Abstract: in recent years, the arrest of foreign ships has become more and more common in China, Japan and South Korea, and there are various differences in the arrest of ships in these three countries. By introducing ship arrest in China, Japan and South Korea, this paper intends to assist enterprises or individuals in need. If you have any questions, please contact with us.

With the rapid development of East Asian shipping industry, China, Japan and South Korea gradually become important jurisdictions for international shipping disputes. It is becoming more common to apply for the arrest of foreign ships calling at these countries for local dispute resolution. Based on years of practical experience, we will briefly introduce the ship arrest in China, Japan and South Korea.

I、 Arrest of ship under Japanese law

1. Scenarios under which ship arrest is permitted under Japanese law

The ship arrest system under the Japanese law is mainly based on the Japanese civil enforcement law, and the following circumstances are generally permitted for the ship arrest:

(1) The ship owner has the debt recognized by court judgment and the creditor applies to the court for enforcement;

(2) Arrest by a ship mortgagee for the purpose of enforcing ship mortgage;

(3) The creditor applies to the court for an attachment order based on the obligation of monetary payment,

(4) Arrest applied to realize the maritime lien.

2. General procedures for arresting ships under Japanese law

Under Japanese law, the ship arrest shall apply to the court of the place where the ship locates, together with the incorporation documents of the applicant and the respondent, ship registration documents, supporting documents of creditor's rights or priority, power of attorney:

Under Japanese law, when an application is made for the arrest of a ship due to a provisional arrest order for a pecuniary claim under (3) above, the court will require security. The security shall cover the damages that may be caused to the respondent in case of a wrong arrest. The security may be cash, negotiable bonds or a letter of guarantee issued by a bank or insurance company acceptable to the court. However, the applicant is not required to provide security when applying for arrest of the ship based on mortgage or priority due to items (2) and (4) above.

The court will examine the applicant's application for ship arrest. During this period, the court may check with the applicant as it deems necessary. If the court finally issues the ship arrest order, it will appoint a civil enforcement officer who will take the court arrest order on board and serve it on the master, and retain the ship's certificates to restrict her from sailing.

In addition, although Japanese law in principle only allows for the arrest of ships owned by the debtor and not associated ships, there are also cases that allow the arrest of ships associated with the debtor through the system of "piercing the corporate veil".

3. Fees to be paid for ship arrest under Japanese law

When applying for arrest of the ship due to mortgage or priority in Item (2) or (4) above, the court allows the applicant to apply for auction of the ship after applying for ship arrest. The court will generally ask the applicant to pay the fees of civil executors, appraisers and supervisors in advance. The fees are paid in installments. The amount is determined by the court and needs to be paid in cash. The court will issue a ship arrest order after receiving the fees.

If the ship is successfully auctioned by the court, the fees will eventually be borne by the debtor and allocated in priority from the auction proceeds.

II.Ship arrest under South Korean law

The ship arrest system in South Korea is mainly based on the civil enforcement law and the commercial law.

Under South Korean law, there are two different types of ship arrests for civil/commercial disputes: (1) pre-arrests when the creditor has evidence of its debt, and (2) arrests based on maritime liens recognised by flag state law. The legal nature and procedure varies due to the cause of arrest.

1. Scenarios in which ship arrest is permitted under South Korean law

Under South Korean law, it is not important whether the claim for the ship arrest is based on a maritime claim. As long as there is a claim against the debtor, all of the debtor's assets can be preserved and enforced, irrespective of the type of claim. Under South Korean law, the principle used to be that only ships owned by the debtor could be arrested, but not associated ships. However, with the recent development of the "piercing of the corporate veil" system in corporate law, there are local district court cases which are now somehow open to arrest associated vessels.

It is also feasible under South Korean law to apply for the ship arrest on the basis of the creditor's mortgage or priority right, in which case the above-mentioned (2) arrest and the realisation of the mortgage or priority right can be applied directly, without the application of the (1) pre-arrest.

2. Procedure for applying for ship arrest under South Korean law

If the applicant intends to apply for the arrest of a ship in South Korea, they shall apply for an arrest order with the court of competent jurisdiction in the port where the ship is currently located or in which it may enter, together with the appropriate supporting documents for the claim. The court will normally review the application within a few days. If the court issues an arrest order, it may arrest the vessel once it enters the jurisdiction of the relevant South Korean court.

Where the applicant applies for pre-arrest on the basis of a claim, the court will require the applicant to provide security, the amount and form of which will be determined by the court. Where the applicant applies for arrest on the basis of a maritime lien or mortgage, no security is required, but the applicant is still required to pay for the maintenance of the ship and the necessary expenses for the auction. If the applicant applies for the arrest of the ship on the basis of maritime liens or mortgages, they may also apply for a judicial auction of the ship at the same time.

