This case concerned a cargo of iron ore pellets shipped from Ukraine to China. China [redacted] Insurance Co Ltd, Changzhou Branch (the insurer) issued a marine cargo all risks policy to Changzhou Zhongfa [redacted] Co Ltd (Zhongfa), covering general average sacrifices, contributions, and salvage charges. In September 2015, the carrying vessel Cape Elise grounded in Singapore waters. The master and Tsavliris Russ (Worldwide Salvage and Towage) Ltd (the salvor) entered into a no cure-no pay salvage agreement on the LOF 2011 form. Following successful salvage operations, the Lloyd's salvage arbitration determined that, when the LOF agreement was concluded, the cargo was owned by Ferrexpo Middle East FZE (Ferrexpo). Ferrexpo was therefore liable for the cargo's proportion of the salvage reward and related costs.

Ferrexpo subsequently commenced an LCIA arbitration against Zhongtian [redacted] Group Co Ltd (Zhongtian) under a CFR sale contract governed by English law. The LCIA tribunal held that the risks transferred to the buyer upon shipment included the risk of liability for salvage, and that Zhongtian was required to reimburse Ferrexpo for the relevant amounts. Zhongfa, Wuxi Hongtianpeng [redacted] Co Ltd (Hongtianpeng) and Zhongtian then relied on agreements concluded with the insurer and jointly claimed the outstanding salvage charges, the costs of the Lloyd's salvage arbitration and the LCIA arbitration, and interest.

The insurer argued that 'salvage charges' was a specialised concept of the law of salvage and should be governed by ch 9 of the Maritime Code of the PRC or the Salvage Convention 1989. It contended that, after Ferrexpo had incurred liability for the salvage reward under the LOF agreement and sought reimbursement from Zhongtian under the sale contract, the liability had changed from salvage liability into liability for breach of the sale contract and therefore no longer fell within the cargo insurance cover.

Held: Plaintiffs' claims allowed in part.

The Wuhan Maritime Court distinguished the underlying salvage relationship from the marine insurance relationship before it. It held that the rights and obligations between the salvor and the persons interested in the vessel, cargo, and other salved property were matters arising under the salvage relationship. Questions concerning the law applicable to that relationship, including the possible application of ch 9 of the Maritime Code of the PRC, the Salvage Convention 1989, and the law governing the LOF agreement, fell outside the scope of the proceedings. The dispute instead concerned the meaning of 'salvage charges' as an expressly insured risk under the policy, and whether the insurer was liable to indemnify the insureds.

The Court therefore examined the LOF agreement and the salvage arbitration only to the extent necessary to determine the insured loss. The validity and effect of the choice of law provision in the salvage agreement, the substantive rights and obligations of the parties to that agreement, the law applicable to the salvage relationship, and the specific application of the Salvage Convention 1989 fell outside the scope of the proceedings. The Court expressly declined to determine those matters.

As to the insurance contract, the Court interpreted 'salvage charges' according to its ordinary meaning. The policy did not provide that such charges would be covered only where the insured had already acquired ownership of the cargo when the LOF agreement was concluded. Charges incurred as a result of the successful salvage of the insured cargo could therefore constitute salvage charges under the policy. The fact that Ferrexpo first became liable to the salvor for the salvage reward, and Zhongtian subsequently reimbursed Ferrexpo under the sale contract did not alter the essential character of the charges as arising from the successful salvage of the insured cargo.

The case also raised the question whether a foreign arbitral award had to be recognised by a Chinese court before it could be relied upon as evidence. The insurer relied on the provisions of the Civil Procedure Law of the PRC under which the recognition and enforcement of foreign arbitral awards are dealt with in accordance with international treaties concluded or acceded to by China, or on the basis of reciprocity. It argued that the Lloyd's salvage award and the LCIA award could not be admitted as evidence, because they had not been recognised by a Chinese court.

The Court held that recognition was required where a party sought the recognition or enforcement of a foreign arbitral award in China. Prior recognition was not, however, a prerequisite where an award was submitted merely as evidence of the occurrence, nature, and amount of the insured loss. Both awards had been examined during the proceedings, and their results had also been acknowledged by the insurer in subsequent agreements. They could therefore be relied upon as evidence of the salvage charges and related expenditure.

The Court ultimately ordered the insurer to pay CNY 2,176,240.54 in salvage charges and expenses incurred during the determination of those charges, together with CNY 3,769,346.20 in necessary and reasonable expenses and applicable interest.