Integral Marine Consultants Pte Ltd is an established insurance adjusting firm in East Asia providing a full spectrum of integrated services. It is staffed entirely by ex-Marine Engineers, Master Mariners, mechanical engineer and legally trained practitioners. Besides loss adjusting work, we provide liability review services, claims defence work, recovery services on behalf of insurers and third parties’ interest and mediation services.

Our main office is located in Singapore and over the years, we have built up extensive local knowledge and experience in claims handling in countries around us. The establishment of our branch and associate offices in the region is an extension of this need to strengthen our networking and to provide valuable services to our customers.

We work for many insurers in conducting damage surveys, loss investigation, pre-risk evaluation, claim examination and liability review. We also act for financial institutions and many insurance companies in the area of valuation of ships and craft for insurance and loan purposes.

Capt F C Lee is a well-regarded maritime arbitrator practicing in Hong Kong, Shanghai, London and Singapore and has been acting as sole arbitrator, or a panel arbitrator or chairman of a tribunal on more than 140 appointments in international and domestic arbitrations. He and Ms Debbie Koh are both experienced mediators on a wide range of disputes.


Integral Marine Consultants Pte Ltd, established in 1984, is a Singapore incorporated company with limited liability. The principal business of our company is to carry out surveys on behalf of local and overseas insurers local and overseas solicitors, financial institutions, shipowners, shippers and consignees.


Our team of surveyors in Singapore, Hongkong, China, Malaysia and Myanmar are experienced professionals in the industry and have had considerable exposure in a wide variety of jobs done both locally and overseas. In Singapore alone, we have two master mariners and two 1st Class Engineers with extensive insurance surveys experience. In Hong Kong, we are tied up with Toplis & Harding (Marine & Recoveries)


The surveyors listed above have travelled extensively on overseas survey assignments within Far East, Middle East, South and South East Asia and at times, we are sent as far as Africa to handle complicated cargo and hull and machinery claims.


Jobs handled by us are varying in nature but generally include:

1 Collision damage.

2 Assessment of salvage options for grounded/stranded cases.

3 Investigation of marine casualties.

4 Damage surveys and follow up repair monitoring of main and auxiliary engines, boilers etc.

5 Damage surveys to main and auxiliary engines as a result of poor fuel grade or contaminated fuel

6 Oil pollution investigation.

7 Pre-insurance survey of all types of ships for Hull Underwriters

8 Stowage, lashing and towage surveys.

9 Supervision of stowage, loading and or discharging of cargo and heavy plants, including assessment of inland transit risks.

10 Supervision of New Buildings.

11 Liability Risk Assessments of Shipyards, containerfreight stations, logistics warehouse, high security warehouse etc.

12 Technical audit of shore-based manufacturing plants.

13 Provision of dispute mediation services in charter party, shipbuilding, ship repairs, insurance claims disputes.

14 Act as Arbitrator in areas of disputes covering charter-party, carriage affreightmet issues, ship repairs/shipbuilding, trade related disputes, contractual issues and marine and general insurance claims.


We handle all aspects of cargo claim recoveries for insurers and uninsured interests in pursuing recovery claims against carriers (ocean carriers, inland carriers, freight forwarders etc) for loss of or damage to cargo whilst in transit. We have a sound combination of legal and technical expertise to offer value added service to our clients in the sense that all claims are being reviewed and pursued with diligence. Where possible, we will try best to obtain security and enter into substantive negotiation without having to resort to expensive legal expenses to obtain the necessary security.

Our in-depth understanding of ship operations and charter party business, will enable us to deal with standard defences raised by shipping companies i.e. perils of the sea, insufficient packing, pre-shipment damage etc, as well as raising issues with cargo surveyors whose findings may appear ambiguous or in doubt.

Our work is carried out on ‘No Cure No Pay’ basis. Our fees are 20% of the net recovered sum but exclude specific disbursements like legal fees, court filing fees, translation charges, and search fees etc. However, we will only resort to ship arrests and legal proceedings with underwriters’ approvals.


As part of our comprehensive offers of professional recovery services, we also act for insurers or owners of fixed installations like wharves, terminals, single buoy moorings, offshore platforms, aquaculture farms, seaside holiday resorts, submarine pipelines and electrical cables etc.

Our services include thorough investigations to ensure that all claims are adequately quantified and substantiated and these also include basis of consequential losses. Appropriate care would also be taken to review the impact of local law and practices which could impact on the claims.

Our fees are on the same scale as that applies to marine cargo recoveries.


It is always our preference to reach a settlement without resorting to legal action but where there is no other alternative; we will not hesitate to recommend legal action in appropriate jurisdictions. However, when this is done, we will make use of our existing network of lawyers in US, China, Japan, South Korea, Singapore, Malaysia, Indonesia and India where we have been able to control their costs due to our historical relationship. This feature represents tremendous savings to our clients in terms of legal costs. Alternatively, we can also absorb the legal costs after evaluating the chances of success but if that is the case, our fees (on no cure no pay basis) would be pitched at a higher rates than the normal 20% net recovered fees which we charged our clients. However, we will absorb only the legal fees but excluding court fees, translation charges (in foreign jurisdictions like Japan, Korea and China) and other incidental charges.

In particular, we are very familiar with recovery work in China against shipowners, shipyards, inland operators, freight operators and port administrations. Our long co-operation with Chinese lawyers and our familiarity with the legal practices in China have made legal actions in China highly desirable when negotiations failed to reach any settlement. Our success rates in China are gratifying.


With regard to warehouse operations, we have been engaged by insurers and P&I Clubs to carry risk assessment of different types of warehouse and logistic operations (particularly those relating to JIT requirements). Some of the warehouse risk assessment which we have conducted include those in Singapore, Malaysia and Australia. The most recent risk assessment of warehouse operations include the YCH Supply Chain City (High Security Warehouse) in Singapore, Mainfreight Warehouse in Sydney, Australia and the risk assessment of the duty free operations of Heinemann in Singapore Regional HQ and Sydney Airports. The criteria of risk assessment of this nature are very extensive but principally focus on inventory management, adequacy and suitability of IT applications, documentation control to minimize the liabilities exposure of freight forwarders, quality and adequacy of manpower, upskill training, etc.

One of the frequent losses faced by freight forwarders is inventory loss and losses from error and omissions lapses. In this regard, our past experience in handling such in depth investigations and evaluations on Warehouse Management Systems’ data records and insightful review of documentation flow is a big advantage.

We will provide on-site without prejudice investigation of the reported losses or damages and the recording of the relevant statements from person or persons closely connected to the incident. In addition, the gathering of documentary evidence such as Master bill of lading, container tracking records, House Bill, Gate Movement records, Subrogation Receipts, Survey reports. Packing List, relevant invoices etc would be part of the site investigation work. Policy liability comments would examine the issue of legal liability, title to sue, the role of the assured, the quantum of damages and the issue of limitation of liability.


Capt Lee Fook Choon has been an accredited Mediator with the Hong Kong Mediation Council since 2000 and was involved in ad-hoc and institutional mediations involving maritime, insurance and international trade disputes. As an insurance adjuster for more than 30 years, he has been involved in numerous negotiations as a neutral party to settle claims between insurers and the assured. Besides insurance companies, he has been engaged in mediations involving commercial disputes between parties from Norway, Singapore, Vietnam, India, Hong Kong and China. He is currently a Principal Mediator with the Singapore Mediation Centre and a maritime expert with the Singapore International Mediation Centre. He is also the panel mediator with HKIAC and adjudicator in Malaysia. He holds an LLM and is a Master Mariner, Chartered Arbitrator (UK), Chartered Insurance Practitioner, marine loss adjuster and insurance recovery consultant since 1978 and has arbitrated over 140 disputes since 1994 in Hong Kong, Singapore, London and Shanghai.

Deborah Koh has been a mediator with the Singapore Mediation Centre since 2012. She has mediated over 70 disputes ranging from divorce, tenancy, sale of goods and services, defamation and friendly loans at the Primary Disputes Resolution Centre of the State Courts, Small Claims Tribunal, Syariah Courts and Singapore Mediation Centre. She graduated from Cambridge University with a First Class Honours in Law and started her career as a Justices’ Law Clerk at the Singapore Court of Appeal. She spent four years in private practice before joining Integral Marine Consultants. She currently also acts as Consultant to the Singapore Mediation Centre.


