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Case Involving Seizure of Japanese Ship Is Not an Anomaly :
The Current State of the Rule of Law in China

Hikota Koguchi
Professor, Faculty of Law, Waseda University; Director, Organization for Asian Studies

The impact of the Sunflower Student Movement

A case involving the seizure of a ship owned by Mitsui O.S.K. Lines has attracted nationwide attention. The summary of the incident is as follows. There are three plaintiffs: Zhongwei Shipping Co. (hereafter “X1”), and the private citizens Chen Zhen (“X2”) and Chen Chun (“X3”). X2 and X3 are the grandchildren of the owner of the X1 company. Mitsui O.S.K. Lines (“Y”) became the defendant after it absorbed the original defendant, Japan Line, Ltd . The plaintiffs argued that Japan Line’s predecessor, Daido Kaiun (“A”), signed contracts in June and October 1936 to lease two ships (“I, II”) from X1 for a year. However, they allege, “it failed to pay rent charges from August 1937 onward and retained possession over ships I and II past the dates of return agreed on in the contracts, resulting in the sinking of the ships. A has not paid compensation for this or any other costs.” The plaintiffs demanded a total payment of around 31.2 billion yen for “1) the equivalent of rent charges for ships I and II and fees for seizing and using the ships, 2) interest on the late payment of 1), 3) the cost of operating losses caused by unpaid rent, and 4) losses due to the destruction of ships I and II.”

Y made three counterarguments in response to this lawsuit: 1) The plaintiffs lacked the standing to file a lawsuit, 2) the statute of limitations had expired, and 3) ships I and II were “seized” (and used after their “capture”) by the Japanese military in 1937 and “kept in the possession” (“senyū” (占有: “occupy” or “possess”) in the original; in Chinese, senyū sometimes means shoyū (所有: “possess” or “own”)) of the Japanese government from then on; as a result, the lease entered into with X1 terminated, A committed no breach of contract intentionally or inadvertently within the period of the contract, and thus A was not required to assume any responsibility for what happened.

The Shanghai Maritime Court issued a ruling in favor of the plaintiffs on December 7, 2007, ordering the defendant to pay a total of about 2.9 billion yen. Both the plaintiffs and the defendant were dissatisfied with the ruling and appealed to the Shanghai Municipal Higher People’s Court, but the appeals of both parties were rejected on August 6, 2010. China has a two-tier court system, but it is not difficult to get a retrial, so Y applied for one in the Supreme People’s Court. On December 23, 2010, the Supreme People’s Court dismissed its petition for a retrial, finalizing the ruling.

The case aroused interest in Japan not because of the matters just described, but because a ship belonging to Y was arrested after the company failed to comply with the ruling. Was this a freak incident? Not at all. The Chinese court’s disposition of arrest was nothing out of the ordinary. In China, when the person who loses the case does not comply with the ruling, the person who won the case applies to the enforcement division for enforcement of the ruling. If this is granted, the parties usually proceed with a conciliation of execution. If you take a look at judicial precedents in China, you’ll see this type of case is very common. In this case, they began conciliation of execution, but the negotiations broke down, leading the plaintiffs to request enforcement once again in 2013. The court granted their request, which involved the seizure of Y’s ship on April 19, 2014. This is not the sort of story in which the Communist Party of China deliberately orders the seizure of a ship for political ends. When the Communist Party intervenes, it would do the opposite from a certain political standpoint—try to keep the court from seizing assets. Such an action, however, would carry the risk of provoking opposition from the claimants.

What interested me about this case was (a) whether or not X2 and X3 had the standing to sue, (b) the statute of limitations issue, and (c) Y’s third counterargument as described earlier. Due to limitations of space, I will omit a detailed discussion of (a) and (b) and simply say that the court’s ruling was conclusively not illegal in the context of Chinese law. With that said, I’d like to discuss the third counterargument of the defendant.

