XIAMEN MARITIME COURT
Civil Ruling
(2020) Min 72 Min Chu No. 239
Plaintiff: Good Vantage Shipping Limited
Domicile: Room B, 4th floor, Ngan House, 210 Des Voeux Road Central, Hong Kong
Legal Representative: Pan Yang, director
Agent ad litem: Zhang Lihua, lawyer from Shanghai Yaojiang Law Firm
Agent ad litem: Yang Lihua, lawyer from Shanghai Yaojiang Law Firm
Defendant: Shi Ruichao, male, born on 12 April 1966, Han nationality
Domicile: No. 1 Yong’an East Road, Hongqiao Street, Saiqi Town, Fu’an, Fujian Province
Defendant: Chen Fuxiang, male, born on 8 January 1964, Han nationality
Domicile: Room 1601, No. 90 Tiyu Road, Siming District, Xiamen, Fujian Province
Defendant: Xie Cantang, male, born on 11 July 1976, Han nationality
Domicile: No.55 Liulong Road, Xinglong Street, Xibing Town, Fu’an, Fujian Province
With respect to the case of dispute concerning bareboat charter between the Plaintiff Good Vantage Shipping Limited (hereinafter referred to as “Good Vantage”) and the Defendants Shi Ruichao, Chen Fuxiang and Xie Cantang, this court accepted it on 20 April 2020.
Good Vantage claimed as follows: on 14 July 2010, Good Vantage signed a Bareboat Charter with an outsider Continental International Shipping Limited (hereinafter referred to as “Continental Shipping”). Meanwhile, the Defendants Shi Ruichao, Xie Cantang and Chen Fuxiang respectively signed a guarantee contract with Good Vantage as surety, promising to be jointly liable for the performance of any and all liabilities and obligations of Continental Shipping under the Bareboat Charter. Since 11 June 2015, the Charterer Continental Shipping had never paid any hire. By 4 September 2015 when the Bareboat Charter was prematurely terminated, the total outstanding hire has reached USD 12,665,919.98, plus the disbursements paid by Good Vantage in the course of retrieving the ship in total amount of USD 696,737.81. After retrieved, the ship was sold out at the price of USD 5.2 million. In Good Vantage’s view, as the Charterer Continental Shipping failed to pay hire in due time, according to the Bareboat Charter, the Owner shall have the right to request for premature termination of the Bareboat Charter and the Charterer’s compensation for its loss, while according to the guarantee contracts, Shi Ruichao, Xie Cantang and Chen Fuxiang shall be jointly liable for the performance of the Charterer’s obligations to pay hire and compensate for damages under the Bareboat Charter.
During the time period for making defence, Shi Ruichao raised objection to jurisdiction on the following grounds: 1. Under the principal contract (i.e., the Bareboat Charter), it is agreed that any and all disputes should be resolved through mediation (arbitration plus mediation), so before the two parties agree to refer to mediation in arbitration, any court shall not accept the filing of the disputes. Hence, the act of the Plaintiff directly filing litigation before Xiamen Maritime Court is in violation of the Chinese laws and regulations on foreign-related arbitration and the obligations of China as a state signatory to the United Nations Convention on International Settlement Agreements Resulting from Mediation (hereinafter referred to as “Singapore Convention on Mediation”); 2. It is also agreed under the principal contract that the courts of Hong Kong have exclusive jurisdiction to settle any dispute arising out of or in connection with the Bareboat Charter. Even if the guarantee contracts have a different jurisdiction clause, the jurisdiction should be subject to the provision of the principal contract. Therefore, Xiamen Maritime Court has no jurisdiction; 3. It is agreed under the guarantee contracts that the courts of Hong Kong shall have exclusive jurisdiction. Therefore, proceedings shall be taken first in the courts of Hong Kong and then concurrent proceedings may be taken in Xiamen Maritime Court; 4. It is not convenient to investigate into the case facts if this case is tried by Xiamen Maritime Court. The courts of Hong Kong have jurisdiction, and it will be more convenient for the courts of Hong Kong to try this case.
In response to Shi Ruichao’s objection to jurisdiction, Good Vantage defended as follows: 1. Although it is agreed under the principal contract that the courts of Hong Kong have non-exclusive jurisdiction, mediation in arbitration is not agreed thereunder; 2. As the creditor only sues the sureties, the people’s courts of the place where the guarantors are resident shall have jurisdiction; 3. The guarantee contracts grant Good Vantage the right to take proceedings in any jurisdiction, and does not require Good Vantage to first take proceedings in the courts of Hong Kong before taking any proceedings in any other jurisdiction. Hence, Shi Ruichao’s argument regarding concurrent proceedings and inconvenient court cannot stand and Xiamen Maritime Court has jurisdiction over this case.
