Norwegian bulker owner Spar Shipping has created a legal first in China (PRC) in its long-running charter claim against Grand China Logistics (GCL).
For a number of years, Spar has made efforts to collect $25.3m following a series of judgments in the UK.
The owner terminated three long-term charters to a GCL subsidiary on the grounds that the charterer had persistently failed to pay hire in advance.
To recover its cash, Spar filed a claim at the Shanghai Maritime Court.
This court has now ruled that the UK judgments are binding for the first time ever.
Following approval from the Supreme People’s Court, the court confirmed that English High Court judgments can be recognised and enforced in China, based on legal reciprocity
The decision was made despite the Chinese court finding no precedent in which a civil and commercial judgment issued by a Chinese court was recognised and enforced by the English court.
But it was satisfied that as a matter of principle Chinese civil and commercial judgments can be recognised and enforced by the English courts, according to lawyer Yang Yang and senior claims executive Patrick Lee, of insurer Gard Hong Kong.
They explained that, unlike in England, China has a civil law legal system which is not based on the doctrine of precedent, and is largely based on statutory law rather than case law.
Other courts to follow suit
But the Gard executives said: “It can be expected that courts in other port cities with designated maritime courts would follow the memorandum when faced with a similar situation.”
These include the maritime courts of Ningbo, Qingdao, Guangzhou, Dalian, Tianjin, Haikou, Wuhan, Nanjing, Beihai and Xiamen.
Before the new ruling, it was thought that an arbitration clause was more beneficial than an English court jurisdiction clause in respect of enforcement in China.
The judgment adds to a growing trend of recognising foreign judgments in China.
In 2016, a Singapore judgment was enforced, and in 2017 a US civil ruling was recognised.
“In the interconnected world of maritime trade and transportation, the recognition of foreign court judgments based on reciprocity is a welcome trend,” the Gard lawyer and claim executive said.
A shift in attitude
Lianjun Li, a partner at Reed Smith Richards Butler in Hong Kong, told TradeWinds that Chinese courts may now shift to a more open attitude towards the enforcement of a foreign court judgment.
“Despite that, there are certain points for clarification, the mentioned case is a good signal for recognising and enforcing foreign judgment in PRC. It may also lessen the foreign party’s concern when they conclude a foreign court jurisdiction agreement with the Chinese party,” he said.
UK arbitration proceedings were suspended because the charterer, Grand China Logistics Holding (Group), went into liquidation. The shipowner, therefore, brought suit against the parent company.
Annual interest of more than 8% is understood to have brought the total figure considerably higher than the $25.3m principal amount.
The English judgment was widely welcomed for clarifying the position under English law: the right to terminate the contract and/or claim for damages following a repudiatory or renunciatory breach will be based on the facts of each case.
