1. 5 th International Cargo Recovery Conference “Practical aspects and new developments in Chinese recovery law” 17 June 2016, New York 20 June 2016, Montreal Presented by: Ikwei Chong (Partner)

2. 1 Shanghai: then and now Shanghai: 1987 Shanghai: 2016

3. 2 Legal framework Civil law system General legislations ‒ General Principles of Civil Law of China (January 1987) ‒ Contract Law of China (October 1999) ‒ Insurance Law of China (October 2009) Specific legislations / regulations ‒ Chinese Maritime Code (July 1993) ‒ Special Maritime Procedural Law (July 2000) ‒ Railway Law of China (May 1991)

4. 3 Ocean / coastal / inland waterway carriage Relevant legislations / regulations ‒ Chinese Maritime Code  International / coastal carriage ‒ Regulations on Domestic Cargo Transportation by Inland Waterways (January 2001)  Domestic inland waterway carriage Time limit ‒ International / coastal / inland waterway carriage  1 year from date cargo delivered or should have been delivered

5. 4 Time limits – can it be extended? Time extension by mutual agreement ‒ Null and void under Chinese law Time limit in maritime claims can only be protected by: a)starting legal action; b)starting arbitration (eg. China Maritime Arbitration Commission); c)admission of claim (on liability, quantum or both?) Protecting time limit in non-maritime claims (eg. inland carriage) ‒ Presenting claim by demand letter, witnessed by notary officer

6. 5 Limitation of liability ‒ Ocean carriage ■Either 666.67 Special Drawing Rights (“SDR”) per package / shipping unit or 2 SDRs per kilogramme of weight of cargo lost or damaged, whichever is higher ■Opportunity for forum shopping? ■Establishing jurisdiction in China ­ port of loading ­ port of discharge ­ port of transhipment ­ port of domicile of carrier / defendant ‒ Coastal / inland waterway carriage ■No prescribed limitation

7. 6 Air carriage International ‒ Montreal Convention ■Time limit : 2 years ■Limitation : 19 SDRs per kilogramme Domestic ‒ Regulation for the Limitation of Liability for Domestic Air Carriers ■Time limit : 2 years ■Limitation : RMB100 (or US$15) per kilogramme

8. 7 Transportation by land – railway carriage Relevant legislations / regulations ‒ Railway Law of China ‒ Railway Cargo Transportation Rules Time limit ‒ 180 days Limitation of liability ‒ RMB 100 (or US$15) per ton

9. 8 Transportation by land - road / truck carriage Relevant legislations ‒ General Principles of Civil Law of China ‒ Contract Law of China Time limit ‒ 2 years from the date party knows or ought to have known its rights have been infringed Limitation of liability ‒ N o prescribed limitation

10. 9 Litigation in China: court system 4 levels of People’s Court: ‒ Basic People’s Court ‒ Intermediate People’s Court ‒ High / Provincial People’s Court ‒ Supreme People’s Court Specialised Courts ‒ 10 Chinese Maritime Courts (Dalian, Tianjin, Qingdao, Shanghai, Wuhan, Ningbo, Xiamen, Beihai, Guangzhou and Haikou)

11. 10 Litigation in China: procedure Legal action / procedure ‒ Statement of Complaint ‒ Payment of Court Fee ‒ Statement of Defence ‒ Submission of supporting documents / evidence ‒ Trial / Mediation China - style ‒ Judgment / Appeal Attorney’s / legal fees ‒ Each party bears its own legal fees ‒ No incentive to settle cases early ‒ Prevalence of contingency fee arrangement

12. 11 Litigation in China: fees / expenses Court fees – calculated based on claim amount

13. 12 Ship arrest - update Application for ship arrest Counter – security ‒ 1 month’s time charter hire of ship ‒ Cash deposit / letter of guarantee (bank / guarantee company) ‒ Insurance product (premium at 0.5-1% of claim amount) ‒ Counter – security wording ‒ Recent trends Power of Attorney and other authorisation documents Plan in advance Wrongful arrest – very low risk

14. 13 Practical tips on achieving recovery ● Freezing the shares held by a foreign defendant in local Chinese companies (where the foreign defendant does not have other asset in China) The frozen shares cannot be assigned or transferred and the defendant cannot receive any dividend in the meantime. Company A (Claimant) Company B (Defendant) (Country X) Company C (B’s subsidiary) (China) Controlling 100% Freeze Company B’s shares in Company C Chinese Court Apply to Maritime claim Judgment obtained

15. 14 Practical tips on achieving recovery – cont’d ● Travel Prohibition Order (“TPO”) (Article 255 of the Chinese Civil Procedure Law) Procedure: 1)Apply to the Court for a TPO against the Legal Representative or Person in Charge of the defendant company who has failed to perform its obligations under the Judgment / Award 2)The Court has absolute discretion whether to allow a TPO 3)If the TPO is granted, the individual will be prohibited from leaving China until outstanding obligations are fulfilled or sufficient security is provided 4)Effective tool in getting around problem of piercing corporate veil and separation between the corporate defendant and its individual owners / shareholders

16. 15 Practical tips on achieving recovery – cont’d ● Information System for Enforcement of Judgment (established by the Supreme People’s Court)

17. 16 Practical tips on achieving recovery – cont’d ● Adverse impact on: ‒ Obtaining bank loans ‒ Setting up new companies (by the same individual who is the legal representative of the defendant company who has failed to fulfill the Judgment / Award obligations) ‒ Doing business

18. 17 Recent Developments Time limit for pursuing subrogation claims ‒ Judicial Interpretation Jun 2013 / Reply Dec 2014 ‒ Calculated from the date of insurance payment ‒ Not applicable to marine insurance claims Reform on case acceptance and registration by the Court ‒ Supreme People’s Court Opinion: with effect from 1 May 2015 ‒ Less discretion: more certainty and transparency Tianjin explosion of 12 August 2015 ‒ Potential for recovery?

19. Clyde & Co accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this summary. No part of this summary may be used, reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, reading or otherwise without the prior permission of Clyde & Co. © Clyde & Co 2016 Thank you Ikwei Chong （张逸伟） Partner Clyde & Co, Shanghai T: +86 21 6035 6188 M: +86 1356 478 3912 E: ikwei.chong@clydeco.com 1,8001st360+45 Lawyers and fee earners worldwide Best Community Engagement - MPF Awards for Management Excellence 2015 Partners worldwideOffices across Europe, Americas, Middle East, Africa and Asia.