Provisions of the Supreme People's Court on Several Issues concerning the Application of Law in the Seizure and Auction of Ships

Fa Shi [2015] No.6

February 28, 2015

The Provisions of the Supreme People's Court on Several Issues concerning the Application of Law in the Seizure and Auction of Ships (hereinafter referred to as the "Provisions"), adopted at the 1631st Meeting of the Judicial Committee of the Supreme People's Court on December, 8 2014, are hereby promulgated for implementation as of March 1, 2015.

The Provisions are formulated in accordance with laws such as the Civil Procedure Law of the People's Republic of China (hereinafter referred to as the "Civil Procedure Law") and the Special Procedure Law of People's Republic of China on Admiralty (hereinafter referred to as the "Special Procedure Law on Admiralty") in combination with the judicial practices with a view to regulating the seizure and auction of ships in maritime litigation.

Article 1 When a maritime claimant applies for taking preservative measures such as the restriction on disposal of or mortgage on a ship, the maritime court concerned may, in accordance with the relevant provisions of the Civil Procedure Law, render a ruling to grant permission and notify the ship registration authorities that they shall assist in implementation.
The preservative measures mentioned in the preceding paragraph do not affect other maritime claimants to apply for the seizure of the ship.

Article 2 A maritime court may, upon the application by different maritime claimants, take measures to seizure the ship that has already been seized by it or by other maritime courts.
If the maritime claimant who applies for the seizure of the ship earlier has not applied for the auction of the ship, maritime claimants who apply for the seizure of the ship later may apply for the auction of the ship to the maritime court which has approved their application for the seizure of the ship in accordance with Article 29 of the Special Procedure Law on Admiralty.

Article 3 When a ship is seized because the bareboat charterer is liable for the maritime claim, if a maritime claimant applies for the auction of the ship for paying off the related debts arising from the operation of such ship by the bareboat charterer in accordance with Article 29 of the Special Procedure Law on Admiralty, the maritime court shall allow the application.

Article 4 When a maritime claimant applies for the seizure of a ship, the maritime court concerned shall order the maritime claimant to provide security. For an application for the seizure of a ship due to a crew labor contract or a personal injury compensation dispute at seas or the waters connected to seas, if the facts are clear, and the relation of rights and obligations is explicit, the provision of security may be waived.

Article 5 The specific amount of the security to be provided by a maritime claimant in accordance with Paragraph 2 of Article 76 of the Special Procedure Law on Admiralty shall be equivalent to various maintenance costs and expenses that may be incurred during the period of the seizure of the ship, the loss for detention due to the seizure of the ship and the expenditures of providing the security for releasing such seizure by the person against whom the claim is made.
After the seizure of the ship, if the security provided by the maritime claimant is not sufficient to compensate the possible loss caused to the person against whom the claim is made, the maritime court shall order the claimant to add security.

Article 6 After the trial of the last instance, if the maritime claimant applies for returning the provided security, the maritime court shall notify such application to the person against whom the claim is made; if the person against whom the claim is made has not lodged any sue for related compensation within 30 days, the maritime court may approve the application of the maritime claimant for returning the security.
If the person against whom the claim is made consents to return of the security, or a valid legal instrument has ruled that the person against whom the claim is made is liable, and that, the amount of compensation or payment is basically equivalent to the amount of the security provided by the person against whom the claim is made as required by the maritime claimant, the maritime court may directly approve the application of the maritime claimant for returning the security.

Article 7 A ship shall be managed by the ship owner or the bareboat charterer during the period of seizure.
If the ship owner or the bareboat charterer does not perform the duties for the ship management, the maritime court concerned may entrust a third person or the maritime claimant to manage the ship on behalf thereof; relevant costs arising therefrom shall be borne by the ship owner or the bareboat charterer, or may be paid preferentially out of the proceeds from auction of the ship.

Article 8 After the seizure of a ship, if the maritime claimant has sued to another maritime court of competent jurisdiction in accordance with Article 19 of the Special Procedure Law on Admiralty, the maritime court that has seized the ship may continue to take the preservative measures.

Article 9 Before the implementation of a ruling regarding the seizure of a ship, if the maritime claimant withdraws the application for the seizure of the ship, the maritime court shall rule to approve the application and shall terminate the implementation of the ruling regarding the seizure of the ship.
If the ruling regarding the seizure of the ship is unable to be implemented due to objective reasons after it is rendered, the maritime court shall rule to terminate the implementation thereof.

