China's highest court has issued legal guidelines that limit the liabilities of shipyards and shipping companies affected by the coronavirus pandemic
Earlier this week, the Supreme People’s Court of China told lower courts that yards and vessel operators should be favoured in some scenarios.
“If port operators restrict berthing time for quarantine and inspection without explicit orders from maritime authorities, vessel owners or operators will have legal claims for compensation,” the supreme court said.
Among other conditions, carriers and shippers can terminate the transport contracts if vessels cannot arrive at loading or discharge ports due to the pandemic, the supreme court stated.
Moreover, the carriers can be exempted from the liabilities for delayed deliveries that result from Covid-19, if they inform the shippers in time, according to the supreme court.
The guidelines also stated that shipbuilders and repair yards can delay their deliveries due to a shortage of workers or equipment, but lower courts need to take individual situations into consideration.
Chinese law rules
The supreme court’s instruction is expected to affect legal cases governed by Chinese law. However, English law applies to most shipbuilding and international shipping contracts.
“In domestic cases governed by Chinese law, the opinions will influence contract interpretation and the decisions that are made,” a lawyer familiar with Chinese legal matters told TradeWinds.
“In foreign cases governed by foreign law, the opinions may have no effect at all.”
The lawyer, who did not want to be named, also said the enforcement of foreign arbitral awards in China are unlikely to be affected by the supreme court’s guidelines.
Arbitration
“The majority of such awards — certainly those from London — qualify for recognition and enforcement under the New York convention,” said the lawyer, referring to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
“Party states are under a mandatory obligation to enforce awards from other party states provided certain conditions are satisfied; the grounds for refusal are very limited.”
“Foreign parties are sometimes worried about the public policy exception being invoked successfully, but this rarely happen.”
