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The Case of XX Hong Kong Ltd．etc. v. Fujian XX Shipping Company on Dispute over Claims for loss of Containers in Longtong Jurisdiction: Arbitration; China Maritime Arbitration Commission Date of Decision: October 24, 2000 1.Case Brief On August 1, 1994, the principle claimant, as the agent for the second and third claimants, signed a Connecting Carrier Agreement with the respondent. This Agreement stipulated that, the respondent should carry the containers with goods or empty consigned by the claimants in Hongkong and Damen or/and other localities agreed by both parties. Article 9 of the Agreement reads as: "LIABILITY AND INDEMEIFICATION XSC (the respondent in this case) shall indemnify and hold EGH (the preliminary claimant in this case) or the PRINCIPALS (the second and third claimants in this case) harmless from all expenses and liabilities EGH or the PRINCIPAL may incur which in any way may arise from or be connected with any loss,damage, delay or misdelivery of goods while in the possession or custody of XSC under this Agreement except such loss, damage, delay or misdelivery which is directly attributable to the gross neglect or willful misconduct of EGH or the PRINCIPALS,its agents, servants or employees. Notwithstanding any clause contained herein or contained in XSC tariff, long or short form bill of lading or any underlying agreement between the Participants or any statute or convention to the contrary, XSC agrees that in no event shall its liability to EGH or the PRINCIPALS for claims arising out of this Agreement be less than that of EGH or the PRINCIPALS liability to third parties resulting from XSC breach of this Agreement. XSC are liable for any loss or damages sustained to equipments and/or containers while in the possession or custody or jurisdiction of XSC and shall indemnify EGH or the PRINCIPALS for the cost of such loss or damages. In case of container total loss, XSC shall give notice in writing of such Total loss to EGH and pay to EGH or the PRINCIPALS the depreciated replacement value of the container. The depreciated replacement value per Container is determined by depreciating the replacement value per Container is determined by depreciating the replacement value on monthly basis at the rate of 5 (five) percent per annum, commencing from the manufacture date of the Container. The replacement value of each type of the Container are as following. However, the depreciated replacement value shall not be less than 50 (fifty) percent of the replacement value." Article 10 of the Agreement reads as: "CLAUSE PARAMOUNT The parties agree that this Agreement shall have effect subject to Hague Rules as adopted by the International Convention of Brussels of August 25th 1924 as amended by the Brussels Protocol of 1968, and any legislation making those Rules compulsorily applicable to this bill of lading including COGSA, which Rules shall be deemed incorporated herein and made a part of this Agreement and nothing herein contained shall be deemed as surrender by the parties of any of their rights and immunities or an increase of any of their responsibilities under said Act except as provided in the Jurisdiction and Liability and Indemnity provisions herein. The provisions cited in said Act shall (except as may be otherwise specifically provided herein) also govern before EGH or the PRINCIPALS cargo and containers are loaded on and after they are discharged fro the XSC vessel provided, however, that the containers and cargo at said time determined to be in actual custody of XSC." In February 1997, the PRINCIPALS respectively carried 28 and 10 containers with cargo from Xiamen to ports of Europe, America and Middle East. The PRINCIPALS respectively issued a full B/L to the owner of the goods from Xiamen to each destination port. These containers should be carried from Xiamen to Hongkang first and then head for the destination ports by changing ships in Hongkong. For the purpose of completing the transport from Xiamen to Hongkong, the EGH entrusted the respondent to carry such 38 containers from Xiamen to Hongkong in accordance with the Agreement. The respondent loaded such 38 containers consigned by the claimants in M/V"Longtong", and issued clean B/L on Feb. 2nd, 1997.A collision occurs between M/V Longtong and M/V Minda of Fujian Minda Shipping CO., LTD on Longtong's way to Hongkong from Xiamen on February 2, 1997. Consequently, all such 38 containers loaded in Longtong were lost. The claimants making such accident suffered from the loss of all the containers, meanwhile, PRINCIPALS were confronted with the claim for compensation, as the one who issued the B/L, by the owner of the goods whose cargos were unavailable due to the