This country-specific Q&A provides an overview of Shipping laws and regulations applicable in Hong Kong.
What system of port state control applies in your jurisdiction? What are their powers?
Hong Kong is a member of the Tokyo MOU.
The local authority responsible for the implementation of port state control (“PSC”) in Hong Kong is the PSC Section of the Marine Department of Hong Kong (“MARDEP”).
Surveyors within the PSC Section of MARDEP would regularly conduct inspections on board foreign vessels within the waters of Hong Kong according to the procedures laid out in the “Port State Control Inspection Manual” prepared by MARDEP. This Port State Control Inspection Manual is revised by MARDEP from time to time, taking into account the most recent guidelines laid down in the Tokyo MOU Port State Control Inspection Manual as well as the “Procedures for Port State Control, 2019” in IMO Resolution A.1138(31).
Apart from the power to inspect foreign vessels within the waters of Hong Kong, MARDEP as the PSC authority has wide-ranging power(s) under the Shipping and Port Control Ordinance (Cap. 313) and its subsidiary legislation to: (i) investigate deficiencies on board the vessel; (ii) take copies of documents from the vessel; (iii) detain the vessel; and (iv) give directions for the rectification of these deficiencies.
Are there any applicable international conventions covering wreck removal or pollution? If not what laws apply?
There are no applicable international conventions in Hong Kong relating to the removal of a wreck. Although the Nairobi Wreck Removal Convention (WRC) 2017 came into force in China on 11 February 2017, China’s ratification of the WRC does not apply to Hong Kong.
The local legislation governing wreck removal in Hong Kong is s. 21, Shipping and Port Control Ordinance (Cap. 313). Under this provision, the Director of MARDEP is given extensive powers to direct the owners, master or any other interested person of a sunken vessel to remove, move, raise or destroy the wreck.
Hong Kong applies the International Convention for the Prevention of Pollution from Ships (MARPOL 73/78) and its 1997 Protocol (“MARPOL”), which regulates the general prevention and control of pollution by ships.
For oil spills and pollution, compensation and insurance, Hong Kong has through its domestic legislation given effect to the following: (i) International Convention on Civil Liability for Oil Pollution Damage (“CLC”); and (ii) the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (“Fund Convention”) 1992, but excluding the 2003 Supplementary Fund Protocol.
For liability, compensation and compulsory insurance for damage or threat of damage due to contamination caused by discharge of bunker oil, Hong Kong has given effect to the Civil Liability for Bunker Oil Pollution Damage (“Bunker Oil Convention”) 2001.
Are there any applicable international conventions covering collision and salvage? If not what laws apply?
Hong Kong applies the Collision Regulations (“COLREGs”) 1972. The COLREGs contain a detailed code of rules that seafarers are obliged to comply with in the navigation of a vessel for the avoidance of collision. The COLREGs have the force of law in Hong Kong pursuant to the Merchant Shipping (Safety) (Signals of Distress and Prevention of Collisions) Regulations (Cap. 369N).
Where a collision has occurred, liability and division of damage or loss is determined in accordance with the 1910 Collision Convention, which is given effect in Hong Kong under the Merchant Shipping (Collision Damage Liability and Salvage) Ordinance (Cap. 508).
For salvage, Hong Kong applies the International Convention on Salvage (“Salvage Convention”) 1989. The Salvage Convention is given the force of law in Hong Kong by s. 9(1), Merchant Shipping (Collision Damage Liability and Salvage) Ordinance (Cap. 508).
It is important to note that the provisions of the Salvage Convention can be excluded by contract between the owners and salvors. To date, the most widely used international salvage agreement remains the Lloyds Open Form.
Is your country party to the 1976 Convention on Limitation of Liability for Maritime Claims? If not, is there equivalent domestic legislation that applies? Who can rely on such limitation of liability provisions?
Yes, Hong Kong is a party to 1976 Convention on Limitation of Liability for Maritime Claims (LLMC 1976) together with the 1996 Protocol. The LLMC 1976 is given the force of law in Hong Kong under the Merchant Shipping (Limitation of Shipowners Liability) Ordinance (Cap. 434).