21 Bukit Batok Crescent
#07-76, Wcega Tower
Singapore 658065


Tel : 65-67340798
Email :
Person to contact : Ms Priscilla Tan


Our associates’ address in Malaysia, Myanmar, China and Hongkong


No.25 2nd Floor
Jalan Chengal
96000 Sibu, Sarawak
East Malaysia


Tel : 084-345916
Fax : 084-347524
Mobile : 019-8866161 (Mr Peter Lau)
Email :
Person to contact : Mr Peter Lau



Representative Office (Myanmar)
No.F17/F18, Aung San Stadium (North Wing)
Kan Daw Galay Road
Mingalar Taung Nyunt Township
Yangon, Myanmar


Tel : 95 1 254118
Fax : 95-1-252259
Email :
Person to contact : Ms Tint Tint Aung
Mobile: 95 999 21223



Unit 1506-8, 15/F., Yen Sheng Centre,
64 Hoi Yuen Road,
Kwun Tong, Kowloon,


Tel : 852 28667744
Fax : 852 28582633
E-mail address :
Mobile : 852 94603784
Person to contact : Ms. Perrine Chan

Wednesday, November 18, 2009

海事纠纷中的专案调解 (非机构调解)






  • 一个并不敌对的解决问题的途径;
  • 依靠一位来自法律或者其他专业领域的调解员,他会帮助双方明确症结所在并推进建设性的协商,最后探究可能的解决方法,以此推动整个进程;
  • 无论律师在与不在,调解双方都可以作出自己的决定。这样,他们才能保证他们把握着对结局的控制,不去冒着风险让一位法官或者仲裁员作出对他们不利的判决并强加于其身;
  • 调解并不在于决定谁对谁错,谁无辜谁有过失,也不在于宣布谁是输家赢家;
  • 调解不是倒回去看问题。焦点不在于过去谁做了什么谁说了什么。相反的,调解的目的是找到一个可行的办法并最终达成一个能满足双方的要求和目的,让双方都能接受或满意的解决方案


























  • 与诉讼和仲裁相比,调解成本更低;
  • 调解更为迅捷;


  • 更少风险


  • 保持良好的商业关系


  • 隐私和机密



  1. 尽早决定调解双方需要提交什么文件给对方或仲裁员,最好是能在第一次会面之前就做好决定。
  2. 一个“破冰会议”是非常重要的。它能够让双方在社会影响力的作用下对对方有进一步的了解。
  3. 调解员一定要设定调解议程表。这是为了控制调解进程,保证调解会议的进行。
  4. 调解员该鼓励调解双方列出一个单子,在上面列出什么问题是没有分歧的。这会促成双方达到最后目标。这也可以阻止调解各方提出让人不能忍受的一长串无理要求,以此节省时间,集中精力在那些重要的问题上。
  5. 为了保证客观性和公正性,调解员也可以指派一位专家来指导案件。但这一指派必须要得到调解各方的首肯。
  6. 调解员不应操之过急,每次一点进步并得到调解各方的认可才是最重要的。
  7. 中场休息、餐点休息和社交聚餐是非常重要的。
  8. 调解员的公正是保证调解各方信心至关重要的一点,这也确实并不容易做到。1999年2月3日在新德里,印度最高法院的S P Bharucha法官在他就任调停调解庭的就职演说中说:“一个好的调停人或调解员,可以引导(调解双方)最终达成协议,纠纷事宜能以让人接受的方式解决,而调解双方又不会感到挫败。最终的商定协议不会像法庭判决或者仲裁决定一样让人有苦难言,而是会培养出相互的善意与信任。”他的至理名言总结出了调解的核心思想。
  9. 耐心的瓦解双方的不情不愿从而改变他们的敌对立场是非常重要的。
  10. 所有与调解方的谈话都必须通知另一方。程序透明是调解成功至关重要的一环。
  11. S P Bharucha法官还说:“一个成功的调解员会告诉调解各方他们在案件中的优势和劣势,并且有针对性的给出建议来解决纠纷。他会引导各方到正确的解决思路上来,让他们看清楚什么是对他们最好的解决方式……调解是一门艺术。它需要耐心的培养和不断的完善。一个好的调解员一定要有非常好的洞察力和陈述能力,才能用一种友好而中立的方式看待争论者的气恼和抱怨。”


Friday, June 15, 2007


China acceded to the 1969 Civil Liability Convention in the 1990 and to the CLC 92 Protocol in 1999. Currently all Chinese ocean going ships carrying more than 2000 tons of oil in bulk are compulsorily insured for oil pollution liability. China is also a party to the Fund Convention (Fund 71) but it is only applicable to Hong Kong SAR but not to the rest of China.

The bulk of the oil and chemical pollutions along the Chinese coasts and rivers are caused by coastal tankers or tankers of less than 2000 grt. Hence in reality, there is no proper compensation regime in existence for oil pollution or for that matter chemical pollution in China which is caused by vessels of this category.

There have been much consultation on this but as of today, no agreement has been reached to set up a domestic compensation regime which requires coastal ships to have mandatory insurance for oil pollution liability and neither is there any compensation fund set up by cargo receivers. Today PRC is the third largest importer of crude oil and the largest importing country of chemical refined products. China has yet to accede to the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea (HNS), 1996 and it is unlikely to accede to it any time soon largely for the same reason to protect the viability of the local fleets and businesses.

While this policy is understandable, the negative impact of such a policy is that the country’s environment, its industries and its people will have to bear the brunt of the effects of inadequate or non existent compensation regime. More insidious is the chemical pollution where the resultant impact on the environment and the well being of its people is long term and its effects are not so easily identifiable. This loophole is also subject to exploitation by both local and foreign ships engaged in the carriage of oil and chemical products to China.

The paper will examine the growth of China as a key player in the oil, gas and chemical industry, its comparative development of a compensatory legal regime, its shortcomings and how this situation is being exploited by local and foreign shipowners in a perfectly legal way but at the expense of the local environment, water sources and the well being of the population.

The historical records of marine oil spills in PRC

As mentioned above, PRC has now emerged as the third-largest oil importer in the world. Statistics from the Ministry of Communications of PRC indicated that cargo landed by sea reached around 1.8 billion tons in 2005 and the throughput in ports across the country amounted to 4.17 billion tons. This also included the 61.8 million TEUs handled in PRC which is one-eighth of the world’s total. According to the statistics published by the Customs Administration of PRC, the country imported more than 100 million tons of crude oil in 2003 for the first time. By 2004, the crude oil imported had exceeded 120 million tons, and in the case of refined oil and chemical products, more than 40 million tons. In 2005, crude oil imported had exceeded 130 million tons. It is estimated that given the rapid growth of high powered PRC’s economy, the insatiable demand for crude and refined oil and chemicals will continue its spiraling growth.

It is also reckoned that at least 90 per cent of the nation’s imported crude oil would continue to be transported by sea. Even if the pipelines into China from Kazakhstan and Russia are completed and in operation, it is estimated that 80% of the imported oil would still be transported by sea. The phenomenal rise in the movement of goods and people along the Chinese coasts had led to surging growth in maritime traffic. Collisions between ships and incidents of groundings are also on parallel increase and resultant oil pollution occurrences of all descriptions could not be avoided. Between 1973 and 2003, there were more than 2,353 reported oil spills along the Chinese coasts and rivers. This figure includes oil spillages of big and small spills. In PRC, a big spill is in excess of 50 metric tons. Over a period of 30 years, it would work out to be one oil spill every 54 days. Of this figure, there were 62 major spills, each in excess of 50 metric tons and to be precise, more than 34,189 metric tons of oil had been spilt into coastal waters and rivers. This figure represents oil pollution caused by vessels of all descriptions.

If this is broken down into specific details, there were a total of 29 oil spills in PRC between 1973 and 2003 which were caused by oil tankers (according to a statistics ). Each of these spills was in excess of 50 metric tons. 7 of these oil tanker related oil spills were caused by foreign vessels and all of them had paid compensation for the damage caused. Excluding the compensation for cleaning up costs, the compensation for these 7 cases averaged 8.28 million RMB, the highest being 17.75 million RMB. The remaining 22 oil spill accidents were caused by Chinese vessels and only 9 of them had paid compensation. Excluding the compensation for cleaning up resources, their compensation amount averaged 1.53 million RMB, the highest being 5.5 million RMB.

For example on 14 November 2000, a Chinese tanker “DeHang 298” collided with Norwegian chemical tanker “Bow Cecil” at the mouth of Pearl River. Dehang 298 eventually sank with loss of five crew members and 230 cubic meters of heavy oil were leaked into the sea. China’s Maritime Safety Department took timely action to clean up the oil spill and expanded around 6.5 million RMB on the cleaning-up operation. The owner of the tanker DeHang 298 is a single ship owner and did not have the financial ability to pay the compensation. On the other hand, Bow Cecil was found not liable for the collision and hence was not responsible for the cleaning up costs. Due to the absence of clear law governing the compensation regime in PRC, the State ended up having to pay for the entire cleaning up cost.

Prevailing Situation of Damage to Environment Arising from Carriage of Hazardous and Noxious Substances by Sea in PRC

Whilst researching for historical records and data on compensation models concerning damage to environment arising from carriage of hazardous and noxious substances in PRC, the writer had met with little success because of the paucity of information. The Chinese State Oceanic Administration began to publish the Ocean Environment Quality Yearbook in 1990 to indicate important happenings to the ocean environment, but incidents of pollution and damage to environment caused by the carriage of hazardous and noxious substances within PRC waters was not recorded. Up to the year 2005, this situation has not changed. To understand the seriousness of the impact to environment arising from carriage of hazardous and noxious substances, the writer would summarize the example of one collision case near the estuary of Yangtze River.