loss. The claimants held that, according to the Agreement, the respondents should assume the compensation liabilities for the loss of these containers and for any loss caused by the loss of these containers and suffered by the claimants. Accordingly, the claimants filed a request for arbitration as follows: (1) the respondent should pay 219193.60 Dollars for the loss of these 38 containers (2) the respondent should pay 978701.35 Dollars, 52000000 Liras and 25461.73 Marks for losses caused and to be caused by the loss of these 38 containers; (3) the respondent should pay interests of the sum mentioned above from February 2, 1997 to the actual date of payment; and (4) the respondent should pay counsel fees and arbitration fees. For the claimant's request for arbitration, the respondent replies: (1) This case should be awarded in accordance with the B/L issued to the claimants other than the Agreement. In February, 1997, the PRINCIPALS delivered their 38 containers to the respondent to carry to Hongkong from Xiamen by Longtong. The respondent issued the PRINCIPALS 38 B/L with the PRINCIPALS themselves as the shippers and consignee, and the PRINCIPALS had no objection to the contents and clauses of the B/L. Paragraph 1 of Article 78 in the Maritime Law of the People's Republic of China stipulates: " The relationship between the carrier and the consignee as well as the holder of the bill of lading with respect to their rights and obligations shall be defined by the clauses of the bill of lading. " It is obvious that the bills of lading is the exclusive base for handling the relationship between the claimants and the respondent. In accordance with Article 7 of the Agreement, the Hague Rules should be applicable to the rights and obligations of the carrier. And in accordance with Paragraph 2 Article 4 of the Hague Rules and Article 51 of the Maritime Law of the People's Republic of China, the carrier should be exempted from the misfeasance in navigation, therefore, the respondent should be exempted from the claimants'claims. (2) Stipulations of Article 9 of the Agreement were obviously unfair and should be revoked. The Agreement prescribed that the goods delivered by the claimants to the respondents were common ones other than special ones, and the carriage was charged on the basis of the common goods (e.g. charged on the basis of the containers) other then on the basis of the goods. In such circumstances, the general provisions on rights and obligations of the parties to contract for international transport of goods in the Maritime Law of the People's Republic of China shall apply to that of the claimants and the respondents, and the obligations as well as the liabilities of the carrier as well as the shipper should not be increased at will, without limit and. However, Article 9 of the Agreement still stipulated that the respondent should abandon rights and exemption endowed by the Hague Convention, while none responding restrictions were stipulated for the claimants and no special carriage or preference were granted to the respondents. These stipulations were obviously unequal in rights and obligations of both parties and visibly lopsided in economic interests, violated not only the general principles of related Conventions and routines on regulating the international cargo transport but also the principles of fairness and equal value exchange in the General Principles of the Civil Law of the People's Republic of China, were obviously unfair and should be revoked. Moreover, this Article stipulated that the respondent should indemnify for any loss, damage, delay of goods caused by any incident, which included such force majeure as perils, war, dangers and accidents of the sea or other navigable waters, contingencies and saving or attempting to save life or property at sea. The former was force majeure, and compensation for losses caused by force majeure should be exempted, which is a basal principle of China laws while the later were exemption items as accepted by the Maritime Law of the People's Republic of China, related international Conventions and routines. Article 9 added stipulations of the respondent's obligations at will, violating the principles of the Maritime Law of the People's Republic of China and the related international Conventions as well as public interests, so it should be invalid. (3) The loss of the 38 containers was not inevitable to cause losses to the claimants. According to stipulations of Paragraph 1 Article 5"Principle Term and Liability Term for the Carrier" of the bill of lading issued by the PRINCIPALS to owners of goods, all liabilities of the carrier should be governed by the Hague Convention. In light of the Hague Convention, the respondent as the carries should