Different legislative purposes

Maritime lien is to seize or even sell the ship through judicial procedures with the ship as the target and the purpose of ensuring the realization of specific creditor's rights, so that creditors can get priority compensation for the proceeds from the sale of the ship according to law, and it focuses on the protection of maritime creditors. Limitation of liability for maritime claims is a legal system in which the shipowner, operator and charterer can limit their liability to a certain extent according to the provisions of the law, and it focuses on the protection of maritime debtors.

Causes of conflict

The establishment of this fund makes it impossible for ships to be arrested, which affects the exercise of maritime liens.

If the general accident liability subject requests to enjoy the limitation of liability for compensation, it shall set up a compensation fund in the court. The establishment of the fund has the function of ensuring the realization of creditor's rights. After the liability limitation fund is submitted by the responsible person, all restricted creditors shall not arrest the ship of the responsible person. If a ship is detained, it shall be released. The maritime lien can be exercised through the court's arrest of the ship.

Restrictive creditor's rights overlap with creditor's rights secured by maritime lien.

The creditor's right on which the maritime claim is based is a limitation of creditor's right, and the liable subject has the right to enjoy the limitation of liability. The restrictive creditor's rights stipulated in China's Maritime Law include: personal injury, property loss or damage, including damage to port engineering, harbor basin, waterway and navigation AIDS, and claims for compensation for corresponding losses caused thereby; Claims for compensation for losses caused by delayed delivery of goods by sea or delayed arrival of passengers and their luggage; Claims for compensation for other losses caused by violation of non-contractual rights directly related to ship operation or salvage operations; Claims by persons other than the responsible person for measures that the responsible person can limit the liability to avoid or reduce losses in accordance with the provisions of this chapter, as well as claims for further losses caused by such measures.

No matter how the claims listed in the preceding paragraph are made, the liability for compensation is limited. However, item 4 relates to the remuneration paid by the responsible person agreed in the contract, and the responsibility of the responsible person may not invoke the limitation of liability in this article. The creditor's rights guaranteed by China's maritime law include: the payment request of crew wages, other labor remuneration, repatriation expenses and social insurance expenses; Claims for personal injury or death in ship operation; Request to pay tonnage tax, pilotage fee, port fee and other port fees; Request for payment of salvage money at sea; Claims for property compensation arising from tort in ship operation.

It can be seen that the restrictive creditor's rights overlap with the creditor's rights guaranteed by the maritime lien. The creditor's rights secured by maritime lien shall be realized by distributing the auction price of the ship in accordance with the legal order of repayment; All restricted creditor's rights arising from the average accident shall be compensated within the scope of the fund according to the distribution method of the fund. Because different principles apply to the allocation of funds and the compensation of ship price, when the creditor's rights are both limited creditor's rights and secured by maritime lien, there will be a contradiction in which order to be compensated.

Different principles apply to the allocation of funds and compensation for the auction price of ships.

Regarding the allocation of funds, China's Maritime Law stipulates that if a general accident only causes personal injury or death, the compensation limit for personal injury or death shall be calculated and the compensation shall be paid in proportion within the limit; If the general accident only causes property losses, the compensation limit for property losses shall be calculated and the compensation shall be paid in proportion within the limit. When a general average accident causes damage to port engineering, harbor basin, waterway and navigation AIDS, the relevant compensation shall be given priority to property losses. According to the order of compensation for maritime liens, all property losses caused by infringement in ship operation shall be compensated in proportion. If an ordinary accident causes both personal injury and property loss, the compensation limit for personal injury and death shall be calculated first. If the compensation limit is insufficient to pay the claim for personal injury or death, the difference and the claim for non-personal injury or death shall be compensated in proportion from the property damage compensation limit. Property damage compensation obtained from the distribution, if there is damage to port engineering, harbor basin, waterway and navigation AIDS, should be given priority. According to the order of compensation for maritime lien, the claim for personal injury or death has priority over the claim for property compensation. It can be seen that the order of payment of creditor's rights has changed because the responsible person applied for the limitation of maritime claims liability.

Unreasonable laws, regulations and solutions

Regarding the conflict between the allocation of limitation fund for maritime claims and the compensation for the auction price of ships with maritime lien, China's maritime law stipulates that maritime lien does not affect the implementation of limitation of maritime claims. If the creditor's rights of the maritime claimant are restricted, the maritime liability may apply for limitation of liability for maritime claims: the maritime claimant applies for arrest of the ship, and the responsible person applies for limitation of liability for maritime claims and establishes a fund to release the ship. All registered creditor's rights arising from this average accident shall be distributed according to the fund principle. Creditor's rights or non-restrictive creditors arising from accidents other than this average may obtain guarantee by arresting the ship or obtain compensation by auctioning the price of the ship, or the responsible person may apply for limitation of liability for maritime claims to set up a compensation fund.

It can be seen that after the general accident, once the responsible person applies for limitation of liability for maritime claims and establishes a fund, the distribution of related creditor's rights will be carried out in accordance with the principle of fund distribution. After the allocation of funds is completed, the restricted creditors can't claim from the responsible person even if they don't get full compensation, but the unrestricted creditors can get full compensation by arresting the ship separately. According to the principle of priority, these unrestricted creditor's rights may not be repaid after the restricted creditor's rights. Both of them lead to the change of the recoverability of creditor's rights.

The purpose of limitation of liability for maritime claims is to limit the liability of maritime debtors, and the order of compensation within the scope of liability is not a problem to be considered. Therefore, in order to give consideration to both, it is suggested to make the following considerations: (1) If the general accident only causes personal injury or death, the compensation limit for personal injury or death shall be calculated and the compensation shall be made in proportion within the limit; (2) If the general accident only causes property losses, the compensation limit for property losses shall be calculated, and the compensation shall be made in proportion within the limit (the damage compensation for port projects, harbor basins, navigation channels and navigation AIDS will no longer have priority); (3) If an ordinary accident not only causes personal injury or death, but also causes property damage, the compensation limits shall be calculated separately, and the compensation shall be paid in proportion within their respective compensation limits; (4) In order to solve the contradiction that some non-restrictive creditor's rights are subordinate to restrictive creditor's rights, but they may get more sufficient priority, the author suggests that if these non-restrictive creditor's rights are paid by seizing or auctioning the ship's price, the amount of priority creditor's rights allocated by the fund can be deducted from the ship's price, and the rest can be paid to non-restrictive creditor's rights to achieve an appropriate balance; (5) Where the responsible person applies for the establishment of a fund at the auction price of the ship, the creditor who is restricted by the average accident and the creditor who can participate in the compensation for the ship price shall register their creditor's rights respectively. The limited creditor's rights arising from this accident shall be paid off together with other creditor's rights that can participate in the payment of the ship's price in the order of payment of the ship's lien.