On the morning of April 17, 2001, a chemical tanker of the Republic of Korea which had onboard 2000 metric tons of styrene, was involved in a collision with a Hong Kong registered cargo ship near the estuary of Yangtze River. This collision resulted in more than 700 metric tons of styrene spillage into the sea causing serious damage to the marine environment and ecosystems.

This was the world’s most serious incident of styrene spillage and the relevant department claimed a ‘state indemnification’ of US$8 million from the wrongful parties. The term "state indemnification" is still a new terminology in China and was used for the first time in judiciary practice since the promulgation of the "Law on State Ocean Environment Protection of the People's Republic of China" in April 2000. Pursuant to the relevant provisions of the law, the Chinese Government shall have the right to demand the ship in question to indemnify the State for damage caused to the Chinese marine environment arising from serious leakages of crude oil or other chemical products within the territorial waters of PRC.

The money obtained from the ‘state indemnification’ will mainly be used for i) measure taken to neutralize the damage caused by the chemical and ii) to monitor the condition of the affected marine areas. As the impact is often far reaching, such monitoring and supervision will take years if not decades to determine the true extent of damage. To be realistic, the US$8 million is just an initial estimation by environmental experts and the actual losses to the marine environment and damage to its ecosystems would certainly be much higher.

As the writer is given to understand, the owners of the two ships involved had paid only US$1 million each as fines, hardly sufficient for costs to neutralize the styrene contamination. The final agreement on the "state indemnification" has still to be finalized.

In retrospect, the compensation demanded by the Chinese authority paled in comparison with that of a recent heavy oil spill in the port of Odessa involving 74 m/tons of bunker fuel. The State Ecological Inspection presented a claim of US$24.5 million for environmental damage which amounted to US$329 per kg of oil spilt. The Port Authority also put up a claim of US$7.6 million for cleaning up cost which worked out to US$84 per kilo of oil spilt.

Another trend in the maritime transportation chain which warrants attention in PRC is the importation of high tech refined products such as lubricating oil from United States, South Korea and Singapore. Many of the shipments of refined products are shipped from South Korea or Singapore using small chemical tankers of 2000 dwt or below. This practice is to evade the compensation regime of the CLC and also to take advantage of the absence or lack of a well defined national compensation regime in PRC.

CLC only applies to ship carrying more than 2,000 m/tons of oil in bulk as cargo, and in this case, a ship carrying less than 2000 m/tons can totally evade the governance of CLC should a pollution occur. And since China has not acceded to the HNS Convention or push for a comparable national compensation regime to be put in place, a ship found to be have caused spillage is only governed by the limits of limitation of liability as found in Chapter XI of the Maritime Code of PRC. The limitation amount as set in Chapter XI of the Chinese Maritime Code is actually much lower than that of CLC.

In the case of an oil spill caused by a foreign ship carrying less than 2000 m/tons of oil in bulk within China’s territorial waters, the shipowner can actually escape liability by paying a security deposit into the maritime court in accordance with the stipulations of the Chinese Maritime Code. Once this limitation fund is set up, the wrongful vessel can continue to trade freely without any fear of being arrested or detained by any parties in PRC.

Reasons for the inadequate compensation for oil and chemical spills in PRC

PRC as of to date, does not have a specific legal regime which introduces strict liability for the shipowners and a system of compulsory insurance and insurance certificates for ships of all tonnages operating within Chinese waters. She has a patchwork of articles in laws and regulations which are inadequate and does not address the changing situations confronting the country in the present as well as into the future. Perhaps a highlight of some of these regulations and articles in law would give readers a better picture.

Article 124 of the General Principles of the Civil Law of PRC stipulates “Any person who pollutes the environment and causes damage to others in violation of state provisions for environmental protection and the prevention of pollution shall bear civil liability in accordance with the law.” This is the basic principle for civil compensation regarding oil spill pollution.

Article 90 of the Marine Environment Protection Law of PRC stipulates that “Whoever causes pollution damage to the marine environment shall remove the pollution and compensate the losses; in case of pollution damage to the marine environment resulting entirely from the intentional act or fault of a third party, that third party, shall remove the pollution and be liable for the compensation. For damages to marine ecosystems, marine fishery resources and marine protected areas which cause heavy losses to the State, the department invested with power by the provisions of this law to conduct marine environment supervision and administration shall, on behalf of the State, put forward compensation demand to those held responsible for the damages.

Article 39 of the Regulations of the PRC on the Prevention of Vessel-Induced Sea Pollution stipulates that “In case of violation by vessels of the Marine Environmental Protection Law of the People's Republic of China and these Regulations that has caused pollution damage to the marine environment, the harbor superintendency may order the payment of a fee for eliminating the pollution, and compensation for the state's losses. If the party concerned does not accept the order, he may bring a suit before the people's court in accordance with the stipulation of Article 41 of the Marine Environmental Protection Law of the People's Republic of China.

Article 40 of the Regulations of the PRC on the Prevention of Vessel-Induced Sea Pollution stipulates that “In the event that units or individuals that have suffered pollution damage as a result of the marine environmental pollution by vessels demand civil liability compensation, the matter shall be handled in accordance with the handling procedures stipulated in Article 42 of the Marine Environmental Protection Law of the People's Republic of China. Disputes over liability for and the amount of compensation may be handled by the harbor superintendency through conciliation. If a party does not agree, a suit may be brought before the people's court. Cases involving foreign vessels may also be solved in accordance with arbitration procedures.”

Article 44 of the Regulations of the PRC on the Prevention of Vessel-Induced Sea Pollution stipulates that “In case of vessel-induced pollution,the ship owners who request exemption from liability for compensation shall submit to the harbor superintendency a report,which shall be able to prove that the pollution damage has been caused entirely by one of the circumstances as listed in Article 43 of the Marine Environmental Protection Law of the People's Republic of China,and that the pollution damage to the marine environment could not be avoided despite all prompt and reasonable measures

But the above-mentioned rules are too ambiguously drafted to be firmly applied in judicial practices. Due to a lack of a uniform, standard and fixed criterion, the judges in many instances, have to apply their discretions in interpretation and this is one reason which explained for the different conclusions arrived at by the judges of different districts or even from judges of the same court. The inconsistencies of the judicial decisions have led to poor compensation for victims of the pollution incidents.

Another reason for the inadequate compensation in PRC is the loophole in the application of the CLC. According to an analysis , PRC’s domestic oil tankers navigating along the coast with a deadweight of less than 2,000 tons accounts for 77.6 percent while oil tankers on inland rivers below 2,000 tons in deadweight accounts for 87 percent. Fully 47 percent of these inland tankers are less than 500 tons. All these vessels do not come under the governance of CLC and China has such a large diverse fleet of small and old vessels plying within its waters and rivers that any attempt to impose strict liability on them and or compulsory insurance would certainly kill off this important leg of the transport chain which kept the China’s economy beating.

Being a party to CLC, China only requires owners of oil tankers engaged on international route carrying more than 2,000 tons of cargo oil to buy insurance to protect their pollution liability. CLC as a whole, did not achieve its objective well in PRC because insurance for oil pollution is not widely promoted. In PRC only vessels carrying more than 2,000 tons of cargo oil and for international transport are obligated to insure their risks against oil pollution. Vessels for internal transport and vessels with a deadweight under 2,000 tons are not covered with liability insurance for cost reasons.

Next, the FC, of which PRC is a party, is only applicable to Hong Kong SAR and not to the mainland proper. Again for economic reasons, PRC has not set up any oil pollution compensation fund, hence for any excess amount above the limitation amount stipulated by CLC, the victims have no remedy in PRC against the guilty parties. The Chinese authority is apparently reluctant to impose financial burdens on many nascent shipowners who have yet to find their feet.

Finally, the low limitation amount of the limitation of liability regime as stipulated by the Maritime Code of PRC, as mentioned before, also contributed to the inadequate compensation regime available to victims of oil or chemical pollution incidents. Furthermore though the rules are present, the actual implementation and enforcement of the rules are rare and hard to be applied .

The prevalent compensation regimes for oil/chemical spill pollutions in the world which could be models for PRC to adopt

(1) Compensation regime established by CLC and FC

Many countries choose to become a party to both CLC and FC and to follow the stipulations in their entirety. At the end of May 2006 there are 93 countries and regions which have joined both the CLC and FC. But this compensation regime is hard to be promoted in China, because China is now the third largest importer of oil and the largest importer of refined oil products and chemicals. Oil importers would have to shoulder a heavy burden for contributions made to the FC. It will also increase the operating costs of the Chinese oil tanker fleets and any such increases of their operating costs would certainly meet with strong resistance. It is also inevitable that the owners would pass all the cost increases down the line to the consumers. There is a huge social costs to be considered.

(2) US model : Internal Compensation Fund Regime only
Due to the limitation amount stipulated by FC 1971, it was deemed too low by US. It did not join in the FC and after the major oil pollution accident of 1989, US promulgated the OPA 1990, and set up the OSLTF (Oil Spill Liability Trust Fund) accordingly. This kind of compensation regime may be suitable for PRC as it has the liberty to impose a regime which is uniquely suitable for the Chinese economic and social conditions.