also be exempted from responsibilities against the shipper (e.g. owners of goods). In case the claimants did not exert the exemption right properly so as to cause losses, for which the respondent may not be required by the claimants to indemnify if the losses had not inevitable relationship with the loss of the goods. Moreover, the claimants admitted that they had obtained the payment of reservation from the insurer, and in accordance with such provisions in Article 252 of the Maritime Law of the People's Republic of China as"...right of the insured to claim compensation from the third party shall be transferred to the insurer as from the payment date by the insurer...", so the claimants had lost their rights of claimant and had no right to claim compensation from the respondent. On May 13, 1999, tribunal awarded partially that the requirements of the claimants for the compensation for the 38 containers by the respondent should be overruled. At the same time, the tribunal reckoned that the respondent should compensate the losses and expenses that were cased by the claimant from the owners of goods for the lost or damaged goods in the containers and might not avoided through the cautious and reasonable treatment by the claimants. The claimants should submit the tribunal all detailed materials before June 30, 1999 or apply for extending such time limit with explanations thereof. On the May 10, 2000, the tribunal required, at the second hearing, that the claimants should submit all the detailed materials for claimant before July 10, 2000, and that the respondent should reply within half month as of the date of receipt. Based on the materials submitted by the two parties, the arbitration court would award. The claimants submitted 9 pieces of resolutions of claimant for goods under bills of lading to the arbitration court on July 10, 2000, and illustrated radical facts of and reasons for claimant. The claimants indicated that they had paid 198180.90 Dollars for losses of the owners of goods and total 113958.41 Dollars for related consultancy fees and other losses. The claimants had obtained 39481 Dollars through applying for registration of creditor's rights aiming at fund of liability restriction for collided Minda in Xiamen Maritime Court. Deducting the obtained, the losses of the claimants to be compensated by the respondents for this case should be 198180.90 Dollars + 113958.07 Dollars –39481.41 Dollars= 272657.56 Dollars and interests thereof. The claimants thought that it was proved that they had taken active measures to cautiously handle the claimant from the owners of goods and reduced the compensation sum to the minimum. And the results of the resolution of this case also indicated that the claimants had fulfilled their duties scrupulously. The payment from the claimants for the compensation was considerably lower than the claimant of the owners of goods, and the claimants successfully refused the claimant for losses of goods under several tens of bills of lading cased by the sinking of the Longtong, from which, it can been seen that the claimants had avoided a large number of losses for the respondent. Meanwhile, it was also shown that the claimants handled the claimant cautiously and scrupulously. With regard to the form of the evidence, it was needed to point out that it was not required by law to adopt notarization and attestation for the evidence and to take the origins of the evidence as the basis for finding facts. According to Chinese arbitration practices in the maritime, mainly facts are not found on the basis of origins of the evidence, and the copies of the evidence materials might be treated as the basis. The respondent agreed to and obeyed the partial award made by the arbitration on May 13, 1999, acceding to appropriate compensation for the losses and expenses caused by the loss of goods on the conditions that the evidence provided by the claimants satisfied the requirements of the partial award. However the respondent held that the compensation to the claimants should meet the requirements as follows: (1) the losses and expenses of the claimants had happened indeed;(2) the form of the evidence for losses and expenses satisfied the requirements of the Civil Procedure Law of the People's Republic of China, that is, the origins should be shown for the written evidences, and evidences from abroad should be notarized by the notarization authority of the locality as well as be attested by the China Embassy or Consulate: (3) the claimants should prove that they had made all reasonable measures to handle the claim of the owners of goods, that was, they should fulfill the obligation of diligent answer. Schedule of the Claimed situation for Owners of Goods against the Claimants

