Applying for the seizure of marine fuel

By Henry Lee and Jessy Wang, Dacheng Law Offices
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The seizure of marine fuel, as one of the preservation measures for maritime claims specified in the PRC Maritime Litigation Special Procedure Law, is not as widely used as the seizure of vessels. In certain circumstances it can, however, help a maritime claimant to realize its claim. But a lack of specific provisions relating to the seizure of marine fuel in PRC law leads to much uncertainty in practice.

The need for fuel seizure

Henry Lee, Dacheng Law Offices
Henry Lee
Senior Partner
Dacheng Law Offices

The value of the seizure of marine fuel as a preservation measure can be illustrated in the following circumstances. A maritime claimant has the right to bring a maritime claim against a vessel time charterer. It is not possible for the claimant to apply for seizure of the vessel or cargo, which do not belong to the respondent. The claimant’s only recourse may be to apply for seizure of the marine fuel belonging to the charterer under the time charter party.

One advantage of opting for the seizure of marine fuel rather than seizure of a vessel is that the amounts that the courts require to be provided as security for the applications are different. When a PRC maritime court accepts an application for seizure of a vessel, it requires the claimant to provide a large amount as security, regardless of the amount of the claim involved. This amount is usually equivalent to 30 days’ hire of the seized vessel. When the amount of the claim is significantly less than this, the amount of security required may dissuade the claimant from taking action.

In contrast, if the claimant opts for seizure of marine fuel belonging to the respondent, the court will not generally require such a large amount as security.

Thus it can be seen that there is a genuine need to be able to seize marine fuel as a preservation measure. However current PRC law in this area remains deficient.

Relevant provisions

Jessy Wang, Dacheng Law Offices
Jessy Wang
Lawyer
Dacheng Law Offices

Article 50 of the Maritime Litigation Special Procedure Law specifies that “this section shall govern the application by maritime claimants for maritime claim preservation in respect of marine fuel and marine supplies relating to their maritime claims”. In other words, the provisions of that law on the seizure and auctioning of cargo apply to fuel.

Article 38 of the Supreme People’s Court Several Issues Concerning the Application of the PRC Maritime Litigation Special Procedure Law Interpretations specifies that “when a maritime claimant applies for seizure of marine fuel or supplies, the provisions of section 1 of chapter 3 of the Maritime Litigation Special Procedure Law may be applied, in addition to article 50” of that law. In other words, the general provisions of the Maritime Litigation Special Procedure Law on maritime claim preservation shall apply.

Application for seizure

First, an application for the seizure of marine fuel should be made to the maritime court of the place where the fuel is located. As marine fuel is usually loaded and stored with the vessel, this is usually the place where the vessel is berthed. In practice, this point is seldom in dispute.

Determination of ownership

Second, the marine fuel in question must belong to the respondent. However, in practice, distinguishing to whom the fuel belongs may not be easy. Generally speaking, when a vessel is subject to a bareboat charter or time charter, the marine fuel belongs to the bareboat or time charterer. In other circumstances, the fuel belongs to the ship owner.

But the circumstances may be more complex than this.

For example, one vessel may be subject to a series of charter parties, and under the first charter party between the original ship owner and the time charterer, it is likely that the time charterer is the owner of the marine fuel; however, under the second charter party between the same time charterer and the subsequent charterer, it is possible that the subsequent charterer has become the owner of the fuel by virtue of having a signed a “back to back” charter party provision.

Accordingly, when a claimant submits an application for maritime claim preservation, the court will require sufficient evidence to determine the ownership of the marine fuel.

PRC law has no specific provisions on how to determine the ownership of marine fuel. As the seizure of marine fuel is relatively rare, the courts also lack clear criteria on which to judge this. It is generally held in the industry that a maritime claimant submitting an application for preservation should provide preliminary evidence to demonstrate that the fuel belongs to the respondent and, particularly where the respondent is a vessel time charterer, it must provide the time charter party. Naturally, when the court issues its judgment, the respondent may object. If the respondent is a time charterer, it may submit the time charter party executed with the subsequent charterer.

Security

Third, the court will usually order the claimant to provide security, and the claimant should institute legal action or apply for arbitration within 15 days. As mentioned above, the amount of the security that certain maritime courts may require may be far less than that required for the seizure of a vessel, but the time limit for instituting legal action or applying for arbitration is much shorter than the 30-day limit for the seizure of a vessel.

Method of seizure

Finally, as laws are silent on the method of seizing marine fuel, this has given rise to substantial practical difficulties.

If there is no reasonable way to separate the fuel from the vessel, seizure of the fuel will naturally result in a delay in the sailing schedule. In particular, when the fuel and vessel belong to the charterer and vessel owner respectively, how to seize the fuel without causing a delay in the sailing schedule is one of the problems that will need to be faced up to.

Henry Lee is a senior partner and Jessy Wang is a lawyer at Dacheng Law Offices

(Dacheng Law Offices)

Dacheng Law Offices LLP, Shanghai

3/F China Development Bank Tower

500 Pudong South Road

Shanghai, 200120

Tel: +86 21 3872 2401

Fax: +86 21 5878 6866

E-mail:

henry.lee@dachenglaw.com

jessy.wang@dachenglaw.com

www.dachenglaw.com

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