Some Japanese reports say ships I and II were “requisitioned” by the military, but the defense used the word “captured” (or “seized”). The defendant argued that, from the standpoint of A, the Japanese navy’s “capture” of the ships was beyond its control. If this claim is accepted, it complicates matters. In that case, the plaintiffs would need to sue the Japanese government, not Mitsui O.S.K. Lines. In fact, they did file a lawsuit against the Japanese government in the Tokyo District Court in 1970, but it was dismissed by the court in 1974 due to the statute of limitations.

Let’s assume they had sued the Japanese government again, this time in a court in their own country. Since 1995, lawsuits filed in China by private citizens against Japan or Japanese companies have been determined to lie outside the disclaimer clause for the right to claim state reparations in the Japan-China Joint Communiqué. If the Communist Party of China gave the green light, then, the plaintiffs could file the lawsuit and might be able to win. However, even if they won the lawsuit, it would be impossible to enforce the ruling since the defendant was a country. Thus, from the plaintiff’s standpoint, one must use all possible means to ensure the defendant is a civilian. The fact that the defendant in this case was a shipping company also allowed the plaintiffs to seize assets (by way of reference, I would like to add that private Chinese citizens will not be able to file a lawsuit apart from this case in the future due to the statute of limitations).

The problem lies in the reasoning the Chinese court used to grant the plaintiffs’ claims for damages. Although it recognized the fact that the Japanese military “seized” (the actual Chinese word is “kòuliú” (扣留: “arrest”)) ships I and II, they maintained this was different from “capturing” (hokaku (捕獲) or daho (拿捕)) the ships. The word “capture” (hokaku (捕獲)), it reasoned, denotes that the rights to the ships were transferred to Japan, but a “capture” in this sense had not been proven, in addition to the fact that A continued using the ships after the incident. If these things were taken into account, the court concluded, the defense’s claim of indemnification could not be accepted. Japanese companies need to exercise caution, as this approach of putting the burden of proof on the defendant is sometimes taken by Chinese courts.

I imagine my Japanese readers are thinking that the Communist Party of China was behind this incident. It is true that the party interferes with trials in China. A good indicator of this is the unnatural trial schedule for this case. The plaintiffs filed the lawsuit in 1988, and it went to trial in 1991, but the case was suspended for several years; finally in 1995, there were two hearings on January 10 and May 15. After that, there was another year-long gap until the trial was resumed on May 20, 1996. Then, it was suspended again and finally resumed on November 25, 2003. Naturally, the Communist Party of China is thought to have had a hand in this unnatural schedule. This, however, does not mean that the party was trying to force the court to rule in favor of the lawsuit or seizure of the ship, but that it gave the green light to the court to go ahead with the lawsuit and seizure after stopping them. Thus, the party intervenes in many different ways.

Hikota Koguchi
Professor, Faculty of Law, Waseda University; Director, Organization for Asian Studies

Professor Koguchi became an assistant to the School of Law at Waseda University in 1971 and has served as a professor there since 1982. He was a visiting researcher in the East Asian Legal Studies program at Harvard Law School from 1981 to 1982.

Main areas of research: Chinese criminal and civil law (contract law, tort law, and property law)

Major publications: Introduction to Chinese Law [Chūgoku Hō Nyūmon] (coauthor; Sanseido, 1991), Chinese Business Law and Reality [Chūgoku Bijinesu no Hō to Jissai] (editor-in-chief; Nippon Hyoron Sha, 1994), Addenda and Corrigenda to the Remnants of Tang Statutes [Tōrei Shūi Ho] (co-author; University of Tokyo Press, 1997), Economic Development and Law in China [Chūgoku no Keizai Hatten to Hō] (author and editor; Waseda University Institute of Comparative Law, 1998), Justice and Law in Contemporary China [Gendai Chūgoku no Saiban to Hō] (sole author; Seibundoh, 2003), Contemporary Chinese Law [Gendai Chūgoku Hō] (co-author; Seibundoh, 2004 (2nd edition: 2012)). Journal article in English: “Some Observations about ‘Judicial Independence’ in Post-Mao China,” Boston College Third World Law Journal Vol. VII, No. 2, 1987.