Schedule of the Claimed situation for Owners of Goods against the Claimants, the Compensation of the Claimants and Claimed back Situations for the Claimants against the Respondent 

Numbers for bills of lading Numbers of the claiming Claimed sum (Dollars) Sum of compensation Losses, expenses (Dollars) Resolution methods Claimed back sum (Dollars)
EISU14670

0007291

 Fireman's

Fund insurance company

 55623.39 25253.06 Prosecuting in an American court then reconciliation with compensating25%claimed sum to the owner of goods. 25253.06 + 3741.80 (legal service  fees)
EISU14670

0006057

 Safico trade co. 40040s 28279.30+38390.79 arrest charges he ship was detained by a court of Egypt then compromising. The Xiamen Maritime Court recognized the rationality of the compensation. 28279.30 + 38390.79 + 65794.86 (Schedules for losses)
EISU14670

0006855

 ROYAL

INSURANCE S.A

 77000 and interests thereof, totally 80474.62 77000 Prosecuting in a court of Uruguay, and the claimants compensated 77000 Dollars to the owner of goods with the interests thereof owed after the judgment 77000
EISU14670

0006758

 COMMERCIAL UNION INSURANCE COMPANY 41610 10400 Prosecuting in an American court then reconciliation with compensating25%claimed sum to the owner of goods. 10400 and consultancy fees 3421.07
EISU14670

0007169/7983/7991 and 8017/

8009/7177

 Thomson Consumer Electrionics 245238.04 and 31036.76 41440.35 Prosecuting in an American court then reconciliation 41440.35
EISU14670

0006511

 FEDERAL INSURANCE COMPANY 80839.10 6808.19 reconciliation 6808.19
EISU14670

0005085

 Segelken& suchopar,Hamburg Acting for Gerling &Konzem 25461.73

Deutsche Mark

 4000 reconciliation 4000
EISU14670

0006677

 WE Cox&Co Ltd Acting For The Tokio Marine&Fire insurance Co 33128.40 5000 Prosecuting in a Japan court then reconciliation 5000
EISU14670

0004146

 Aristo Trading and insurer 54568.80 refused Prosecuting in an court of Aristo then compromising legal service fees 2609.5