Persons entitled to rely on the limitation provisions under the LLMC 1976 include ship-owners, charterers, managers, operators of a vessel and salvors, and/or their servants or agents.
If cargo arrives delayed, lost or damaged, what can the receiver do to secure their claim? Is your country party to the 1952 Arrest Convention? If your country has ratified the 1999 Convention, will that be applied, or does that depend upon the 1999 Convention coming into force? If your country does not apply any Convention, (and/or if your country allows ships to be detained other than by formal arrest) what rules apply to permit the detention of a ship, and what limits are there on the right to arrest or detain (for example, must there be a “maritime claim”, and, if so, how is that defined)? Is it possible to arrest in order to obtain security for a claim to be pursued in another jurisdiction or in arbitration?
For claims arising out of delayed, lost or damaged cargo, it is possible for a receiver to arrest the offending vessel or her sister-ship as security for its claim under s.12A(2)(g),(h), High Court Ordinance (Cap. 4).
To arrest the offending vessel or her sister ship, the arresting will need to demonstrate that the requirements under s.12B(4), High Court Ordinance are met, failing which the arrest may be wrongful and set aside.
Hong Kong is party to the 1952 Arrest Convention, but not the 1999 Convention.
A claimant may arrest a vessel in Hong Kong as security for its claim, with the substantive merits of the claim to be determined in a foreign court proceeding or arbitration.
For an arrest, are there any special or notable procedural requirements, such as the provision of a PDF or original power of attorney to authorise you to act?
The procedural requirements for an arrest are generally stated in Order 75 rule 5, Rules of High Court (Cap. 4A).
To effect an arrest, the arresting party will need to conduct a prior search in the caveat book maintained with the Bailiff to determine if there are any caveats against arrest of the vessel.
The arresting party’s solicitors will also be required to provide an undertaking to the Bailiff to pay all expenses incurred by the Bailiff in the arrest, preservation, and maintenance of the vessel.
There is no requirement for the arresting party’s solicitors to provide to the Court or the Bailiff a power of attorney or a letter of authorisation confirming the solicitors’ authority to act.
However, as a matter of prudence, solicitors acting for the arresting party will usually require a written retainer and deposit from the arresting party before providing any corresponding undertaking to the Bailiff to pay the arrest and maintenance expenses of the ship.
What maritime liens are recognised?
Maritime liens recognised in Hong Kong under the common law are as follows:
(a) damage caused by a ship;
(c) crew wages, Master’s wages and disbursements;
(d) bottomry (loan on the ship) and respondentia (loan on the cargo) (now obsolete)
Is it a requirement that the owner or demise charterer of the vessel be liable in personam? Or can a vessel be arrested in respect of debts incurred by, say, a charterer who has bought but not paid for bunkers or other necessaries?
Whether an arrest can be effected irrespective of ownership or possession of the vessel depends on the nature of the claim itself.
Where the claim is in the nature of:
(i) maritime lien claim; or
(ii) statutory lien claim falling within s.12A(2)(a), (b), (c) and (r), High Court Ordinance (Cap. 4) — claim to possession or ownership of a vessel; question arising between co-owners of a ship as to possession, employment or earnings of the ship; claim in respect of mortgage of or charge on a ship; or a claim for forfeiture or condemnation or ship or goods / restoration of ship or goods after seizure / droits of Admiralty,
there is no requirement that the owner or demise charterer of the vessel be liable in personam. See s.12B(3) and s.12B(2) of High Court Ordinance (Cap. 4), respectively.
Where however the claims are in the nature of statutory lien claims that fall within s.12A(2)(e)-(q) High Court Ordinance (Cap. 4), it is a requirement for any arrest of the offending vessel that the owner or demise charterer of the vessel be liable in personam (see s.12B(4)(i), High Court Ordinance (Cap. 4).
