The Seminar on Extending the Maritime Law (Revised Draft) to be Applicable to Inland Waterway Transportation and Inland Vessel was held in Wuhan, Hubei province on December 23, 2017. The Seminar was jointly hosted by the research group of the Ministry of Transport on revision of the Maritime Law, the Wuhan Maritime Court, and the Yangtze River Maritime Law Society, and co-hosted by Hubei Zhong He Xin Law Firm. Present at seminar are 20 more experts and professors from the research group led by Chu Beiping the dean of Dalian Maritime University Law School, and over 70 guests from the Supreme People's Court, Hubei People's Congress Standing Committee, Hubei Higher People's Court, Zhejiang Higher People's Court and maritime courts, port and shipping administrations, universities, research institutes, and port and shipping companies of Wuhan, Guangzhou, Beihai, Shanghai, Dalian as well as representatives of the National People's Congress. Professor Si Yuzhuo, the former headmaster of Dalian Maritime University and renowned maritime law expert, and Wang Yanjun, the former deputy chief judge of the fourth court of civil trial of the Supreme People’s Court were invited to attend the seminar.
Director Yang Yunfu was invitation by Wuhan Maritime Court to attend the seminar and provided his own suggestions on the discussed issues.
Main suggestions put forward by Mr. Yang were mainly as follows:
1. To clarify the form of contract for the inland waterway cargo transportation.
In real life practices, many individual ship owners or small and medium sized shipping companies engaged in domestic inland waterway cargo transpiration do not have a proper legal sense in making formal contract. They usually use phone calls, SMS and Wechat (a popular social media in China) to make major terms such as freight rate, port of departure and port of destination. They also do not include any explicit reference to the rights and obligations of the parties in the agreement. At present, common written contracts mainly include bill of landing, single-voyage transportation contract, voyage charter contract, long-term transportation contract. The Domestic Waterway Cargo Transportation Regulations (Cargo Regulations) divides inland waterway cargo transportation contract into liner shipping contract and voyage charter shipping contract in accordance with Maritime Law. Mr. Yang considered that it is difficult to define “liner transportation”, and typical liner shipping is gradually declining in domestic waterway cargo transportation. He suggested that the new provision should no longer distinguish liner shipping contract and voyage charter contract for domestic waterway cargo transportation. The new provision on contract of domestic waterway cargo transportation should include all forms of contract commonly used in practice, meaning that all written, oral or other forms of bill of landing, single-voyage transportation contract, voyage charter contract, long-term transportation contract and any other forms of contract that consider transporting goods as its main purpose should be included in the adjustment. Since the current Maritime Law does not apply for inland waterway vessels, the inland waterway towage contract has to be deemed, as an expedient measure, by the Cargo Regulations as the contract of waterway cargo transportation. He then suggested that the Maritime Law should be extended to cover inland waterway vessels, which enables it to accommodate the inland waterway towage contract into the adjustment scope of Chapter VII of Towage Contract at Sea, and to include inland waterway time charter contract and bareboat charter contact in Chapter VI of Charter Parties.
2. To define the scope of adjustment to the Maritime Law on contract of inland waterway cargo transportation.
In light of the location of the port of departure and destination as specified in the waterway cargo transportation contract, Mr. Yang has roughly classified the domestic waterway cargo transportation into four types: transportation between coastal ports, through transportation from river to sea, through transportation from sea to river, and transportation between inland ports. Take Yangtze River as an example, the inland waterway transportation of China can be further divided into transportation on the tributaries of the Yangtze River, direct transportation between main lines and tributaries, transportation between tributaries and transportation between lakes, and so on. According to Article 2 of the Maritime Law, the transportation between coastal ports, and the direct transportation between the river and the sea are considered within the scope of maritime transportation, and thus are adjudicated by the Maritime Law. If the Maritime Law is extended to be applicable to inland waterway transportation, it is necessary to examine whether there is a need to properly limit the scope of inland waterway transportation. Mr. Yang posed the question of whether the Maritime Law should be applied to the dispute over freight transportation in a small gully of the Yangtze tributary. By answering that question, he pointed out that if the legislature is going to formulate the domestic waterway cargo transportation as an independent and separate law, the scope of its applicability can be as broad as possible to include all types of domestic waterway transportation that cover the marine transportation, river, lake and any kind of navigable waters in China. If, however, the lawmakers plan to create a separate chapter within the Maritime Law, then considering the nature of Maritime Law which is related to the “sea”, the scope of domestic waterway transportation should be limited to navigable waters connected with the sea, such as the transportation between the river ports in the main line of Yangtze River that is connected to the sea, and the direct transportation between the Yangtze River trunk line and the tributaries. All other types of inland waterway cargo transportation, such as transportation in tributary rivers, lakes, etc., should be adjudicated under the Contract Law, given its relatively limited cargo traffic. Mr. Yang suggested that the Supreme People’s Court stipulate, when necessary, through judicial interpretation that dispute over inland waterway cargo transportation and other similar disputes may refer to relevant provisions of the Maritime Law. By “directly applying” and “making reference to” the Maritime Law, the issue of application of law for inland waterway cargo transportation can be solved.
