Hong Kong: Shipping Comparative Guide

1 Legal framework

1.1 Which legislative and regulatory provisions govern the shipping sector in your jurisdiction?

No answer submitted for this question.

1.2 Which bilateral and multilateral instruments on shipping have effect in your jurisdiction?

No answer submitted for this question.

1.3 Which bodies are responsible for enforcing the applicable laws and regulations? What powers do they have?

No answer submitted for this question.

1.4 What is the regulators' general approach in regulating the shipping sector?

No answer submitted for this question.

2 Registration

2.1 What types of vessels may be registered in your jurisdiction? What requirements and restrictions apply in this regard? Is dual registration permitted?

All types of vessels may be registered in Hong Kong, other than the following:

• non-self-propelled barges carrying petroleum products or dangerous goods of any substance which fall within the purview of the International Convention of Pollution from Ships Annex I, II or III;
• accommodation barges;
• fishing vessels;
• ships engaged in processing living resources of the sea, including whale and fish factories and aqua farming vessels;
• specialised ships engaged in research, expeditions or surveys;
• non-convention ships serving exclusively within the domestic waters of a country (other than Hong Kong and mainland China waters);
• ships propelled by nuclear energy; and
• mobile offshore drilling units.

Dual registration is not permitted in Hong Kong.

2.2 What entities may register a vessel in your jurisdiction? What requirements and restrictions apply in this regard?

The entities that are permitted to register a vessel include:

• individuals who are residents of Hong Kong and hold a valid Hong Kong identity card;
• companies incorporated in Hong Kong; and
• companies incorporated outside Hong Kong, but which have established a place of business in Hong Kong and have registered under Part 16 of the Companies Ordinance (Cap 622) in Hong Kong as a ‘non-Hong Kong company' with a place of business in Hong Kong.

There are no restrictions on the ownership of shares in a company owning a Hong Kong ship or on the persons who may be directors of such company.

2.3 What body administers the shipping register in your jurisdiction?

The Hong Kong Shipping Register is administered by the Hong Kong Ship Registry of the Marine Department of Hong Kong under the Merchant Shipping (Registration) Ordinance (Cap 415).

2.4 What information is included in the shipping register? Is this publicly accessible?

The information in the Hong Kong Shipping Register can be publicly accessed by applying to the Hong Kong Ship Registry for a transcript of the register. The register is available for inspection during the normal office hours of the registry. The following information appears on the register:

• the name of the ship;
• such survey details as the registry considers necessary for registration;
• the details of the ship's origin that were provided when the application for registration was made;
• the name, address and a description of each owner, together with details of the shares that each owner has in the ship;
• the name and address of the representative person for the ship; and
• details of all mortgages registered.

In the case of a demise chartered ship, in addition to the foregoing information, the following appears on the register:

• the name and description of the demise charterer;
• the period of the demise charter as specified in the charterparty;
• the name and description of the owner of the ship; and
• the details of any mortgage granted by the owner of the ship.

It is not possible to record details of any beneficial owner where the ship is held on trust by a trustee.

2.5 What are the formal and documentary requirements for registration of a vessel? What is the process for registration? What is the effect of registration? What is the effect of deregistration?

Documentary requirements and process: An application for registration is made to the Hong Kong Ship Registry on a prescribed form (all the forms can be downloaded at www.mardep.gov.hk/en/forms/home.html), which includes the consent of the representative person.

Completion of the application form requires:

• the particulars of the ship, its owners and demise charterers (if any); and
• details of their qualifications to own a ship, such as evidence of incorporation of a company.

In the case of a demise chartered ship, the application must also include:

• the consent of the owner of the ship;
• a declaration by both the owner and demise charterer that:
• • the demise charterer is qualified to register the ship as a demise charterer in Hong Kong;
  • the demise charterer will have possession and control of the vessel; and
  • the vessel will not be registered elsewhere; and
• a certified true copy of the demise charterparty.