3. Fees to be paid for applying for ship arrest in South Korea

If the applicant applies for the ship arrest in South Korea, in addition to the costs associated with the security that may be required as mentioned in point 2 above, there are some fees that need to be paid to the court, including stamp duty, the cost of service of documents by the court and miscellaneous fees that vary depending on the type of arrest. For example, if a ship is at anchor off the port, a ferry will be used to carry the Court Executive. Alternatively, if the applicant applies for an order for the custody or preservation of the ship, a portion of the costs may need to be paid in advance based on the court's decision taking into account the wages of the replacement crew that may be incurred, or a guarantee may need to be provided or a contract entered into with the company that will hold/preserve the ship. However, such costs, including the costs of the judicial sale, will be allocated after the claim has been enforced.

III. Ship Arrest under Chinese Law

Arrest of ships under Chinese law is mainly based on the Civil Procedure Law, the Law on Special Procedures in Maritime Litigation and the relevant judicial interpretations issued by the Supreme Court. The arrest of ships under Chinese law can be divided into two types of arrests, namely pre-litigation/in-litigation arrests and execution arrests, depending on the stage of the proceedings.

1. Circumstances under which ship arrest is permitted under Chinese law

Article 21 of the Maritime Procedure Law provides for 22 types of requests for arrest of ships by the parties, i.e. "maritime claims". According to these provisions, it can be seen that Chinese law is more detailed than that of South Korea and Japan. Moreover, under the provisions of the Maritime Procedure Law, the arrest of an associated ship is not permitted.

2. Procedures for applying for the arrest of a ship under Chinese law

According to the relevant provisions of the Maritime Procedure Law, parties applying for preservation of maritime claims prior to prosecution shall apply to the maritime court where the property to be preserved is located, and such application shall not be bound by the litigation jurisdiction agreement or arbitration agreement between the parties.

After the maritime court has accepted the application, it may order the applicant to provide security. The security is determined by the court, which will generally accept cash or letter of guarantee issued by bank, insurance company or any other financial institution. The court shall make decision within 48 hours of accepting the application. If the decision allows for the ship arrest, it shall issue the order immediately. In addition, if an application for pre-action arrest of a ship is made, the applicant shall institute proceedings or apply for arbitration within 30 days.

Please note that the Chinese maritime courts are relatively cautious and conservative in applying for pre-litigation arrest of ships due to contractual disputes, including (1) if the creditor and the debtor have agreed on overseas arbitration under the contract, the court will basically require the parties to first initiate arbitration, and (2) except for disputes involving personal injury and maritime accidents or disputes based on mutual assistance in preservation arrangements between two countries or jurisdictions, some Chinese courts  recently tend not to grant applications for ship arrest based on contractual disputes.

3. Fees payable for the ship arrest under Chinese law

When applying for ship arrest in Chinese court, the applicant is required to pay the appropriate court fees in accordance with the relevant laws. In addition, the applicant will be required to provide security in accordance with the court's decision. In addition to the cash, if a letter of guarantee is to be provided by bank, insurance company or any other financial institution, fee will generally be payable to such bank, insurance company or financial institution, depending on the amount to be secured.

In addition, costs will be incurred during the arrest of the ship, including ship care and maintenance, supplies, crew wages and other related costs. The court may require the applicant to pay the costs in advance, or may appoint a third party and require the applicant to sign a ship custody agreement and pay the relevant costs to them in advance.

IV. Summary

According to the above analysis, there are various differences in the ship arrest of Japan, South Korea and China. The main differences are as follows:

1. Compared with Japan and South Korea, the provisions of Chinese law on the circumstances under which arrest can be applied for are more specific. The scope of permitted ship arrest under South Korean law is broader, not limited to maritime claims.

2. With regard to the security, the requirement under Chinese law is much stricter than that of South Korean law and Japanese law.

3. With regard to the possibility of arresting associated ships, Chinese law are much stricter than South Korean law and Japanese law. Under South Korean law and Japanese law, it is possible to  arrest ships not owned by the debtor through "piercing the corporate veil" under specific circumstances.

To sum up, the application for arrest of foreign ships in China, Japan and South Korea has its own advantages and disadvantages. One shall comprehensively consider the creditor's rights, the country of registry, route and port of arrival of the ship to be arrested, the respondent's residence, legal service fees and other requirements, and determine the appropriate country for the application for ship arrest.

Shanghai Yaoliang law offices has sufficient experience in arresting ships and/or handling relevant legal procedures in China, Japan, South Korea and other countries. 

Please note that this article does not constitute a legal opinion and the English translation is for reference only. With regard to any specific project or question, please rely on the specific legal opinion or advice based on the specific factual background.