3. To define rights and obligations of the contracted parties
Lawmakers should make a full reference to the Maritime Law, the Contract Law, and the Cargo Regulations to help define the rights and obligations of parties involved, and bring provisions of the domestic waterway cargo transportation in line with those of the international maritime cargo transportation.
The carrier’s obligations should include carrier’s seaworthiness obligation, obligation of non-deviation, cargo management obligations and the obligation to receive and deliver goods. Mr. Yang suggested the provisions in Articles 47 to 49 of the Maritime Law to the lawmakers as the primary resource.
As to the carrier’s liabilities, the carrier should be required to assume the risk for the loss of goods, damage and delay in delivery. In the case of inland waterway transportation, the consignor usually entrusts the port with common operations, and there are also cases of “FOB Stowed” in real life practices which the consignor is responsible for all subsequent stowage and, in the case of bulk delivery, trimming operations at the port. Mr. Yang suggested that in general, the carrier’s period of responsibility can be specified from receipt to delivery. When the consignor or the consignee specifies the carrier to complete the cargo handling, the carrier’s period of responsibility begins when the goods are received from a third party, and ends when the goods are delivered. According to him, the lawmakers can make reference to Article 34 of the Cargo Regulations and Article 57 of the Maritime Law to stipulate the compensation assessment in situations where carrier has not delivered the goods within the period of time that agreed in the contract or within a reasonable period of time without the contract. In addition, he suggested Article 61 of the Maritime Law as the reference when drafting provisions on loss of the right to claim limitation of liability in the event of loss or damage of the goods when the delivery is delayed by the carrier. He also specified that Article 311 of the Contract Law can be considered when making provisions on carrier’s defense to loss of the right to claim limitation of liability, such as circumstance of force majeure, the character of goods, or reasonable damage of goods. The carrier shall not enjoy the right to claim limitation of liability if the loss arises from faults of the shipper and consignee. For calculation of damages, Mr. Yang recommended the legislature consider Article 312 of the Contract Law.
In terms of the consignor’s obligations, Mr. Yang observed that in the current sluggish shipping economy, the consignor is in a dominant position in performance of contract, and thus there is a need to further regulate their behavior. Considering Article 66 to 69 of the Maritime Law, the amended Maritime Law should clearly stipulate the consignor’s obligation of correct declaration, obligation of handling formalities in a timely manner, obligation of carrying dangerous cargo consignments, and obligation of freight payment to ensure the safety of personnel, ships, cargo, and the environment.
For the consignee’s obligations, Mr. Yang stated that although the consignee is not the original party to the contract of carriage, he enjoy the rights and assume responsibilities under the contract of carriage. Since the transferable bill of lading is not used in inland waterway shipping, there are not many issues concerning the consignee identification and cargo delivery. The consignee’s right of receiving goods comes from the sales contract and his identity is specified in the transportation contract by the shipper (usually the seller). Legal relation between the consignee and carrier arises from the withdrawal of goods. The delivery of goods by the carrier and the withdrawal of goods by the consignee together constitute an important part of performance of contract. As long as the consignee’s obligation is concerned, the amended provision should specify that the consignee has the obligation to pick up the goods within a reasonable time. According to Article 44 of the Cargo Regulations, in the inland waterway transportation, the consignee also has the right to claim damages against the carrier for the loss, damage, or delay of delivery of goods recorded in the seaway bill. Mr. Yang went on to advice the lawmakers to include the consignee’s right to claim for damages against the carrier in the situation where the carrier does not issue a consignment note, which is very common in the domestic inland waterway transportation.
4. To properly limit the freedom of contact of domestic inland waterway cargo transportation
Provisions with regard to international marine transportation contained in the current Maritime Law was drafted with the consideration of preventing liner carriers from abusing the freedom of contract. Mr.Yang referred Article 44 of the Maritime Law which strictly limits the parties’ freedom to make sea freight contract, the bill of lading, and any kind of transportation documents served as a contractual voucher. Any articles and clauses in the contract shall be null and void in violation of Chapter 4. Unlike the bill of lading, parties to a voyage charter contract can still make a free contract to determine their rights and obligations, save for exceptions where the carrier violates the seaworthiness obligation, obligation of non-deviation or makes errors on purpose or makes significant errors in the performance of contract.