So in the case of a time charterer who had contracted for but did not pay for the bunker supply to the vessel, it may not be possible for the bunker suppliers to effect an arrest of the vessel (unless the vessel subsequently comes into the ownership of or is demise chartered to the time-charterer).
Are sister ship or associated ship arrests possible?
Sister-ship arrest is possible in Hong Kong. See s. 12B(4)(ii), High Court Ordinance (Cap. 4).
Associated ship arrest is not possible in Hong Kong.
Does the arresting party need to put up counter-security as the price of an arrest? In what circumstances will the arrestor be liable for damages if the arrest is set aside?
An arresting party is not required to put up counter-security for the arrest of a vessel.
An arresting party is only required to provide a solicitors’ undertaking to pay the Bailiff’s expenses of the arrest, preservation and maintenance of the vessel.
If an arrest is set aside, an arresting party will only be held liable in damages if the arrest was obtained by malice (mala fides) or through gross negligence (crassa negligentia).
The threshold for obtaining damages for wrongful arrest is said to be ‘notoriously high’. See para. 44, The Fearless I  HKLRD 48
How can an owner secure the release of the vessel? For example, is a Club LOU acceptable security for the claim?
The owner is required to put up sufficient (covering principal, interest and costs) and suitable security for the release of the vessel. Acceptable types of security include but is not limited to:
(a) cash payment into Court;
(b) letter(s) of guarantee or undertaking issued by reputable bank(s) or P&I Club(s); or
(c) bail bond in the form set out at Form No. 11, Appendix B, Rules of Court, issued by reputable banks or corporations.
Describe the procedure for the judicial sale of arrested ships. What is the priority ranking of claims?
Any party having an interest in the arrested ship may apply for a judicial sale, whether before (sale pendente lite) or after judgment in the action has been obtained.
Judicial sale of ships in Hong Kong is generally conducted by way of a sealed bids tender. Direct sales are not permitted, save for exceptional circumstances (see The Margo L  1 HKC 217).
Upon the Court issuing an Order for appraisement and sale of the ship:
(a) the Bailiff will arrange for the ship to be appraised by two appraisers, one of whom will conduct a physical survey of the ship and the other a desktop valuation—the appraisers’ valuations will be used as the basis for the reserve value of the ship;
(b) on completion of the appraisement, the Bailiff will prepare an Invitation to Tender, which is advertised in one local newspaper and one international shipping newspaper over two consecutive days;
(c) interested bidders may physically inspect the ship, and thereafter submit their bids together with a deposit of 10% of the offer (in the form of cashiers’ order or bank draft drawn on a Hong Kong bank) in sealed envelopes prior to the close of the tender date as advertised;
(d) on the tender date, the Registrar will open all sealed bids that have been submitted and decide if any of the bids meet the reserve value of the ship and if so, which of the bids the Court should accept—the Court is not bound to accept the highest bid or any bid during the tender;
(e) where the bids either do not meet the reserve value or are not accepted by the Court, the Court may call a second round of tender for the sale of the ship;
(f) closing usually takes place within one (1) week from the date on which any bid is accepted by the Court;
(g) on full payment of the purchase price, the buyer takes delivery of the vessel free and clean of all encumbrances, liens, mortgages and claims.
The general ranking of priorities against the sale proceeds of the ship are as follows:
(i) port dues;
(ii) Bailiff’s costs and expenses incurred in connection with the arrest, preservation and maintenance of the ship;
(iii) costs of the arresting party;
(iv) costs of the producer of the fund – i.e. the party who applied for a sale of the ship;
(v) maritime lien claims;
(vi) possessory lien claims;
(viii) statutory lien claims;
(ix) all other claims.
Who is liable under a bill of lading? How is “the carrier” identified? Or is that not a relevant question?
The persons who are liable for damage to or loss of cargo under a bill of lading is the “carrier”, defined in Article 1 of the Hague-Visby Rules as including the owner or charterer that enters into a contract of carriage with the shipper.
Equally, however, where any person takes or demands delivery of goods from the carrier or makes a claim under that bill of lading, that person is also subject to the same liabilities under the bill of lading as a contracting party (see section 5(1), Bills of Lading and Analogous Shipping Documents Ordinance (Cap. 440).
As to how a “carrier” is identified from the bill of lading, this will depend on a number of factors including (i) terms that are found on the reverse side of the Bill of Lading; (ii) identification of the carrier from the front side of the bill of lading; and (iii) on whose behalf the Bill of Lading was signed.
Is the proper law of the bill of lading relevant? If so, how is it determined?
The proper law of the bill of lading is relevant because it not only affects how the substantive terms of the Bill of Lading are to be interpreted, it can also determine: (i) which international convention(s) on the responsibilities and liabilities of a carrier are being incorporated by reference (see for example, Article X(c), Hague-Visby Rules); and (ii) the applicable limits of the carrier’s liability.
Where there is an express choice of law clause in the contract, the Hong Kong Courts will usually give effect to such a clause.
In the absence of an express governing law provision, the proper law is determined by the Court under the common law principles:
(a) parties’ implied choice based on their intentions at the time of contract;
(b) system of law with the closest and most real connection – place in which bill of lading was issued; parties’ place of incorporation; place of shipment; and place of delivery etc.
Are jurisdiction clauses recognised and enforced?
Yes, the Court will usually recognise and give effect to jurisdiction clauses save for exceptional circumstances (for example, where there are no real defences to a claim).
What is the attitude of your courts to the incorporation of a charterparty, specifically: is an arbitration clause in the charter given effect in the bill of lading context?
Whether and if so which of the terms of a charterparty will be incorporated into a bill of lading depends on the wording of the incorporation clause printed on the bill.
Where the incorporation clause is worded generally, only those terms relevant to the carriage of goods will be incorporated.
To incorporate into the bill of lading an arbitration clause that is contained in the charterparty, the Hong Kong Court will require specific words of incorporation. See the recent decision of OCBC Wing Hang Bank Limited v Kai Sen Shipping Company Limited  HKCFI 375.
Is your country party to any of the international conventions concerning bills of lading (the Hague Rules, Hamburg Rules etc)? If so, which one, and how has it been adopted – by ratification, accession, or in some other manner? If not, how are such issues covered in your legal system?
Hong Kong has ratified the Hague-Visby Rules, together with its 1979 Protocol.
These provisions are given the force of law in Hong Kong under s.3, Carriage of Goods by Sea Ordinance (Cap. 462).
Is your country party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards? If not, what rules apply? What are the available grounds to resist enforcement?
Yes, Hong Kong is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
There are limited grounds under which a party may resist the enforcement of a Convention award under s.89(2), Arbitration Ordinance (Cap. 609)—these grounds are as follows:
(a) a party to the arbitration agreement was under some incapacity;
(b) arbitration agreement was not valid;
(c) one party not given proper notice of the appointment of the arbitrator or of the arbitral proceedings, or otherwise unable to present one’s case;
(d) the award deals with a difference not contemplated by or not falling within the terms of submission to arbitration, or contains decisions on matters beyond the scope of submission to arbitration;
(e) composition of the arbitral authority or the arbitral procedure was not in accordance with (i) the agreement of the parties, or (ii) (if there was no agreement) the law of the country where the arbitration took place;
(f) the award has (i) not yet become binding on the parties, or (ii) has been set aside or suspended by a competent authority of the country in which or under which the award was made;
(g) award is in respect of a matter which is not capable of settlement by arbitration under Hong Kong laws;
(h) it would be contrary to public policy to enforce the award.
Please summarise the relevant time limits for commencing suit in your jurisdiction (e.g. claims in contract or in tort, personal injury and other passenger claims, cargo claims, salvage and collision claims, product liability claims).
The ordinary time limits, which may be subject to extension or exclusion, under s.4 of the Limitation Ordinance (Cap. 347) is as follows:
(a) contract – 6 years;
(b) tort – 6 years.
