In fact, ship arrest is often the only way of wiping out accumulated debts and returning the vessel to the creditors who lent the money to buy the ship in the first place. It is not uncommon for maritime lenders to engage in"jurisdiction shopping to their advantage. The dominant role the US and China play in global trade inevitably puts them on the top of the shopping list. In the US, maritime imports accounted for 43 percent of all imports in 2004. The table below shows the dominant position of US sea logistic Table 1: Import value by mode of tra Mod Import value sd 600 billion Air USD 364 billion
VII.A Arrest of property by the maritime courts VII.B Arbitration agreement VII.C Compensated losses for wrongful arrest VII.D Auction of the arrested vessel VIII Conclusion Notes I Introduction In the last decade or two, the range of inquiry and the kinds of approaches used in the academic research circles of maritime law have broadened astonishingly. However, comparative longitudinal research concerning ship arrest laws is engaged in relatively infrequently. One reason may be that maritime law researchers in academic circles are attracted to the study of legal phenomena that are conveniently and quickly accessible through the existing literature. As the two most powerful maritime nations in the international trade arena, the US and China have become popular forums for ship arrest proceedings. This article argues that, the international admiralty communities would benefit from a comparative longitudinal study of these countries’ court practices concerning ship arrest. The aim of this article is twofold: (I) to provide an overview of the developments in ship arrest law in today’s US and China, and (ii) to contribute to the comparative study of the different approaches adopted in Chinese and US ship arrest laws by filling a gap in the existing literature in this area. Commercial lending in the maritime field is frequently based on a creditor’s ability to enforce unpaid debts by applying for a ship arrest order from a maritime court.[3] In fact, ship arrest is often the only way of wiping out accumulated debts and returning the vessel to the creditors who lent the money to buy the ship in the first place. It is not uncommon for maritime lenders to engage in “jurisdiction shopping” to their advantage. The dominant role the US and China play in global trade inevitably puts them on the top of the shopping list. In the US, maritime imports accounted for 43 percent of all imports in 2004. The table below shows the dominant position of US sea logistics: Table 1: Import value by mode of transportation Mode Import value Sea USD 600 billion Air USD 364 billion
Truck USD 252 billion Rail USD77 billion FTZ USD 83 billion Other USD 37 billion Source: Import Trade Trends: FY 2004 Year End Report (October 2003-September 2004), US Department of Homeland Security, January 2005, p. 25(available http://www.customs.ustreas.gov/linkhandler/cgov/toolbox/about/accomplish/ trade trends fy04. ctt/trade trends fy04. pdf) In China, total container trade rose to 65 million TEUs(twenty-foot equivalent units) in 2003 with more than two-thirds being handled in mainland China ports. [4]The container volume exported is expected to reach 100 million TEUs by 2010, according to Zhang Chunxian, China's Minister of Communications, speaking at the New York-New Jersey Port Industry conference Zhang also predicted that total trade of tonnage will jump from I billion tons 2004 to 3.5 billion tons by 2010.5] The tremendous volume of shipping activities taking place in the US and in China makes the two countries popular forums for ship arrest proceedings In this article it is argued that ship arrest law is a part of maritime law and that the historical development of a country's maritime courts has a strong bearing on its approaches to rules of interpretation and construction. Hence, first a historical analysis of the maritime court systems of the two countries will be presented. Secondly, it is argued that a country' s admiralty jurisdiction will have a strong correlation with its national policy on maritime development the context in which its ship arrest law operates. Thus, the different approaches taken by the US and China to promote a uniform system of maritime law will be examined. Thirdly, the scope of ship arrest is Died by analyzing its definition. China has been shifting away from the absolute immunity doctrine that most socialist countries still insist on. The section examining the conflicts of law relating to ship arrest contains a comparative analysis of the different approaches the US and China take in using the law of the flag as a solution. Using the law of the flag as a solution allows maritime creditors to know in advance which order of priorities applies to their maritime liens. In this section, a description will be given of the current developments in the different ways in which the two countries take on such practices. After a comparison of the Chinese and US approaches to maritime liens and their ranking with mortgage, the Chinese and US approaches to in personam and in rem actions are examined. Next, the different approaches adopted by the two countries to extending ship arrest power to new rights are explored, namely the container leasers'right to arrest