(3) Double compensation regime: International Conventions and Internal Legislations

In 1971, Canada promulgated a code to set up an ocean oil pollution compensation fund, and in 1987 promulgated the amended SOPF (Ship Source Oil Pollution Fund). Canada is at the same time a party to the CLC and FC and so the internal fund is mainly for making up shortfalls not covered by the CLC and FC.

Can PRC wait any longer to push for and implement a compulsory compensation regime?

In 2005 while promoting compulsory insurance against oil pollution from ships, China’s Maritime Safety Administration (MSA) began the work to establish a compensation regime for oil pollution from ships to guarantee financial support for cleaning up operations and compensation for victims of such incidents. This fund will be set up by levying a charge on ship owners and cargo consignors to ensure that they in take responsibility for oil pollution and compensating the victims of oil spills. But till now the fund has yet to be set up.

PRC in my view, is faced with a difficult choice of trying to protect and nurture a viable shipping and oil/chemical industry but at the same time, pinned down with a pressing need to come to terms with the harsh reality of a fast degrading maritime environment. A weak and feeble legal regime with no bite, will not serve its long term purpose and it is critical that PRC must design a feasible compensation regime to protect its environment adequately and to ensure that victims of such incidents are realistically compensated. PRC cannot afford to remain status quo because with the wide range of industrial chemicals being imported into the country, the impact of any spills whether in small or large quantity, would be far reaching in its impact to its marine ecosystems, marine resources and the health of the Chinese people.

A major source of protein needs of the population is derived from its rivers and coastal waters where large scale aqua farming are undertaken to harvest fish, crabs, shell fish, oysters, scallops, shrimps etc. It cannot depend on catches landed from the surrounding seas and the far oceans as these alone, are not able to meet the demands from a increasingly affluent society. The rivers and lakes are also water sources for PRC. The coastal regions, beside supporting large industrial installations, are also increasingly being used for recreational purposes. Any contamination of such areas by chemicals would be far reaching in its implications. It is unrealistic to draw on the country’s financial resources to clean up such pollution or to implement measures to minimize its damage whilst the guilty parties can get away easily.

Rising health care costs is already a serious concerns for the Chinese people and any additional burdens imposed on the population because of long term contaminated related illnesses will surely lead to social tensions and high social costs.

Imposition of a strict compensation regime will close the loophole now being exploited by local and foreign shipping entities. More importantly, a strict compensation regime will force shipowners to upgrade their fleets and to improve manning standards. The implementation of such a national compensation regime should be taken proactively rather than taking the traditional route of implementing reactive legislation to deal with the effects after a major disaster.

A good example for PRC to consider is the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea (HNS) 1996. This Convention was adopted by IMO on 3 May 1996. The HNS Convention is based on the two tier system established under the CLC and FC. However it goes further in that it covers not only pollution damage but also risks of fire and explosions, including loss of life or personal injury as well as loss of or damage to property.
Hazardous and noxious substances are defined by reference to lists of substances included in various IMO Conventions and Codes. These include oils; other liquid substances defined as noxious or dangerous; liquefied gases; liquefied substances with a flashpoint not exceeding 60C; dangerous, hazardous and harmful materials and substances carried in packaged form; and solid bulk materials defined as possessing chemical hazards. The Convention also covers residues left by the previous carriage of HNS, other than those carried in packaged form.

The Convention defines damage as including loss of life or personal injury; loss of or damage to property outside the ship; loss or damage by contamination of the environment; the costs of preventative measures and further loss or damage caused by them.

The Convention introduces strict liability for the shipowner and a system of compulsory insurance and insurance certificates。 For ships not exceeding 2000 GRT, the limits of liability is set at 10 million SDR and above that, additional 1500 SDR is added for each gross ton until it reaches 50,000 GRT and above that, 360 SDR per gross ton until the limit of 100 million SDR is reached or roughly about US$128 million.

In order to ensure that shipowners engaged in the transport of HNS are able to meet their liabilities, the Convention makes insurance compulsory for them. A certificate of insurance must be carried onboard and a copy is kept by the authorities who keep record of the ship’s registry.

The HNS also set up a second tier fund which is financed by cargo interests. Contributions to the second tier will be levied on persons in the contracting parties who receive a certain minimum quantity of HNS cargo in a calendar year. This second tier will consist of one general account and three separate accounts for oil, liquefied natural gas and liquefied petroleum gas. The HNS Convention excludes pollution damage as defined in the CLC and FC to avoid an overlap with these Conventions.

The HNS in the writer’s view, is not entirely perfect but it serves to provide a good template for PRC to study and to create a compensation model which will suit the Chinese economic model whilst at the same time, represent a bold step to ensure at least some certainty of compensation for the victims of oil or chemical substance pollution. This will also relieve the State from having to shoulder the burden of dealing with the consequences of long term damage to its maritime environment, ecosystems and the health of the Chinese people.

Capt Lee Fook Choon
International Congress of Maritime Arbitrators
Singapore 27 Feb 2007



































在一些大型的索赔案中,有必要提供样品进行专业的分析。可以是农学家、园艺家、植物学家、微生物专家、真菌专家、细菌学家或农业部门的专业人士。商业实验室通常也比较擅长,例如:英国的CAB国际微生物研究院,以及荷兰的Centraalbureau voor Schimmelcultures。

Capt Lee Fook Choon
China International Marine Insurance Seminar
Nanjing 27 April 2007


Legal System

Legal System refers in general to the legislative, the executive and the judicial system of a country. This paper attempts to discuss some significant aspects of the Chinese legal system such as the law making process, interpretation of law and the judiciary.

1 Law Making

 The National People’s Congress (NPC) together with its permanent body – the Standing Committee, is the highest organ of state power in making laws for the country.

 NPC deputies elected from the provinces, autonomous regions and municipalities and from the armed forces

 3000 members and met once each year for about 2 weeks

 A session of NPC may also be convened at any time if the Standing Committee deems it necessary or if 1/5 of the deputies so decide

 In principle, NPC has power to enact and to amend basic laws but in reality, it has neither the skill nor adequate time to consider draft bills for enactment

 On the other hand, the Standing Committee is much smaller in size and meets every two months and many of its members are full time with the Standing Committee.

 The Standing Committee cannot however amend the Constitution but can interpret the Constitution and supervise its enforcement

 Chairman of provincial people congresses are invited to attend the standing committee meeting but with no voting rights.

 In addition, State Council (Central People’s Govt of PRC) and local governments of provinces, autonomous regions and municipalities directly under the Central Government can also have legislative power like the NPC and its Standing Committee provided it is for local regulations and must not contravene with the provisions of the Constitution, the law and administrative rules and regulations.

 In effect, Chinese law can be divided into 4 levels, namely : the Constitution, laws adopted by the NPC and its Standing Committee, administrative regulations adopted by the State Council and local regulations by the people’s congresses of provinces, autonomous regions and cities.

2 Interpretation of Law

 In China, the Court has the power to implement the law but not to interpret the law. The Constitution entrusts the NPC Standing Committee with the power to interpret the Constitution and Laws. As mentioned earlier, the State Council and people’s congresses at various levels may enact administrative and local regulations respectively. The basis of legislative interpretation is that those who make the law are in the best position to interpret the law. It therefore follows that in addition to NPC and its standing committee, the State Council and the standing committees of the various local people’s congresses can also interpret the law.

3 Judicial Interpretation

A resolution adopted by the NPC Standing Committee dated 10 June 1981 allowed the Supreme People’s Court to interpret all questions arising from court trials concerning specific application of laws and decrees. The lack of action on the part of the NPC Standing Committee to interpret various laws have left much room to the court to fill in the void. Since the 1981 decision, the Supreme Court has issued thousands of judicial interpretation to guide the lower courts

Such judicial interpretations have binding force on all the courts in China and covers almost every aspect of the legal system.

The Judiciary

 The people’s courts of the PRC are the judicial organs of the State and it is tasked to try criminal, civil, economic, administrative, maritime and other cases prescribed by law

 Judicial power is exercised by the courts at four levels namely :basic people’s court, intermediate people’s court and special court, high people’s court and the Supreme People’s Court. Except for the Supreme People’s Court, all other courts are referred to as local courts. There is only one Supreme People’s Court which is located in Beijing

 The Supreme People’s Court handles cases of first instance assigned by law such as major criminal cases of national importance, economic, administrative, communications and transportation matters affecting whole nation. It also handles appeals and protests lodged against judgements handed down by local people’s high courts and special courts

 The high people’s courts include all the high people’s courts of the provinces, autonomous regions and municipalities under the Central government. A high people’s court handles cases of first instance assigned by law as well as appeals and protests lodged against judgements made by intermediate or special courts. It also supervises the administration of justice by people’s courts at lower levels.

 The intermediate people’s courts include those established in the prefectures of a province or autonomous region or municipalities under the jurisdiction of a province and those established in the municipalities under the Central Government. It handles cases of first instance assigned by law as well as appeals and protest against judgements of the basic people’s courts. It also supervises the administration of justice of the basic people’s courts

 The basic people’s courts include the people’s courts of counties, autonomous counties, cities (at county level) and municipal districts. It handles all criminal, civil, economic and administrative cases of first instance. It also directs the work of people’s mediation committees A basic people’s court may also set up a number of people’s tribunals as agencies within its jurisdictions. A people’s tribunal is part of the people’s basic court and its judgements and orders are judgements and orders of basic people’s court.

