Web Alert: Newly released judicial interpretation on rules relating to vessel arrests in China

The Chinese Supreme People’s Court held a press conference on 8 November 2016 announcing the release of three new judicial interpretations, including one in relation to property preservation in China entitled 'Rules on Issues Relating to Property Preservation Cases Processed by People’s Courts', (the 'Rules') which comes into effect from 1 December 2016.

As a judicial interpretation to relevant laws in China, the Rules provide details and new guidelines for the courts in China to follow when dealing with property preservation applications. Given that vessel arrests in China are initiated by claimants through filing property preservation applications, the following are the major points for vessel operators to be aware of:

• The Rules provide that the amount of security to be provided to the court by the Applicant prior to the preservation of property being granted shall not exceed 30% of the amount to be preserved or the value of the property in dispute (Article 5).
• The Rules recognise that the Applicant can arrange insurance for his potential liability for wrongful preservation of property, and the courts shall treat letters of undertaking issued by such liability insurers as acceptable security required for a property preservation application (Article 7).
• The Rules set out scenarios where the requirement of security can be waived by the courts. The scope of these scenarios is fairly broad and include where the facts, rights and obligations are clear and therefore less possibility for wrongful preservation, and where the Applicant is financial institution such as commercial bank or insurance company (Article 9).

The Rules are read as a move by the Chinese courts to reduce the costs for applicants to file property preservations in China, and to help applicants overcome hurdles associated with providing acceptable security required for these applications. The implied impact to vessel operators who are calling ports in China is that it might become easier to have vessels arrested in China.

The full text of the Chinese version of the Rules can be found here. 

Should members have any enquiries regarding vessel arrests, security and counter security for release of vessels in China, please do not hesitate to approach your usual club contact.