There was a collision at sea near Changjing Kou Light Ship in the East China Sea between CF Crystal (Hong Kong-flagged cargo vessel owned by Hong Kong company Changhong (defendant)), and Sanchi (Panamanian-flagged tanker owned by a Belize company Bright Shipping (plaintiff) and managed by an Iranian company (National Iranian Tanker Co) with a representative office in Shanghai). The collision location was outside the People's Republic of China (PRC) territorial waters, within international waters, but within the PRC’s exclusive economic zone (EEZ) pursuant to the United Nations Convention on the Law of the Sea (UNCLOS). The relevant provisions of UNCLOS were as follows:

• Article 3: the breadth of the territorial sea does not exceed 12 nautical miles;
• Article 55: the EEZ was defined as an area beyond and adjacent to the territorial sea; and
• Article 57: the breadth of the EEZ shall not extend beyond 200 nautical miles.

Sanchi exploded, caught fire and eventually sunk; Crystal caught fire initially, but was eventually extinguished. The incident resulted in pollution from spilled bunkers and natural gas condensate and some made landfall in PRC and Japan.

Two limitation funds were constituted and the Shanghai Maritime Court (SMC) was seised by the defendant, but the plaintiff did not submit to the PRC jurisdiction. The plaintiff, instead, served proceedings on the defendant in Hong Kong, a jurisdiction which had a 3.6 times higher tonnage limitation compared to the PRC, invoking the jurisdiction of the Hong Kong court. Accordingly, a dispute on jurisdiction arose, with the invocation of Spiliada principles to determine whether the SMC or the Hong Kong court was the clearly more appropriate forum to hear the dispute.

The defendant also relied on lis alibi pendens to support its application for a stay of proceedings in Hong Kong. The plaintiff resisted, arguing that substantial justice will not be done in the PRC, submitting the inconsistency between the relevant law of the PRC and the provisions of UNCLOS (in particular, arts 55, 56 and 58 which set out the specific legal regime over the rights of exploration, exploitation and conservation of natural resources of the EEZ by costal States and the rights of other States to lawful use of the sea, including the freedom of navigation), and that the SMC does not have jurisdiction over the inter-ship claim as a matter of international law. In The Chou Shan [2014] FCAFC 90 (CMI58), the Full Court of the Federal Court of Australia held in respect of a collision that took place in the EEZ of the PRC that the lex causae was not PRC law. Whilst noting that the law of the coastal state applied if the activity giving rise to damage was 'closely connected with the exercise [of a state’s rights over the EEZ under UNCLOS]', the Court held that the activity concerned was the 'freedom of both parties to navigate under Arts 58 and 90' and it was not relevant that pollution was caused by the collision. It was held that the 'closest and most direct analogue' to a collision in the EEZ was a collision 'on the high seas', in respect of which the general maritime law as administered in the forum applies.

In this case, however, the Court thought that it was not required to resolve the suggested inconsistency or SMC’s jurisdiction over the collision as a matter of international law.

Held: Defendant's application for a stay of proceedings dismissed. In the circumstances, Shanghai was not the clearly more appropriate forum (stage 1 Spiliada) and substantial justice would not be done in Shanghai, among other things because of the applicable time bar in the PRC (stage 2 Spiliada).

[For the unsuccessful appeal to the Court of Appeal, see Bright Shipping Ltd v Changhong Group (HK) Ltd [2019] HKCA 1062 (CMI510).]