 The special people’s courts are set up for specific designated cases and these are military courts, railway transport courts and maritime courts. These special courts are deemed at the same level as intermediate courts.

 According to the Constitution, each people’s court is composed of one president, vice-presidents, chief judges and associate chief judges of divisions and judges.

 Only the people’s courts can exercise judicial power. No other government agencies, department has the right to exercise this power.

 In principle, a people’s court is independent and not subject to interference by any administrative organ or public organization.

Jurisdiction by Level

1 Hierarchy Jurisdiction

 Jurisdiction of court is sub-divided into hierarchically and geographically.

 Under the Civil Procedure Law, a basic people’s court could hear all civil cases as courts of first instance

 Intermediate courts have jurisdiction as courts of first instance over major cases involving foreign interests and cases that have substantial impact on the community within their geographical jurisdiction’s well as cases which are assigned by the Supreme People’s Court

 The maritime people’s court has jurisdiction as courts of first instance over maritime cases and related commercial cases

 High people’s court has jurisdiction as courts of first instance which have substantial impact on the community within their geographical jurisdiction

 The Supreme People’s Court has jurisdiction as the court of first instance to hear cases which have substantial impact on the whole country

 Prior to the adoption of the Civil Procedure Law, all cases involving foreign interests must be heard by an intermediate court but now it could also be heard before a basic people’s court. This is a reflection of the gradual maturity of the system and the fact that there is a need to share the case load of the intermediate courts.

2 Jurisdiction by Geographical Locality

 A civil lawsuit brought against a citizen, a legal person or any other organization shall be under the jurisdiction of eh court in the place where the defendant is domiciled If the defendant’s domicle is different from his habitual residence, the lawsuit shall be under the jurisdiction of the court of the place of his habitual residence

 Actions from contractual disputes come under the jurisdiction of the people’s court where the defendant is domiciled or the place of implementation of the contract. However parties may specify in writing to choose the jurisdiction of the people’s court with regard to the defendant’s place of domicle, or the place for honoring the contract, or the place where the contract is signed, or the plaintiff’s domicle and the place of the subject matter but they must never violate the rule of jurisdiction by level or exclusive jurisdiction like the maritime courts or the railway courts

 Actions arising from disputes over insurance contracts come under the jurisdiction of the people’s court at the place of the defendant’s domicle or at the place of the insured subject matter

 Actions arising from disputes over negotiable instruments come under the jurisdiction of the people’s court at the place where payment is to be made or at the place where the defendant is domiciled.

 Actions arising from disputes over contracts on carriage by rail, road, water, air or combined transportation come under the jurisdiction of people’s court at the place of departure, destination or the place where the defendant is domiciled.

 Actions against acts of infringement come under the jurisdiction of the people’s court at the place where such acts are committed or at the place where the defendant is domiciled.

 Actions claiming compensation for damage arising from rail, road, water and air accidents come under the jurisdiction of the people’s court at the place where such accidents occurred, or at the place where the vehicles or ships first arrived, or at the place where the aircraft first landed, or at the place where the defendant is domiciled.

 Actions claiming compensation for damage from ship collisions or other maritime accidents come under the jurisdiction of the people’s court where such collision took place, or at the port where the collided ship first arrived, or at the port where the ship responsible for the damage is detained or at the place where the defendant is domiciled.

 Actions claiming salvage come under the jurisdiction of the people’s court at the place of the rescue or at the prot where the rescued ship first arrived.

 Actions arising from general average come under the jurisdiction of the people’s court at the port where the ship first arrived, or at the place where the general average is adjusted, or at the port where the voyage terminates.

 If more than one court has jurisdiction over the same dispute, the court that first accepts the case should exercise jurisdictions.

Systems of Adjudication

 The people’s courts try cases in public, except for those involving state secrets, individual privacy and the commission of crimes by minors. For public hearing, announcements will be made in advance and citizens are allowed to attend

 Cases of first instance are tried by a collegial panel of judges except for very simple civil cases and minor criminal cases where a single judge by adjudicate. Appeals and protests are heard by a collegial panel of judges. The presiding judge of the panel is appointed by the president of the court or the chief judge of a division. Majority view will prevail but dissenting view is also entered into minutes.

 The parties and their legal representatives have the right to demand the withdrawal of members of the judicial panel, clerks, public prosecutors, expert witnesses or interpreters, who they think have an interest in the case or related to a party in the case. Such persons may also withdraw on their own accord

 China practises a two instances final adjudication system

 In China, there is a system known as supervision of adjudication system. If errors are discovered concerning the finding of facts or application of the law in the judgements or orders that have already become legally effective, they can still be corrected through the procedure of trial supervision or what we may call judicial review

Special Provisions for Procedure of Civil Action Involving Foreign Interests.

 In the event that the provisions of any Internationa Treaty which China had acceded to but such provisions are in conflict with the Chinese local law, the provisions of international treaty shall apply.

 If foreigners or foreign enterprises and organizations are going to have agent ad litem in taking or responding to actions in PRC on their behalf, they must appoint an attorney-at-law of the PRC

 Parties involved in disputes over contractual or property rights may specify in writing to choose the jurisdiction of the people’s court at the place having actual relation with the dispute. But actions over disputes arising from contracts for Sino-foreign equity joint ventures etc shall be under the jurisdiction of the people’s court

 Judgement made by foreign court or award rendered by a foreign arbitration organization have to apply for recognition and enforcement of the people’s court, if the parties to such judgement or award wanted to have it enforced in PRC

Special Maritime Procedure

 China has adopted the Special Maritime Procedure Law (SMP) on 25 Dec 1999. SMP is a special law. When the people’s court tries any maritime cases, the SMP takes precedent over the Civil Procedure Law. It means that Civil Procedure Law will only apply if there is no relevant provision under the SMP.
 Maritime tortuous actions also come under the jurisdiction of the maritime court of the place where the ship’s port of registry is located.

 Actions arising from a charter party dispute of a seagoing ship shall be under the jurisdiction of the maritime court of the place of the port of delivery, the port of re-delivery, the ship’s port of registry and the defendant’s place of domicle

 Actions arising from a dispute over a protection and indemnity contract shall be under the jurisdiction of the maritime court where the subject matter of insurance is located, where the accident occurred or where the defendant is domiciled.

 Actions arising from the service contract of crew, shall be under the jurisdiction of the maritime court of the place where the plaintiff is located.or where the contract is signed, where the port of embarkation and disembarkation of the crews is located or where the defendant is domiciled.

 Actions arising from a dispute over maritime security shall be under the jurisdiction of the maritime court of the place where the collateral is located or where the domicle of the defendant is located, actions arising from a dispute over a ship mortgage may also be under the jurisdiction of the maritime court where the ship’s port of registry is located.

 Actions arising from a dispute over the ownership, possession, employment and maritime lien of a sea going ship shall be under the jurisdiction of the maritime court of the place where the ship is located, where the ship’s port of registry is located or where the defendant’s domicle is located.

 Where all the parties to a maritime dispute are foreigners, foreign enterprises have agreed in writing to be subject to the jurisdiction of a maritime court of PRC though the place actually related to the casualty is not within the territory of PRC, the said maritime court shall have jurisdiction over the dispute.

 The Chinese maritime court also allowed the application by the claimants for the preservation of evidence. Some conditions must be met before such an application is approved. First the claimants must be a party to the dispute, second the evidence to be preserved must substantiates the maritime claims, thirdly, the party against whom an application is made, is a party to the dispute and lastly, there must be fear that the respondents may disperse off the evidence which are hard to obtain.

Arbitration in China

 China has been advocating the use of arbitration to resolve commercial disputes. Arbitration has made 4 decades of progress in PRC.

 China’s first Arbitration Law was propagated on 31 Oct 1994 and came into effect on 1 Sept 1995

 An arbitration agreement means an arb clause stipulated by their parties in the contract or a written agreement to refer their dispute to arbitration. Chinese law requires a valid arb agreement to name the Arb Commission so choose, parties must have capacities to sign the arbitration agreement

 A party may object to the jurisdiction of an arbitration commission if he has justifiable reasons and such objection must be raised before the first hearing or in the case of documents only arbitration, before the service of the first defense.

 Preservation of Property and Preservation of Evidence can be effected by application to the intermediate people’s courts. Such application is made by the arbitration commission.

 Enforcement of arbitration award by a Domestic Arbitration Institution must be lodged with the Intermediate People’s Court. The competent court will only review the arbitration procedures adopted. But it will not require the evidence to be verified, or investigate whether the law is properly applied and neither would the court examine the actual compensation to be paid..

 If the party is domiciled outside China, the applicant shall directly request a competent foreign court to recognize its validity and enforce the award

 Enforcement of an Award issued by a Foreign Arbitration Commission shall apply directly to the local Maritime Court in China and if there is no maritime court, then to the Intermediate People’s Court for enforcement action. The intermediate People’s Court shall act in accordance to international treaties which China has concluded or to which China is a party on the basis of the principle of reciprocity.