2.Award(1) The respondent shall pay the claimants 132403.81 Dollars and interests thereof with yearly rate of 7% from April 24, 2000 to the actual date of payment.(2) The arbitration fees for this case are XXX Dollars, XXX Dollars of which shall be afforded by the claimants and XXX Dollars by the respondent. The claimants have paid in advance the arbitration commission all the arbitration fees, so the respondent shall pay the claimants XXX Dollars. The actual fees paid by the claimants and the respondent for arbitrators they have assigned themselves shall be assumed respectively
(3) The funds in items (1) and (2) listed above to be paid by the respondent to the claimants shall be paid off within 45 days as of the day that this award is rendered.
3. Comments
 Matters related to this case are mainly as follows:(1) General issues(a). Evidences submitted by the claimants
 It is not provisioned by the Arbitration Rules that the evidence shall be of form of origins or be notarized or attested. The arbitration court held that one party may put forward reasonable reasons for suspending the authenticity of the evidences provided by the counter party, demanding to examine the origins of the evidence materials or investigate, but it may not totally deny the force of the evidences provided by the counter party upon the strength of not being origins or not having been notarized or attested. (b). Cognizance of the judgment of the Xiamen Maritime CourtThe Civil Judgment (Xia Hai Fa Shi Chu Zi [1998] No.021) of the Xiamen Maritime Court made cognizance for the losses under some bills of lading. But such lawsuit was brought against the Fujian Minda Shipping CO., LTD by the Evergreen Marine Corp., Ltd, and the compensation responsibility for tort other than for the compensation clauses of the Agreement that this case is to identify. Because of the different legal relationships between the two cases, the sum of compensation decided in the No.021 Civil Judgment shall not be certainly deemed as the basis for deciding the compensation sum for the respondent in this case.
(c) Evidences provided for the claimants
If goods are lost, the carrier shall prove for his exemption of liabilities firstly. The research report of the harbor supervisor and the judgment of the court are evidences with considerable force, and shall be put into full use. At the same time, it is possible to be required to provide evidences in such forms as witness showing at court and being questioned as well as sailing dairy offered.
 (d) Reconciliation Since the goods were lost, by considering the legal service fees and other expenses for conducting lawsuit and it is not certain to claim back all from the failure even if they win the lawsuit, it is common for the claimants to pay proper money to the owners of goods for the reconciliation before or after the beginning of the lawsuit in accordance with the specific situations of each case. deciding the sum for, reconciliation, such factors shall be taken into consideration as the laws of the locality, especially whether being exempted from failure in sailing, the court costs and the possibility of claiming back litigation costs and fees and legal service fees in case of wining, etc. (e) Notifying and soliciting the respondent before the reconciliationIn accordance with the liability nature of the respondent in this case, that is, it shall be responsible for indemnifying the payment made by the claimants to the third party and holding harmless the interests of the claimants, the claimants shall indicate the respondent such matters as replying the claimant, hiring lawyers, deciding whether to respond, how to argue, how to provide evidences and witnesses, negotiating conditions for reconciliation and so on before or in the process of the case if the respondent requires to approve in advance or decide these, and shall be responsible for results of their decisions including payment of fees and postponing of time. The respondent's not requiring so in advance shall not impact his objection to the acts of the claimants afterwards, but it is not permitted to take the consent of the respondent in advance as the premise for the availability of the claimants' acts.    (2) Compensation (Only the last four digits are listed for the number of each bill of lading)(a). The number of the bill of lading: 7291.
The claimant body: Fireman's Fund Insurance Company.  Claimed sum : 55623.39 Dollars. Resolution method: prosecuting in an American court then compromising. Compensation sum: 25253.06 Dollars. Required sum of the claimants: 25253.06 Dollars and consultancy fees 3741.8 Dollars Opinions of the tribunal : in light of the lawsuit processing in America where the exception of nautical faults is adopted, the compensation sum accepted by the claimants is overhigh, so the tribunal supports respondent's arguing for 20% required sum of the claimants. However, the legal service fee is essential resolve the dispute and the sum thereof is reasonable, so the respondent shall compensate. The respondent shall compensate 11124.68 Dollars and consultancy fees 3741.80 Dollars to the claimants. (b). The number of the bill of lading: 6057. The claimant body: Safico Trading Co. Claiming sum: 40040 Dollars. Resolution method: the ship detained by a Court in Egypt and then compromising. Compensation sum: 28279.30 Dollars for losses of goods and 38390.79 Dollars for arresting the ship. Required sum of the claimants: 28279.30 Dollars r losses of goods and 38390.79 Dollars for arresting the ship as well as 65794.86 Dollars for losses of ship schedule. Opinions of the tribunal: Upon investigation, the owner of good had contact in all abounds owning to receiving no goods 3 months prior to claiming and failed, so it/he wrote to the claimants for finishing the claiming within two weeks on June 28,1997, and if failing, it/he would arrest the ship. The ship is actually arrested in January, 1998, so the claimants has enough time to negotiate with the owner of goods to make measures to avoid the arresting of the ship. Because of the nonfeasance of the claimants, the ship was arrested, which really can be avoided, so the respondent may be not responsible for the arresting fees and the losses of ship schedule.The respondent shall compensate 28279.30 Dollars to the claimants.