In drafting the provisions on domestic waterway cargo transportation, Mr. Yang advised that if the carrier has only issued the bill of landing, but did not give consignor the opportunity to negotiate the terms of the contact, the career’s contractual freedom should be strictly limited. In contrast, where the consignor and the carrier have the opportunity to enter into a full contract such as a single voyage contract, a voyage charter contract, or a long-term contract, whether or not the parties’ rights and obligations should be limited is a critical issue for the lawmakers. To analyze the issue, Mr. Yang recalled that the fundamentals of Contract Law is encouraging the principle of freedom of contract. However, in certain circumstances, the freedom of the contract is not absolute, and it should be appropriately limited to prevent the abuse of contractual freedom and to ensure fairness and justice. According him, in the current practice of domestic coastal and inland waterway cargo transportation, there are few contracts that have the terms to exempt or limit responsibilities and obligations. Most of the contracts only focus on the freight. As the economy of waterway transportation continued to decline, the contradiction of more ships than goods has become increasingly prominent. Carriers are in a clear disadvantaged position in the contract negotiations, and are unlikely to abuse the freedom of contract. However, once the shipping market recovers, the carrier will be on the advantageous side and may fully utilize the contractual freedom to harm the interests of the consignor. Therefore, from a long term perspective, Mr. Yang recommend to impose mandatory obligations on the carrier, consignor and consignee without the need to distinguish the types of contract for the carriage of goods in domestic coastal and inland waterways. The obligations shall not be altered through freedom of contract. He explained that stipulating the consignor’s mandatory obligations and strictly limiting the freedom of contract is conducive to the safety of navigation, especially in the transport of dangerous goods and special cargoes, given that the consignor is currently in an advantageous position when signing the contract. Furthermore, he stressed that in the domestic waterway cargo transportation, the existence of various kinds of contract not only make the legislature very difficult to define and unify the contract of transportation that restricts or gives freedom of contract, but also increase the difficulty of legislation and bring uncertainties to the shipping practice. Strictly restricting contractual freedom for domestic coastal and inland waterway transportation can help to further clarify the rights and obligations of the parties, strengthen contract awareness, rule awareness, and sense of responsibility, which is in line with the legislative objective of regulating the domestic waterway cargo transportation market.
5. To re-build the “actual carrier” system
After the abolition of the Cargo Regulations, whether to continue to apply the “actual carrier” rule to disputes over coastal and inland waterway cargo transportation contracts in the court has become a major issue. Though there are many cases in which the parties clearly stated that the “actual carrier” rule is no longer be applicable after the abolition of the Cargo Regulations during the court hearing, judicial practice shows that the “actual carrier” rule had helped the court resolve a large number of disputes, adjudicate the interests of parties and standardize the domestic waterway cargo transportation market. Due to the abolition of the Cargo Regulations, there is a regulatory gap in the “actual carrier” rule. The denial of the “actual carrier” rule in the court to adjudicate disputes over coastal and inland waterway transportation had resulted in the inconsistency of the courts’ decisions and affected the credibility of the judicial system, leading to the situation of repeating the pursuing of recovery between the parties. In that case, Mr. Yang has advised the legislature to rebuild the “actual carrier” system when drafting the domestic waterway cargo transportation provisions in accordance with the Maritime Law and Cargo Regulations. In contrast to the fact that the “actual carrier” rule is only applicable to the bill of lading for international maritime cargo transportation, Mr. Yang suggested that it should be applicable to all types of contracts for domestic waterway cargo transportation, including voyage charter contract and other forms of contract.
Mr. Yang has also suggested that restricting the freedom of contract is a prerequisite for establishing the “actual carrier” rule. Under the Article 47 of Cargo Regulations, where the actual carrier assumes joint liability, the relevant provisions in Cargo Regulations on the liabilities of the carrier apply to the actual carrier. Since the Cargo Regulations is not obligatorily applicable, the consignor and the carrier have some level of contractual freedom to limit liabilities for lost or damage of goods due to unseaworthiness or improper management of the ship. In that case, the actual carrier can enter a plea based on limitation or exemption of liability agreed between the consignor and carrier when assuming joint liability. Also, the carrier may add “Himalaya Clause” in the contract to enable the actual carrier to rely on limitation or exemption of liability he entered with the consignor. If the actual carrier takes full liability in accordance with the Cargo Regulations, while the carrier enters the plea for limiting or exempting liabilities, there would be no way to ensure that both parties assume joint liability. As a result, Mr. Yang concluded that the “actual carrier” rule may break the relativity of contract and lead to more problems. Only when the freedom of contract is restricted for carriage contract, the actual carrier can assume joint liability with the carrier. This is also the main reason why Mr. Yang opposed adopting the “actual carrier” rule to voyage charter contract under Chapter 4 of the Maritime Law.