At registration, the following should be produced to the registry:

• evidence of the proposed owner's title by way of the builder's certificate, bill of sale or court order vesting title to the ship in the owner;
• proof that the ship is free of encumbrances and evidence of deletion of the ship from its previous registry (if any) or, if the ship was last registered concurrently in more than one place, from the registry of each such place;
• the certificate of survey confirming the tonnage and major particulars of the ship; and
• evidence of marking the name on the ship.

If it is not possible to produce the original title documents at the time of registration, the ship can be provisionally registered for a period of one month, during which the original title documents should be submitted to the registry. Provided that adequate reasons for delays are given, it is possible to renew provisional registrations for a further period of one month for any one application at a time.

Effect of registration: Once a ship is registered in Hong Kong:

• the ship can enjoy the benefits in connection with flying the Hong Kong flag; and
• the government of the Hong Kong Special Administrative Region will exercise its jurisdiction over the ship.

The ship's title and mortgage registered on the register are binding under the Merchant Shipping (Registration) Ordinance.

Effect of deregistration: If the owner or the demise charterer of a registered ship wishes to close the ship's registration, it must:

• obtain the consent of all registered mortgagees (if any) to the closure; and
• give notice in writing to the registry that it wishes to close the ship's registration, together with evidence of the mortgagee's consent to closure.

The registry will issue a deletion certificate as directed by the owner on receipt of such application. This certificate may be issued whether the ship is sold or is transferred by its owner to another register.

The registry also has the power to close the register for any ship for various reasons, including:

• non-payment of fees;
• failure of the owner or the representative to comply with the requirements of the Merchant Shipping (Registration) Ordinance; or
• any other reason based on which it appears to the registry that the ship may have ceased to be registrable.

A demise charterer is obliged to notify the registry within seven days of termination of the demise charter, following which the ship is no longer entitled to be registered.

The closing of the registration of a ship by the registry does not affect any existing entry on the register as regards any undischarged mortgage. The mortgagee will also receive 30 days' notice from the registry, so as to allow time for the mortgagee to request that a new mortgage be registered under a new register.

If a ship is lost by reason of it being taken in war, or if a ship is broken up or is a total loss, the owner should advise the registry and the register will be closed.

No export licence or other governmental consent is required for the sale of a Hong Kong registered ship or the closure of the register. Following deregistration, the certificate of registry should be returned to the registry.

2.6 What are the formal and documentary requirements for registration of a shipping mortgage? What is the process for registration? What is the effect of registration? What is the effect of deregistration?

Form and registration: A mortgage may be created to secure any obligation of the shipowner.

Once a ship is registered (whether provisionally or permanently), a mortgage can be recorded on the register. However, when a ship is provisionally registered, the mortgagee is also required to produce a ‘confirmation by mortgagee' to the registry in a specified form acknowledging that the mortgagee has seen the original title document and knows that the original title document will not be produced to the registry at the time of registration.

The mortgage form is prescribed by statute. The particulars of each mortgage will be entered on the register and the date and time of registration will be endorsed on the mortgage itself. However, it is not necessary for any endorsement of the mortgage to be made on the certificate of registry carried on board the ship.

Current legal practice requires a mortgage to be supplemented by a collateral deed of covenants which spells out the detailed obligations of the owner. This deed of covenants need not be registered on the register; but both it and the mortgage must be registered as a charge with the Hong Kong Companies Registry if the mortgage and deed of covenants are granted by a company which is incorporated in Hong Kong or is a ‘non-Hong Kong company' registered in Hong Kong.

The mortgage and deed of covenants must be registered at the Hong Kong Companies Registry within one month of the date of the mortgage or deed, failing which the security created may become unenforceable. The rules of the International Convention for Unification of Certain Rules relating to Maritime Liens and Mortgages of 1967 have not been incorporated into Hong Kong law.

Priorities: Priorities among registered mortgages are governed by the time at which they were registered and not the order in which they were created.

Enforcement and validity: A ship mortgage registered in the prescribed form will be recognised by the Hong Kong courts as a statutory lien which will attach to the ship, entitling the mortgagee to arrest the ship in enforcement of its rights and to exercise the other remedies available, including the right to take possession and to have the ship sold privately, by public auction or through the courts.