Through investigation, the following facts are ascertained: on 14 July 2010, a Bareboat Charter was entered into by and between Good Vantage and the outsider Continental Shipping, under which it was agreed that Continental Shipping were to charter M/V “Fortune East” owned by Good Vantage. The Bareboat Charter was reasonably amended from the BIMCO Standard Bareboat Charter Code Name: "BARECON 2001”.Under the Bareboat Charter, dispute resolution is addressed in Clause 30, with Clause 30(a), Clause 30(b) and Clause 30(c) thereunder all about reference to arbitration, specifically, Clause 30(a) providing application of English law and reference to arbitration at London, Clause 30(b) providing application of the United States Code and the Maritime Law of the United States and reference to arbitration at New York and Clause 30(c) providing application of the laws of the place mutually agreed by the parties and reference to arbitration at a mutually agreed place. When the Bareboat Charter was finally signed by the two parties, Clause 30(a), Clause 30(b) and Clause 30(c) were all struck out. But Clause 30(d) was not struck out, which provides as follows:
“Notwithstanding Clause 49 in the Additional Clauses, the parties may agree at any time to refer to mediation any difference and/or dispute arising out of or in connection with this Contract.
In the case of a dispute in respect of which arbitration has been commenced under (a), (b) or (c) above, the following shall apply: -
(i) Either Party may at any time and from time to time elect to refer the dispute or part of the dispute to mediation by service on the other party of a written notice (the "Mediation Notice") calling on the other party to agree to mediation.
(ii) The other party shall thereupon within 14 calendar days of receipt of the Mediation Notice confirm that they agree to mediation, in which case the parties shall thereafter agree a mediator within a further 14 calendar days, failing which on the application of either party a mediator will be appointed promptly by the Arbitration Tribunal ("the Tribunal") or such person as the Tribunal may designate for that purpose. The mediation shall be conducted in such place and in accordance with such procedure and on such terms as the parties may agree or, in the event of disagreement, as may be set by the mediator.
(iii) If the other party does not agree to mediate, that fact may be brought to the attention of the Tribunal and may be taken into account by the Tribunal when allocating the costs of the arbitration as between the parties.
(iv) The mediation shall not affect the right of either party to seek such relief or take such steps as it considers necessary to protect its interest.
(v) Either party may advise the Tribunal that they have agreed to mediation. The arbitration procedure shall continue during the conduct of the mediation but the Tribunal may take the mediation timetable into account when setting the timetable for steps in the arbitration.
…”
Clause 49 of the Bareboat Charter is concerning the applicable law and jurisdiction, under which Clause 49.2 provides “[S]ubject to Clause 49.4 the courts of Hong Kong have exclusive jurisdiction to settle any dispute arising out of or in connection with this Charter”, while Clause 49.4 provides “[T]his Clause 49 is for the benefit of the Owner only. As a result, the Owner shall not be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Owner may take concurrent proceedings in any number of jurisdictions”.
On the same day of 14 July 2010, Shi Ruichao and Chen Xiangfu, as guarantors, both signed a Personal Guarantee with Good Vantage. Provisions on jurisdiction are set out in Clause 9 of the Personal Guarantees, under which Clause 9.1 provides “[F]or the benefit of the Owner, and subject to Clause 9.4 below, each and every Personal Guarantor hereby irrevocably agrees that the courts of Hong Kong shall have exclusive jurisdiction”, while Clause 9.4 provides “Nothing in this Clause 9 limits the right of the Owner to bring proceedings, including thirdparty proceedings, against any Personal Guarantor, or to apply for interim remedies, in connection with this Guarantee in any other court and/or concurrently in more than one jurisdiction. The obtaining by the Owner of judgment in one jurisdiction shall not prevent the Owner from bringing or continuing proceedings in any other jurisdiction, whether or not these shall be founded on the same cause of action”.
Through investigation, it is also ascertained that China signed the Singapore Mediation Convention on 7 August 2019, but have not yet ratified it so far.
After review, this court holds the views as follows: the dispute in this case arose from guarantee contracts in connection with a bareboat charter. As the registered office of the Plaintiff Good Vantage was in the Hong Kong Special Administrative Region, this case is a case involving Hong Kong. In accordance with the provision of Article 551 of the Interpretations of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China, the people's courts may refer to the special provisions on foreign-related civil procedures when trying civil lawsuits involving the Hong Kong Special Administrative Region. Further, Article 259 of the Civil Procedure Law of the People’s Republic of China(hereinafter referred to as “the Civil Procedure Law”) provides “[T]his Part shall apply to civil actions within the territory of the People's Republic of China involving foreign parties. For matters not addressed in this Part, the other relevant provisions of the Law shall apply.” It is a procedural issue to judge whether the jurisdiction clauses in this case can exclude the jurisdiction of the people’s court in the Mainland China and whether this court has jurisdiction over this case, and thus the laws of the People’s Republic of China shall apply. The key disputes over jurisdiction in this case lie in: 1. whether the Bareboat Charter has arbitration and mediation clauses and whether these clauses exclude the jurisdiction of this court; 2. whether the jurisdiction clause under the Bareboat Charter excludes the jurisdiction of this court; 3. whether the jurisdiction clause under the Personal Guarantees excludes the jurisdiction of this court; and, 4.whether this court will be an inconvenient court if this case is finally tried by this court.
