This case arose from a gasoline leak during loading operations on the Feng Sheng You 16 at Dongying Port, which endangered the vessel, the cargo, and port safety. Dongguan Fenghai Shipping Co Ltd (Fenghai) was the owner of both the Feng Sheng You 16 and the Feng Sheng You 9. It deployed the Feng Sheng You 9 to carry out lightering operations for the Feng Sheng You 16. Fenghai claimed a salvage reward from Dongying Xinyu Logistics Co Ltd (Xinyu) on the basis that Xinyu was the owner of the salved gasoline and was therefore liable to contribute to the salvage reward in proportion to the value of the salved cargo. The Qingdao Maritime Court dismissed Fenghai's claim at first instance. The Shandong High Court reversed that judgment on appeal and ordered Xinyu to pay a salvage reward of RMB 1,290,384 plus interest. Xinyu applied to the Supreme People's Court for retrial.

Fenghai argued that the Feng Sheng You 9 had performed sister ship salvage, that the salvage operation had been successful, and that the vessel itself had not been at fault or engaged in fraud or other dishonest conduct. The salvage reward should therefore not be disallowed or reduced. Xinyu argued that the operation was merely transhipment and did not constitute salvage. Even if it did, the danger had been caused by the fault of the Feng Sheng You 16, also owned by Fenghai, so Fenghai, as the common owner of both vessels, should not be entitled to a salvage reward.

Held: Retrial application dismissed.

The Court held that art 191 of the Maritime Code of the PRC recognises salvage between vessels belonging to the same owner. This corresponds to art 12.3 of the Salvage Convention 1989. Article 12.3 provides that the provisions on salvage reward apply even where the salved vessel and the vessel undertaking the salvage operation belong to the same owner. Sister ship salvage may therefore give rise to a claim for a salvage reward.

The Court also considered art 187 of the Maritime Code of the PRC, which corresponds to art 18 of the Salvage Convention 1989. Article 18 provides that a salvor may be deprived of the whole or part of the payment due under this Convention to the extent that the salvage operations have become necessary or more difficult because of fault or neglect on its part or if the salvor has been guilty of fraud or other dishonest conduct. The purpose of this rule is not to deny sister ship salvage, but to prevent a salvor from benefiting from its own misconduct.

The key issue was how to identify the relevant fault of the salvor in a case of sister ship salvage. The Court held that the fault of the salved vessel should not automatically be attributed to the sister ship performing the salvage operation. Although the danger had been caused by defects in the equipment, management, and operation of the Feng Sheng You 16, the salvage operation was performed by the Feng Sheng You 9. The Feng Sheng You 9 itself had not caused the salvage operation to become necessary, and there was no evidence that it had engaged in fraud or other dishonest conduct during the salvage operation. The rule reflected in art 18 of the Salvage Convention 1989 therefore did not justify disallowing or reducing the salvage reward.

The Court also held that Xinyu was the owner of the salved gasoline and should bear the salvage reward in proportion to the value of that salved cargo. The Shandong High Court had correctly assessed Fenghai's total salvage reward at RMB 2,088,000, of which Xinyu was liable for RMB 1,290,384.