CHINA Law and Practice Contributed by: John Wang, Xu Jun, Song Jia and Zhao Yuxuan, Wang Jing & Co
5.10 Procedure for the Judicial Sale of Arrested Ships A judicial sale of an arrested ship must follow the steps set out below: • set up an auction committee;
These documents shall be duly notarised and legal - ised: • an application for arrest; and • supporting evidence and translation into the Chinese language (if the original language is not Chinese). Originals or notarised copies of support - ing evidence are required. The court always requires the applicant to lodge a counter-security in the case of a wrongful arrest. 5.6 Arresting Bunkers and Freight The applicant is entitled to arrest bunkers. However, it is very difficult to enforce such an arrest due to com - plex customs formalities, safety and storage require - ments, etc. The applicant is entitled to apply for a court order to preserve the freight for due debts. 5.7 Sister-Ship Arrest The maritime court may arrest a sister vessel that is owned, at the time of arrest, by the ship-owner, the demise charterer, the time charterer or the voyage charterer who is liable for the maritime claim, except for claims related to the ownership or possession of the vessel. 5.8 Other Ways of Obtaining Attachment Orders The applicant may apply for the arrest of cargo, or for property preservation against the respondent’s real estate or other assets. 5.9 Releasing an Arrested Vessel The owner or any interested party may lodge a sat - isfied security to release the vessel. The court only accepts security lodged in cash or a letter of under - taking (LOU) issued by a domestic bank or insurance company, or any other entity they deem appropriate. Nonetheless, the ship-owner or the interested party is at liberty to negotiate the security with the appli - cant. In the event that the applicant agrees to accept a club LOU or a foreign bank’s guarantee, the court may release the vessel.
• appraise the ship value; • issue the auction notice; • display the ship; • set the price; • register the bidders;
• conduct the ship auction and bidding (online); • effect the auction confirmation and delivery; and • release the ship and announce the auction result (done by the court). In PRC law, the private sale of an arrested ship is not allowable. While the ship is under arrest, the ship-owner or bare - boat charterer is liable for maintaining the ship until it has been sold by the court. After being sold by auction, the payment sequence is: • maritime claims with maritime liens; • maritime claims secured by possessory liens; • maritime claims secured by ship mortgages; and • other maritime claims in relation to the judicial sale and/or sell-off of the ship. 5.11 Insolvency Laws Applied by Maritime Courts The PRC has the Enterprise Bankruptcy Law, which provides that all bankruptcy cases shall be submitted to the Intermediate People’s Court instead of the mari - time court. According to the Interpretations to the Civil Procedure Law and the Interpretations to the Special Maritime Procedure Law, the Intermediate People’s Court may request the maritime court to assist in the arrest and/or auction of the vessel owned by owners that are under bankruptcy proceedings. However, the enforcement of such a request or arrest is subject to communication and co-ordination between the courts.
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