Chinese Winds Turn In Favour Of Cargo Claimants Against Port Operators.
Legal News & Analysis - Asia Pacific - China - Shipping Maritime & Aviation
30 December 2020
Does a sudden strong wind in a port area constitute a force majeure event under Chinese shipping law? A recent judgment may provide helpful guidance on this issue.
Traditionally, under established Chinese shipping practice, if cargo interests filed a claim against port operators for cargo damage caused by a sudden strong wind (a gust or a squall), the port operators would usually avoid liability on the ground that the sudden strong wind constituted a force majeure event. However, a second instance judgment issued recently by Shandong Higher People's Court1 will probably change this state of affairs. In the judgment, Shandong Higher People's Court held that although the sudden wind was strong when the incident occurred, taking into account the fact that the port operators failed to take sufficient measures to prevent the collapse of the container cranes, the port operators’ argument that the sudden strong wind should be treated as a force majeure event was untenable. Given that strong winds and typhoons are a common cause of cargo damage incidents in China, it is our view that this decision will provide helpful guidance for the handling of similar types of claims in future.
In June 2018, Quanzhou Antong Logistics Co., Ltd ("Antong") contracted with Qingdao Port for the shipment of peas to be carried in 60 containers by barge from Qingdao Dagang Pier to Huangdao Container pier, and, subsequently, on several ocean vessels to Shanghai and Wuhan. Qingdao Port then subcontracted the actual transportation to Tongbao. The cargo was carried on the barge "Shi Tai 598", which was owned by Shitai. On 13 June 2018, while the "Shi Tai 598" was loading containers in Berth #45 of pier No.8 at Qingdao Port, a container crane collapsed and caused severe damage to the "Shi Tai 598" and to 41 containers. Antong had subscribed an insurance policy with insurers PICC QZ in early 2018. After PICC QZ paid Antong the insurance indemnity in the sum of RMB1,041,257.33, they commenced legal proceedings, as the subrogated insurer, against Qingdao Port, Tonbao and Shitai, before the Qingdao Maritime Court.
It was established that, on 13 June 2018, five container cranes had collapsed owing to the sudden strong wind. According to the speed indicator installed at the top of one of the collapsed cranes, the maximum wind speed recorded when the incident occurred was 57.4 metres per second, while just a short time earlier, the recorded wind speed had only reached 16 metres per second. After having been informed of a bad weather report warning that thunder, strong wind, etc. were on the way, Qingdao Port immediately arranged for their employees to stop working on the terminal's five container cranes, and took emergency wind prevention measures such as installing iron wedges. However, those measures did not work as the wind that day was too strong.
First Instance Judgment
Qingdao Maritime Court did not address the issue of force majeure. They held that considering PICC QZ was pursuing a tortious claim, the key disputable point of the case would be whether Antong should be treated as the "aggrieved party" which suffered a loss. Given, they found, that Antong did not have ownership of the damaged cargo, Antong would not have suffered any loss, and therefore PICC Quanzhou's subrogated claim should be dismissed.
Second Instance Judgment
Shandong Higher People's Court held that Qingdao Maritime Court was incorrect to dismiss PICC QZ's claim. As Antong was under an obligation to compensate the shipper for loss or damage which occurred during transportation, they would be aggrieved parties and had suffered a loss, according to Chinese law.
With regards to the force majeure issue, they held that the incident was not unavoidable and insurmountable. Although the sudden wind was strong at that time, and Qingdao Port's employees did take some precautionary measures such as installing iron wedges, they failed to take anti-collapse measures such as installing windproof mooring anchors or setting pier studs in accordance with the Regulation on Prevention against Gusts and Typhoons for Large Port Machinery, issued by the Chinese Ministry of Transportation in 2003.
Meanwhile, as Tongbao and Shitai did not carry out any tortious act, Tongbao and Shitai were not found liable for the claim.
Previously, if cargo interests found that cargo damage was caused as a result of a sudden strong wind or a typhoon in the port area, they were inclined not to pursue a claim against the port operators as they felt their chances of success were not good. Following the decision in (2019) Luminzhong No. 2737, it is our opinion that cargo interests faced with similar situations should now feel more optimistic, as, in a change to the previous position, a sudden strong wind or a typhoon will not necessarily be considered a force majeure event under Chinese law. To reinforce their position, it may be helpful for a potential claimant to collate evidence showing that the port operators or other liable parties failed to take reasonable measures to minimise the risks.
For further information, please contact:
Ik Wei Chong, Managing Director, Clyde & Co
1The case number of the above-mentioned 2nd instance judgment is (2019) Luminzhong No. 2737. Parties: Plaintiff: PICC Quanzhou Branch ("PICC QZ")
Defendant I: Qingdao Port Dagang Branch ("Qingdao Port")
Defendant II: Qingdao Port Tongbao Shipping Co., Ltd ("Tongbao")
Defendant III: Guangzhou Shitai Marine Co., Ltd ("Shitai")