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SMC Issued White Paper to Report Trials Involving Construction of the China (Shanghai) Pilot Free Trade Zone




    On May 12, 2020, the Shanghai Maritime Court (SMC) held a press conference to release Shanghai Maritime Court Report on Trials Involving Construction of the China (Shanghai) Pilot Free Trade Zone. The white paper, published in both Chinese and English, aims to bring into better play the role of maritime justice in promoting the opening-up and development of the FTZ by systematically summarizing the experience of the SMC in facilitating the construction of the FTZ in the past five years. By outlining the general situation of trial, the measures taken by the SMC, the innovation of the trial mechanism, and noteworthy cases, the white paper details the work done by the SMC centering around the construction of the FTZ since 2015.

Overview and characteristics of cases involving the FTZ. From 2015 to 2019, the SMC accepted 1,425 maritime cases involving the FTZ, and concluded 1,352 of them. There was a significant increase in the number of cases accepted in 2015 and 2016, which leveled off after 2017. Maritime cases involving the FTZ accounted for 4%-6% of all the cases accepted by the SMC in the same period, and the growth of such cases was lower than that of non-FTZ cases, which suggested that the shipping industry in the FTZ was above the average in administrative supervision, business environment and development quality. It should be noted that in 2019, the number of maritime cases involving the FTZ began to increase again, especially in the second half of the year, which may be attributed to the addition of the Lingang New Area to the FTZ.

The FTZ-related maritime cases handled by the SMC have the following characteristics: 1. The two traditional typesCthose cases involving the sea freight forwarding contracts and the ones involving contracts of carriage of goods by seaCare still in the dominant position, with the former occupying the largest share and the latter the second largest, but a new trend has emerged after 2017: the business model of a freight forwarder has been shifting from traditional agency to door-to-door whole-process logistics service. 2. For contracts of goods carriage by sea, the number of disputes over delivery of goods without original bill of lading has declined, the number of disputes over cargo damage has increased, and the frequency of cargo damage in domestic coastal shipping is quite high. 3. Despite the small proportion of cases involving shipping finance such as ship financing and shipping insurance, it has jumped to top five from one digit in the past, speaking to the fact that the shipping service industry in the FTZ has been increasingly active. 4. The number of disputes over e-commerce platforms for logistics has been on the rise. By handling such cases, the SMC finds that the operating practices vary in the industry, and neither the platform operators nor the contracting parties have a clear idea of their legal relationship or their rights and obligations. Adjudication, therefore, is needed to help them have a better understanding of those matters. 5. The number of disputes over cruise business activities is small: only 21 cases have been accepted since 2015. In spite of the small number, the cases cover multiple types, including casualty of tourists, cruise ticket underwriting, cruise leasing, overdue mooring fees (material supply funds, shipping agency fees), ship insurance (repair, operating loans), and labor service of the crew. 6. There are 42 arbitration cases under judicial review, with 24 involving the mainland, 8 involving the Hong Kong Special Administrative Region and 10 involving regions outside China. There has been no case in which a decision has been made not to recognize the enforcement or to cancel the arbitral award.