Article 10 If no deal is reached in the ship auction, and a further auction is needed, an announcement of auction shall be publicized seven days in advance of the date of auction in accordance with Article 45 of the Auction Law of the People's Republic of China.

Article 11 The auction of a ship shall be made by the Ship Auction Committee, and maritime courts do not entrust any auction organization to auction the ship separately.

Article 12 Maritime courts shall determine a reserve price based on the assessed value. Such reserve price may not be disclosed.
At the first time auction, the reserve price shall not be lower than 80% of the assessed value; if the auction fails and a further auction is needed, the reserve price may be lowered at discretion, but the reduced amount shall not exceed 20% of the previous reserve price.

Article 13 The ship may be sold if both auctions have failed. The sale price shall not be lower than 50% of the assessed value.

Article 14 If the sale under Article 13 of the Provisions has failed, upon the consent by the creditors that account for not less than two-thirds of the registered claims, the ship may be sold at a price lower than 50% of the assessed value. If this also fails, the maritime court concerned may release the seizure of the ship.

Article 15 After the auction or sale of a ship by a maritime court, the effect of other preservative measures taken against the ship is lost.

Article 16 The expiration date of the period for application for the registration of claims provided by Article 111 of the Special Procedure Law on Admiralty is the 60th day since the date of the last announcement for auction of a ship.
The announcement mentioned in the preceding paragraph refers to the announcement for the first auction of the ship.

Article 17 After admitting an application for the registration of the claims, the maritime court concerned shall rule whether or not to approve the registration in accordance with Article 114 of the Special Procedure Law on Admiralty, once a deal has been reached for the auction or sale of the ship.

Article 18 Maritime courts shall allow a maritime claimant without the registration of claims who has applied for the auction of a ship to join the allocation of the proceeds from the auction of the ship, if they have directly so requested.

Article 19 When a maritime court rules to terminate a ship auction, it shall rule at the same time to terminate the procedures of the registration of the claims and the repayment of debts; the application fees paid by the involved parties shall be returned thereto.

Article 20 If the involved parties have filed proceedings in connection with the claims before the registration of the relevant claims, Paragraph 2 of Article 116 of the Special Procedure Law on Admiralty shall not apply; the involved parties may lawfully appeal against the judgment or ruling rendered by the maritime court.

Article 21 After the involved parties have filed a lawsuit to ascertain the existence of certain rights in accordance with the Paragraph 1 of Article 116 of the Special Procedure Law on Admiralty, if the proportion of the negligence degree in the ship collision needs to be determined, the involved parties may lawfully appeal against the judgment or ruling rendered by the maritime court.

Article 22 The proceeds and the interest thereof obtained from the auction or sale of a ship by the maritime court concerned, after the fees provided in Paragraph 2 of Article 119 of the Special Procedure Law on Admiralty are paid preferentially, shall be duly allocated in accordance with the following order:
1. the maritime claim that enjoys the maritime lien;
2. the maritime claim that has been secured by the possessory lien;
3. the maritime claim that has been secured by the ship mortgage;
4. other maritime claims related to the auctioned or sold ship.
The maritime claimant who applies for auction of a ship after the application for seizure of the ship in accordance with Paragraph 2 of Article 23 of the Special Procedure Law on Admiralty shall join the allocation of the proceeds of the ship after the repayment of the maritime claim provided in the preceding paragraph.
Any balance after the allocation in accordance with the preceding paragraph shall be disposed of in accordance with the Civil Procedure Law and relevant judicial interpretations.

Article 23 If the involved parties apply for the ship auction to achieve the security rights on the ship in accordance with Section 7 of Chapter XV of the Civil Procedure Law, the maritime court at the place where the ship is located or the place of port of ship registry shall have the jurisdiction; the competent court shall handle the case in accordance with the provisions on the repayment procedures for the ship auction set forth in the Special Procedure Law on Admiralty and the Provisions.

Article 24 The Provisions apply to the seizure or auction of a ship by the superior people's court of a maritime court.
The Provisions apply to the liquidation of debts by the auction of a ship in the enforcement procedures.

Article 25 The Provisions do not apply where the seizure and auction of a ship has already been made before effectiveness of the Provisions, and the involved parties apply for reconsideration after effectiveness of the Provisions.
After effectiveness of the Provisions, the Provisions on Maritime Courts' Auction of Seized Ships for the Repayment of Debts (Fa Fa [1994] No.14) formulated by the Supreme People's Court on July 6, 1994 shall be repealed simultaneously. The Provisions shall prevail if there is any discrepancy between the judicial interpretations and normative documents previously issued by the Supreme People's Court and the Provisions.