On 11 February 2017, the Sagan, a Panamanian-registered tanker owned by Global Eminence Ltd (the defendant), ran aground in Japanese waters near Suwa during a voyage from Kaohsiung, Taiwan, to Ulsan, South Korea, following a main engine failure. The defendant immediately reported the incident to its hull insurer, China Continent Property & Casualty Insurance Co Ltd Shipping Insurance Operation Centre (the insurer) and urged it to participate in arranging salvage. The defendant and the insurer disagreed on who should sign the salvage contract and in what form. Unable to obtain the insurer's confirmation, the defendant proceeded independently and signed three contracts with Nippon Salvage Co Ltd (the plaintiff) under the Wreck Hire 2010 International Wreckage Removal and Marine Services Agreement (Daily Hire) form, covering refloating operations, spill clean-up, and final wreck removal and disposal of the Sagan. The plaintiff commenced operations on 11 February 2017. On 15 March 2017, as the vessel had not been successfully refloated, the defendant gave notice to terminate the refloating operation. The defendant terminated the contract on the basis that rescue and repair costs exceeded the vessel's insured value.

The plaintiff brought a claim before the Shanghai Maritime Court for payment of refloating operation expenses and interest in accordance with the salvage contract. The plaintiff also applied for the insurer to be joined as a co-defendant or third party bearing joint and several liability. The defendant acknowledged the existence of the salvage contract but argued that the amount claimed by the plaintiff, based on its own unilateral calculations, was insufficient and that costs should be determined by judicial evaluation. The insurer argued that the refloating operation did not fall under a salvage contract and that it should not bear any liability.

The Court considered two issues: first, the legal nature of the contract between the parties; and second, the reasonableness of the costs claimed. On the first issue, the Court applied the principle from the Supreme People's Court judgment in Nanhai Rescue Bureau of the Ministry of Transport v Archangelos Investments ENE (The Archangelos Gabriel) [2016] ZGFMZ No 61 (CMI295) that an 'employed salvage contract' concluded by agreement of the parties can constitute a maritime salvage contract alongside the 'no cure, no pay' principle under the Salvage Convention 1989 and the Maritime Code of the PRC (the Maritime Code). On the second issue, the Court appointed Shanghai Shuangxi Maritime Affairs Development Co Ltd (Shuangxi) as an independent judicial evaluator, which issued an evaluation report assessing the reasonable refloating operation costs at USD 3,559,866.49.

Held: Judgment for the plaintiff.

The contract for refloating operations constituted a maritime salvage contract. Although the contract was in the form of Wreck Hire 2010 and did not use the term 'salvage' expressly, both parties agreed the service was a refloating operation, the billing standard referenced Lloyd's salvage contract and SCOPIC terms, and the plaintiff was a professional salvage company acting on the defendant's trust. The nature of the contract was to be determined by reference to its substance, not its form or title. The contract met the criteria for a maritime salvage contract as established in The Archangelos Gabriel. The insurer, as a non-signatory third party without independent claim rights, had no legal basis to challenge the nature of the contract agreed between the contracting parties. The refloating operation costs of USD 3,559,866.49, as determined by the Shuangxi evaluation report, were confirmed. The defendant was ordered to pay USD 3,559,866.49 plus interest calculated at the US dollar demand deposit interest rate of the Bank of China from 23 July 2018 to the date of actual payment. The legal relationship of ship insurance between the defendant and the insurer and the legal relationship of maritime salvage between the plaintiff and the defendant were two independent legal relationships; the insurer's remaining objections were to be heard in separate proceedings.