I. Whether the Bareboat Charter has arbitration and mediation clauses and whether these clauses exclude the jurisdiction of this court
It is in reliance on Clause 30(d) under the Bareboat Charter that Shi Ruichao argued that the dispute should be referred to mediation. However, seen from the specific content of this clause, which mainly provides that the parties may agree to refer to mediation, gives guidance on how to apply for mediation in the arbitration procedure, how to elect a mediator, and how to deal when the other party does not agree to mediate, and specially points out that the arbitration procedure shall continue during the conduct of the mediation, it is in fact unclear whether the parties may agree to refer to mediation a dispute in respect of which no arbitration has been commenced. Given this, this court reviewed the Drafting Notes published by BIMCO for the BIMCO Standard Bareboat Charter Code Name: "BARECON 2001". As explained in the Drafting Notes, mediation referred to in Clause 30(d) is only triggered once arbitration proceedings have commenced and then runs in parallel with those proceedings, if the parties so choose, and this has been done to ensure that one party cannot invoke mediation as a delaying tactic. In the opinion of this court, as the standard bareboat charter based on which the Bareboat Charter was made was drafted by BIMCO, BIMCO’s Drafting Notes may be deemed as a supplement to the matters not addressed in the Bareboat Charter and courts may refer to such notes to interpret the Bareboat Charter. Hence, this court considers according to the provision of Clause 30(d), the precondition for the dispute to be referred to mediation is that arbitration has been commenced in respect of the dispute. In this case, as Clause 30(a), Clause 30(b) and Clause 30(c) were struck out when the Bareboat Charter was signed, no arbitration clause has been agreed under the Bareboat Charter, which means the parties have not agreed to refer to arbitration, and thus the precondition for mediation in the arbitration procedure is not satisfied. Accordingly, Shi Ruichao’s argument that this case should be referred to arbitration or mediation and the jurisdiction of this court is excluded cannot stand. This court accepting this case is not in breach of the obligations of China as a state signatory to the Singapore Mediation Convention.
II. Whether the jurisdiction clause under the Bareboat Charter excludes the jurisdiction of this court
In the view of this court, Clause 49.2 and Clause 49.4 of the Bareboat Charter jointly constitute an asymmetrically exclusive jurisdiction clause, specifically, the courts of Hong Kong have exclusive jurisdiction only when the Owner has chosen to bring proceedings in courts of Hong Kong, in which case the Charterer shall be subject to the agreement on exclusive jurisdiction, but it does not limit the right of the Owner to take proceedings in any other jurisdiction. This clause does not violate the Civil Procedure Law, and should be considered valid and effective. In this case, the Plaintiff did not choose to take proceedings in any court of Hong Kong, but filed litigation before Xiamen Maritime Court, so the condition for exclusive jurisdiction of the courts of Hong Kong is not met. Hence, Shi Ruichao’s argument that the courts of Hong Kong have exclusive jurisdiction cannot stand and this court will not support it.
III. Whether the jurisdiction clause under the Personal Guarantees excludes the jurisdiction of this court
This court also holds that Clause 9.1 and Clause 9.4 of the Personal Guarantees jointly constitute an asymmetrically exclusive jurisdictionclause, specifically, the courts of Hong Kong have exclusive jurisdiction only when the Owner has chosen to bring proceedings in courts of Hong Kong, but it does not limit the right of the Owner to take proceedings in any other jurisdiction. In this case, the Plaintiff did not choose to bring proceedings in any court of Hong Kong, but filed litigation before Xiamen Maritime Court, so it is in conformity with the contractual agreement and the relevant legal provisions in the Mainland China. Hence, Shi Ruichao’s argument that the courts of Hong Kong have exclusive jurisdiction cannot stand and this court will not support it.
