Considerations when Executing a Guarantee Involving Chinese Elements

In Emeraldian Limited Partnership v (1) Wellmix Shipping Limited and (2) Guangzhou Iron & Steel Corporation Limited, the English High Court made a determination on the liability of a Chinese guarantor under a guarantee not approved by China's State Administration of Foreign Exchange ("SAFE"). This illustrates the relevant considerations involved when executing a contract of guarantee involving cross-border elements, in particular, Chinese ones.

Facts

The first defendant charterer (C) entered into a voyage charter with the claimant ship owner (O) for the carriage of iron ore from Itaguai, Brazil to China, and the charterparty was governed by English law and subject to English jurisdiction. O sought to claim demurrage in the sum of US$5mil from C who in turn claimed against the second defendant (G), a Chinese company, who was the alleged guarantor of C's obligations under the charterparty.