Ik Wei Chong, Clyde + Co, Shanghai
In China, whilst it is usual practice for the cargo owners and insurers to lodge claims against ocean carriers for damage to and loss of cargo, claims against port operators are also increasing, especially when the accidents occurred during loading or discharging operation performed by port operators. However, one of the contentious issues is whether the limitation of liability applicable to ocean / Bill of Lading carriers could also be enjoyed by port operators. Article 58 of the Chinese Maritime Code states that:
“The defence and limitation of liability provided for in this chapter shall apply to any legal action brought against the carrier with regard to the loss of or damage to or delay in delivery of the goods covered by the contract of carriage of goods by sea, whether the claimant is a party to the contract or whether the action is founded in contract or in tort.
The provisions of the preceding paragraph shall apply if the action referred to in the preceding paragraph is brought against the carrier’s servant or agent, and the carrier’s servant or agent proves that his action was within the scope of his employment or agency.”
In view of the above provision, the port operator should in theory only be entitled to enjoy the limitation of liability if it is regarded as the carrier’s “servant or agent”. We have considered and analyzed the relevant Court decisions and articles written by maritime law scholars on this issue.
There are several Court decisions which support the view that the port operator should be regarded as the carrier’s servant so that the limitation will apply. In the case of Fujian Dingyi Food Co Ltd v. Guangzhou Container Port Co Ltd (2004 Guang Hai Fa Chu Zi No. 111 – 福建顶益食品有限公司诉中远集装箱运输有限公司等海上货物运输合同货损赔偿纠纷案), the Guangzhou Maritime Court held that the “Ship Loading and Discharge Agreement” between the ocean carrier and port operator has the characteristics of employment contract and the port operator could therefore be regarded as the carrier’s servant and can enjoy limitation. Other Court decisions include Shenyang Mining Machinery v Dalian Wantong Logistics etc (2001 Da Hai Fa Shang Chu Zi No. 246 – 中国沈阳矿山机械(集团)进出口公司诉韩国现代商船有限公司等海上货物运输合同纠纷案) issued by the Dalian Maritime Court, Dalian Wenda International Trade v Qingdao Qianwan Container Yard etc (2003 Lu Min Si Zhong Zi No. 28 – 大连保税区闻达国际贸易有限公司诉青岛前湾集装箱码头有限公司案) issued by the Shandong Higher People’s Court.
Whilst the above Court decisions represent the consistent view of various Chinese Courts, it should be noted that they are fairly dated and we have not sighted more recent decisions (e.g. after 2010) to that effect.
Unsurprisingly, the above view received criticism in the shipping industry. Strictly speaking, there is no concept of “servant” under Chinese law (this term was modeled after English law). Secondly, port operators are usually not individuals and it may be inappropriate to treat the port operation contract as an employment contract. Some scholars are of the view that the port operator should be regarded as an “independent contractor”. This view is accepted in the case of BOC Insurance v Shanghai Jiaoyun Container Development etc (2002 Hu Hai Fa Hai Chu Zi No. 34 – 中银集团保险有限公司诉上海交运集装箱发展有限公司港口货物损害赔偿纠纷案), the Shanghai Maritime Court held that the port operator cannot enjoy the limitation and should be liable in tort.
In 2017, a Senior Judge with the Chinese Supreme People’s Court made certain important comments on this issue in the “Conclusive speech in the National Maritime Trial Forum” (dated 16 June 2017 – 在全国海事审判实务座谈会上的总结讲话):-
“Generally speaking, port operators may not be able to enjoy the carrier’s defence of limitation of liability, except for special circumstances.”
The reasoning of the Judge is that the basis of the exemption items and limitation of liability applicable to carriers under the Maritime Code is due to the special nature of risks involved in ocean carriage, but port operators usually do not assume such risks and consequently it may be unfair to cargo interests if port operators could enjoy such limitation of liability.
Please note that the above is not a formal judicial interpretation and will not be applied or adopted in the Court proceedings directly but comments from the Supreme People’s Court would usually be highly persuasive and would hopefully influence the Court decisions in future trial of similar cases.
Whilst we are still awaiting a formal definitive Court decision supporting the above view of the Chinese Supreme People’s Court, this view should meanwhile be utilised as part of settlement negotiations in claims against port operators.