This case arose from the grounding and flooding of the Korean-flagged tug Jaewon 5 in the waters of the Port of Ningbo. The vessel was at risk of continuing to sink, sliding into deeper water, and causing pollution. On 8 October 2016, the vessel owner, S&P Marine Co Ltd (S&P), instructed Zhejiang Manyang Shipping Engineering Co Ltd (Manyang) to carry out emergency operations. Several days later, S&P further instructed Manyang to arrange for the vessel to be towed to a repair yard. Both letters of instruction provided that S&P would pay the expenses arising from the instructed work. After completing the salvage and towage operations, Manyang claimed approximately CNY 11.21 million. S&P argued that the parties had entered into a no cure-no pay salvage contract, and that the salvage reward could not exceed the salved value of the vessel.

Held: Plaintiff's claim allowed in part.

The Ningbo Maritime Court first considered the status of the Salvage Convention 1989 in the case. Since S&P was a Korean company and Jaewon 5 was a Korean-flagged vessel, the case involved foreign elements. Both parties chose the law of the PRC as the applicable law. The Court stated that the Maritime Code of the PRC, as the special law governing maritime matters, was the primary domestic law applicable to the dispute. Under art 268.1 of the Code, where an international treaty concluded or acceded to by China differs from the Code, the treaty prevails, except in respect of provisions to which China has made a reservation. The Maritime Code of the PRC and the Salvage Convention 1989 therefore jointly formed the legal framework for determining the nature of the salvage contract.

The Court held that both the Maritime Code of the PRC and the Salvage Convention 1989 adopt no cure-no pay as the ordinary rule governing salvage reward and, on that basis, provide for the assessment and payment of salvage reward. Those rules are not, however, mandatory in every salvage contract. The Maritime Code and the Convention allow the parties to make different contractual arrangements concerning salvage reward. In addition to a traditional salvage contract under which payment depends on a useful result, the parties may conclude a contract for salvage services under which remuneration is payable for the work actually performed.

The two letters of instruction specified in detail the salvage and towage work to be performed by Manyang, and S&P undertook to pay the expenses arising from the instructed work. Manyang's entitlement to remuneration therefore depended not on whether the vessel ultimately obtained a useful result from the salvage operations, but on whether Manyang had completed the agreed work in accordance with the letters of instruction. The Court accordingly held that the parties had entered into an employment salvage contract, rather than a traditional salvage contract subject to the default no cure-no pay rule. Consequently, the default rules in the Maritime Code of the PRC and the Salvage Convention 1989 concerning the assessment and payment of salvage reward and the limitation of the reward by reference to the salved value did not apply to the case. S&P's defence that the salvage reward was capped at the salved value of the vessel could not be sustained. The parties' rights and obligations should instead be determined primarily in accordance with the specific terms of their contract.

As to the amount of remuneration, the Court accepted neither the rate schedule unilaterally prepared by Manyang nor the survey report submitted by S&P. The former had not been confirmed by S&P, and some of the rates were clearly higher than market levels. The latter merely estimated an overall amount by reference to other cases and did not separately analyse the vessels, personnel, equipment, materials and working time actually employed in the operations. The Court therefore assessed the reasonable expenses on the basis of the letters of instruction, the daily work reports confirmed by the master, the logbooks, the resources actually deployed, and local market standards. After deducting the amount already paid by S&P, the Court ordered S&P to pay Manyang approximately CNY 3.48 million in salvage and towage remuneration.