Dentons handled case recognized as "Top 10 Maritime Cases of the Year"

The Supreme People's Court of China has just released its top 10 maritime cases of 2017. The case involving a dispute over a maritime cargo transport contract (Zhejiang Longda Stainless Steel. Co., Ltd. v. A.P.Moller-Maersk A/S), advised by Dentons Shanghai partner Yuan Bin and Ningbo associate Wen Li, was selected.

Background information 

In June 2014, Longda planned to export a batch of stainless steel from Ningbo to Colombo in Sri Lanka. Longda booked the space with Maersk through a freight forwarder for cargos to be shipped on June 28. On July 9, 2014, Longda emailed Maersk through the freight forwarder, stating that the shipping destination was erroneous so the goods needed to be shipped to a different port or returned. Maersk responded on the same day by saying that it was unable to arrange for a change of port as the goods were scheduled to arrive at the port of destination in less than 2 days, and a return could only be made possible after confirmation from the destination port was obtained. The next day, the freight forwarder of Longda asked if the goods could be brought back on the original ship. However, Maersk replied on the same day that it was not feasible, and the goods would have to go through custom clearance first by the consignee before the company could apply for the return of goods with the local custom authority. Goods would be returned only if the authority granted such permission. The goods involved arrived at the port of destination on around July 12, 2014. On May 19, 2015, Longda sent an email to Maersk stating that it had applied for a return shipment at Maersk's request. Maersk subsequently informed Ronda that the goods in question had been auctioned. Ronda filed a lawsuit in the Ningbo Maritime Court, requesting that Maersk compensated for the damages caused by loss of the goods and the corresponding interests.

Verdict 

The Ningbo Martime Court of First Instance rejected Longda's request for claims, prompting the company to file an appeal. The Zhejiang Provincial Higher People's Court of second instance set aside the judgment of first instance, ruling that Maersk should compensate Longda for 50% of the value of the goods lost and interests. Refusing to accept the decision, Maersk filed for a retrial request at the Supreme People’s Court.  

In retrial, the Supreme People’s Court held that the consignor has the right, specified in the Article 308 of the Contract Law, to request a change of the contract, and the rights and obligations of the parties should also be determined in accordance with the principle of fairness. Should the change of the transport contract prove to be unviable or seriously affect the carrier's normal course of operation, the carrier may refuse the consignor’s requests, but should promptly notify the consignor of the reasons why such requests cannot be executed. The goods in question were shipped on an international liner, and arrived at the port of destination on July 12, 2014. On July 9, 2014, Longda asked Maersk to ship the goods to a different port, or return them altogether. However, since the requests were raised three days prior to the arrival date, Maersk claimed it cannot fulfill Longda's pursuits as they were not practical. As such, the Supreme Court resolved to uphold the judgment of first instance, which supported Maersk’s claim on grounds of fairness. Longda was fully aware that there was no one at the port of destination to collect the goods and did not take actions accordingly, resulting in the auction of the goods. The evidence that Longda put forward was not sufficient to prove that Maersk did not fulfil its obligations in connection with the goods. Therefore, the judgement of second instance lacks any factual basis, and hence should be corrected. 

Implications 

Whether Article 308 of the Contract Law applies to maritime cargo transport contracts has long been subject to debates within the academia and in practice. During the retrial, facts were closely examined in the principle of fairness, and the rights and interests of the two parties were both taken into consideration. The result ascertained that Article 308 of the Contract Law does apply to maritime cargo transport contracts, providing precedents to the ongoing amendment of the Maritime Law. By overturning the previous ruling and supporting the foreign party, the retrial demonstrates the court’s prudence in the application of the law and its commitment to equally protect legitimate rights of all party. More importantly, it highlights a solid role of rule of law and a sound business environment in China.