Truck USD 252 billion Rail USD77 billion FTZ USD 83 billion Other USD 37 billion Source: Import Trade Trends: FY 2004 Year End Report (October 2003 – September 2004), US Department of Homeland Security, January 2005, p. 25 (available at http://www.customs.ustreas.gov/linkhandler/cgov/toolbox/about/accomplish/ trade_trends_fy04.ctt/trade_trends_fy04.pdf). In China, total container trade rose to 65 million TEUs (twenty-foot equivalent units) in 2003, with more than two-thirds being handled in mainland China ports.[4] The container volume exported is expected to reach 100 million TEUs by 2010, according to Zhang Chunxian, China’s Minister of Communications, speaking at the New York–New Jersey Port Industry conference. Zhang also predicted that total ocean trade in terms of tonnage will jump from 1 billion tons in 2004 to 3.5 billion tons by 2010.[5] The tremendous volume of shipping activities taking place in the US and in China makes the two countries popular forums for ship arrest proceedings. In this article it is argued that ship arrest law is a part of maritime law and that the historical development of a country’s maritime courts has a strong bearing on its approaches to rules of interpretation and construction. Hence, first a historical analysis of the maritime court systems of the two countries will be presented. Secondly, it is argued that a country’s admiralty jurisdiction will have a strong correlation with its national policy on maritime development, the context in which its ship arrest law operates. Thus, the different approaches taken by the US and China to promote a uniform system of maritime law will be examined. Thirdly, the scope of ship arrest is studied by analyzing its definition. China has been shifting away from the absolute immunity doctrine that most socialist countries still insist on. The section examining the conflicts of law relating to ship arrest contains a comparative analysis of the different approaches the US and China take in using the law of the flag as a solution. Using the law of the flag as a solution allows maritime creditors to know in advance which order of priorities applies to their maritime liens. In this section, a description will be given of the current developments in the different ways in which the two countries take on such practices. After a comparison of the Chinese and US approaches to maritime liens and their ranking with mortgage, the Chinese and US approaches to in personam and in rem actions are examined. Next, the different approaches adopted by the two countries to extending ship arrest power to new rights are explored, namely the container leasers’ right to arrest
a vessel and the treatment of freights as the subject of maritime arrest. The last section is devoted to a review of the 2003 New Practice Direction on Chinese maritime procedural law, issued by the Supreme People's Court. As there are ten maritime courts in China, different interpretations of the ambiguous maritime statutes by these maritime courts are inevitable. The discussion will focus on the approaches to ship arrest laws that were reviewed in the 2003 New Practice Direction II Historical development of courts, jurisdiction, and approaches IL.A Maritime courts In this section it is argued that, since ship arrest law is a part of the general maritime law system its rules of interpretation can best be understood by making a historical analysis of a countrys maritime courts. Generally speaking, the common-law method of statutory interpretation tends to be more "restrictive" than that of the civil law.[6 IL.A I The establishment of the uS maritime courts The roots of the US admiralty court development can be traced back to the reign of Richard I and his Laws of Oleron. [7 It was regarded as the most important sea code in the Anglo-American heritage. [8 Although it cannot now be known with absolute certainty what originally was the nature of the admiralty, 9] it rests on the original jurisdiction of the courts of common law. [10 It was generally agreed that the maritime courts of England and of all other powers in Europe were formed upon the same common model -the consular courts of the Mediterranean. [11] These courts are described in the Consolato del Mare as having jurisdiction over all maritime controversies. 12 he maritime systems originating from the Laws of Oleron adopted the English common-law approach [13 Starting with the surge of British overseas shipping in the 1500s, the english admiralty courts handled an increasing volume of cases. [14] Having once been a colony of the British Empire, the US had followed the British approach; for example, the US had inherited the British tradition of a separate system of admiralty court with specific rules relating to the arrest of vessels. The US admiralty courts also followed the custom of common-law England which required no juries. [151 In line with the very nature of its common-law origin, the US statutory construction is such that the role of maritime statutes function as a corrective to the gaps or defects in the common law. In short, the common-law statutory construction is restrictive in approach; it tends to focus on the usual meaning of the words of the enactment, with a view to ascertain and to give effect to the intention of the lawgiver as expressed in the text, and to admit few, if any, external aids to interpretation [16]
