China: PRC Supreme Court's Position To Forced Sale Of Ships Arrested Securing Claims Against Bareboat Charterers----Review And Prospect

Last Updated: 30 May 2014
Article by Chen Xiangyong and Lucas Feng


Before Special Maritime Procedure Law of the People's Republic of China took into force in 2000 (SMPL 2000), three judicial interpretations were issued by the PRC Supreme Court to regulate forced sale of ships. They are the Provisions regarding Arrest of Vessels before Litigation 1986 (Arrest Interpretation 1986), Provisions regarding Maritime Courts Arrest of Vessels before Litigation 1994 (Arrest Interpretation 1994) and Provisions regarding Maritime Courts Auction of Vessels to Pay Debts 1994 (Sale Interpretation 1994).

According to the Arrest Interpretation 1986, the court can only arrest the vessels registered owned by the opponent. Then the range of vessels subject to arrest was expanded by the Arrest Interpretation 1994 according to which the court can arrest vessels operated or chartered by the opponent. The SMPL 2000 repealed the Arrest Interpretation 1986 and Interpretation 199. Regarding the Sale Interpretation 1994, the Supreme Court also scheduled to repeal it as expressed in the Maritime Trial Working Conference 2012 held by the Supreme Court. And according to Article 29 of the Consulting Draft of Provisions of the Supreme People's Court on Several Issues Concerning Arrest and Forced Sale of Vessels which was issued on November 2013 (Consulting Draft 2013), it was confirmed that the Sale Interpretation 1994 would be repealed after entry into force of the Provisions.

The Issue

The issued is that while the court can arrest vessels bareboat chartered by the opponent according to Article 3 of Arrest Interpretation 1994, however the vessels cannot be sold because the court can only force to sell the vessels registered owned by the opponent according to Article 1 of the Sale Interpretation 1994. The conflict was still not resolved by SMPL 2000, which supersedes the Arrest Interpretation 1994. Article 12 of SMPL 2000 prescribes that the court can preserve the "property" owned by the opponent. Furthermore, according to Article 23 and Article 29, the court can arrest and force to sell the opponent bareboat chartered vessels. The law is still not clear whether bareboat chartered vessel can be sold.

The Supreme Court's Position

Regarding the conflicting issue, the Supreme Court's position can be tracked back to 2012. In the Maritime Trial Working Conference 2012, Judge Liu Guixiang, President of the fourth law court of Supreme People's Court, expressed that the court can force to sell all the arrested vessels including those opponent bareboat chartered vessel in accordance with Article 29 of SMPL 2000. This position was followed by the maritime courts in different degrees.

In March 2013, the Supreme Court held a forum regarding the Arrest and Auction of Ships Related Issues at Guangzhou and further discussed the issue. The preliminary view of the Supreme Court was that the court can force to sell the opponent bareboat chartered vessel but the registered owner can rebut upon the nature of creditor's right and maritime lien.

However, the Supreme Court's position was different eight months later. According to Article 3 of the Consulting Draft 2013, "in the case where vessels are arrested due to the bareboat charterer's liability for maritime claim, maritime claimants could apply to auction the vessel in order to settling the debt according to Article 29 of SMPL 2000. However, the before provisions shall not prejudice other maritime claimants to exercise their rights against the registered owner".

The public consultation was closed on 15 December 2013. However, for the sake of prudence, the Supreme Courts has been consulting shipping law practitioners since March 2014.

Analysis and Comments

China is not a country to International Convention on the Arrest of Ships 1999 (Arrest Convention 1999). However, SMPL 2000 was drafted concerning the Convention.

According to paragraph (3) Article 3 of the Arrest Convention 1999, "the arrest of a ship which is not owned by the person liable for the claim shall be permissible only if, under the law of the State where the arrest is applied for, a judgment in respect of that claim can be enforced against that ship by judicial or forced sale of that ship". The provision can be viewed as reconciliation between common law systems and civil law systems as well as balance between shipping interest countries and cargo interest countries. It left space for the contracting countries to regulate the issue in its own domestic law and Article 3 of the Consulting Draft 2013 is such domestic law in China. It can be said that Article 3 of the Consulting Draft 2013 is in line with the aim of the Arrest Convention 1999. And it can solve the difficulty in the current practice that after arresting the bareboat charterer's vessel the court can neither release nor auction the vessel.

From the respect of domestic law, demise charter is a specific charter form under Chinese Maritime Code. The nature of demise charter has fundamental distinction with other forms of charter. The demise charter operates as a lease of the ship pursuant to which possession and control passes from the owners to the charterers whilst other charter forms, primarily comprising time and voyage charters, are in essence contracts for the provision of services. In the duration of the charter, the demise charterers are the de facto "owners" of the vessel, they employed the master and crew and through them they have possession of the vessel. Therefore, when the court arrested the vessel, the demise charterer shall be liable up to the limit of the vessel's value. If the vessel was auctioned later, the registered owner could seek indemnity according to the demise charterparty.

In the forum held by March 2013, the preliminary view concluded by the Supreme Court was similar with the law of Norway. According to Article 93 (4) of Norwegian Maritime Code, the range of vessels subject to arrest must be ascertained through reference to the enforceable assets prescribed in Norway Judicial Enforcement Act, i.e. Article 7 (1) and Article 11(4) of the Act. In another word, in most cases the court cannot arrest the vessel demise chartered by the opponent. However, there is an important exception which allows arrest and forced sale when the claim was secured by one of the maritime lines prescribed under Article 53 of Norway Maritime Code. Similarly, the Supreme Court's preliminary view is similar that if the maritime claim was protected by maritime liens the court may reject the registered owner's opposition and auction the vessel.

However, the Supreme Court's position is different eight months later when the Consulting Draft 2013 was issued. The Supreme Court then took an approach more like English law as provided under Article 21 of High Court Act 1981. Forced sale of demise chartered vessel was allowed without prejudice to the rights of other creditors. The result would be more balanced that the claimant had to consider whether there exist other creditors whose debt ranks before his, such as the right of the bank who was the mortgagee and supplied finance for the ship.

It is estimated that the Consulting Draft 2013 will be finally approved and enter into force within 2014. After entry into force, it may be needed to amend Article 111 of SMPL 2000 concerning Article 3 of the Consulting Draft. According to Article 111 of SMPL 2000, the creditors may register with the court "debts relating to the vessel". In order to avoid future conflict, it is advisable for the Supreme Court to further define the range of "debts relating to the vessel" and clarify whether it only means maritime claims or it includes other civil and commercial debt.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions