[2016] ZGFMZ No.61

Updated : 2016-10-26

Supreme People’s Court of China

Civil Judgment

 

[2016] ZGFMZ No.61*

7 July 2016

 

*Maritime salvage - Salvage Convention 1989 - Chinese Maritime Code Chapter IX “Salvage at Sea” - tank vessel grounded in Chinese water - shipowner and salvor concluded salvage contract on basis of pre-agreed charge rate rates for refloating the vessel via towing - local maritime safety administration ordered refloating the vessel via lightering and load shedding (offloading oil) - salvage vessels stood-by and did not conduct towing - doctrine of “change of circumstances” in Chinese contract law (material adverse change) - whether stood-by is a kind of “change of circumstances” and whether the shipowner can request to reduce the salvage charge - salvage contract on basis of “no cure no pay” - “employed salvage contract” (on basis of pre-fixed charge rate) - salvaged vessel’s value accounts for 38.85% to the total salved values - whether the salvaged cargo owner should be joined as third party in the lawsuit filed by salvor against shipowner - whether shipowner shall assume 100% salvage charge or can request to just assume38.85% of the salvage charge

 

Applicant for retrial (plaintiff of first instance and appellee of second instance): Nanhai Rescue Bureau of Ministry of Transport

Domicile: Guangzhou, Guangdong Province, China.

 

Respondent (defendant of first instance and appellant of second instance): Archangelos Investments E.N.E.

Domicile: Athens, Greece.

 

Defendant of first instance: Hong Kong Andaousen Co., Ltd Shanghai Representative Office

Domicile: Shanghai, China.

 

With respect to the case of salvage contract dispute between the applicant for retrial Nanhai Rescue Bureau of Ministry of Transport (hereinafter referred to as “Nanhai Rescue Bureau”) and the respondent Archangelos Investments E.N.E. (hereinafter referred to as “Archangelos Investments”) and the defendant of first instance Hong Kong Andaousen Co., Ltd Shanghai Representative Office (hereinafter referred to as “Shanghai Representative Office”), the retrial applicant Nanhai Rescue Bureau was dissatisfied with the civil judgment [2014] YGFMSZZ No.117 issued by Guangdong High People’s Court (hereinafter referred to as “second instance court”) and filed an application for retrial with our Court. On 24 December 2015, our Court delivered the civil ruling [2015] MSZ No.3182 deciding to review this case, and formed a collegial trial panel according to provisions of law. The said collegial trial panel was composed by judge He Rong (Deputy President of Supreme People’s Court of China), judges Zhang Yongjian, Wang Shumei and Yu Xiaohan, and acting judge Guo Zaiyu. On 7 July 2016, our Court held an open trial over this case. Now the trial of this case has been finished. 

 

I. Claim of Nanhai Rescue Bureau in first instance trial

1. Nanhai Rescue Bureau lodged a lawsuit before Guangzhou Maritime Court (hereinafter referred to as “first instance court”) and stated that: 

(1) Archangelos Investments was the shipowner of MV Archangelos Gabriel and Shanghai Representative Office was the agent of the said vessel.

(2) On 12 August 2011, MV Archangelos Gabriel ran aground at Qiongzhou Strait. Under the entrustment of Archangelos Investments, Nanhai Rescue Bureau appointed salvage vessels MV Nan Hai Jiu 116, MV Nan Hai Jiu 101, MV Nan Hai Jiu 201 and a group of divers to the accident site to provide salvage, transportation and guarding services.

(3) As per the agreement between the parties, Nanhai Rescue Bureau’s salvage charges were RMB7,240,998.24 in total, but Archangelos Investments had not paid the said salvage charges so far.

(4) As such, Nanhai Rescue Bureau lodged this lawsuit, and required Archangelos Investments and Shanghai Representative Office to pay the salvage charges of RMB7,240,998.24 and the interest thereof from 20 August 2011 to the date of actual payment (which was RMB476,449.64 calculated until 19 August 2012 temporarily, at the loan interest rate publicized by the People’s Bank of China over the same period) , and to assume the court fee of this case.

 

II. Findings of facts by the first instance court

The first instance court identified facts of this case as follows:

2. MV Archangelos Gabriel was an oil tanker owned by Archangelos Investments, the nationality of the said vessel was Greek, the registry port was Piraeus, and gross tonnage of the said vessel was 40,682mt.

3. MV Archangelos Gabriel carried 54,580mt Cabinda crude oil from Hong Kong to Qinzhou, Guangxi Province (PRC), and there were 26 crew members onboard the vessel.

4. At about 0500 of 12 August 2011, the said vessel ran aground near 6# light-buoy of north waterway of Qiongzhou Strait (22°21′7.2″N, 110°48′7.8″E). The said vessel developed a list of 3° at portside. There was some fracture in the below water part of the forepeak tank, and some sea water had leaked into the cargo holds. The vessel itself and the cargo onboard the vessel were both in danger, which constituted serious threat to the safety of marine environment.

5. After the accident, Archangelos Investments immediately entrusted Shanghai Representative Office to send emergency email to Nanhai Rescue Bureau regarding MV Archangelos Gabriel’ grounding accident, and requested Nanhai Rescue Bureau to, as per its experience, arrange two salvage tugboats to conduct salvage operation over MV Archangelos Gabriel. Moreover, they agreed with Nanhai Rescue Bureau’s quotation (for salvage charge).

6. At 2040 of 12 August, Shanghai Representative Office submitted the letter of authorization to Nanhai Rescue Bureau through email, entrusting Nanhai Rescue Bureau to send MV Nan Hai Jiu 116 and MV Nan Hai Jiu 101 to assist MV Archangelos Gabriel to refloat. Shanghai Representative Office promised that no matter whether Nanhai Rescue Bureau had successfully assisted the said vessel to refloat or not, Shanghai Representative Office agreed to pay the charges at RMB3.2/hph (per horsepower per hour) calculated from time of stand-by engine at the place of duty of each vessel respectively to the time when Shanghai Representative Office informed the ending of salvage operation and the vessels returned to the original place of duty respectively. MV Nan Hai Jiu 116 and MV Nan Hai Jiu 101 were only responsible for towing operation, and Nanhai Rescue Bureau would not be liable for any accident during the refloating process of MV Archangelos Gabriel.

7. In addition, Shanghai Representative Office entrusted Nanhai Rescue Bureau to send a group of divers to conduct bottom searching of MV Archangelos Gabriel, and the charge for bottom searching would be calculated as follows: land mobilization fee at RMB10,000; water traffic fee at RMB55,000; operation fee at RMB40,000 every 8 hours, calculated from the moment when the divers went onboard the traffic boat to the moment when the divers completed the operation and left the traffic boat and went back ashore.

8. In the meantime, in order to prevent deterioration of the dangerous situation which might result into marine pollution, Zhanjiang Maritime Safety Administration of China (hereinafter referred to as “Zhanjiang MSA”) decided to refloat MV Archangelos Gabriel through compulsory lightering and load shedding (offloading some cargo). After organization and arrangement by Zhanjiang MSA, on 17 August MV Danchi of China Shipping Development Co., Ltd Oil Tanker Company discharged some crude oil from MV Archangelos Gabriel (via ship to ship transfer).

9. On 18 August, MV Archangelos Gabriel, by taking advantage of the high tide, successfully refloated and sailed to the port of destination Qinzhou Port, Guangxi Province. The offloaded crude oil was carried by MV Danchi to the destination port.

10. Regarding work of MV Nan Hai Jiu 116:

(1) MV Nan Hai Jiu 116 was a salvage vessel owned by Nanhai Rescue Bureau, with a gross tonnage of 3,681mt and gross power of 9,000kw (12,240hp).

(2) After MV Nan Hai Jiu 116 reached the accident site, because Zhanjiang MSA decided to refloat MV Archangelos Gabriel through lightering and load shedding, MV Nan Hai Jiu 116 did not conduct towing operation to MV Archangelos Gabriel.

(3) From 0745 of 12 August to 1920 of 18 August, under the instruction of Archangelos Investments, MV Nan Hai Jiu 116 guarded over MV Archangelos Gabriel at the accident site all the time for 155.58 hours. Nanhai Rescue Bureau claimed that as per the agreed charging rate of RMB3.2/hph, Archangelos Investments should pay salvage charges of RMB6,093,757.44.

(4) Archangelos Investments and Shanghai Representative Office argued that the purpose for retaining MV Nan Hai Jiu 116 at the charging rate of RMB3.2/hph was that the said vessel should conduct towing operation. But in fact, the said rescue vessel only stood-by and guarded at the accident site, instead of attending any salvage operation. Thus, Nanhai Rescue Bureau could not claim for the salvage charges as per the agreement.

11. Regarding work of MV Nan Hai Jiu 101:

(1) MV Nan Hai Jiu 101 was a salvage vessel owned by Nanhai Rescue Bureau, with a gross tonnage of 4,091mt and gross power of 13,860kw (18,850hp).

(2) At 0938 of 12 August, Nanhai Rescue Bureau sent an email to Shanghai Representative Office to confirm the second rescue vessel MV Nan Hai Jiu 101. At 0957 of the same day, Shanghai Representative Office replied and required Nanhai Rescue Bureau to arrange the above two rescue vessels to conduct salvage operation.

(3) At 0930 of 12 August, MV Nan Hai Jiu 101 departed for the accident sea area to salvage MV Archangelos Gabriel. During the process of sailing to the accident sea, at 1519 of the same day, Nanhai Rescue Bureau sent an email to Shanghai Representative Office and stated that since the master of MV Archangelos Gabriel insisted that, as per the opinion of Zhanjiang MSA, the refloating operation should be conducted via load shedding/offloading, it was suggested that only MV Nan Hai Jiu 116 stay at the accident site for operation and MV Nan Hai Jiu 101 return to the anchorage.

(4) At 1544, Shanghai Representative Office replied and confirmed that only MV Nan Hai Jiu 116 would stay at the accident site and MV Nan Hai Jiu 101 would be cancelled.

(5) At 1550, MV Nan Hai Jiu 101 started to return to anchorage and did not reach the accident site; at 2305, the said vessel returned back to the anchorage. Nanhai Rescue Bureau claimed that MV Nan Hai Jiu 101 worked for 13.58 hours, and as per the charging rate of RMB3.2/hph, Archangelos Investments should pay the salvage charges of RMB819,145.60.

(6) Archangelos Investments and Shanghai Representative Office argued that MV Nan Hai Jiu 101 returned to anchorage under the instruction of Nanhai Rescue Bureau during the process of sailing to the accident site. Hence, MV Nan Hai Jiu 101 did not conduct any actual towing operation or other operation, and it would be manifest unfair and unreasonable to calculate the charges as per the agreed charging rate.

12. Regarding work of MV Nan Hai Jiu 201:

(1) MV Nan Hai Jiu 201 was a salvage vessel owned by Nanhai Rescue Bureau, with a gross tonnage of 552mt and gross power of 4,480kw (6,093hp).

(2) On 13 August, Archangelos Investments proposed to rent MV Nan Hai Jiu 201 to carry two representatives of Archangelos Investments from Haikou City to MV Archangelos Gabriel.

(3) Nanhai Rescue Bureau sent an email to Shanghai Representative Office and stated that the charge rate of MV Nan Hai Jiu 201 was RMB1.5/hph, and the total rental hire would be calculated as per the rental period. Shanghai Representative Office replied to confirm that it agreed with Nanhai Rescue Bureau’s quotation, and stated that after the two representatives going on board MV Archangelos Gabriel, MV Nan Hai Jiu 201 would return to anchorage.

(4) On 13 August, MV Nan Hai Jiu 201 carried the said two representatives of the shipowner to MV Archangelos Gabriel to board the grounded vessel, and then returned back to a navy terminal. MV Nan Hai Jiu 201 worked for 7.83 hours in total whereof.

(5) At 1452 of 15 August, Shanghai Representative Office sent again an email to Nanhai Rescue Bureau to rent MV Nan Hai Jiu 201 to carry relevant staffs and equipments at 0800 of 16 August to MV Archangelos Gabriel, and inquired whether MV Nan Hai Jiu 201 could stay at the accident site for several hours and whether the charge rate could be RMB1.3/hph.

(6) At 1600, Nanhai Rescue Bureau replied that the charge rate should still be RMB1.5/hph calculated from the said vessel started to leave the duty anchorage to the time when the said vessel completed the work and was back to the duty anchorage. Moreover, at this time the said vessel was only to be used as a traffic boat, and it would not provide any bottom searching by divers. At 2002, Shanghai Representative Office replied that after tough negotiation, it agreed with Nanhai Rescue Bureau’s plan and required Nanhai Rescue Bureau to arrange the vessel immediately.

(7) On 16 August, MV Nan Hai Jiu 201 carried relevant staffs and equipments to MV Archangelos Gabriel, and then moored properly there and stopped the engine. At this time MV Nan Hai Jiu 201 worked for 7.75 hours.

(8) At 1633 of 17 August, Shanghai Representative Office sent again an email to Nanhai Rescue Bureau to rent MV Nan Hai Jiu 201 to conduct an operation on 18 August and the time of departure would be 0200 of 18 August. MV Nan Hai Jiu 201 would carry the master and surveyor etc to go on board MV Archangelos Gabriel. Shanghai Representative Office confirmed that the charge rate would be RMB1.5/hph.

(9) On 18 August, the said vessel carried relevant staff and luggage to the lighter boat and then moored properly there and stopped the engine. At this time MV Nan Hai Jiu 201 worked for 8.83 hours.

(10) Nanhai Rescue Bureau claimed that as per the agreed charge rate of RMB1.5/hph and the work time of 24.41 hours, Archangelos Investments should pay salvage charges of RMB223,095.20.

(11) Archangelos Investments and Shanghai Representative Office argued that MV Nan Hai Jiu 201 was of 6,093hp, and Nanhai Rescue Bureau took advantage of Shanghai Representative Office’s difficulties to send the traffic boat with such large horsepower for the purpose of charging for more. Moreover, Archangelos Investments and Shanghai Representative Office contended that Nanhai Rescue Bureau added or deleted some record in the logbook of MV Nan Hai Jiu 201 randomly. Archangelos Investments and Shanghai Representative Office would not confirm the authenticity of MV Nan Hai Jiu 201’s logbook, but they did not provide any evidence to prove their contention in this regard.

13. Regarding work of divers:

(1) At 0957 of 12 August, Shanghai Representative Office sent an email to Nanhai Rescue Bureau and required Nanhai Rescue Bureau to arrange divers to conduct bottom searching operation, in order to find out the damage and stranding condition of MV Archangelos Gabriel.

(2) At 1554, Shanghai Representative Office sent an email to the agent of MV Archangelos Gabriel (Zhanjiang Ocean Shipping Agency Co., Ltd) and stated that the staffs and divers of Nanhai Rescue Bureau would left the “base” at about 1500 and would reach the accident site at about 1730 to conduct underwater searching operation. Shanghai Representative Office entrusted Zhanjiang Ocean Shipping Agency Co., Ltd to act as the shipowner’s agent to cooperate with Zhanjiang MSA for the salvage operation and for arranging MV Archangelos Gabriel to continue to sail for Qinzhou.

(3) At 1808 of 13 August, Nanhai Rescue Bureau sent an email to Shanghai Representative Office and stated that the divers went on board the traffic boat at 1500 of 12 August and left the traffic boat at 2300 on the same day. The divers worked for 8 hours. Nanhai Rescue Bureau requested Shanghai Representative Office to confirm the work time. In the above email, Nanhai Rescue Bureau also listed the work time (breakdown) of MV Nan Hai Jiu 101 on 12 August and the work time (breakdown) of MV Nan Hai Jiu 201 on 13 August. At 1935, Shanghai Representative Office replied its gratitude for Nanhai Rescue Bureau’s work. In the meantime, Shanghai Representative Office asked whether Nanhai Rescue Bureau could reduce the operation fees, and suggested cancelling the operation fee of MV Nan Hai Jiu 101 from 0930 to 1530 of 12 August, cancelling the operation fee of divers of RMB100,000, and cancelling the operation fee of MV Nan Hai Jiu 201 on 13 August at RMB55,000. At 2033, Nanhai Rescue Bureau replied that Nanhai Rescue Bureau could not accept Shanghai Representative Office’s such request.

(4) Nanhai Rescue Bureau claimed that Archangelos Investments and Shanghai Representative Office should pay the land mobilizing fee at RMB10,000, traffic fee at RMB55,000, and operation fee at RMB40,000, in total as RMB105,000. Archangelos Investments and Shanghai Representative Office argued that the land mobilizing fee and traffic fee had already covered the preparation and mobilization of the divers and equipments. The operation fee at RMB40,000 per 8 hours should just include the charge during actual underwater searching operation. Since the divers had not actually conducted underwater searching operation, Nanhai Rescue Bureau had no right to charge for the said operation fee.

14. Regarding other facts relating to the charge rate of MV Nan Hai Jiu 116 and MV Nan Hai Jiu 101:

(1) At 1452 of 15 August, Shanghai Representative Office sent an email to Nanhai Rescue Bureau for negotiation of relevant charges, and requested as follows:

1) To reduce the charge rate of MV Nan Hai Jiu 116 to RMB2.9/hph;

2) To cancel rental of MV Nan Hai Jiu 101 and to reduce the charge rate, and Nanhai Rescue Bureau should offer the lowest rate;

3) To reduce the diving operation fee at RMB100,000;

4) The rental fee for renting MV Nan Hai Jiu 201 on 13 August should be RMB55,000;

5) Shanghai Representative Office would rent MV Nan Hai Jiu 201 to carry divers, the master and surveyors to go on board the stranding vessel, and whether Nanhai Rescue Bureau would reduce the charge rate to RMB1.3/hph.

(2) At 1600, Nanhai Rescue Bureau replied that the charge rate of MV Nan Hai Jiu 201 should still be RMB1.5/hph. Other charges incurred during salvage of MV Archangelos Gabriel would be discussed later.

15. During court hearing of first instance, Nanhai Rescue Bureau confirmed that Shanghai Representative Office did not need to assume the compensation liability.

 

III. Reasoning of first instance court

16. The first instance court held that this was a case of salvage contract dispute. In accordance with Article 26 of Certain Provisions of the Supreme People's Court on the Acceptance Scope of Maritime Courts, this case shall be under the exclusive jurisdiction of maritime courts. Since the place where the salvage took place over the involved vessel was within the jurisdiction scope of the first instance court, as per Article 31 of Civil Procedure Law of the PRC, the first instance court shall have jurisdiction over this case. Because Archangelos Investments was a Greek company and MV Archangelos Gabriel was a Greek nationality oil tanker, this case had foreign related element. Since the parties both chose Chinese law as the applicable law during the court hearing, as per Article 3 of Law of the People's Republic of China on Application of Laws to Foreign-Related Civil Relations, Chinese law shall be applied to handling the substantive disputes in this case. The first instance court further analyzed detailed legal issues as follows.

17. Regarding establishment and validity of the involved salvage contract:  

(1) After the accident, Archangelos Investments’s agent Shanghai Representative Office sent an email to Nanhai Rescue Bureau, requesting Nanhai Rescue Bureau to arrange two salvage tugboats to conduct salvage operation and they would agree with Nanhai Rescue Bureau’s quotation In addition, Shanghai Representative Office issued the letter of authorization to Nanhai Rescue Bureau through email, setting out the agreed salvage vessels, manpower (divers) and the standard of the charging rate, etc. Seeing from the emails, Archangelos Investments and Shanghai Representative Office were very clear about MV Archangelos Gabriel’s danger. Shanghai Representative Office and Nanhai Rescue Bureau had fully discussed the charge rate and other issues. Hence, there was not any serious misunderstanding or taking advantage of other’s difficulties. 

(2) Article 175.1 of Maritime Code of the PRC (hereinafter referred to as “Chinese Maritime Code”) provides 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.” In accordance with this article the salvage contract between Nanhai Rescue Bureau and Archangelos Investments established, and the said contract did not violate any mandatory provisions of laws and regulations. Thus, the said salvage contract was lawful and effective, and the parties concerned shall abide by and perform the contract.

18. Regarding whether the cargo owner China National United Oil Cooperation should be added as third party to join this lawsuit: 

(1) Archangelos Investments applied to add China National United Oil Cooperation to join this case, for the reason that the involved cargo and the involved vessel were in common danger; as per Article 183 of Chinese Maritime Code, “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”.

(2) The first instance court was of the opinion that Nanhai Rescue Bureau claimed against Archangelos Investments to pay the salvage charges as per the agreed charge rate. In this case, the involved legal relationship was different from that of general average as claimed by Archangelos Investments. Hence, it was untenable for Archangelos Investments to apply to add the cargo owner as third party to join in this lawsuit.

19. Regarding whether Nanhai Rescue Bureau’s operation was in compliance with the constituting elements of salvage at sea:  

(1) MV Archangelos Gabriel was the vessel as defined by Article 3 of Chinese Maritime Code, which was the subject of salvage as stipulated by Chinese Maritime Code.

(2) After MV Archangelos Gabriel ran aground, both the vessel and the cargo onboard were in danger, which might cause marine pollution accident and might seriously endanger the safety of marine environment.

(3) Archangelos Investments and Shanghai Representative Office were both well aware of the fact that MV Archangelos Gabriel was in danger. Nanhai Rescue Bureau dispatched MV Nan Hai Jiu 116, MV Nan Hai Jiu 101, MV Nan Hai Jiu 201 and a group of divers to the accident site to provide transportation and guarding services. The above operations were important parts of the successful salvage of MV Archangelos Gabriel.

(4) Although MV Nan Hai Jiu 116 did not conduct towing operation as agreed, according to the shipowner’s instruction, the said vessel stayed at the accident site and provided guarding service until MV Archangelos Gabriel was successfully refloated. Moreover, Chinese Maritime Code did not have specific requirement regarding forms of salvage.

(5) As such, the above acts of Nanhai Rescue Bureau were salvage acts. During the process of salvage, the acts or omissions of Nanhai Rescue Bureau and Archangelos Investments were done voluntarily, and this case did not fall into any condition for deprivation the right to obtain the salvage reward as provided by Article 186 of Chinese Maritime Code. Seeing from the whole salvage process, MV Archangelos Gabriel successfully got floating, all the crew members and cargo onboard the said vessel finally safely reached Qinzhou Port. As such, Nanhai Rescue Bureau’s salvage was consistent with the constituting elements of salvage at sea, and Nanhai Rescue Bureau shall have right to obtain relevant salvage reward as per Article 179 of Chinese Maritime Code.

20. Regarding determination of the amount of salvage reward and the interest thereof:  

(1) Regarding salvage charge of MV Nan Hai Jiu 201. With regard to the operation time of MV Nan Hai Jiu 201, Archangelos Investments contended that Nanhai Rescue Bureau added or deleted the logbook record of the said vessel, but Archangelos Investments did not provide evidence to prove this. The said vessel worked for 24.41 hours, and the charge rate of RMB1.5/hph was agreed by Nanhai Rescue Bureau and Archangelos Investments after full negotiation. Thus, the first instance court would uphold this. Because the total power of the said vessel was 6,093hp, as per the agreed charge rate, Archangelos Investments should pay charges of RMB223,095.20 regarding the said vessel.

(2) Regarding charges of divers. According to the letter of authorization issued by Archangelos Investments to Nanhai Rescue Bureau, the operation period of divers was calculated from the time when the divers went on board the traffic boat to the time when divers completed operation and left the traffic boat. As per the above agreement, even though the divers did not conduct underwater operation, as long as the divers went on board the traffic boat, Archangelos Investments should pay the operation fee of RMB40,000 to Nanhai Rescue Bureau. Moreover, Archangelos Investments should pay the agreed land mobilizing fee at RMB10,000 and water traffice fee at RMB55,000. The above three fees were RMB105,000 in total.

(3) Regarding salvage charges of MV Nan Hai Jiu 116 and MV Nan Hai Jiu 101:

1) Archangelos Investments did not raise objection to the total power and work time of MV Nan Hai Jiu 116 and MV Nan Hai Jiu 101, but Archangelos Investments argued that because the two vessels did not actually conduct towing operation, the charge rate should be reduced, and the charge rate could be determined with reference to the standards of Charging Methods of the Ministry of Transport of the PRC on Salvage and Wreck Removal at International Route, Regulations of the Ministry of Transport of the PRC on Port Charges, Regulations of Guangdong Province on Port Charges.

2) The first instance court held that regarding the above standards cited by Archangelos Investments, the first standard was abolished, and the second and third standards were applicable to port towing only. Thus, the above standards were not applicable to this case.

3) In accordance with Article 180 of Chinese Maritime Code, the salvage reward shall be fixed by taking into full account the salvor’s time used, expenses and losses incurred by the salvors, and the risk of liability and other risks ran by the salvors or their equipment, etc. In actual salvage operation, there was some difference of the cost, technical requirement and liability risk between salvor’s guarding operation and towing operation.

4) As per Article 176(2) of Chinese Maritime Code, the salvage contract might be modified by a judgment of the court or an award of the arbitration tribunal under the circumstance that the payment under the contract was in an excessive degree too large or too small for the services actually rendered.

5) Because MV Nan Hai Jiu 116 and MV Nan Hai Jiu 101 did not conduct towing operations as planned, Archangelos Investments contended that it was too high for Nanhai Rescue Bureau to require the salvage charges at the rate of RMB3.2/hph. Archangelos Investments raised objection in this regard and requested the first instance court to have this charge adjusted.

6) On one hand, in the emails Archangelos Investments requested Nanhai Rescue Bureau to reduce the said charge rate all the time, but Nanhai Rescue Bureau replied that other expenses incurred by salvage of MV Archangelos Gabriel would be discussed later. It could be seen that Nanhai Rescue Bureau thought that there might be room for adjustment of the said salvage charge rate. On the other hand, after Archangelos Investments informing Nanhai Rescue Bureau that the salvage plan was altered to the way of refloating by lightering and load shedding, Archangelos Investments still asked Nanhai Rescue Bureau in the email dated 15 August whether the salvage charge rate could be reduced to RMB2.9/hph.

7) It could be seen that after altering the salvage plan, Archangelos Investments was still willing to pay the salvage charge at RMB2.9/hph, and this charge rate was consistent with the principle of encouraging salvage as stipulated by Chinese Maritime Code. As such, the first instance court reduced the salvage charge rate of MV Nan Hai Jiu 116 and MV Nan Hai Jiu 101 to RMB2.9/hph. Thus, the salvage charges of MV Nan Hai Jiu 116 and MV Nan Hai Jiu 101 should be RMB5,522,467.68 and RMB742,350.70 respectively.

21. The above salvage charges of MV Nan Hai Jiu 116, MV Nan Hai Jiu 101, MV Nan Hai Jiu 201 and divers were RMB6,592,913.58 in total.

22. Regarding the interests of salvage reward claimed by Nanhai Rescue Bureau:

(1) Nanhai Rescue Bureau and Archangelos Investments did not agree with the time limit to pay the salvage reward, and the two parties did not reach supplementary agreement for this matter. Moreover, the said time limit could not be determined according to the contract or trading practice.

(2) In accordance with Article 62 of Contract Law of the PRC (hereinafter referred to as “Chinese Contract Law”) that “in case of unclear time limit for the performance, the debtor may fulfill its obligations at any time, and the creditor may demand the fulfillment at any time, while giving the debtor necessary time to make preparations”, the first instance court exercised the right of judicial discretion to determine that the preparation time (for payment) was two months after salvage operation was completed. Thus, the interests of salvage reward of this case should be calculated from 19 October 2011 to the payment date determined by the judgment at the loan interest rate of working capital publicized by the People’s Bank of China over the same period.

 

IV. Judgment of first instance court

23. In conclusion, after discussion by the Judicial Committee of the first instance court, in accordance with Articles 175.1, 176(2), 179 and 180 of Chinese Maritime Code, the first instance court delivered the civil judgment [2012] GHFCZ No.898 as follows:

(1) Archangelos Investments shall pay Nanhai Rescue Bureau salvage reward of RMB6,592,913.58 and interests thereof calculated from 19 October 2011 to the payment date determined by the judgment at the loan interest rate of working capital publicized by the People’s Bank of China over the same period; 

(2) Other claims of Nanhai Rescue Bureau shall be dismissed;

(3) The court fee of this case in first instance was RMB65,822, for which Nanhai Rescue Bureau shall assume RMB9,591 and Archangelos Investments shall assume RMB56,231.


V. Appeal of the appellant Archangelos Investments

24. Archangelos Investments was dissatisfied with the first instance judgment and filed an appeal to the second instance court. Archangelos Investments requested the second instance court to revoke the first instance judgment, to order Archangelos Investments to assume corresponding payment obligation at 38.85% of the adjusted charge rate, and to order Nanhai Rescue Bureau to assume the court fees of this case in first and second instances.

 

VI. Findings of facts by the second instance court

25. During second instance trial, apart from the determination of the involved salvage reward, all the parties had no objection to other facts identified by the first instance court. Thus, the second instance court admitted the facts that the parties had no objection. 

26. In addition, the second instance court found out that after MV Archangelos Gabriel ran aground, the master of the said vessel immediately reported the accident to Zhanjiang MSA, and Zhanjiang MSA ordered the master and shipowner to immediately make and implement the refloating plan. After research, the shipowner/master of MV Archangelos Gabriel decided to choose the plan of refloating by lightering and load shedding on the day when the accident took place. As such, the shipowner of MV Archangelos Gabriel dispatched many shipbuilding engineers, salvage experts, and surveyors from Singapore, the Netherlands, China and other regions to go on board the said vessel for assistance and guidance. Although the “Comprehensive Security Plan of MV Archangelos Gabriel--Refloating by Emergency Lightering and Load Shedding” was issued by Zhanjiang MSA on 17 August 2011, the plan of refloating by lightering and load shedding was confirmed by the shipowner and approved by Zhanjiang MSA before 1425 of 12 August.

27. The salved value of the involved vessel was USD30,531,856, and the salved value of the involved cargo was USD48,053,870. The vessel’s salved value was 38.85% to the total salved values.

 

VII. Reasoning of the second instance court

28. With regard to the validity of the involved salvage contract at sea, the second instance court held that:

(1) During the process of concluding the salvage contract between Nanhai Rescue Bureau and Archangelos Investments through emails, MV Archangelos Gabriel was in danger. The shipowner of MV Archangelos Gabriel retained experts of relevant industries to research the salvage plan. The vessel’s P&I Club and shipowner jointly retained lawyers and nautical experts to confirm the salvage plan and to conclude the salvage contract. Shanghai Representative Office as the representative of the shipowner had attended the negotiation and conclusion of the involved salvage contract. The emails between Shanghai Representative Office and Nanhai Rescue Bureau could prove that Archangelos Investments was well aware of the accident situations, and had enough professional knowledge about the involved salvage operation. Under the circumstance that Archangelos Investments had chosen the plan of refloating by lightering and load shedding, Archangelos Investments finally concluded the involved contract with Nanhai Rescue Bureau after full negotiation and agreed with Nanhai Rescue Bureau’s quotation. Archangelos Investments asserted that there was serious misunderstanding over conclusion of the said contract, but the second instance court would thereby not uphold such assertion.

(2) Archangelos Investments confirmed that during the same period of the involved salvage, according to the operation contract concluded between Nanhai Rescue Bureau and other third parties, the operation fee of MV Nan Hai Jiu 116 and the salvage vessel of the same type was no less than RMB3.0/hph. Thus, Nanhai Rescue Bureau had not taken advantage of other’s difficulties in this case. Archangelos Investments’ assertion that the involved salvage contract should be changed or revoked as per Article 54 of Chinese Contract Law should not be upheld.

(3) Archangelos Investments entrusted Nanhai Rescue Bureau to dispatch MV Nan Hai Jiu 116 and MV Nan Hai Jiu 101 to the accident site to assist MV Archangelos Gabriel to refloat, and agreed that no matter whether Nanhai Rescue Bureau had successfully assisted the said vessel to refloat or not, Archangelos Investments would pay the charges at RMB3.2/hph. MV Nan Hai Jiu 116 and MV Nan Hai Jiu 101 were responsible for towing operation, and Nanhai Rescue Bureau would not be liable for any accident during refloating operation process of MV Archangelos Gabriel.

(4) Seeing from the salvage process in this case, Nanhai Rescue Bureau actually conducted the salvage operation under the instructions of the shipowner. Thus, the involved salvage was a contractual salvage. The salvor conducted salvage under the instructions of the salved party. No matter whether the salvage had a useful result, the salved party should, as per Article 179 of Chinese Maritime Code, pay the salvage reward according to the manpower and equipment used by the salvor.

(5) The first instance court held that the salvage reward should be paid because MV Archangelos Gabriel successfully refloated and the salvage had a useful result. This is an error in application of law.

29. With regard to whether the salvage reward claimed by Nanhai Rescue Bureau was reasonable, the second instance court held that:

(1) The involved letter of authorization recorded that Archangelos Investments entrusted Nanhai Rescue Bureau to dispatch MV Nan Hai Jiu 116 and MV Nan Hai Jiu 101 to the accident site to assist MV Archangelos Gabriel to refloat, and MV Nan Hai Jiu 116 and MV Nan Hai Jiu 101 were only responsible for towing operation. Refloating by towing and refloating by lightering and load shedding were two different and independent salvage methods. Tugboat’s guarding was not necessarily in refloating by lightering and load shedding.

(2) In addition, when Archangelos Investments requested Nanhai Rescue Bureau to dispatch MV Nan Hai Jiu 116 and MV Nan Hai Jiu 101 to conduct salvage operation, Archangelos Investments had not confirmed the plan of refloating by lightering and load shedding. In combination with the literal meaning of the letter of authorization, it should be determined that the purpose for Archangelos Investments to request dispatching salvage tugboats to the accident site was that the salvage tugboats should conduct salvage of MV Archangelos Gabriel to refloat by proper operation ways instead of waiting and assisting to refloat.

(3) After the salvage tugboats reached the accident site, Archangelos Investments’s salvage plan was changed, which caused that the salvage tugboats and divers did not actually conduct the agreed salvage operation. Thus, it was lawfully for Archangelos Investments to request modifying the salvage contract for the reason that Nanhai Rescue Bureau had not actually conducted the salvage operations as agreed in the contract.

(4) Since the first instance court had, based on Archangelos Investments’ claim and taken into account the factors of Article 180 of Chinese Maritime Code (regarding assessment of salvage reward), adjusted the involved salvage reward, the second instance court would not adjust any further.

(5) None of the parties concerned had objection to the salvage reward of RMB6,592,913.58 as determined by the first instance judgment. Thus, the second instance admitted the above salvage reward.

30. With regard to whether Archangelos Investments could request to assume the involved salvage reward as per the proportion of the vessel’s salved value to the total salved values:  

(1) Article 175 of Chinese Maritime Code provides 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.”

(2) Article 183 of Chinese Maritime Code provides 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.”

(3) In terms of application of the above provisions, Chinese Maritime Code did not distinguish salvage of different types. Thus, the above provisions should also apply to the involved contractual salvage in this case. If a vessel was in danger at sea and the salvage contract should be concluded by the shipowner or the master themselves, it was no good to timely salvage and it would be inconsistent with marine transportation practice. The two “statutory representation rights” in Article 175 of Chinese Maritime Code did not go against the agency law system. Thus, in terms of Nanhai Rescue Bureau’s argument that the involved salvage contract was not signed by the master or shipowner of MV Archangelos Gabriel, Shanghai Representative Office never disclosed that Shanghai Representative Office was representing the cargo owner, and Article 175 of Chinese Maritime Code should not be applicable to this case, these arguments were untenable and the second instance court would not support.

(4) As per Articles 172 and 179 of Chinese Maritime Code, salvage reward was a kind of salvage charges. In the contractual salvage, the salvor and the salved party could make an agreement on the salvage charges, including the form of salvage reward. Thus, it was groundless for Nanhai Rescue Bureau to claim that salvage reward was only applicable to the salvage contract on basis of “no cure no pay”.

(5) According to the agreement between the parties concerned in this case, the salved party should pay the salvor the economic reward, which should belong to salvage reward, and Article 183 of Chinese Maritime Code shall apply in this regard. Hence, Archangelos Investments could pay the salvage reward to Nanhai Rescue Bureau at the proportion of the vessel’s salved value to the total salved values, i.e. 38.85% or RMB2,561,346.93.

(6) Archangelos Investments did not pay the above salvage reward, which constituted breach of contract. Thus, it was tenable for Nanhai Rescue Bureau to claim for interests of delayed payment, and the second instance court would uphold the said interests. It was reasonable for first instance court to exercise the right of discretion to determine that Archangelos Investments should pay the involved reward within 2 months after receiving the notice for payment. Thus, the involved interests should be calculated from 19 October 2011 to the date determined by the judgment at the loan interest rate of working capital publicized by the People’s Bank of China over the same period.

 

VIII. Judgment of second instance court

31. In conclusion, according to Articles 175 and 183 of Chinese Maritime Code, Article 107 of Chinese Contract Law, and Articles 64 and 170.1(2) of Civil Procedure Law of the PRC, the second instance court delivered the civil judgment [2014] YGFMSZZ No.117 as follows:

(1) The first instance judgment shall be revoked; 

(2) Archangelos Investments shall pay Nanhai Rescue Bureau the salvage reward of RMB2,561,346.93 as well as the interests thereof calculated from 19 October 2011 to the date determined by the judgment at the loan interest rate of working capital publicized by the People’s Bank of China over the same period;

(3) Other claims of Nanhai Rescue Bureau shall be dismissed;

(4) The court fee of this case in second instance was RMB65,822, for which Archangelos Investments shall assume RMB23,283.11 and Nanhai Rescue Bureau shall assume RMB42,538.89.

 

IX. Application for retrial of Nanhai Rescue Bureau

Nanhai Rescue Bureau was dissatisfied with second instance judgment and filed an application for retrial based on the following reasons:

32. The letter of authorization of Archangelos Investments recorded that no matter whether Nanhai Rescue Bureau had successfully assisted MV Archangelos Gabriel to refloat or not, Archangelos Investments agreed to pay the charges at RMB3.2/hph. This showed that the parties had reached agreement on the charge rate. In the meantime, Nanhai Rescue Bureau had also provided salvage, guarding and transportation services as per the agreement. Thus, the contract between the parties established and was performed. The second instance court only ordered Archangelos Investments to pay 38.85% of the salvage charges, which violated the principle regarding privity of contract and was inconsistent with the basic principle that the obligations of a contract should be fully performed. 

33. During the application for retrial, Nanhai Rescue Bureau provided the Average Guarantee, which could prove that the insurer of the vessel’s cargo had promised on 18 August 2011 that it would assume the salvage charges attributable to the cargo owner. However, the second instance court did not identify this fact and only allowed Archangelos Investments to pay a part of the contract charges, which reduced the salvage charges that should be assumed by the shipowner and cargo owner, and this would be detrimental for realization of the purpose of encouraging salvage operation at sea as provided by International Convention on Salvage 1989 (hereinafter referred to as “Salvage Convention”). As such, the above evidence was enough to overturn the second instance judgment.

34. As a professional salvage institution, Nanhai Rescue Bureau had attended the salvage of MV Archangelos Gabriel, and Nanhai Rescue Bureau should be entitled to obtain all the salvage reward under the contract accordingly. The second instance judgment deprived Nanhai Rescue Bureau’s lawful rights and interests under the contract, and this was against the social public interest (regarding encouraging salvage at sea).

35. The salvage reward would be calculated as per the agreed charge rate and disbursements and this contract should be in legal nature of “employed salvage agreement” (on basis of pre-fixed charge rate). Even assuming that the charges under the involved contract constituted salvage reward, Archangelos Investments should be obliged to require the cargo owner to provide guarantee to the salvor Nanhai Rescue Bureau as per Article 188 of Chinese Maritime Code. But in fact, Archangelos Investments required the insurer of the cargo to provide the guarantee.

36. In conclusion, Nanhai Rescue Bureau requested to revoke the second instance judgment, to order Archangelos Investments to pay the charges of RMB6,592,913.58 under the salvage contract as well as the interests thereof, and to order Archangelos Investments to assume the court fees of this case in first and second instances.


X. Defence submission of Archangelos Investments and Shanghai Representative Office regarding the application for retrial

37. Archangelos Investments submitted the following defence opinions:

(1) The second instance court ordered Archangelos Investments to assume the salvage reward as per the proportion of the vessel’s salved value to the total salved values, which was in compliance with the principle of privity of contract and correctly applied law. 

(2) First of all, as per Article 6 of Salvage Convention and Article 175 of Chinese Maritime Code, the master and shipowner were endowed with the two “statutory representation rights”. The involved salvage contract was concluded by Archangelos Investments on behalf of the cargo owner with Nanhai Rescue Bureau, thus both Archangelos Investments and the cargo owner were Party A to the contract.

(3) Secondly, Article 183 of Chinese Maritime Code did not clearly say that the salvage reward under this article was only applicable to the “no cure no pay” salvage contract, but not the “employed salvage contract”. Thus, Article 183 of Chinese Maritime Code should be applicable regarding the salvage reward as claimed by Nanhai Rescue Bureau. There is a proviso in Article 179 of Chinese Maritime Code that “except as otherwise provided for by the salvage contract”, and this proviso had already provided the system design and regulation regarding “employed salvage”. The salvor and salved party could make an agreement that the achievement of salvage reward might not depend on the salvage result. No matter whether the salvage was successful or not, the salvor could obtain the pre-agreed salvage charges (including salvage reward, award or compensation) as per the fixed rate. In this case, the salvage was a kind of property salvage, and Nanhai Rescue Bureau should and should only obtain the salvage reward as provided by Chinese Maritime Code.

(4) From the beginning of the salvage or before this litigation, to the completion of court hearing in second instance trial, Nanhai Rescue Bureau should have found out the Average Guarantee, but Nanhai Rescue Bureau found out the said evidence as late as after completion of the second instance trial. This was resulted from Nanhai Rescue Bureau’s fault instead of objective reason. Thus, the said evidence was not “new evidence” [1]. Even the Average Guarantee was a “new evidence”, it was groundless for Nanhai Rescue Bureau to require Archangelos Investments to pay all the salvage reward based on the said evidence. The second instance court ordered Archangelos Investments to pay the salvage reward at the proportion of the vessel’s salved value to the total salved values, which did not deal with the salvage reward that was attributable to the cargo owner in the Average Guarantee. Neither the Average Guarantee nor the second instance judgment required the shipowner to pay the salvage reward for the cargo owner, or deprived Nanhai Rescue Bureau the right to require the cargo owner to pay the salvage reward as per the proportion (of the cargo’s salved value to the total salved values), or exempted the cargo owner from such obligation.

(5) General average and salvage at sea were two independent legal systems. It is not correct to, on basis of rules of general average, deprive Archangelos Investments’s legal right to pay the salvage reward pro rata only.

(6) Because Zhanjiang MSA ordered to change the salvage plan from refloating by towing to refloating by lightering and load shedding, it would be manifest unfair to calculate the salvage charges at the charge rate regarding towing operation as agreed (RMB3.2/hph). According to the principle of material adverse change[2], the said charge rate should be changed or adjusted. In addition, Nanhai Rescue Bureau was a public institution (shiye danwei)[3]. In order to safeguard the social public interests, Nanhai Rescue Bureau should only charge for the reward which was enough to satisfy its actual expenses, and Nanhai Rescue Bureau should not pursue for profits beyond the actual expenses. Moreover, life salvage was Nanhai Rescue Bureau’s main administrative duty, and Nanhai Rescue Bureau should not claim for any salvage reward in this respect. Even after the salvage reward was adjusted, the reward for life salvage (at least 50%) should be reduced once again.

(7) In conclusion, Archangelos Investments requested to dismiss Nanhai Rescue Bureau’s application for retrial and to maintain the second instance judgment.

38. Shanghai Representative Office’s statement of defence was identical to that of Archangelos Investments.

 

XI. Reasoning of retrial court  

39. After examination, our Court (as the retrial court) admits the facts identified by the first and second instance courts.

40. Our Court holds that this is a salvage contract dispute. China has acceded to the Salvage Convention. The Salvage Convention establishes the purpose of encouraging timely and effectively salvage over the ships and other properties in danger, and incidents which constitute threat to the safety of environment. In the meantime, the Salvage Convention ensures giving enough encouragement to the salvors’ maintaining of salvage operation. The above purpose of the Salvage Convention shall be abided by in this case. After the involved accident took place, Archangelos Investments timely sought salvage, and Nanhai Rescue Bureau actively attended salvage as per the agreement. Both Archangelos Investments and Nanhai Rescue Bureau have played active roles in avoiding marine pollution, and such acts shall be advocated.

41. Because Archangelos Investments is a Greek company, and MV Archangelos Gabriel is a Greek nationality oil tanker, this case has foreign related element. All the parties concerned have unanimously chosen Chinese law as applicable law during litigation. In accordance with Article 3 of Law of the People's Republic of China on Application of Laws to Foreign-Related Civil Relations, Chinese law shall apply to this case. Chinese Maritime Code, as the special law dealing with marine transportation relationship and vessel relationship, shall prevail in law application. Where it is not provided in Chinese Maritime Code, the Chinese Contract Law and other relevant laws shall apply.

42. According to Nanhai Rescue Bureau’s application for retrial, the statements of defence of Archangelos Investments and Shanghai Representative Office, the key issues of this case involve with facts identification and applications of law. The key issues are as follows:

(1) Whether the evidence provided by Nanhai Rescue Bureau during retrial is “new evidence” as provided by law; if it is “new evidence”, whether it is enough to overturn the second instance judgment;

(2) How to understand the salvage contract as provided by the Salvage Convention and Chinese Maritime Code;

(3) The nature of the involved contract and application of law; 

(4) How to determine the amount of salvage reward claimed by Nanhai Rescue Bureau.

43. Firstly, in terms of whether the evidence provided by Nanhai Rescue Bureau is “new evidence” as provided by law, and whether it is enough to overturn the second instance judgment:  

(1) During retrial, Nanhai Rescue Bureau submitted to our Court the Average Guarantee issued by PICC Property & Casualty Co., Ltd Beijing Branch (hereinafter referred to as “PICC Beijing Branch”), which is used to prove that after Archangelos Investments paid salvage reward to Nanhai Rescue Bureau, Archangelos Investments can obtain indemnity from PICC Beijing Branch. Nanhai Rescue Bureau contended that the said evidence could overturn the second instance judgment.

(2) During cross-examination at court, Archangelos Investments and Shanghai Representative Office raised no objection to the authenticity and legitimacy of the said evidence but argued that the said evidence was not “new evidence”, and they did not admit the probative value of the said evidence.

(3) Our Court holds that the said evidence is issued by PICC Beijing Branch for the shipowner of MV Archangelos Gabriel and other interested parties in the involved voyage. Although the said evidence helps our Court to understand relevant undertakings concerning the involved salvage charges, it is not directly relevant to the involved salvage reward issue between the parties. Thus, our Court will not admit (this evidence).

44. Secondly, in terms of how to understand the salvage contract under the Salvage Convention and Chinese Maritime Code: 

(1) Salvage law is a traditional international maritime legal system, and the Salvage Convention and Chinese Maritime Code have made special provisions in this regard. Chapter IX of Chinese Maritime Code is regarding provisions concerning salvage at sea, and this Chapter absorbed major contents of the Salvage Convention.

(2) Article 12 of the Salvage Convention and Article 179 of Chinese Maritime Code set forth the principle of paying salvage reward on basis of “no cure no pay”. Based on the said principle, Article 13 of the Salvage Convention and Articles 180 and 183 of Chinese Maritime Code make further provisions on the standards regarding determination/assessment of the salvage reward and specific rules regarding apportionment of the salvage reward (between related parties). The above articles are specific provisions for determination of salvage reward based on the principle of “no cure no pay” salvage contract.

(3) In the meantime, both the Salvage Convention and Chinese Maritime Code allow the parties concerned to make other agreement on determination of the salvage reward. As such, except the “no cure no pay” salvage contract as provided by the Salvage Convention and Chinese Maritime Code, there may be “employed salvage contract” concluded as per the agreement of the parties concerned.

45. Thirdly, in terms of the nature of the involved contract and application of law:

(1) According to the findings of facts by court, after full negotiation, Archangelos Investments and Nanhai Rescue Bureau had clearly agreed that no matter whether the salvage is successful, Archangelos Investments will pay the reward and Nanhai Rescue Bureau shall not be liable for any accident during the refloating operation process of MV Archangelos Gabriel.

(2) As per the said agreement, there is not a direct connection between whether Nanhai Rescue Bureau can obtain salvage reward and whether salvage has actual result.

(3) Meanwhile, the salvage reward is calculated at the fixed charge rate and expenses agreed by the parties, such as horsepower hour of the salvage vessels and the manpower cost, which are not related to the value of the salved properties.

(4) As such, the involved salvage contract is not the “no cure no pay” salvage contract as provided by the Salvage Convention and Chinese Maritime Code, instead it is an “employed salvage contract” (on basis of pre-fixed charge rate).

(5) With respect to the condition and standard for paying the reward under an “employed salvage contract”, the Salvage Convention and Chinese Maritime Code do not have specific rules dealing with this issue. The first and second instance courts adjusted the fixed charge rate agreed in the “employed salvage contract” on basis of relevant factors as provided by Article 180 of Chinese Maritime Code. Such adjustment is wrong, and the two courts did not correctly apply the law. In this case, the rights and obligations of the parties shall be determined according to the provisions of Chinese Contract Law.

46. Fourth, in terms of how to determine the amount of salvage reward claimed by Nanhai Rescue Bureau:

(1) With regard to the amount of salvage reward claimed by Nanhai Rescue Bureau, Archangelos Investments contended that Archangelos Investments should, in accordance with Article 183 of Chinese Maritime Code, assume the salvage reward at the proportion of the vessel’s salved value to the total salved values.

(2) Our Court is of the opinion that Article 183 of Chinese Maritime Code shall apply to the “no cure no pay” salvage contract. However, the involved contract in this case is an “employed salvage contract”. Thus, it is not improper for Nanhai Rescue Bureau to require Archangelos Investments to pay all the salvage reward based on the contract between it and Archangelos Investments.

(3) Archangelos Investments also argued that the salvage plan had been changed from towing and bottom searching operation to refloating by lightering and load shedding, which falls into conditions regarding material adverse change. Thus, the agreed salvage reward should be adjusted.

(4) Article 26 of Interpretation of the Supreme People's Court on Certain Issues Concerning the Application of the Contract Law of the People's Republic of China (II) provides that: “where, after the conclusion of the contract, the objective situation undergoes significant changes that were unforeseeable by the concerned parties at the time of conclusion of the contract, and such 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.”

(5) Our Court is of the view that in this case, the salvage plan is not changed due to the significant changes of objective situations, instead it is a result of negotiation and discussion of relevant parties, including the litigation parties in this case. Moreover, to continue with the performance of the contract is not manifest unfair to Archangelos Investments or cannot realize the purpose for which the involved contract was concluded. Hence, the change of salvage plan is not material adverse change in legal sense. Thus, it lacks factual and legal basis for Archangelos Investments to apply to reduce the agreed charge rate and expenses for reason of the alleged material adverse change, and our Court will not uphold such contention.

(6) According to the agreement between Nanhai Rescue Bureau and Archangelos Investments, Nanhai Rescue Bureau dispatched relevant vessels and staff to provide the involved salvage service. Archangelos Investments shall pay the reward as per the agreed charge rate and the vessels, staff provided by Nanhai Rescue Bureau and the time consumed in the operation, etc. It is correct for the first instance court to, based on the agreement of the parties concerned, determine that Archangelos Investments shall pay the charges of MV Nan Hai Jiu 201 and divers to Nanhai Rescue Bureau. In the meantime, based on the actual salvage condition, the first instance court exercised the right of discretion to adjust the salvage charge rate of MV Nan Hai Jiu 116 and MV Nan Hai Jiu 101 from RMB3.2/hph to RMB2.9/hph. Nanhai Rescue Bureau did not file an appeal in this regard or apply for retrial regarding this issue. Thus, our Court will admit.

 

XII. Judgment of retrial court

47. In conclusion, based on the amount of salvage reward determined by the first instance judgment and as per the provisions of Chinese Maritime Code, the second instance court ordered Archangelos Investments to pay the salvage reward at the proportion of the vessel’s salved value to the total salved values. The second instance court incorrectly applied law and handled this case wrongfully for making the above determination, which shall be rectified. The first instance court incorrectly applied law, but since the adjustment of relevant charge rate is on the basis of the agreement between the parties, and Nanhai Rescue Bureau has not exercised relevant litigation rights to raise objection to this issue, the first instance judgment can be maintained.

48. In accordance with Articles 8, 107 of the Contract Law of the PRC, Article 170.1(2) of the Civil Procedure Law of the PRC and Article 407.1 of Interpretations of the Supreme People's Court on the Application of the Civil Procedure Law of the PRC, our Court hereby delivers the judgment as follows:

(1) The civil judgment [2014] YGFMSZZ No.117 of Guangdong High People’s Court shall be revoked;

(2) The civil judgment [2012] GHFCZ No.898 of Guangzhou Maritime Court shall be maintained.

49. The court fee of this case in first instance is RMB65,822, for which Nanhai Rescue Bureau of Ministry of Transport shall assume RMB9,591 and Archangelos Investments E.N.E. shall assume RMB56,231. The court fee of this case in second instance is RMB65,822, which shall be assumed by Archangelos Investments E.N.E.

50. This judgment is final.

 

Presiding judge: He Rong

Judge: Zhang Yongjian

Judge: Wang Shumei

Judge: Yu Xiaohan

Acting judge: Guo Zaiyu

7 July 2016

Judicial assistant: Ma Ling

Court clerk: Li Na


 

Annex

 

Maritime Code of the People's Republic of China[4]

 

Adopted at the 28th Meeting of the Standing Committee of the Seventh National People's Congress on November 7, 1992 and promulgated by Order No.64 of the President of the People's Republic of China on November 7, 1992.

 

Chapter IX Salvage at Sea

 

Article 171 The provisions of this Chapter shall apply to salvage operations rendered at sea or any other navigable waters adjacent thereto to ships and other property in distress.

Article 172 For the purposes of this Chapter:

(1)"Ship" means any ship referred to in Article 3 of this Code and any other non-military, public service ship or craft that has been involved in a salvage operation therewith;

(2)"Property" means any property not permanently and intentionally attached to the shoreline and includes freight at risk;

(3) "Payment" means any reward, remuneration or compensation for salvage operations to be paid by the salved party to the salvor pursuant to the provisions of this Chapter.

Article 173 The provisions of this Chapter shall not apply to fixed or floating platforms or mobile offshore drilling units when such platforms or units are on location engaged in the exploration, exploitation or production of sea-bed mineral resources.

Article 174 Every Master is bound, so far as he can do so without serious danger to his ship and persons on board, to render assistance to any person in danger of being lost at sea.

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.

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 terms 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 177 During the salvage operation, the salvor shall owe a duty to the salved party to:

(1) carry out the salvage operation with due care;

(2) exercise due care to prevent or minimize the pollution damage to the environment;

(3) seek the assistance of other salvors where reasonably necessary;

(4) accept the reasonable request of the salved party to seek the participation in the salvage operation of other salvors. However, if the request is not well-founded, the amount of payment due to the original salvor shall not be affected.

Article 178 During the salvage operation, the party salved is under an obligation to the salvor to:

(1) cooperate fully with the salvor;

(2) exercise due care to prevent or minimize the pollution damage to the environment;

(3) promptly accept the request of the salvor to take delivery of the ship or property salved when such ship or property has been brought to a place of safety.

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 not 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 minimizing 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 181 The salved value of the ship and other property means the assessed value of the ship and other property salved or the proceeds of the sale thereof, after deduction of the relevant taxes and customs dues, quarantine expenses, inspection charges as well as expenses incurred in connection with the discharge, storage, assessment of the value and the sale thereof.

The value prescribed in the preceding paragraph does not include the value of the salved personal belongings of the crew and that of the cabin luggage of the passengers.

Article 182 If the salvor has carried out the salvage operations in respect of a ship which by itself or its goods threatened pollution damage to the environment and has failed to earn a reward under Article 180 of this Code at least equivalent to the special compensation assessable in accordance with this Article, he shall be entitled to special compensation from the owner of that ship equivalent to his expenses as herein defined.

If the salvor has carried out the salvage operations prescribed in the preceding paragraph and has prevented or minimized pollution damage to the environment, the special compensation payable by the owner to the salvor under paragraph 1 of this Article may be increased by an amount up to a maximum of 30% of the expenses incurred by the salvor. The court which has entertained the suit or the arbitration organization may, if it deems fair and just and taking into consideration the provisions of paragraph 1 of Article 180 of this Code, render a judgment or an award further increasing the amount of such special compensation, but in no event shall the total increase be more than 100% of the expenses incurred by the salvor.

The salvor's expenses referred to in this Article means the salvor's out-of-pocket expenses reasonably incurred in the salvage operation and the reasonable expenses for the equipment and personnel actually used in the salvage operation. In determining the salvor's expenses, the provisions of sub-paragraphs (8), (9) and (10) of paragraph 1 of Article 180 of this Code shall be taken into consideration.

Under all circumstances, the total special compensation provided for in this Article shall be paid only if such compensation is greater than the reward recoverable by the salvor under Article 180 of this Code, and the amount to be paid shall be the difference between the special compensation and the reward.

If the salvor has been negligent and has thereby failed to prevent or minimize the pollution damage to the environment, the salvor may be totally or partly deprived of the right to the special compensation.

Nothing in this Article shall affect the right of recourse on the part of the shipowner against any other parties 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.

Article 184 The distribution of salvage reward among the salvors taking part in the same salvage operation shall be made by agreement among such salvors on the basis of the criteria set out in Article 180 of this Code; failing such agreement, the matter may be brought before the court hearing the case for judgment, or, upon the agreement of the parties, submitted to the arbitration organization for an award.

Article 185 The salvors of human life may not demand any remuneration from those whose lives are saved. However, salvors of human life are entitled to a fair share of the payment awarded to the salvor for salving the ship or other property or for preventing or minimizing the pollution damage to the environment.

Article 186 The following salvage operations shall not be entitled to remuneration:

(1) The salvage operation is carried out as a duty to normally perform a towage contract or other service contract, with the exception, however, of providing special services beyond the performance of the above said duty.

(2) The salvage operation is carried out in spite of the express and reasonable prohibition on the part of the Master of the ship in distress, the owner of the ship in question and the owner of the other property.

Article 187 Where the salvage operations have become necessary or more difficult due to the fault of the salvor or where the salvor has committed fraud or other dishonest conduct, the salvor shall be deprived of the whole or part of the payment payable to him.

Article 188 After the completion of the salvage operation, the party salved shall, at the request of the salvor, provide satisfactory security for salvage reward and other charges.

Without prejudice to the provisions of the preceding paragraph, the owner of the ship salved shall, before the release of the goods, make best endeavours to cause the owners of the property salved to provide satisfactory security for the share of the payment that they ought to bear.

Without the consent of the salvor, the ship or other property salved shall not be removed from the port or place at which they first arrived after the completion of the salvage operation, until satisfactory security has been provided with respect to the ship or other property salved, as demanded by the salvor.

Article 189 The court or the arbitration organization handling the salvor's claim for payment may, in light of the specific circumstances and under fair and just terms, decide or make an award ordering the party salved to pay on account an appropriate amount to the salvor.

On the basis of the payment on account made by the party salved in accordance with the provisions of the preceding paragraph, the security provided under Article 188 of this Code shall be reduced accordingly. 

Article 190 If the party salved has neither made the payment nor provided satisfactory security for the ship and other property salved after 90 days of the salvage, the salvor may apply to the court for an order on forced sale by auction. With respect to the ship or the property salved that cannot be kept or cannot be properly kept, or the storage charge to be incurred may exceed its value, the salvor may apply for an earlier forced sale by auction.

The proceeds of the sale shall, after deduction of the expenses incurred for the storage and sale, be used for the payment in accordance with the provisions of this Code. The remainder, if any, shall be returned to the party salved, and, if there is no way to return the remainder or if the remainder has not been claimed after one year of the forced sale, it shall go to the State treasury. In case of any deficiency, the salvor has the right of recourse against the party salved.

Article 191 The provisions of this Chapter shall apply to the salvor's right to the payment for the salvage operations carried out between the ships of the same owner.

Article 192 With respect to the salvage operations performed or controlled by the relevant competent authorities of the State, the salvors shall be entitled to avail themselves of the rights and remedies provided for in this Chapter in respect of salvage operations.


* On July 7, 2016, a landmark maritime salvage case was heard by a five-judge-trial-panel headed by Ms. He Rong (Deputy President of Supreme People’s Court of China), and composed by Mr. Zhang Yongjian (Division Chief Judge of No. IV Civil Trial Division of Supreme People’s Court of China), Ms. Wang Shumei (Deputy Division Chief Judge of No. IV Civil Trial Division of Supreme People’s Court of China), and Mr. Yu Xiaohan (Judge of No. IV Civil Trial Division of Supreme People’s Court of China), and Mr. Guo Zaiyu (Acting Judge of No. IV Civil Trial Division of Supreme People’s Court of China). This case involves with very special legal issue of maritime salvage, inert alia, the difference between salvage contract on basis of “no cure no pay” and “employed salvage contract” (on basis of pre-fixed charge tariff), and whether shipowners shall assume full salvage charge or shipowners can request to just assume salvage reward as per the proportion of the vessel’s salved value to the total salved values. The July 7, 2016 court hearing was live broadcasted by about 20 media channels (including Xinhua News Agency, CNN and Bloomberg etc), and about 60 persons observed the hearing in the public gallery area, including some NPC (National People’s Congress) members, Invited People’s Supervisors and Invited Consultants of Supreme People’s Court, and some diplomats from Singapore and India. More than 2 million persons watched this court hearing live broadcast. The Editors Team thereby quickly have this case translated and for convenience of understanding, English version of Chinese Maritime Code Chapter IX “Salvage at Sea” is annexed to this judgment.

[1] "New evidence" in Chinese civil procedure law context means evidence newly discovered after the evidence exchange deadline or evidence that could not be produced earlier due to "objective reasons." If, however, a party suddenly appears with new evidence, and it has not described to the court its diligent efforts to obtain it, then the court is likely to exclude it-unless the party can genuinely show it to be newly discovered." Regarding the conception in general of “new evidence” in Chinese civil procedure law, please refer to Paul Schmidt: A Review of China's New Civil Evidence Law, Pacific Rim Law & Policy Journal. Vol. 12(2), 2003, pp. 308 – 309.

[2] Regarding “Doctrine of Change of Circumstances” in Chinese contract law, it is somewhat similar to doctrine of “material advisers change” in common law and for further understanding of this Chinese law issue, please refer to Gordon Y. M. Chan, The Doctrine of Change of Circumstances in Chinese Contract Law, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1934085.

[3] The Public Institutions in China, or Shiye Danwei (Chinese: 事业单位), refers to organizations involved in the cultural, educational, sporting and medical care sectors, providing social services and welfare to the public under the sponsorship of the State and local governments. The institutions usually include media, publishing houses, public schools and hospitals. China has a total of 1.26 million public institutions with over 40 million employees. Ref: http://wiki.china.org.cn/wiki/index.php/Shiye_Danwei.

[4] Full text English translation of Maritime Code of the People's Republic of China can be viewed from website of PRC National People’s Congress and URL address is http://www.npc.gov.cn/englishnpc/Law/2007-12/12/content_1383863.htm.