Main measures taken to facilitate the construction of the FTZ. One, scientifically developing the general idea of providing judicial services to guarantee the construction of the FTZ. Centering on the pertinent national strategy, the SMC has concentrated on the goal of building an "international, law-based and convenient" FTZ by "handling all kinds of maritime cases involving the FTZ in accordance with the law, exploring and innovating the mechanism for maritime trial, increasing the international influence of the adjudication rules for shipping trade, making judicial suggestions, and helping build an optimal law-based business environment. Two, formulating the opinions on providing maritime judicial services to guarantee the construction of the FTZ. Shortly after the Shanghai Pilot Free Trade Zone was established, the SMC formulated the Opinions of Shanghai Maritime Court on Serving and Guaranteeing the Construction of the China (Shanghai) Pilot Free Trade Zone. After the construction of the FTZ Lingang New Area began, the SMC formulated, based on the State Councils Overall Plan for the Lingang New Area of the China (Shanghai) Pilot Free Trade Zone, the Opinions of Shanghai Maritime Court on Serving and Guaranteeing the Construction of the Lingang New Area of the China (Shanghai) Pilot Free Trade Zone, which can be seen as Version 2.0 of the aforesaid Opinions. Three, optimizing the pattern of resource allocation for maritime trial involving the FTZ. A special court has been set up to handle maritime cases involving the FTZ, specifically, cases in which the parties register in the FTZ, or the disputes take place in the FTZ, as well as those concerning the special regulation policies, the opening up of business, and the implementation of major functional projects in the FTZ. Four, protecting and promoting the innovative development of shipping-related industries. For example, in view of the adjustment of import and export clearance policies in the FTZ, the SMC has warned the freight forwarding industry about the potential risks and offered preventive suggestions. It has also worked with the Municipal Commission of Transport to strengthen supervision of the NVOCC market. To support the innovative development of shipping and other related industries in the FTZ, SMC has held lectures to share legal information regarding the shipping industry, and conducted research on legal practices in shipping finance, ship financing and leasing, private shipping businesses, and cross-border e-commerce platforms for logistics. By properly handling the debt disputes involving "Hanjin Shipping", the SMC has contributed to the stability of the shipping market. Five, playing the role of a maritime justice think-tank for the FTZ. In 2015, the SMC published its first White Paper on Maritime Trials Involving the FTZ in both Chinese and English. Together with the government of Pudong New Area, the SMC has carried out the research on the construction of a shipping insurance center with international competitiveness under the framework of the FTZ. At the request of the Shanghai insurance regulatory bureau, it has helped with the legal argumentation on the pilot project of the "registration system for shipping insurance products." Six, striving to create an optimal law-based environment for shipping business in the FTZ. As there are many new circumstances and problems in the FTZ, many cases then become the first of its kind, which requires the SMC to form maritime judicial rules of universal application through careful trial, make the maritime judicial rules for the FTZ more predictable, and accumulate and expand international influence. Several cases have been published in internationally renowned maritime law journals. At the same time, the SMC has ranked No.1 in judicial transparency of China's maritime courts for several consecutive years by promoting judicial openness. Seven, building the FTZ through practical cooperation. The SMC has continued to deepen business collaboration with units of various ports, kept close contact with the traffic administrative departments of Shanghai and governments of district level, joined the Convention on Developing A Law-based Shipping Industry in the China (Shanghai) Pilot Free Trade Zone, conducted policy research, provided legal consultation, and resolved disputes for the FTZ, and cooperated with universities to cultivate professionals in shipping law.

Innovation in the trial mechanism for maritime cases involving the FTZ. One, establishing a diversified dispute resolution mechanism in line with the characteristics of maritime cases, taking the lead in exploring the mediation of maritime disputes by entrusting a maritime arbitration institution, and establishing a special cooperative mediation mechanism with the Shanghai Commercial Mediation Center. Two, innovating the judicial recognition mechanism for general authorization of maritime litigation agency, allowing overseas parties to authorize agent ad litem once for litigations within a certain period of time and scope. Three, developing and recommending the use of the "model provisions on the service address agreed in the contract" to ease the service problem. Four, improving the mechanism for the identification and application of international rules and foreign laws, strictly abiding by the international conventions to which China is a party, valuing the parties' unanimous choice of the law to be applied, and applying the law in accordance with the Law on the Choice of Law for Foreign-related Civil Relationships and the agreement reached with the parties. Five, establishing a professional enabling system for maritime trials. A team made up of special consultants and expert jurors, a database of professional maritime appraisal and evaluation institutions, and a directory of institutions entrusted with the custody of ships arrested by court, have been established to complement the judges and make the trials more professional. Six, building a channel to connect with other maritime courts for case filing at a different place. Through the case filing platform of China Mobile WeCourt, the SMC has conducted online transmission of materials, instant review and on-the-spot filing with the Tianjin Maritime Court and the Dalian Maritime Court, respectively, which enable the parties to file a lawsuit with the maritime court at a different place. Seven, formulating special procedural guidelines for increasing the speed and efficiency of trials, such as the Guidelines on Strengthening and Improving the Review of Jurisdictional Objections, and the Guidelines on Strengthening and Improving the Review of Foreign-related Evidence, so as to create a trial mechanism to facilitate litigation for parties and help the courts improve the efficiency of case handling. Eight, promoting the extensive and in-depth application of information-aided trial technology. The SMC has investigated facts and evidence outside China using instant messaging tools, and developed an "intelligent analysis system for cargo data" according to its own needs, which has greatly improved the ability of fact-finding in maritime trials. Nine, improving the mechanism for auction of ships to increase liquidity. Over the past five years, 52 vessels have been successfully auctioned through the online platform for judicial auction, with an average premium rate of 57.68%, effectively protecting the legitimate interests of creditors and debtors.

Noteworthy maritime cases involving the FTZ. The white paper includes 10 maritime cases involving various industries which can serve as references for adjudication. The cases outline the idea of the SMC in serving and guaranteeing the construction of the FTZ by showing how it supports expanded foreign investment, cross-border trade and guarantee, and the cruise industry in the FTZ, works on the negative list system and facilitates customs clearance, encourages and promotes the arbitration policy, and respects the international practice and autonomy, thereby helping all walks of life better understand the FTZ-related policies, regulating and guiding the players in the shipping market, and optimizing the business environment in the FTZ.

  Shanghai Maritime Court Report on Trials Involving Construction of the China (Shanghai) Pilot Free Trade Zone (2015-2019) .pdf


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