 CIETAC, also named as the Court of Arbitration of China Chamber of International Commerce from 1 October 2000. It is headquarted in Beijing with sub branches at Shenzhen and Shangai

 CMAC, China Maritime Arbitration Commission, headquartered in Beijing with sub-commission in Shanghai (established Jan 2003). A Fishery Dispute Resolution Center was also established in Jan 2003 within Shanghai CMAC

Capt Lee Fook Choon

Maritime Law Seminar
Jakarta, December 2006


Sunday, May 14, 2006


This paper was supposed to be presented by the writer at the ICMA Congress in New York but was cancelled because of the 9/11 Tragedy

It is very common to find a jurisdiction clause in contracts of maritime nature, particularly in the Bills of Lading and charterparty. It is also common knowledge that the ability of this clause to achieve the results intended is dependent on a number of considerations such as the scope of its wording, its exclusivity, to whom it is binding, whether such a clause infringes on any mandatory statutes of the chosen forum and most critical of all, the judicial attitude of the courts in the forum which have to enforce such a clause.

Take the Gencon Bills of lading for instance, the choice of law and choice of jurisdiction are incorporated by way of reference. The clarity with which the bills of lading incorporate the choice of jurisdiction in the charterparty is very important. If the incorporation is vague and unclear, the court may not permit effective incorporation of the charterparty terms. There are several cases which have dealt with this issue. Hence the manner in which the bills of lading are worded to incorporate the provision of the charterparty is very important.

The next issue that have given rise to legal debates relates to situations where there are several sub-charterparties. The question that had risen is, which is the effective charterparty for purposes of ascertaining the correct jurisdiction clause. The problem becomes compounded when the various charterparties provide for different jurisdiction clauses. The tentative solution has been to determine which of the charterparties is available and therefore that would be the relevant choice of jurisdiction. However this area of the law remains cloudy.

The effects of a jurisdiction clause are serious enough to warrant many legal opinions being sought by marine cargo insurers and other uninsured cargo interests. In the context of international trade, most of the shippers have no direct influence over the choice of the jurisdiction clause in the bills of lading (unless of course you are a major shipper). In reality, many shippers are not even aware of the significance and the legal effects of such a clause.

The primary objective of most hard headed business people is to have the goods shipped and delivered to final destination with minimum fuss, very often with the fastest and the most cost effective means possible. It is not too presumptuous to state that the effects of the jurisdiction clause are not fully appreciated until a cargo claim has arisen or at the commencement stage of recovery action by the subrogated insurers, that is, after a claim has been paid.

The problems are even more complex and unfair when the bill of lading has been indorsed to an innocent third party like the consignee. To his dismay, he has to accept the fact that under common law, he is bound by a clause of which he is not even a party to it and of which, he has no knowledge. Take the case of a consignee who is based in India and the shipper is domiciled in Singapore but the choice of jurisdiction happens to be say, Nicaragua. Some jurists have commented that in such cases where the choice of jurisdiction have no direct connection to the transaction or the parties, the terms of the bills of lading should not be given effects.

Under the English law, a party can be bound by a term in a contract to which he is not party and of which he has no knowledge. This was established in the Court of Appeal judgement in the KH Enterprise case. Under the English law, jurisdiction clause in the bills of lading is generally held to be effective though this may not be the case in non-English law jurisdictions.

In the insurance recovery process, the jurisdiction clause in the bills of lading remains the most thorny issue confronting many marine cargo insurers. The concerns of the marine insurers is understandable and most would feel comfortable with forums which embrace established carriage of goods by sea conventions or where the rule of law is firmly established. Their biggest concern is having to fight an action in a jurisdiction where the rule of law is not firmly established and precedents do not have significant bearing in the adjudication process.

These problems are further compounded by the widespread use of multimodal transport bills of lading or intermodal bills of loading where the jurisdiction clause and governing law is very often, leveraged on to the law of the country where the multimodal operator is domiciled. In some of these countries, the body of maritime law is not fully transparent or adequately developed.

Yet attempt to transfer the jurisdiction to a more favourable forum is the natural desire of all the claimants against the carrier but this decision is fraught with danger. For the enterprising ones who try, they face the prospects of not being able to resist a stay application from the carrier in a forum of choice.. Some jurisdictions have not acceded to the Hague Visby Rules or other established convention and had unilaterally, adopted a shortened time-bar of less than a year in action against the carrier. Any delays in trying to settle for a forum of choice may cause the claimants to be time-barred in the forum as defined in the contract.

Perhaps an example in a recovery case handled by the writer will be able to spotlight the problems posed by the jurisdiction clause in the bill of lading. In this example, the jurisdiction clause provides for Taiwanese law, and for the exclusive jurisdiction of the courts in Taipei. This matter involved a misdelivered shipment of goods from Hongkong to Russia. Claims against the carrier (through negotiation) was unsuccessful and an in-rem proceedings was thus commenced in Hongkong but not served on the carrier. The concern was whether the claimants could resist a stay application from the defendants who would obviously wish to rely on an alleged jurisdiction clause in the bill of lading.

This hesitation prompted the subrogation insurers to seek an opinion from a maritime lawyer in Taipei on the judicial attitude of the courts in Taipei. It was suggested that the Supreme Court of Taiwan had ruled in a case in 1978 that the jurisdiction clause in the bill of lading is only an expression of a carrier’s own willingness and as such, should not be deemed to be an agreement between both parties. It therefore followed that shippers are not bound by the jurisdiction clause in the bill of lading and it is the right of the shipper to decide whether or not to be bound by such a provision in the bill of lading.

Attention was also drawn to the 9 month time bar clause on the reverse side of the bill of lading. It was suggested that the subrogated insurers should ignore the jurisdiction clause (to avoid this 9 month time bar provision) on the pretext that the jurisdiction clause is only an unilateral expression of willingness made by the carrier and that such provision should not be applicable to the shipper or the subrogated insurers.

We also learned through this consultation process that the ROC courts will usually use the Civil Procedure Code to determine the issue of jurisdiction. Under this Code, it would appear that the courts in ROC lack jurisdiction over the matter on the argument that the ship involved is owned by a company not domiciled in Taiwan and that the ship in question has never called at Taiwan. Finally, the said casualty had occurred outside Taiwan.

With regard to the issue of the governing law, it was further suggested that it is the practice of the ROC courts to determine such issue based on the Law Governing the Application of Laws to Civil Matters Involving Foreign Elements. It was suggested that lex loci actus shall be applied to cases where the intention of the parties are unclear and that the act was committed outside Taiwan. Hence, it is very likely that the ROC courts will probably rule that the governing law clause is an unilateral expression of the carrier’s willingness and as such, shall not bound the shipper if the shipper chose not to.

Review of the above opinion by a learned Counsel in London

Still uncertain of the above findings, the subrogated insurers decided to place the facts of the above case and the Taiwanese opinion before a learned Counsel in London for review. Interestingly enough, the learned Counsel was of the view that under English law, the jurisdiction and governing law clauses in the bill of lading would be deemed to effectively incorporated though in ROC, this may not be case.

The issue in question, as expressed by the learned counsel, is whether the courts in Hong Kong would give effect to the law and jurisdiction clause in the bill of lading, bearing in mind that if they were to refuse jurisdiction on the basis that the matter should be dealt with in Taiwan, the Taiwanese courts on the other hand, may not regard the incorporation of the clause as effective. In effect, a court which is required to consider whether or not the clause should be given effect must do so not according to the court’s own law (lex fori) but according to the putative proper law of the contract ie in our case here, the ROC law.

An Australian case was also highlighted (Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 65 CLR 197) in where the issue was whether the foreign law and jurisdiction had been incorporated into the contract. The decision was that the issue should be determined not by the system of law indicated by the clause itself, but by the lex fori (the Australian law in this case).

In UK however, the questions of incorporation of the jurisdiction and governing law clause have generally been a settled issue to be considered under the putative proper law ie the law which would be proper law of the contract if the clause was validly concluded. To support this finding, several cases were mentioned, ie The Parouth [1982] 2 LR 351; The Atlantic Emperor [1989] 1 LR 548, 552lhc –553lhc and 554 rhc; The Lake Avery [1997] 540,550lhc etc.

Our understanding of this matter was further strengthened in a decided case (Albeko Schuhmaschinen AG v Kamborian Shoe Machine Co Ltd (1961) 111 LJ 519 which relates to the formation of contracts and where Salmon J expressed the view that even if the criteria of the lex fori regarding the formation of the contract had been satisfied, nevertheless the contract would not be regarded to be effectively concluded if the criteria of the putative proper law were not satisfied.

