——Yangzhou Ship Trading Co., Ltd. and Yizheng Shipbuilding Co., Ltd. v. Singapore S Pte. Ltd. 

Key Word：Realization of possessory lien; Special procedure; Judicial sale of barges; Priority payment; Temporary foreign registration

Facts：

Applicants Yangzhou Ship Trading Co., Ltd (hereinafter “Trading Company”) and Yizheng Shipbuilding Co., Ltd. (hereinafter “Shipbuilding Company”), as co-builders, entered into two shipbuilding contracts with respondent Singapore S Pte. Ltd. (hereinafter “S Company”). The contracts stipulated that the former would construct two barges for the latter. Payment terms were 10% of the contract price to be paid three business days after the contract was signed, with the balance to be paid two days prior to delivery. Following completion of the two barges, the Trading Company and the Shipbuilding Company registered the ships under the name of a Marshall Islands company at S Company’s request. However, S Company failed to pay the construction fees as agreed. Giving the fact that S Company refused to repay its due debts, the Trading Company and the Shipbuilding Company made an application before the Court to realize its possossory lien on the two barges.

Judgment：

The Court conducted a thorough review of the evidence of the case and inquired the parties, fully safeguarding the litigation rights and equal status of both Chinese and foreign parties. Based on the findings of fact, the Court promptly and legally permitted the judicial sales of the two barges involved in this case. The court also confirmed that the claims of the Trading Company and the Shipbuilding Company would be prioritized for repayment from the proceeds of the sales.

Typical Significance：

As the international shipbuilding market continues fluctuating, when ship prices decline or when the charges against the ship become substantial, shipbuilding companies will face significant risks of default or even abandonment by ship buyers. This case fully leveraged the efficiency of the special procedure with regard to realizing security rights. Bearing in mind the need to equally safeguard the litigation rights of Chinese and foreign parties, the Court quickly ascertained the facts regarding the performance of the shipbuilding contract, and held that the Chinese shipbuilding enterprise’s right to enjoy a possessory lien on the foreign ship which was temporarily registered in the Marshall Islands. It also held that this possessory lien was not affected by other judicial preservation measures such as seizure and detention against the same ship initiated by third parties. The timely decision of the Court effectively protected the legitimate rights and interests of the Chinese shipbuilding enterprise.