(c). The number of the bill of lading:  6855. The claimant body: Royal Insurance Uruguay S．A.. Claimed sum: 77000 Dollars and interests thereof, totally 80474.62 Dollars. Resolution method: judged by a court in Uruguay. Compensation sum: 77000 Dollars. Required sum of the claimants: 77000 Dollars. Opinions of the tribunal: there is no dispute over the principle of strict liability adopted by Uruguay. According to the materials submitted to the arbitration by the claimants, lawyers, before and after the judgment of the court, all consider that the owner of the goods will win. In regards to goods value, the invoice for FOB 66302 Dollars may be considered as the evidence, so it is not incredible that the insurer has paid77000 Dollars to the owner of goods.  The respondent shall compensate 77000 Dollars to the claimants. (d). The number of the bill of lading:  6758. The claimant body: Commercial Union Insurance Companies. Claimed sum: 41610 Dollars. Resolution method: prosecuting in American court then compromising. Compensation sum: 10400 Dollars. Required sum of the claimants: 10400 Dollars and consultancy fees 3421.07 Dollars. Opinions of the tribunal: it is investigated that an indictment under this bill of lading is included in a letter of the claimants to the Secretary Office of the China Maritime Arbitration Commission, and it is indicated in the supplementary opinions of the claimants on July 19, 1999- that the owner of goods would apply to the court for dismissing the lawsuit. The respondent shall compensate 10400 Dollars and consultancy fees3421.70 Dollars to the claimants. (e). The numbers of the bills of lading: 7169/7983/7991 and 8017/8009/7177. The claimant body: Thomson Consumer Electronics. Claimed sum: respectively 245238.04 Dollars and 31036.76 Dollars. Resolution method: prosecuting in American court then reconciliation. Compensation sum: 41440.35 Dollars. Required sum of the claimants　41440.35 Dollars. Opinions of the tribuanal: a large number of bills of lading are involved in this case, the claimed sum of the owners of goods is large and the proportion of compensation with. Reconciliation is low, but the case situation and the reason for answer is the same for each bill of lading, so the fees for answer will not increase with the claimed sum. Consequently, the reconciliation sum is overhigh a little. The respondent shall compensate 2500 Dollars to the claimants. (f). The number of the bill of lading:  6511. The claimant body: Federal Insurance Company. Claiming sum: 80939.10 Dollars. Resolution method: prosecuting in an American court then reconciliation. Compensation sum: 680819 Dollars. Required sum of the claimants: 6808.19 Dollars. Arguments of the two parties: The claimants argued that the case has been filed before the American court, although they may claim nautical faults in their defense, they shall prove that the accident was caused by the failure in management and sailing of the Longtong and the ship's seaworthiness for the Longtong at the same time. The owner of the Longtong did not cooperate and more litigation costs and fee would be caused by any lawsuit, so a risk of more sum was avoided through compensating little part of the claimed sum. The respondent argued that the owner of goods should obtain none compensation because the numbers of the two bill of lading notarized listed in the two "Underwriter's Release" were different and there were no evidence to rationally prove causes and reasons for this, consequently, such should be treated as insufficient evidence.Opinions of the tribunal: the arbitration court has noticed that as for the two notarized "Underwriter's Release" with the same contents except for difference in the number for the bill of lading, the former one is signed on April 7, 2000 and the later on April 24, 2000. The former one's number for bill of lading 7169 is listed in another "Underwriter's Release" (see e above), so it shall be disregard for wrong. The number for bill of lading 6511 and the indictment for goods are indicated in the arbitration application and the affix to the letter of the claimants on July 1, 1998, and the formalities for the "Underwriter's Release" on April 24, 2000 is fulfilled without any wrong,, so it is proper to reconciliate with compensating a little part of claimed sum. The respondent shall compensate 6808.19 Dollars to the claimants.(g). The number of the bill of lading: 5085. The claimant body; Gerling ＆ Konzern. Claiming sum: 25461.73 Deutsche Mark. Resolution method: reconciliation. Compensation sum: 4000 Dollars. Required sum of the claimants: 4000 Dollars. Opinions of the tribunal: upon investigation, the claiming materials for this bill of lading is affixed to the arbitration application, and at the end of the claiming materials there exists the extending of time limit for litigation to August 2, 1999. The paper for liability relief is affixed to the agency words (the fifth) for the claimants on April 10, 2000. But Germany where the unloading port is located dose not abolish the law on the exemption of liabilities for failure sailing, and the respondent shall compensate a little part, because compensation of 35% of the claiming sum for reconciliation is overhigh. The respondent shall compensate 1500 Dollars to the claimants. (h). The number of the bill of lading: 6677 The claimant body: The Tokio Marine And Fire Insurance Co Ltd. Claiming sum: 33128.40 Dollars. Resolution method: reconciliation. Compensation sum: 5000 Dollars. Required sum of the claimants: 5000 Dollars. Opinions of the tribunal: upon investigation, the claiming materials for this bill of lading is affixed to the arbitration application, and at the end of the claiming materials the extending of time limit for litigation is explained. But Japan, where the unloading port is located, dose not abolish the law concerning the exemption of liabilities for failure sailing. The reconciliation sum is overhigh, so the respondent may compensate partially.The respondent shall compensate 2000 Dollars to the claimants.
(i). The number of the bill of lading: 4146. The claimant body: Aristo Trading and insurer. Claiming sum: 54568.80 Dollars，interests and fees. Resolution method: judged by the Dubai Court in Aristo.Compensation sum: refused successfully. Required sum of the claimants: legal service fees 2609.55 Dollars. The respondent agreed to compensate.Opinions of the tribunal: the two parties agree with each other, and the respondent shall pay 2609.55 Dollars to the claimants. In a word, the claimant shall obtain totally 171885.22 Dollars for compensation, with deducting 39481.41 Dollars obtained from the fund of Maritime liability restriction for Minda, so the respondent shall compensate 132403.81 Dollars to the claimants.
   
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