The first defendant, Pan Steel Group Guomao Panzhihua Co Ltd, sold 1500 tons of rolled steel to a German company, Coutinho & Ferrostaal GmbH. The cargo was loaded on board in Changshu, China, at the end of July 2008. The second defendant, Changshu Hanbang Shipping Agency, issued a clean bill of lading on behalf of the carrier. After the arrival of the goods in Antwerp, the buyer found water and rust damage to the rolled steel. After a survey conducted by the buyer, it was concluded that the relevant water and rust damage existed before the loading process. The Court confirmed this finding.

The plaintiff, Mund & Fester Gmbh & Co KG, was the buyer’s cargo insurer. After receiving its insurance indemnity, the buyer subrogated its rights to the plaintiff. The plaintiff claimed cargo damage of RMB 1,552,778.58 plus interest from the defendants.

Both defendants raised various defences, including the fact that the plaintiff’s claim was brought after the one-year time bar as stated in art 257 of the Chinese Maritime Code.

The plaintiff argued that both defendants had knowledge of the cargo damage before loading on board which constituted a maritime fraud (an argument that was rejected by the Court). Therefore, the two-year limitation period as stated in the General Principles of the Civil Law of the People's Republic of China rather than the one-year limitation period as provided by art 257 of the Chinese Maritime Code should apply.

Held: Plaintiff’s claim rejected.

Article 257 of Chinese Maritime Code states that 'the limitation period of claims against the carrier with regard to the carriage of goods by sea is one year, counted from the day on which the goods were delivered or should have been delivered by the carrier'. In the absence of clear wording, this article should be applied to both contract and tort claims.

The present case is a bill of lading tort dispute regarding carriage of goods by sea which should be governed by chapter IV of the Chinese Maritime Code.

Article 58 of this chapter states that:

The defence and limitation of liability provided for in this Chapter shall apply to any legal action brought against the carrier with regard to the loss of or damage to or delay in delivery of the goods covered by the contract of carriage of goods by sea, whether the claimant is a party to the contract or whether the action is founded in contract or in tort. The provisions of the preceding paragraph shall apply if the action referred to in the preceding paragraph is brought against the carrier's servant or agent, and the carrier's servant or agent proves that his action was within the scope of his employment or agency.

However, this article does not specify whether the carrier’s servant or agent can invoke the defence of limitation period of action as provided in art 257 of chapter XIII.

The Court held that art 4 bis of the Hague-Visby Rules is the foundation of art 58 of the Chinese Maritime Code. According to art 4 bis of the Hague-Visby Rules, a servant or agent of a carrier is entitled to avail itself of the defences and limits of liability which the carrier is entitled to invoke under the Rules. Therefore, if the Hague-Visby Rules are to apply in this case the second defendant can use the one-year time bar as a defence.

The legislative purpose of art 58 of the Chinese Maritime Code was to embrace art 4 bis of the Hague-Visby Rules and protect the carrier. If the one-year time bar does not apply to the carrier’s servants or agents, the carrier will lose protection as well. Therefore, the rightful interpretation of art 58 is that a carrier’s servant or agent is entitled to invoke the one-year time bar.