This example focussed the typical problems posed by the jurisdiction clause and in today’s context, we have seen widespread incorporation of jurisdiction and governing law clause in multimodal bill of lading issued by multimodal operators in countries like Vietnam, Thailand, Indonesia and many others. Whilst it is not the attempt of this writer to belittle the legal framework of some of these countries, it is a fact that there exist, many unknown grounds and uncertainties in the law of incorporation of the jurisdiction clause and governing law in countries where the body of maritime law is still being developed. The Taiwanese courts to be fair, have shown a great deal of common sense in their approach to this issue.
Issuers of bills of lading would obviously prefer to hide behind the uncertainties and unfamiliarity of some of the lesser known forums. For the subrogated insurers or uninsured cargo interests, it is a costly affair to ascertain the judicial attitude of some of these forums and also in trying to resist the stay application of the defendants in a forum of choice. Finally, to overcome the problem of choice of law/jurisdiction, it is recommended that insurers should proceed with recovery action at an early stage so that the issue of time bar could be managed.

Capt Lee Fook Choon



The Challenges Beyond

The cargo insurance industry has become highly competitive and knowledge intensive. Insurers have resorted to mergers and information technology to achieve the economy of scale.

The global environment is in a constant state of change. Whether insurers can depend on; internal costs control; imaginative investment incomes; and core premium income to stay viable will be something which even economists cannot predict with certainty.

With the rapid liberalisation of China and the opening of India, cargo insurers are posed with formidable challenges but with many opportunities too. One needs to take bold, imaginative and well-considered risks. The challenge ahead is to lift the traditional conservative lid among insurers to allow the range and scope of business to be expanded even when the premium rates are nowhere near attractive.

The increase in the range and depth of cargo insurance business should not be achieved purely from commercial expediency but in a well-considered undertaking. To achieve this, insurers cannot be contented with just enhancing the insurance knowledge of their underwriting and claims handling staff. There is also a crucial need to expand their fields of knowledge in a multi-discipline approach. For instance, they need to enhance their knowledge of the subject matter insured (product knowledge); the mechanics and risks of sea/land/river/air transportation; the packaging criteria; pre and post casualty control measures; ways to control litigation costs and country knowledge of the main trading nations. Acquisition of knowledge for underwriting and claims handling staff, like any many other professions, is a continuous process.

Product Knowledge

Many underwriting and claims handling personnel are rather poorly informed of the subject matter insured. Many are insufficiently equipped to understand the nature and characteristics of the subject matter insured. Hence, in determining whether it is a good risk that warrants a Class A coverage; or whether a particular mode of transport is suitable; or whether a particular damaged product can be sold in the market or to be condemned; they are largely left to the whims of the assureds or intermediaries.

Take for instance steel related cargoes. Many insurance personnel do not understand the complexities of the steel trade. Grade B steel products are being insured as though they are of Grade A materials. Similarly, in food grains and other agricultural products, losses sustained are being treated as transit loss covered by the policies when in reality, many of the losses can be traced to defects in seeding process; weather-derived diseases; poor crop husbandry; and harvesting and handling deficiencies before shipments. The same can be said of the timber trade and other vegetable oil business where many claims can be attributed to rust suspensions and other non-chemical based impurities which actually can be made good or even sold at substantially good prices even if downgraded or reprocessed.

Knowledge of vast categories of goods insured can be acquired through talks or short courses given by many trade associations and such talks can be organised through the Institute of Insurance or other insurers' associations.

Understanding the Transportation Systems

Today, goods are transported across the world by a multitude of transport modes involving mother carriers, feeder ships, inland barges, road, rail or even domestic air carriers. While the transport systems in Japan, Europe and US are highly developed, the same cannot be said in most countries.

The rail systems and roadways in many countries are in desperate needs of repairs or investment in infrastructure renewal. This also includes the fleet of inland barges and coastal ships used in delivering goods to far inland destinations. It is common to see poorly equipped coastal tankers being chartered to deliver parcel chemical or clean oil products from well-managed ocean tankers to inland river ports. The standard of tank preparation before loading is not observed and the interchangeability of the tank used is also not adequately monitored. This often results in contamination of products on arrival at the final destination. It is also not uncommon to find rickety open and uncovered trucks being used to carry expensive cargo to inland destinations.

Many insurers, under tremendous commercial pressure, are willing to cover door-to-door risks even though they may not have the slightest clue with regard to the state of the inland transport systems in the country of destination. In such a situation, insurers must be prepared to take inevitable losses rather than fortuitous losses. To increase awareness of the inland transport systems and the applicable legal regime governing the limit of liability for such inland carriers, insurers will do well by building up a file on useful data and historical records of the principal trading nations.


One major factor contributing to frequent losses is the sufficiency and adequacy of packaging. Many of the losses suffered in transit, especially during inland transits, can be attributed to less than rigorous packaging being employed. Some packaging methods or materials are determined by shippers whilst some are left to forwarders engaged by the shipper to do the packaging and/or consolidation for shipment.

The normal excuse given by shippers is that a particular packaging material has been in use for numerous shipments without difficulties encountered and, therefore, the argument that insufficient packaging or inadequate packaging is the cause of loss cannot be accepted. To reinforce this point, I will cite a case involving medical basic ingredients shipped in paper cartons by air from India to Europe. On arrival, the paper cartons were found to have softened by moisture as a result of condensation during the airflight and the entire shipment was rejected by the Danish Health Authority for being unfit for human consumption.

The assured gave the excuse that the packaging was adequate and customary whilst ignoring the fact that frequent use of a certain packaging mode without apparent deficiency noted does not mean that the standard of packaging is adequate. A combination of human negligence, weather effects, and shortcomings of the aircraft storage control procedures can put to test whether a certain packaging mode is adequate. There are many similar cases that can be quoted.

Many shippers are also under intense pressure to trim their business costs. Rationalising the packaging methods or materials used is one cost-effective measure. Packaging materials and method used should be adequate to withstand the full rigours of handling and storage in many transport modes and the benchmark cannot be measured only against a particular mode such as truck transportation.

One of the effective ways for insurers to control their claims exposure is to focus on the packaging of the subject matter insured. Good, adequate and robust packaging can go a long way to reduce the scope and extent of damage to goods-in-transit.

Claims Handling

The importance of proper claims handling to ensure only valid claims are paid, cannot be overstated in determining the profitability of the business. It is a fact that insurers rely to a great extent on a network of insurance surveyors to keep claims in check. For some established insurers, great pains are taken to set up a panel of surveyors but this panel is realigned each time a new claims person is put in charge. It is important for insurers to take note that professionalism and loyalty work both ways.

If a survey firm is confident that their listing on the panel is based on merits and is not simply replaced by a change of claims manager, they will work with diligence and a degree of professionalism. As most surveyors can testify, to do a good job in obtaining important information or documents or other physical evidence, very often surveyors must go the extra mile. It is this ‘ extra push’, which very often, makes the difference. The other spectrum is to do ‘just enough’ and the pride of a job well done is relegated to the back-burner. So, many claim handlers do complain about the quality and standard of field surveyors.

It is also common practice that the benchmark of survey services is focused on costs. While it is undeniable that cost has to be controlled, it is also a fact that experienced professionals cannot be cheaply reproduced. They are expensive employees and the costs of employing such people will have to be passed on to users of such services. Globalisation and economy of scale will not alter this situation and in fact, with globalisation, experienced personnel are even harder to keep as their services are in demand.

Perhaps, insurers should take another look at these suggestions:

1. A reliable network of surveyors to be maintained. Once a panel is formed, removal from or addition to this panel should be based on merits and not on personal relationship. Surveys firms should be assessed on the quality of their employees; their knowledge of the local environment; contacts with salvage merchants and traders; and their contacts with service and repair workshops, whether locally, in the region or through Internet.

2. The quality of surveyors should be assessed based on their professional background and pay structure to stamp out corrupt practices.

3. Insurers should back up surveyors in the course of their work in dealing with assureds or their intermediaries in the course of claims handling.

The quality of survey report has a tremendous bearing on the ultimate success of recovery actions against the carriers. Many cases of good merits can be frustrated by poor reports with no concrete substantiation of evidence and facts.

Understanding the Threat of Fraudulent Practices in International Trade

Fraudulent activities in international trade are on the rise. These activities are not only confined to Malacca Straits but also to Vietnam, Philippines waters, parts of China, Central America, South America, parts of Africa and even in Europe. There is still no international order that can help to eradicate or minimise the threats of such criminal activities. The modus operandi of these fraudulent activities is a very complex web involving the planners, executioners, collaborators, distributors and some authorities at the point of sale.

To depend on law enforcement agencies or the courts in many countries to recover converted goods is still a dream. It is better for insurers to take precautionary measures than to become a victim of criminal acts. Insurers need to understand the types of maritime frauds prevalent in the market place and what are some of the possible steps that can be taken to mitigate the risks:

Types of Maritime Frauds

* Hijacking of ship by disgruntled crew to settle disputes with owners

* Hijacking of ship by organized syndicates with crew’s complicity

* Hijacking of cargoes with or without crew’s complicity

* Hijacking of ship and cargoes by crew or by organized syndicates

* Illegal detention of ship/cargo by owners to force payment of outstanding hire or demurrrage or detention charges

* Pirate attacks to plunder ship's stores, equipment and or cash

* Misrepresentation of the nature of goods shipped

How to prevent maritime frauds

* Investigate the ownership and background of operators including their share ownership, mortgages etc 

* If the ship is a chartered carrier, obtain all pre-chartering correspondence between charterers, shipbrokers and owners to determine the quality of shipowners and the shipbrokers.