IV. Whether this court will be an inconvenient court if this case is finally tried by this court and whether proceedings should be taken first in the courts of Hong Kong
Article 532 of the Interpretations of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of Chinaprovides: “[T]he people’s court may dismiss the filing of a lawsuit by the plaintiff and inform the plaintiff to bring the lawsuit with a more convenient foreign court if the following situations have been satisfied at the same time:(1) The defendant raised the request that the case shall be handled by a more convenient foreign court, or proposed oppositions to the jurisdiction;(2) The parties concerned have no agreement on selecting a court of the People’s Republic of China as the competent court;(3) The case is subject to no exclusive jurisdiction of the courts in the People’s Republic of China;(4) The case involves no interests of the nation, citizens, legal entities or other organizations in the People’s Republic of China;(5) Main facts in dispute in the case has not occurred within the boundary of the People’s Republic of China, and the case shall not be governed by laws of the People’s Republic of China, due to which the people’s court may confront substantial difficulties in terms of ascertaining facts and applying laws when trying the case;(6) A foreign court has jurisdiction upon the case and would be more convenient to try the case.” In this case, Shi Ruichao, Xie Cantang and Chen Fuxiang are all residents in the Mainland China, so this case involves the interest of the Mainland China, and therefore the situations set out above are not satisfied. As regards whether proceedings should be taken first in the courts of Hong Kong, Clause 49.4 of the Bareboat Charter and Clause 9.4 of the Personal Guarantees both grant the Owner (the creditor) the right to take proceedings against the Personal Guarantors (the debtor) in more than one jurisdiction, but they contain no requirement that the Owner (the creditor) must take proceedings in the courts of Hong Kong before it takes proceedings in any other jurisdiction. Hence, Shi Ruichao’s argument that this court is an inconvenient court and that proceedings shall be taken first in the courts of Hong Kong cannot stand and this court will not support it.
Based on the above, according to Article 129 of the Judicial Interpretation of the Supreme People's Court on Some Issues Regarding the Application of the Guarantee Law of the People's Republic of China which provides “[W]hen a dispute between the principal and the guarantee contract is brought to court, jurisdiction of the case shall be determined on the basis of the principal contract. Where a dispute is arisen from the guarantee contract of joint liability guarantee and the creditor claims against the guarantee provider, such lawsuit shall be under the jurisdiction of the court at the locality where the guarantee provider has his domicile. Where the courts of jurisdiction selected in the principal and guarantee contracts are different, the jurisdiction shall be determined based on the principal contract”, under the circumstance that it was both agreed under the principal contract and the guarantee contracts in this case that, if the creditor takes proceedings, the courts of Hong Kong shall have non-exclusive jurisdiction and the jurisdiction of the people’s courts in the Mainland China is not excluded, as the Plaintiff brought this lawsuit by reliance on the guarantee contracts, and the domiciles of the Defendants Shi Ruichao, Xie Caotang and Chen Fuxiang are all in Fujian Province which is under the jurisdiction of this court, this court thus has jurisdiction over this case and the objection to jurisdiction raised by the Defendant Shi Ruichao cannot stand and shall be overruled according to law. In accordance with Section 1 of Article 127 of the Civil Procedure Law of the People’s Republic of China and Article 129 of the Judicial Interpretation of the Supreme People's Court on Some Issues Regarding the Application of the Guarantee Law of the People's Republic of China, this court hereby renders down the ruling as follows:
The objection to jurisdiction raised by Shi Ruichao in this case shall be overruled.
The case acceptance fee in the amount of RMB 50.00 shall be borne by the Defendant Shi Ruichao.
If dissatisfied with this Ruling, the Plaintiff Good Vantage Shipping Limited may, within thirty (30) days, and the Defendants Shi Ruichao, Chen Fuxiang and Xie Cantang may, within ten (10) days after receipt of this Ruling served by this court, submit to this court a statement of appeal as well as duplicates thereof in the number of the counterparties, to file appeal before the Fujian Higher People’s Court.
Presiding Judge: Tian Xingyu
People’s Juror: Wei Wei
People’s Juror: Zou Ling
8 July 2020
Judge Assistant: Zhang Zhuwei
Court Clerk: Lin Sanhong
Enclosed: main legal provisions applicable to this case
Civil Procedure Law of the People’s Republic of China
Article 127, Section 1 If a party objects to the jurisdiction over a case after its acceptance by a people's court, the party shall raise the objection during the time limit for filing the statement of defence. The people's court shall examine such objection. If the objection is tenable, the people's court shall rule that the case be referred to the people's court with jurisdiction over the case; if the objection is untenable, it shall be overruled.
Judicial Interpretation of the Supreme People's Court on Some Issues Regarding the Application of the Guarantee Law of the People's Republic of China
Article 129 When a dispute between the principal and the guarantee contract is brought to court, jurisdiction of the case shall be determined on the basis of the principal contract. Where a dispute is arisen from the guarantee contract of joint liability guarantee and the creditor claims against the guarantee provider, such lawsuit shall be under the jurisdiction of the court at the locality where the guarantee provider has his domicile.
Where the courts of jurisdiction selected in the principal and guarantee contracts are different, the jurisdiction shall be determined based on the principal contract.