Transfer: A mortgage may be transferred or assigned to another person.

Discharge: A mortgage will remain on the register until the registry is told that it has been discharged. A mortgagee should submit a memorandum of discharge of mortgage with a specified format (Form RS/M2) together with the original ship mortgage. A memorandum of discharge by a body corporate must be executed under its seal. The discharge with the date and time will then be entered on the register.

Mortgage on closure of a ship's registration by direction: Where the registration of a ship is closed (as discussed in question 2.5), the closure will not affect any existing entry on the register so far as the entry relates to any undischarged registered mortgage of that ship or of any share in it.

3 Port state control

3.1 Which body is responsible for port state control? What powers does it have?

No answer submitted for this question.

3.2 What penalties may be imposed for breach of the applicable laws and conventions?

No answer submitted for this question.

3.3 Can decisions of the port state control authority be appealed? If so, what is the process for appeal?

No answer submitted for this question.

4 Marine casualty

4.1 What key domestic and international provisions apply to marine casualties in your jurisdiction, and what specific considerations should be borne in mind with regard to the following? (a) Collisions; (b) Pollution; (c) Wreck removal; and (d) Salvage.

No answer submitted for this question.

4.2 Which parties may bring a marine casualty claim in your jurisdiction, and against whom?

No answer submitted for this question.

4.3 What limitation of liability regime applies to marine casualty claims and who may avail of it? What types of claims may be limited?

No answer submitted for this question.

4.4 How is the limitation fund constituted? What requirements and restrictions apply in this regard?

No answer submitted for this question.

4.5 Under what circumstances is the limitation of liability unavailable?

No answer submitted for this question.

4.6 What defences are available to marine operators in the event of a marine casualty claim?

No answer submitted for this question.

4.7 Which bodies are responsible for investigating and responding to marine casualties? What powers do they have?

No answer submitted for this question.

4.8 What reporting requirements apply in relation to marine casualties and what are the consequences of non-compliance?

No answer submitted for this question.

4.9 What remedial measures may be ordered in the event of a marine casualty (eg, wreck removal, clean-up)?

No answer submitted for this question.

4.10 Who may conduct salvage operations in your jurisdiction and what other requirements and restrictions apply in this regard?

No answer submitted for this question.

5 Cargo claims

5.1 What key domestic and international provisions apply to cargo claims in your jurisdiction?

The Hague-Visby Rules are given statutory effect in Hong Kong by the Carriage of Goods by Sea Ordinance (Cap 462). Neither the Hamburg Rules nor the Rotterdam Rules have been applied to Hong Kong, although they may be incorporated by reference into contracts of carriage.

5.2 Which parties may bring a cargo claim in your jurisdiction, and against whom?

Cargo claims can be brought in contract, tort (negligence) and bailment.

As regards a claim in contract, title to sue vests in the lawful holder of the bill of lading (Section 4 of the Bills of Lading and Analogous Shipping Documents Ordinance (Cap 440)). A claim in contract lies against the contractual carrier under the bill.

The owner, or the party with the right to immediate possession, of the cargo may claim in negligence and bailment against the owner or demise charterer of the vessel.

5.3 What limitation of liability regime applies to cargo claims and who may avail of it? What types of claims may be limited? What is the procedure for limiting liability?

Limitation of liability may be available in two forms: package limitation and tonnage limitation.

As regards the former, a carrier will not become liable for any loss or damage to or in connection with the goods in an amount exceeding the higher of:

• 666.67 Special Drawing Rights (SDRs) per package or unit; or
• 2 SDRs per kilogram of gross weight of the goods lost or damaged (Article IV r.5 of the Hague-Visby Rules).

The Hague-Visby Rules can apply mandatorily under Section 3 of Cap 462 or voluntarily by virtue of incorporation of a clause paramount in the contract of carriage. A shipowner sued as actual, as opposed to contractual, carrier would be expected to obtain the benefit of package limitation as a bailee on terms.