Furthermore, Mr. Yang also stated that he is opposing to the idea of applying the “actual carrier” rule to the port operator. Because the “actual carrier” system of the current Maritime Law does not apply to port operator, where the goods are lost or damaged during the period of loading or discharging, the consignee may require the port operator to assume all liability by the reason of tort, and the port operator is not entitled to limitation of liability or defense to claim exemption of liabilities. In the Rotterdam Rules that regulates the international maritime transpirations, the port operator is included as one of the parties to the carriage contract which has the right to enter the plea for limiting or exempting liabilities. Whereas, as Mr. Yang already explained, if the provision of domestic coastal and inland waterway imposes strict liability to the carriage contract, then the carrier does not enjoy the right to enter the plea to limit or exempt liabilities. Therefore, expanding the “actual carrier” rule to the port operator is of little significance, rather it will lead to more lawsuits against the port operator.
6. To add carrier’s obligation of notifying the consignee to pick up the goods
In the practice of domestic waterway cargo transportation, there are many disputes caused by failing to pick up the goods promptly. Mr. Yang suggested that the carrier should notify the consignee to pick up the goods within 24 hours after the goods arrive at the port in accordance with Article 38 of the Cargo Regulations. If the consignee does not pick up the goods within a reasonable period of time, the consignee should take full responsibility for any legal consequences caused by the delay according to Article 41 of the Cargo Regulations.
7. To add carrier’s right to exercise a possessory lien on cargo
Article 40 of the Cargo Regulations which regulates the carrier’s right to exercise a possessory lien on cargo is basically consistent with Article 315 of the Contract Law. In order to ensure the carrier’s right to charge the freight, the new provision on domestic inland waterway transportation should grant the right to exercise a possessory lien as provided in the Property Law of the People’s Republic Law of China to the carrier in accordance with Article 315 of the Contract Law. The carrier should have the right to retain not only the corresponding goods that generate freight and demurrage charges, but also other goods shipped by the consignor.
8.To regulate the right to control goods
To guarantee the integrity of the system, Mr. Yang suggested the Law of Contract and Cargo Regulations as reference for the right of carrier to control goods in costal and inland waterway transportation, although it’s not commonly seen that the carrier excises such right.
9. Statute of limitation
According to the current judicial interpretation on the domestic coastal and inland waterway cargo transportation, contract for domestic waterway transportation has a one-year statute of limitations which begins to run from the date that the carrier delivers the goods or the date that the goods should have been delivered in accordance with Article 257 of the Maritime Law. After the implementation of the General Provisions of the Civil Law, the statute of limitations becomes more complicated. While the statute of limitations for coastal and inland waterway cargo transportation contact remains the same, the statute of limitations for the coastal voyage charter contract is two years in accordance with Article 257 (2) of the Maritime Law, and for the inland waterway voyage charter contract is three years in accordance with the General Provisions of the Civil Law. Moreover, Mr. Yang pointed out that the accrual of statute of limitations for the inland waterway transportation insurer to exercise the right of subrogation has been controversial. In practice, some courts are of the opinion that the accrual should be the date that the carrier delivers the goods or the date that the goods should have been delivered in accordance with the Official Reply of the Supreme People's Court on the Starting Date of the Statute of Limitations in Which the Insurer of a Marine Insurance Contract Exercises the Right of Subrogation to Claim for Compensation. Some courts held that the accrual should be the date that the insurer obtain the right of subrogation in accordance with Article 16 of the second judicial interpretation on the Law of Insurance. The one-year statute of limitation applicable to coastal and inland waterway cargo transportation contact comes from the legislative concept of Article 257 of the Maritime Law, that is, the statute of limitation for coastal and inland waterway cargo transportation should be unified and should not be adjudicated under the Property Law. Mr. Yang approved of the first opinion. In order to facilitate the understanding of the parties and to avoid differences in application of laws by the courts, the beneficiary suggested harmonizing the rule of statute of limitation for international maritime cargo transportation and domestic waterway cargo transportation, and extending its application to all types of contract that contemplate transporting goods as the main purpose, such as voyage charter contract and etc.
Above suggestions proposed by Mr. Yang gained support and acknowledgement from most experts attending the seminar.