* Obtain details of P & I coverage as well as hull and machinery coverage to determine the quality of insurance. 

* Obtain copies of vessel’s trading documents to establish the authenticity of registration/classification documents.

* Obtain details of crew (if possible) such as their nationality, age, qualifications, domicile address in order to draw up a character profile of the crew-very critical to determine whether they are guilty of complicity in the crime committed. 

* Investigate into the background of charterers, nature of their business, scale of their operations and location of their office. 

* Obtain evidence and investigate into the background of shippers, nature of business, historical aspects of sale transaction of missing cargo, payment terms of goods, how shipments were arranged, how carrying ships were selected, terms of bills of lading, legality of export and foreign exchange control procedures. 

* Identify the chain of buyers i.e. intermediate and final buyers, their background, if possible, and whether or not they qualify to claim under the policy, whether the import is legal and is covered by the necessary import permits. 

* Examine prevailing market conditions of the product that is the subject of crime.

Country Knowledge

Many insurers are less than well informed of the economic, political, social and legal environment of their principal trading nations other than the United Kingdom. If insurers want to ensure prudent measures to be taken to avoid the pitfalls in claims handling, they need to expand their country knowledge of their principal trading nations. The major trading nations I am referring to are China, India, European Community, East European Countries, Korea, Japan, United States and Russia.

There is a compelling need for insurers to compile country information and data (for quick reference) on the strengths and weaknesses of each of these countries, their technical abilities, customs regime and transaction restrictions, trade practices, political risks, quality of inland transport systems, judicial system, etc. Ask yourself these questions: How much do you know about a country’s legal system? How does the court system function in that country? Is there any avenue for application to court for access to the vessel for document inspection? Do you know enough of the ship’s arrest procedures in all these countries in respect of obtaining security for your claims, the issue of counter security, the issue of whether protective writ can be issued to protect time-bar, repercussions of wrongful arrest, sister and associate ship arrests, the law governing validity of the limitation fund etc?

Why are these questions so important? They are very important because without which, insurers will be heavily exposed to wrongful advice leading to massive wastage in the legal costs in either pursuing a recovery claim or defending a claim. Many insurers, due to the legacy of history, are comfortable with English law but, unfortunately, English law is not universally adopted. Continental law or a hybrid variation of English law is adopted in many trading nations.

Dispute Resolution

Traditionally, insurers tend to look to the court for resolving any disputes with assureds or reinsurers. But in today’s commercial world, there are alternative cost-effective dispute resolution options other than going to court to settle a commercial dispute. In India and China, for instance, it does not make sense to settle disputes by dragging them through the district, provincial high court and then the highest court of appeal. Increasingly, insurers should look at Arbitration and or Mediation processes to resolve commercial disputes.

Insurers in European countries are looking into all aspects of claim control possibilities and it is of no co-incidence that they are by far the boldest in trying out mediation and arbitration.


Arbitration as a dispute resolution process is very little understood amongst insurers in this part of the world. What is an arbitral process and how to commence an arbitration proceeding is something still unfamiliar to many insurers. In actual fact, the East Asian Branch of the Chartered Institute of Arbitrators and the Hong Kong International Arbitration Centre will be more than willing (I believe) to educate insurers through insurers’ associations or the Institute of Insurance in understanding the arbitration process..

The arbitration process needs to be understood and insurers will be well served if they are briefed on the advantages and disadvantages of arbitration such as : How arbitrators are appointed? The difference between a sole and a three-member tribunal; the definition of commencement of arbitration in preservation of writ; How to challenge and dismiss arbitrators guilty of misconduct? How to ensure transparency and accountability in the arbitral process? How to control the costs of arbitration? How to enforce an arbitration award in home country as well as in a foreign country? The right of appeal to the court etc.


This is a process that has seldom been used by local insurers. From my experience as a mediator for foreign insurers, the results have been most gratifying. In most cases, it is a win-win situation, and unlike court or arbitration, the parties can walk away happy with the outcome (having the opportunities to have their views heard and tested against reality). Mediation is a poorly understood concept even among local insurers who are familiar with court proceedings.

The questions often asked are: How does mediation work? What is the difference between domestic and cross-border mediation? How to appoint a mediator? How can complex insurance claims be resolved through mediation? What are the advantages of mediation? If we proceed with mediation, can we revert to arbitration or court action at a later stage? Can a mediation agreement be binding on the parties? And, finally, what is the likely cost of mediation?

Mediation is hot topic in many countries. In construction, municipality and domestic family disputes, for instance, it is widely practised with good results. It is not possible to go into a substantive discussion on specific questions of the mediation process in this article as the depth of the subject will require a separate paper to do so.

The writer reckons that his views may not be shared by all but certainly, he hopes that this article will act as a catalyst to stir more general discussions among insurers to enhance the professional levels in the industry.

Capt Lee Fook ChoonACII, Master Mariner, LLM, Chartered ArbitratorToplis & Harding (Marine) LtdToplis & Harding (Recoveries) Ltd


Wednesday, May 10, 2006


Classic definition of general average given by an English Judge Lawrence J in Birkley v Presgrave :

All loss which arises in consequence of extraordinary sacrifices made or expenses incurred for the preservation of the ship and cargo come within general average and must be borne proportionately by all those who are interested

GA is now defined in MIA 1906 s 6

(1) GA loss is a loss caused by or directly consequential on a general average act. It includes
ageneral average expenditure as well as a general average sacrifice.

(2) There is a general average act where any extraordinary sacrifice or expenditure is
voluntarily and reasonably made or incurred in time of peril for the purpose of preserving
the propertyimperiled in the common adventure.
Rule A of York Antwerp Rules 1994 which in practice apply to the adjustment of general average provides :

“ There is a general average act when, and only when, any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure.

The result of a GA act is a GA loss. GA losses include : the loss suffered by virtue of a GA sacrifice; loss or liability incurred by a GA expenditure, or any losses directly consequent upon a GA act.
The person who suffers a GA loss is entitled to claim a contribution from those who benefit from it in proportion to the values of the interests which have been sacrificed and those which have been saved. The liability for such contributors may in turn be a loss for which they can claim against their own insurers and is also described as a general average loss.

Differences between Particular Average and Particular Charges

PA loss is a partial loss of the subject matter insured caused by a peril insured against, which is not a general average loss or a particular charge.

“Particular Charges” are expenses incurred by or on behalf of the assured for the safety and preservation of the subject matter insured, other than particular average or general average. They include expenses of services ‘ in the nature of salvage’ rendered by the assured or his agents.

Examples of GA

Jettisoning part of cargo or ship's stores, scuttling the ship, cutting away masts or cables, extinguishing a fire by pouring water into a hold, voluntary stranding, putting the cargo into lighters, engaging salvage services, paying money to secure the vessel's release from detention, sale of part of the cargo, additional fuel consumption, employment of towage services, tipping the vessel to repair the propellers, incurring damage to property belonging to third parties

General Average losses include expenses of ship repairs and reconditioning cargo.

York Antwerp Rules

Generally widely accepted as can be seen by their frequent incorporation into charterparties, B/L and marine insurance policies. YA Rules revised regularly, the most recent times was 1994, 2000 and 2004. Consist of 7 lettered rules and 22 specific rules. GA claims adjusted mainly on principles of lettered rules though reasonable consideration are given to the specific rules. GA Rules had been developed since mid 19 century for the purpose of removing differences between municipal laws and for reaching general agreement on matters of details and principles.

Claims Procedures

A person claiming GA contribution can assert a lien. The lien is released in return for the defendants providing an average bond, whereby he undertakes to pay the contribution due and to provide particulars of the value of his property and security in the form of either or both of a cash deposit or more commonly, a guarantee issued by his insurers.

The shipowners will then appoint a GA average adjuster, who in turn carries out a detailed and often lengthy assessment of the rights and liabilities of all interested parties, though unless otherwise agreed, his adjustment is not binding on them.


- The right only arises from a maritime adventure in the nature of a voyage

- There must be a real danger

- The danger must be to a common adventure and the action taken must be necessary for the safety of the common adventure or a direct consequence of such action

- Duration of the common adventure (eg if a portion of cargo is discharged and a GA event followed , the discharged cargo should not be called upon to contribute)

- Port of Refuge expenses [“ the going into port, the unloading, warehousing, and reloading of the cargo and the coming out of the port, are at all events part of one act or operation contemplated, resolved upon and carried through, for the common safety and benefit, and properly to be regarded as continuous.” By Thesiger LJ in Artwood v Sellar]

- There must be a sacrifice or expenditure of an extraordinary nature

- The sacrifice or expenditure must be real

- The GA act must be intentionally incurred for the benefit of the common adventure

- The action taken must be reasonable

- Contribution may be claimed from and only from an interest when it is successfully brought to the place of termination of the adventure

- Substituted Expenses (towage of a vessel from a port of refuge, forwarding of cargo from a port of refuge, temporary repairs, the extra expenses of drydocking with cargo onboard, additional overtime and air freighting spare parts.

Capt Lee Fook Choon