As regards tonnage limitation, the 1976 London Convention on Limitation of Liability for Maritime Claims together with the 1996 Protocol (LLMC) is applied in Hong Kong by the Merchant Shipping (Limitation of Shipowners Liability) Ordinance (Cap 434).

Limitation under the LLMC is available to salvors and ‘shipowners', which are defined as the owner, charterer, manager or operator of the ship.

In order to establish a limitation fund and to obtain a decree limiting its liability, a plaintiff must commence a limitation action in the Admiralty List of the High Court by issuing and serving a writ on a named defendant – one of the persons with claims against the plaintiff in respect of the casualty.

Following the issue by the court of a decree, the plaintiff must constitute the fund by payment into court in accordance with the provisions in the schedule to the Merchant Shipping (Limitation of Shipowners Liability) Ordinance referring to a fixed formula related to the tonnage of the ship and SDRs.

5.4 Under what circumstances is the limitation of liability unavailable?

Under Article 4 of the LLMC, tonnage limitation is unavailable if it is proved that the loss:

• resulted from a personal act or omission; and
• was committed with the intent to cause such loss; or
• was committed recklessly and with knowledge that such loss would probably result.

5.5 What defences are available to (a) carriers and (b) shipowners in the event of a cargo claim?

The principal defences are found in Article IV, Rule 2 of the Hague-Visby Rules and include matters such as:

• errors in navigation;
• fire;
• perils of the sea
• insufficient packing; and
• latent defects not discoverable by the exercise of due diligence.

6 Passenger claims

6.1 What key domestic and international provisions apply to passenger claims in your jurisdiction?

The 1974 Athens Convention concerning the Carriage of Passengers and their Luggage by Sea is given effect in Hong Kong by the Merchant Shipping (Limitation of Ship-owners Liability) Ordinance (Cap 434). Any action for damages arising from the death of or personal injury to a passenger, or for the loss of or damage to luggage, is time barred after a period of two years. The convention applies only to international carriage, not domestic carriage.

The 1976 London Convention on Limitation of Liability for Maritime Claims together with the 1996 Protocol (LLMC) is applied in Hong Kong by the Merchant Shipping (Limitation of Ship-owners Liability) Ordinance. The LLMC provides for limitation by reference to the vessel's tonnage, which may be relevant in the event of a serious casualty.

6.2 What limitation of liability regime applies to passenger claims and who may avail of it? What types of claims may be limited? What is the procedure for limiting liability?

No answer submitted for this question.

6.3 Under what circumstances is the limitation of liability unavailable?

Limitation is unavailable to the carrier if it is proved that the damage:

• resulted from an act or omission of the carrier; and
• was done with the intent to cause such damage; or
• was done recklessly and with knowledge that such damage would probably result.

The Control of Exemption Clauses Ordinance (Cap 71) prohibits the carrier from excluding or restricting its liability for death or personal injury resulting from its negligence.

7 Ship arrest

7.1 What key domestic and international provisions apply to ship arrest in your jurisdiction?

Provisions of the 1952 Arrest Convention are applicable to Hong Kong by virtue of Sections 12A to 12E of the High Court Ordinance, which governs ship arrests in Hong Kong.

7.2 For which types of claims is ship arrest available? What requirements and restrictions apply in this regard?

Section 12A of the High Court Ordinance lists the different types of maritime claims which give rise to the distinctive feature of admiralty jurisdiction – namely, the right to arrest a ship so as to obtain security for the claim.

As with English law, Hong Kong law recognises the traditional maritime liens which are characterised by their ability to survive a private sale of the vessel.

There are also what are commonly referred to as ‘statutory liens' – that is, claims such as charterparty, bill of lading, vessel supplies and repair claims – which enable arrest, provided that certain criteria as to the ownership and control of the vessel are met.

Lastly, there are claims which give rise to the right of ship arrest, irrespective of considerations of ownership, such as:

• any claim to the possession or ownership of a ship;
• any question arising between the co-owners of a ship as to possession, employment or earnings of that ship; and
• any claim in respect of a mortgage of or charge on a ship or any share therein.

