Two Asian shipowners battle it out in court over China

An Australian court has asserted its jurisdiction over a legal dispute involving two bulk carrier owners following a collision in a Chinese port. The incident, which occurred on December 30, 2022, involved the Yangzijiang Shipping-owned bulker Yangze 22 and Mitsui OSK Line’s Vega Dream, leading to significant legal ramifications. The Federal Court of Australia has now clarified the terms of a letter of undertaking from Norwegian insurer Skuld, which provided protection and indemnity coverage for the Yangze 22.

Details of the Collision and Legal Proceedings

The collision took place in the Beicao Fairway near Shanghai, resulting in the spillage of nine tonnes of oil into the Yangtze River. The Shanghai Maritime Safety Administration, with assistance from Nebula Shipping, the owner of the Yangze 22, managed the cleanup efforts. Following the incident, Nebula Shipping sought to establish a limitation fund for maritime claims amounting to approximately $9 million, filing an application with the Shanghai Maritime Court on January 21, 2025.

In the wake of the collision, Nebula Shipping obtained a pre-litigation arrest of the Vega Dream, demanding a guarantee of RMB 200 million (around $27.9 million) from Protea Navigation, which joined Mitsui OSK Line as a plaintiff in the Australian legal proceedings. On February 21, both MOL and Protea Navigation contested the claims in the Shanghai Maritime Court, attributing the collision to the Yangze 22.

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Subsequently, the Vega Dream was released from arrest after a Chinese insurer provided a letter of undertaking to the Shanghai Maritime Court. Meanwhile, Nebula Shipping filed a claim against the owners of the Vega Dream for damages amounting to CNY 157 million, which was accepted for filing. In response, MOL and Protea Navigation arrested the Yangze 22 in Newcastle, Australia, on May 6, leading to further legal complexities.

Judicial Ruling and Implications

On May 29, Judge Sarah Derrington ruled on the matter, stating that Skuld’s letter of undertaking did not provide adequate security for the plaintiffs. The judge emphasized the importance of the Convention on Limitation of Liability for Maritime Claims (LLMC) in determining the maximum liability of shipowners and the enforcement of that liability against a single source of security. She noted that the geographical scope of the LLMC is limited to State Parties, which does not include China.

Judge Derrington declined to release the Yangze 22 from arrest, stating that the amendment sought by the plaintiffs was reasonable and necessary. Legal experts following the case believe that an appropriately amended letter of undertaking was eventually provided by Skuld. The Yangze 22 was released from arrest on June 9 and subsequently departed Australian waters for La Plata, Argentina, marking a significant development in this ongoing maritime legal saga.