The Validity of Employment Salvage Contracts in China
OVERVIEW
Court: Supreme People's Court of P.R.China
Date decided: July 7, 2016
Parties: South China Sea Rescue Bureau（Appellant）vs. Achilleas C. Grosso InvestmentCorporation(Appellee)
Related Legislations: The Civil Code of the People's Republic of China, Maritime Code of the People's Republic of China
Citation:(2016) No. 61 Civil Retrial Case of the Supreme People's Court
LEGAL ISSUE
The concept of employment salvage contracts and its legal consequences.
FACTS
The "Gabriel", owned by Achilleas C. Grosso Investment Corporation（hereinafter referred to as Achilleas）, is a Greek tanker carrying 54.580 tons of Cabinda crude oil. On August 12, 2011, around 05:00, it ran aground near the northern waterway of the Qiongzhou Strait, placing the ship and its cargo in danger and posing a severe threat to maritime environmental safety. Achilleas authorized Andros (Hong Kong) Limited's Shanghai representative office(hereinafter referred to as the Shanghai office) to engage the South China Sea Rescue Bureau to salvage the "Gabriel" after the incident occurred. Then Achilleas requested the South China Sea Rescue Bureau to send two tugs to participate in salvage. At 20:40 on August 12, the Shanghai office submitted a letter of authorization via email to the South China Sea Rescue Bureau, entrusting them to dispatch "South China Sea Rescue 116" and "South China Sea Rescue 101" to assist the "Gabriel" in refloating. Achilleas agreed to pay a rate of 3,2 yuan per horsepower-hour for the South China Sea Rescue Bureau regardless of the success of the operation. They also agreed that "South China Sea Rescue 116" and "South China Sea Rescue 101" would only implement towing operations and they are not liable for any other damage or loss to the vessel during the rescuing of the "Gabriel". Concurrently, to prevent further marine pollution, the Zhanjiang Maritime Safety Administration of the People's Republic of China (hereinafter referred to as Zhanjiang MSA) decided to implement compulsory lightering measures for the "Gabriel". In the end, "South China Sea Rescue 116" did not engage in towing operations for the "Gabriel", and "South China Sea Rescue 101" was recalled by the South China Sea Rescue Bureau before reaching the incident place, without conducting any towing or other operations. Later, "South China Sea Rescue 201" was dispatched for the rescue. On August 18, the "Gabriel" successfully refloated during high tide and subsequently arrived safely at its destination, Qinzhou Port in Guangxi.
The South China Sea Rescue Bureau alleged that after the "Gabriel" ran aground in the Qiongzhou Strait, they were engaged by Achilleas to provide rescue, transportation, and escort services, but the Achilleas had not paid for salvage services. They requested the court to order the Achilleas and Shanghai office to jointly pay rescue fees amounting to 7.240.998,24 yuan and interests.
On March 28, 2014, the Guangzhou Maritime Court issued a civil judgment named (2012) Guanghai Fa Chuzi No. 898. The Achilleas should pay the South China Sea Rescue Bureau rescue remuneration of 6.592.913,58 yuan and interests;
The Achilleas then appealed. On June 16, 2015, the Higher People's Court of Guangdong Province issued a civil judgment named (2014) Yue Gao Fa Min Si Zhong No. 117，which revoked the judgment of the Guangzhou Maritime Court (2012) Guanghai Fa Chuzi No. 898. and ruled that Achilleas C. Grosso Investment Corporation should pay the South China Sea Rescue Bureau rescue remuneration of 2.561.346,93 yuan and interests. Dissatisfied with the second-instance judgment, the South China Sea Rescue Bureau applied for a retrial.
FINDINGS
The Supreme People's Court held that, based on the facts ascertained in this case, Achilleas and the South China Sea Rescue Bureau, through negotiations, explicitly agreed that Achilleas would pay remuneration regardless of the outcome of the salvage operation. Furthermore, the South China Sea Rescue Bureau would not be liable for any damage or loss to the vessel during the refloating operation of the "Gabriel". Therefore, the salvage contract in question doesn’t fall within the scope of the "no cure, no pay" salvage contracts as stipulated in the Maritime Code of the People's Republic of China, but rather, it was employed salvage service.
Regarding the conditions and standards for payment under an employed salvage service, neither the Salvage Convention nor the Maritime Code of the People’s Republic of China provides specific provisions. The second-instance court erred in applying Article 180 of the Maritime Code of the People's Republic of China[1]to adjust the fixed rates agreed upon by the parties in the employed salvage service. The rights and obligations of the parties in this case shall be determined by the relevant provisions of the Contract Law of the People's Republic of China [2]. The contract is valid and the South China Sea Rescue Bureau is entitled to demand full payment of the agreed-upon remuneration based on the contract it had entered into with the Achilleas.
In summary, the remuneration should be made according to the contract both parties agreed on; the first instance judgment should be upheld.
[1] Article 180 The reward shall be fixed to encourage salvage operations, taking into full account the following criteria, etc.
[2] Since the Civil Code of the People's Republic of China had not been enacted when hearing the case, the Contract Law of the People's Republic of China was valid.
COMMENTS
According to the definition of "salvage operations" under the International Convention on Salvage, 1989 [1]and through a comprehensive analysis of the provisions in both the convention and Maritime Code of People's Republic of China , four constitutive elements of maritime salvage are identified: firstly, the objects must in danger, and the danger should be real danger; secondly, the objects of salvage should be recognized by law; Thirdly, the salvager should be voluntary. And finally, the salvage must be successful. Neither the Civil Code of the People's Republic of China nor the Maritime Code of the People's Republic of China prescribes how salvage rewards are to be calculated. The salvor and the salvee are allowed to make a contract fixing the remuneration. Therefore, in cases where services are rendered to a distressed vessel under an employed salvage contract, the remuneration should be calculated on the basis of contractual agreements rather than the salved value.
[1] See Article1（a）"Salvage operation" means any act or activity undertaken to assist a vessel or any other property in danger in navigable waters or in any other waters whatsoever.”
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