China: Relieving Or Exempting Carriers' Liability

Last Updated: 23 May 2014
Article by Jin Yu-Lai

Facts

In July 2009 the plaintiff and the defendant in a recent case entered into a transportation agreement in which the defendant would be responsible for transporting 10 sets of passenger boarding bridges and accessories for the plaintiff from the port of Nansha, China to the port of Mumbai, India by sea, then to the project site at New Delhi International Airport by truck. On July 21 2009 part of the goods under the agreement were loaded onto the M/V XX at Nansha to be transported to Mumbai. The carrier issued a bill of lading for this shipment.

Unfortunately, three pieces of cargo were damaged due to several accidents during transport: one by a fire in the cabin of the XX, another during the unloading process and a third in a traffic accident during the road transport from Mumbai to New Delhi International Airport.

The plaintiff filed a lawsuit against the defendant for this loss and damages of Rmb825,215.

Issues

Whether the Guangzhou Maritime Court had jurisdiction

At trial, the defendant raised an objection to the jurisdiction of the court on the grounds that the dispute was subject to the contract of carriage of goods by sea. According to the carriage contract, any dispute arising from the contract would be governed by Chinese law and arbitration proceedings would then be held in China; thus, the Guangzhou Maritime Court had no jurisdiction over the case.

Although the court ultimately rejected the jurisdiction objection on the ground that no clear arbitration forum was stipulated in the relevant clause, raising the jurisdiction objection can be regarded as a good defence tactic that gave the defendant time to collect sufficient evidence and prepare the defence.

Whether the defendant had 'fire immunity'

Article 51 of the Maritime Law provides that a carrier will not be liable for losses or damages suffered during its period of responsibility for the cargo, unless such loss or damage was caused by the carrier – in which case the carrier will bear the burden of proof.

According to the relevant survey report provided by the plaintiff, the loss of the first piece of cargo was caused by fire. The defendant therefore argued that it had 'fire immunity' under Article 51. Moreover, if the plaintiff intended to restrict the carrier's right to rely on exemptions, it had to provide strong evidence that the fire was the fault of the carrier; the plaintiff failed to provide any such evidence. The survey report showed that the fire was caused by negligence during welding and cutting work, which did not constitute fault by the carrier within the scope of the law. The defendant was thus allowed fire immunity in accordance with Article 51 and was not held liable for the cargo loss.

Whether the defendant had unit limitation of liability

The plaintiff's claim for the second piece of damaged cargo was Rmb143,213.92. After carefully reviewing the sales agreement, customs declaration and other evidence provided by the plaintiff, and confirming the weight of the ticket of goods, the defendant asserted that it was subject to the unit limitation of liability under Article 56 of the Maritime Law. Therefore, the defendant calculated the corresponding unit liability of Rmb57,600 according to the gross weight – 3,000 kilograms – of the relevant cargo.

Settlement

Based on the strong defence, the plaintiff had to make a concession. Both sides committed to a friendly consultation under the judge's mediation and reached the following settlement terms:

  • The plaintiff's claim for the first piece of cargo amounted to Rmb85,354.53, but the defendant was exempted from this charge due to fire immunity.
  • The plaintiff's claim for the second piece of cargo amounted to Rmb143,231.92, but this was lowered to Rmb57,600 on account of the defendant's unit limitation of liability.
  • The plaintiff's claim for the third piece of cargo amounted to Rmb276,898.96, but this was lowered to Rmb129,400.

The defendant paid a total settlement amount of Rmb250,000 – much lower than the original claim amount of Rmb825,215.

Originally published in ILO - February 06 2013

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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