This was an interlocutory application for a stay of proceedings arising from a collision. On 19 March 2013, two ships collided in China’s Exclusive Economic Zone (EEZ). The ships were a container carrier (CMA CGM Florida) and a bulk carrier (Chou Shan). CMA CGM Florida was registered in the United Kingdom. Chou Shan was registered in Panama. The plaintiffs (CMA CGM SA, Provence Shipowner 2008-1 Ltd) were domiciled in France and Ireland. The owner of Chou Shan (Rockwell) was domiciled in the Republic of the Marshall Islands.

After the collision, the two ships immediately proceeded to different Chinese ports, Chou Shan to the port of Qushan and CMA CGM Florida to Yangshan Terminal. CMA CGM Florida leaked oil and fuel. On 31 March 2013, the owners of both ships were required to provide security to the Shanghai Maritime Safety Administration (the Shanghai MSA) in relation to pollution clean-up costs, each to the value of RMB 70 million (over AUD 10 million). Also in April 2013, they were required to provide security to a Chinese authority in relation to loss or damage to fisheries, each in the value of RMB 20 million (over AUD 3 million).

On 9 April 2013, the plaintiffs filed a writ in rem in the Federal Court of Australia, commencing proceedings against Chou Shan claiming USD 60 million in damages plus interest and costs arising out of the collision.

On 6 May 2013 the owners of Chou Shan applied to the Ningbo Maritime Court to set up a limitation fund in Special Drawing Rights totaling 11,850,278 units and on the 21 May 2013, the Ningbo Maritime Court accepted their application. Their rights to limit in this way arose from Ch 11 of the Chinese Maritime Code. Although China is not a signatory to either the LLMC 1976 or the LLMC 1996, the substance of Ch 11 is taken from the LLMC 1976. Australia is a signatory to both the LLMC 1976 and the LLMC 1996, which significantly increased limitation amounts.

On 9 May 2013, cargo interests arrested Chou Shan in Zhousan and commenced proceedings in the Ningbo Maritime Court. The next day she was released from arrest after her P&I Club provided security. On 17 May 2013, Rockwell arrested CMA CGM Florida and filed a civil complaint against the plaintiffs in the Ningbo Maritime Court which was accepted on 24 May 2013. Rockwell then applied to increase their security demand against CMA CGM Florida from USD 5 million to USD 40 million. Their application was accepted on 3 June 2013 and CMA CGM Florida was released from arrest after her P&I Club provided security.

On 22 May Chou Shan was arrested in Port Hedland, Western Australia at the request of the plaintiffs. On 24 May 2013, Rockwell (as owner of Chou Shan) filed a conditional appearance in the Federal Court to apply for the release of Chou Shan. Upon provision of security of USD 61,751,213 by Chou Shan’s P&I Club she was released on 29 May 2013.

Under cl 4 of the letter of undertaking, Chou Shan’s P&I Club was released from their obligations if her owners established a limitation fund in Australia under the LLMC Act and the claims were found to fall within art 2, LLMC 1976. On 18 June 2013 Rockwell and Chou Shan filed a stay application in respect of the Federal Court proceedings on the basis that Australia was a clearly inappropriate forum for the hearing and determination of the plaintiff’s claims. In addition, they asserted that the proceedings were vexatious and oppressive as they were substantially the same subject matter as the proceedings in the Ningbo Maritime Court. On 29 July 2013 CMA CGM Florida registered its claims, under protest as to the jurisdiction, in the Ningbo Maritime Court and stated the Federal Court was the forum where the proceedings commenced and where they should proceed.

Held: In answer to the Chou Shan’s claim that China’s EEZ is not the ‘high seas’ the judge found that the EEZ is neither part of the territorial sea nor part of the high seas. Instead, it is sui generis in nature. The legal regime which applies within the EEZ is determined by the activity in question. Arts 58.1 and 87 of UNCLOS preserve the traditional freedoms of the high seas particularly in respect of freedom of navigation. This freedom is only abrogated when a navigational activity coincides with any of the functional bases of coastal state power within the EEZ such as laws relating to pollution. However, the sovereignty of the coastal state does not extend to regulating the navigation of ships which results in a collision and consequential property damage to vessels.

Responsibility for regulating the navigation of vessels within the EEZ remains with the flag state. This is clear by art 94.3.c of UNCLOS which expressly provides that it is the responsibility of the flag state to take measures necessary for vessels flying its flag to ensure safety at sea with regards to the use of signals, maintenance of communications and the prevention of collisions. This provision applies within the EEZ by virtue of art 59.2.

There were multiple factors that lead to the Court being a clearly inappropriate forum. Following the collision, both ships steamed to China for repairs. Neither ship sank but there was considerable oil spillage in China’s EEZ which was expressly governed by Chinese jurisdiction. Although the in rem proceeding commenced in Australia there was nothing and no-one involved in the proceedings that had any connection whatsoever with Australia. There were proceedings before a Chinese court that had jurisdiction over all persons and substantial justice would be done in China. There was no evidence that the manner in which the Chinese court would resolve liability would give rise to a significantly different outcome than resolution of the liability in Australia. Indeed, there was expert evidence to suggest that the approach would be similar. Regardless of what happened in Australia, the proceedings in China would continue, which was relevant to the cost factor.

As to whether the loss of increased security under the LLMC 1976 would be a loss of a legitimate juridical advantage the judge cited Herceg Novi (owners) v Ming Galaxy (owners) [1998] 2 Lloyd’s Rep 454 where it was stated that ‘the [LLMC 1976] has not received universal acceptance or anything like it. It is not “an internationally sanctioned and objective view of where substantial justice is now viewed as lying”. It is simply the view of some 30 states.’ The judge took into account that the plaintiffs had the benefit of increased security in the proceeding in rem in Australia but, having regard to all the other factors, it was not sufficient to undermine the conclusion that the Court was a clearly inappropriate forum.

[For the unsuccessful appeal to the Full Court of the Federal Court of Appeal, see CMA CGM SA v Ship 'Chou Shan' [2014] FCAFC 90 (CMI58).]