a vessel and the treatment of freights as the subject of maritime arrest. The last section is devoted to a review of the 2003 New Practice Direction on Chinese maritime procedural law, issued by the Supreme People’s Court. As there are ten maritime courts in China, different interpretations of the ambiguous maritime statutes by these maritime courts are inevitable. The discussion will focus on the approaches to ship arrest laws that were reviewed in the 2003 New Practice Direction. II Historical development of courts, jurisdiction, and approaches II.A Maritime courts In this section it is argued that, since ship arrest law is a part of the general maritime law system, its rules of interpretation can best be understood by making a historical analysis of a country’s maritime courts. Generally speaking, the common-law method of statutory interpretation tends to be more “restrictive” than that of the civil law.[6] II.A.1 The establishment of the US maritime courts The roots of the US admiralty court development can be traced back to the reign of Richard I and his Laws of Oléron.[7] It was regarded as the most important sea code in the Anglo-American heritage.[8] Although it cannot now be known with absolute certainty what originally was the nature of the admiralty,[9] it rests on the original jurisdiction of the courts of common law.[10] It was generally agreed that the maritime courts of England and of all other powers in Europe were formed upon the same common model – the consular courts of the Mediterranean.[11] These courts are described in the Consolato del Mare as having jurisdiction over all maritime controversies.[12] The maritime systems originating from the Laws of Oléron adopted the English common-law approach.[13] Starting with the surge of British overseas shipping in the 1500s, the English admiralty courts handled an increasing volume of cases.[14] Having once been a colony of the British Empire, the US had followed the British approach; for example, the US had inherited the British tradition of a separate system of admiralty court with specific rules relating to the arrest of vessels. The US admiralty courts also followed the custom of common-law England which required no juries.[15] In line with the very nature of its common-law origin, the US statutory construction is such that the role of maritime statutes function as a corrective to the gaps or defects in the common law. In short, the common-law statutory construction is restrictive in approach; it tends to focus on the usual meaning of the words of the enactment, with a view to ascertain and to give effect to the intention of the lawgiver as expressed in the text, and to admit few, if any, external aids to interpretation.[16]
Some minority states in the US, such as Louisiana, developed a mixed legal system where the Romano-Germanic tradition had become suffused to some degree with Anglo-American law.[171 In those states, the courts follow the civil-law tradition of constructing codes whilst interpreting the statutes in the common -law manner ILA. 2 The establishment of the chinese maritime courts In contrast, the Chinese maritime court system is a modern establishment. As a result of the rapid development of Chinas shipping and foreign trade during the early 1980s, maritime courts were established in the principal port cities of China in 1984, in accordance with the decision made by the Standing Committee of the National Peoples Congress(hereafter"NPC ).18 From a historical point of view, Chinas maritime courts, having been set up at a later stage of the development of uniform international laws, have had the opportunity to adopt the best uniform laws and practice concerning ship arrest. Although the prospect of creating a uniform body of domestic laws that can match international ship arrest practice is daunting, it has been the principal objective of the Chinese maritime legislators over the past decades. The Chinese maritime law drafters have spent much time and effort on standardizing the procedures for ship arrest, bringing them in line with the international practice, as can substantial incorporation of the International Convention for the Unification of Certain Rules Relating to the Arrest of Sea-Going Ships[ 19)(hereafter"1952 Arrest Convention") into its domestic law. The 1952 Arrest Convention was aimed at creating a set of binding procedures on international ship arrest. [20 China did not ratify the 1952 Arrest Convention; still the Convention has affected China in two indirect ways. First, China has