7.3 Are maritime liens recognised in your jurisdiction? If so, what claims give rise to maritime liens? What is the difference (if any) between arrest of a ship for a maritime claim and a maritime lien?

Hong Kong law recognises the traditional maritime liens in respect of:

• damage done by a ship;
• salvage;
• crew wages; and
• master's disbursements.

The maritime lien survives any private sale of the ship and so can be enforced by way of arrest, even if the current owners or demise charterers of the ship have no in personam liability for the claim. Where there is a ‘traditional' maritime (as opposed to purely statutory) lien on a ship for the amount claimed, an action in rem may be brought in the Court of First Instance against that ship.

7.4 Under what circumstances is the arrest of sister ships and associated ships available? What requirements and restrictions apply in this regard?

As regards the statutory liens for claims in respect of cargo, charterparty, repairs, supplies and similar (as described in Sections 12A(2)(e) to (q) of the High Court Ordinance), the right to arrest is subject to satisfaction of the following criteria:

• Where the claim arises in connection with a ship, and the person that would be liable on the claim in an action in personam (the relevant person) was, when the cause of action arose, the owner or charterer of, or in possession or in control of, the ship, an action in rem may be brought in the Court of First Instance against:
• • that ship, if at the time when the action is brought, the relevant person is either the beneficial owner of that ship in respect of all the shares in it or the charterer of it under a charter by demise; or
  • any other ship of which, at the time when the action is brought, the relevant person is the beneficial owner in respect of all the shares in it. In this regard, it is possible in Hong Kong to arrest sister ships. So, where the party liable in personam on the claim owns a number of ships, the claimant can decide which one of those ships to arrest. While the claimant can name the entire fleet in its in rem writ, it is only permitted to arrest one of the vessels in respect of the claim. A protective in rem writ may be issued, which preserves the statutory lien against any future private sale or change of ownership of the vessel. As a result, an innocent purchaser or demise charterer may find its vessel arrested in respect of earlier claims for which they have no in personam liability.

In contrast, associated ship arrest is unavailable.

7.5 Under what circumstances can bareboat and time-chartered vessels be arrested?

The arrest of bareboat chartered vessels is governed by the rules described in question 7.4. The vessel may not be arrested if the party liable is merely the time charterer of the vessel to be arrested.

7.6 What are the formal and documentary requirements for arresting a vessel? What is the procedure and how long does this take? Must a countersecurity be provided? What other costs are incurred?

Few formalities are required in order to arrest a vessel: there is no need for a power of attorney, notarised or apostilled documents, or translations.

All the arresting party need do is file with the writ an affidavit setting out the basis of its right of arrest pursuant to the High Court Ordinance and exhibiting the supporting documents, together with an undertaking to pay the bailiff's costs of arrest and preservation of the vessel. A search should also be made for any caveats against arrest which may have been filed at court.

Significantly, there is no need to provide a deposit or other counter-security in respect of any potential claim for wrongful arrest.

7.7 What is the procedure to release a ship from arrest and how long does this take? What security must be provided and how is this calculated?

Security for the release of an arrested vessel is usually given contractually by way of a protection and indemnity club letter of undertaking or a bank guarantee. The methods of security regulated by the Rules of the High Court are the bail bond and the payment into court of money, although these are encountered relatively rarely in practice. The release of the ship may be effected within a matter of hours.

As regards quantum, a claimant is entitled to security in respect of its reasonably arguable best case.

7.8 What is the test for wrongful arrest in your jurisdiction?

The shipowner can recover its losses due to a wrongful arrest only where it can prove that the arresting party or its solicitor acted in bad faith or was grossly negligent. This is a high threshold to meet.

7.9 Are any alternatives to ship arrest available in your jurisdiction?

Freezing orders may be available to prohibit the departure of the vessel from Hong Kong, but such injunctive relief does not confer on the claimant any security or priority as regards the claim against the shipowner.

A judgment creditor may also attach the vessel by means of a writ of fieri facias executed by the court bailiff.

8 Judicial sale of a vessel

8.1 What key provisions apply to the judicial sale of vessels in your jurisdiction?

An application for the judicial sale of the arrested vessel may be made pursuant to Orders 12, 22 and 23 of the Rules of the High Court.

8.2 What is the procedure for judicial sale of an arrested vessel and how long does this take? What costs are incurred?

The application is made by way of notice of motion heard in open court. Where the application is made prior to the issue of judgment on the substantive claim, the court will generally need to be satisfied that the continued arrest of the vessel will deplete its value to the detriment of the various claimants and persons interested in the vessel.

8.3 How are the proceeds of sale distributed?

Once a ship has been the subject of a judicial sale, the court does not distribute the sale proceeds equally between all the claimants. Instead, the court will follow a recognised order of priority of claims, while retaining discretion to do what is just in any particular case. As a result, some claims are met in full before other claimants receive anything.

At the top of the order of priorities are maritime liens such as crew wages, salvage and collision claims. They are followed by a shipyard's possessory lien in respect of work carried out to the vessel. However, if the shipyard relinquishes possession and allows the vessel to depart, the shipyard will lose its lien. In that event, the shipyard's claim will be relegated to the status of a ‘statutory' lien.

In addition to maritime liens, the Senior Courts Act 1981 lists several types of claims which are known as ‘statutory' liens, given that they are derived from statute. These liens rank below a mortgage and include claims for cargo damage, breach of charter, unpaid bunkers and other supplies.

8.4 What is the legal effect of the judicial sale of a vessel?

The vessel is sold free and clear from all encumbrances, whether registered or not, such that the vessel should, by convention, be protected in the hands of new owners from any claims against the old owners, even if those claims have the status in any jurisdiction of a maritime lien or were protected by the issuance of proceedings before the sale took place.

9 Environmental issues

9.1 What key domestic and international provisions apply to shipping emissions in your jurisdiction?

No answer submitted for this question.

9.2 What key domestic and international provisions apply with regard to the sulphur content of marine fuel in your jurisdiction?

No answer submitted for this question.

9.3 What key domestic and international provisions apply with regard to ship recycling in your jurisdiction?

No answer submitted for this question.

9.4 What other environmental issues and concerns should shipowners and operators be aware of in your jurisdiction? What best practices should they follow?

No answer submitted for this question.

10 Employment issues

10.1 What key domestic and international provisions apply to the health and safety of maritime workers in your jurisdiction?

No answer submitted for this question.

10.2 What other employment issues should shipowners and operators be aware of with regard to maritime workers in your jurisdiction?

No answer submitted for this question.

11 Disputes

11.1 In which forums are shipping disputes typically heard in your jurisdiction?

No answer submitted for this question.

11.2 What issues do such disputes typically involve? How are they typically resolved?

No answer submitted for this question.

11.3 Have there been any recent cases of note?

No answer submitted for this question.

12 Trends and predictions

12.1 How would you describe the current shipping landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

In 2020, BIMCO published its new Dispute Resolution Clause, which was significant because Hong Kong was included as one of the four named arbitration venues. The BIMCO clause also adopted the procedural terms of the Hong Kong Maritime Arbitration Group (HKMAG).

The HKMAG itself was relaunched a couple of years ago. It is a group of Hong Kong-resident maritime arbitrators, all of whom have expertise relating to the shipping industry and many of whom are Chinese speakers. The new HKMAG Terms 2021 closely follow the LMAA Terms, which are the arbitration practices best known to those in the shipping industry.

Hong Kong is the only seat of arbitration outside mainland China (and the only common law jurisdiction) that has the procedural advantage of parties able to apply to the mainland Chinese courts for interim measures, such as the preservation of assets. This is thanks to the recent Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the Hong Kong Special Administrative Region.

13 Tips and traps

13.1 What are your top tips for shipowners and operators in your jurisdiction and what potential sticking points would you highlight?

No answer submitted for this question.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.