For torts involving personal injuries, the limitation period is 3 yeas from the date on which the cause of action accrued or from the date of the claimant’s knowledge, whichever is later. If the personal injuries lead to death subsequently, the limitation period is 3 years from the date of death or the date of the personal representative’s knowledge, whichever is later. See s.27, Limitation Ordinance (Cap. 347).
For claims that are maintained under the Fatal Accidents Ordinance (Cap. 22), the limitation period is 3 years from the date of death, or the date of knowledge of the person for whose benefit the action is brought, whichever is later. See s.28, Limitation Ordinance (Cap. 347).
Limitation periods can be postponed where fraud, concealment and/or mistake is discovered by the plaintiff subsequently (see s.26, Limitation Ordinance (Cap. 347)).
For cargo claims, the Hague-Visby Rules which has the force of law in Hong Kong, stipulates a time limit of 1 year from the date of delivery or the date when the cargo should have been delivered. This time limit may be extended by agreement of the parties. See Article III.6, Hague-Visby Rules.
For damage or loss to a vessel, cargo or freight, or any property on board the vessel, or in respect of a claim for damages for loss of life or personal injuries suffered by any person on board the vessel, the claim must be brought within 2 years from the date on which the damage, loss or injury was suffered. See s. 7, Merchant Shipping (Collision Damage Liability and Salvage) Ordinance (Cap. 508).
Limitation period for salvage claim is generally 2 years from the date on which the salvage operations are terminated. See Article 23, Salvage Convention 1989. The limitation period may be extended by agreement between the parties.
What restrictions, if any, has your jurisdiction imposed on crew changes in the wake of the Coronavirus pandemic?
The travel restrictions imposed in Hong Kong are constantly changing in view of the evolving situation with COVID-19. The guidance below is based on information as at 9 November 2020.
With effect from 29 July 2020, Hong Kong has suspended crew change arrangements for passenger vessels and merchant vessels without cargo operation in Hong Kong. Crew members of such vessels are required to remain onboard during the stay of the vessel in Hong Kong waters.
Crew change is permissible for merchant ships that have cargo operations in Hong Kong. To avoid outgoing crew members from making contact with the local community after they have completed their services, the outgoing crew is required to remain onboard the ship during their stay in Hong Kong, until transportation arrangements are made for them to travel directly to the airport to board flights to their respective home countries.
Incoming crew members are not required to undergo quarantine restrictions but will be required to produce negative COVID-19 test results before entry into Hong Kong. Incoming crew will also be required to go on board the vessel immediately and directly upon arrival in Hong Kong.
Does your system of law recognize force majeure, or grant relief from undue hardship? If so, in what circumstances might the Covid-19 pandemic enable a party to claim protection or relief?
Hong Kong recognises both force majeure clauses and the doctrine of frustration, the former being a form of contractual relief and the latter being a relief based on common law. Broadly, force majeure and frustration may be invoked in circumstances where a supervening unforeseen event has rendered a party’s contractual obligations impossible or materially different.
Whether COVID-19 offers any relief to a party depends on (i) when a party has entered into the contract; and (ii) the extent to which COVID-19 as an event has affected the party’s ability to perform its contract.
For example, given the current knowledge and scale of COVID-19, it is likely that parties entering into a contract at this stage will be aware of the potential impact of COVID-19 and may even make provisions in their contract for the likely effects of COVID-19. In such an event, it is not likely a Hong Kong Court will find COVID-19 as constituting a frustrating event under common law, as parties had contemplated COVID-19 as an event and its consequences would have been reasonably foreseeable.
However this is not to say that COVID 19 may not be regarded as a force majeure event under a contract, where parties have included the word(s) “epidemics”, “disease” or “pandemic” as a force majeure event in their contract. Whether a party may avoid performance under a force majeure clause depends on the language of the clause itself—whether a party’s performance is “made impossible” or “prevented” by COVID-19, or is of a much lower threshold such as “delayed” or “hindered” by COVID-19.
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