traditionally leaned towards Hong Kongs legal system in enacting its foreign economic law, and Hong Kong adopted the 1952 Arrest Convention more than twenty years before its return to China. Second, China has allowed the 1952 Arrest Convention to be applied continuously to Hong Kong after the 1997 handover[21 and to Macau after 1998.22] Taking a look at the 1991 China Civil Procedural law and the 1999 China Maritime Procedural law, it can be seen that China followed the approach of the 1952 Arrest Convention in almost all areas of its ship arrest law, the only exceptions being bottomry and time-or voyage-chartered vessel arrest. [23] The 1969 Vienna Convention on the Law of Treaties(hereafter"1969 Vienna Convention)(24]is an international document that lays down the basic rules of treaty interpretation. It codifies the approaches of customary international law in respect of treaty interpretation. China ratified the Vienna Convention on September 3, 1997. From then onward, Chinese maritime judges have to consider the vienna Convention when they decide international ship arrest cases. In addition to the Convention, as a civil-law jurisdiction in origin China tends to construe international treaties in a more"liberal"manner, which may be justified under Article 31, paragraphs (3)and(4)] rticle 31 3)allows the construction be taken into account, together with the context, the subsequent agreement and practice between the parties regarding the treatys interpretation Article 31(4)states that the courts may give a special meaning to a term if it has been established that the parties so intended
Some minority states in the US, such as Louisiana, developed a mixed legal system where the Romano-Germanic tradition had become suffused to some degree with Anglo-American law.[17] In those states, the courts follow the civil-law tradition of constructing codes whilst interpreting the statutes in the common-law manner. II.A.2 The establishment of the Chinese maritime courts In contrast, the Chinese maritime court system is a modern establishment. As a result of the rapid development of China’s shipping and foreign trade during the early 1980s, maritime courts were established in the principal port cities of China in 1984, in accordance with the decision made by the Standing Committee of the National People’s Congress (hereafter “NPC”).[18] From a historical point of view, China’s maritime courts, having been set up at a later stage of the development of uniform international laws, have had the opportunity to adopt the best uniform laws and practice concerning ship arrest. Although the prospect of creating a uniform body of domestic laws that can match international ship arrest practice is daunting, it has been the principal objective of the Chinese maritime legislators over the past decades. The Chinese maritime law drafters have spent much time and effort on standardizing the procedures for ship arrest, bringing them in line with the international practice, as can be seen from China’s substantial incorporation of the International Convention for the Unification of Certain Rules Relating to the Arrest of Sea-Going Ships[19] (hereafter “1952 Arrest Convention”) into its domestic law. The 1952 Arrest Convention was aimed at creating a set of binding procedures on international ship arrest.[20] China did not ratify the 1952 Arrest Convention; still the Convention has affected China in two indirect ways. First, China has traditionally leaned towards Hong Kong’s legal system in enacting its foreign economic law, and Hong Kong adopted the 1952 Arrest Convention more than twenty years before its return to China. Second, China has allowed the 1952 Arrest Convention to be applied continuously to Hong Kong after the 1997 handover[21] and to Macau after 1998.[22] Taking a look at the 1991 China Civil Procedural law and the 1999 China Maritime Procedural law, it can be seen that China followed the approach of the 1952 Arrest Convention in almost all areas of its ship arrest law, the only exceptions being bottomry and time- or voyage-chartered vessel arrest.[23] The 1969 Vienna Convention on the Law of Treaties (hereafter “1969 Vienna Convention”)[24] is an international document that lays down the basic rules of treaty interpretation. It codifies the approaches of customary international law in respect of treaty interpretation. China ratified the Vienna Convention on September 3, 1997. From then onward, Chinese maritime judges have to consider the Vienna Convention when they decide international ship arrest cases. In addition to the Convention, as a civil-law jurisdiction in origin China tends to construe international treaties in a more “liberal” manner, which may be justified under Article 31, paragraphs (3) and (4).[25] Article 31(3) allows the construction be taken into account, together with the context, the subsequent agreement and practice between the parties regarding the treaty’s interpretation. Article 31(4) states that the courts may give a special meaning to a term if it has been established that the parties so intended