China Law Blog’s Steve Dickinson posts disturbing news after listening to presentations at the latest China Maritime Law Conference…
The financial crisis has struck hard and fast with a litany of woes. Ports aren’t getting the volume of trade they need to survive, shipbuilding contracts being breached, Chnese shipbuilders heacvily saddled with debt, unpaid charter payments and Chinese companies not quick enough to claim payments from overseas entities
China Law Blog reports…
CLB’s own Steve Dickinson has just returned from the annual China Maritime Law Conference, made up mostly of China’s leading maritime lawyers. This year’s conference was in Wuhan.
Steve reports as follows after the first day:
I just finished the morning session of the first day of the All China Maritime Law Conference being held in Wuhan. The theme of this year’s meeting is the shipbuilding industry. The conference was organized when Chinese shipbuilding was booming and China had plans to replace Korea as the leading shipbuilder in the world. Due to the recent economic downturn, virtually every presenter revised their presentation at the last minute to discuss the effects the current situation is having and will have on the maritime industry in China.
The presenters all agreed on the following. The downturn in shipping is having a profoundly negative effect on all segments of China’s maritime industry.
Shipbuilders are finding that their shipbuilding contracts are being extensively breached. Since shipbuilders in China are mostly new companies, they are heavily in debt. These breaches threaten the life of the entire shipbuilding industry in China.
Vessel owners are finding that charter parties are refusing to pay charter payments. Some charter parties are demanding revisions to charter agreements. In more extreme cases, the charter parties are simply abandoning vessels in mid-voyage. [Editor’s note: charter party agreements are essentially agreements to rent out a ship]
Shippers are finding that their customers are refusing to honor long term shipping agreements and are demanding extreme reductions in shipping rates.
Ports are finding their volumes rapidly decreasing. This is an especially serious problem with smaller and newer ports. It is also a problem with ports in the middle of ambitious expansion plans.
The presenters for this morning session were primarily from Hong Kong, Singapore and England. They proposed various legal solutions for dealing with the crisis situation that has developed. The Chinese lawyers in attendance spoke in near unison on the response they are getting from their clients:
The clients first deny there is any problem.
Once the problem is too acute to deny, the clients reluctantly consult with a lawyer on what to do. When told that they will need to retain and pay for a lawyer to pursue resolution of the issue, the client refuses. The reason: "We are already losing money. Why would we pay a lawyer and even lose more money?"
What does this mean for the future? It is possible the Chinese maritime industry will wake up and start to deal with the current situation. Currently, however, the Chinese maritime industry is taking a purely passive approach to the current crisis. Since the lawyers are all new to the industry, the Chinese lawyers have little perspective on what will be the result. The industry leaders are in the same position: they have no historical perspective. If the attitude of the Chinese maritime industry does not change, it seems likely there will be a major shake out, with many companies going out of business. Only the major players who are funded by the central government are likely to survive.
http://www.chinalawblog.com/2008/11/china_as_downturn_neophyte_if.html
and here’s CLB’s post on the conference and organisers
