Zhao Liang,is a PhD candidate in the Faculty of Law at the University of Hong Kong. Mr. Zhao studied maritime law in Dalian Maritime University from 1998 to 2002. He continued his postgraduate study in the University of Southampton and obtained LLM degree in Maritime Law in 2004. After graduation in UK, he came back and practiced in maritime law and commercial law in C&M Law Firm in Beijing. During his practice and research, Mr. Zhao has published and presented several papers on academic and professional journals and conferences.

The Implementation of the Right of Control in China
-- with Reflection on the Rotterdam Rules

Introduction
The United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea, namely “The Rotterdam Rules”, was adopted by the UN General Assembly on 11 December 2008. The opening for signature of the Convention commenced on 23 September 2009 in Rotterdam, the Netherlands.  The Rules contain many innovative features which have not been addressed before, including the electronic transport records, delivery of goods, right of controlling party, namely the right of control of goods and etc. This article is to examine whether the concept of the right of control works well in China  and, furthermore, review whether the right of control is an appropriate approach in the Rotterdam Rules.

1. China’s existing legislation on the right of control
1.1 Maritime Code and Contract Law   In mainland China, the statute law governing the carriage of goods by sea is primarily the Maritime Code 1993. The Contract Law 1999 also contains a special chapter for the contract of transportation including the carriage of goods and passengers. As to the application of the laws, the Contract Law provides that if there are provisions as otherwise stipulated in respect of contracts in other laws, such provisions shall be followed.  It means that the Maritime Code has the priority and shall prevail as a special law for the contract of carriage of goods by sea.
1.2 The Right of Control   Article 308 of the Contract Law 1999 provides a right of control for general contract of carriage of goods. It states that before the delivery of goods to the consignee by the carrier, the shipper may request the carrier to stop the goods in transit, return the goods, change the place of destination or deliver the goods to another consignee, but shall indemnify the carrier the loss thus caused. This article itself does not concern the issue of the bills of lading in shipping practice. It is well understood that when a bill of lading is issued and negotiated to a third party, the carrier is bound to follow the practice of bills of lading by delivering the goods to the lawful holder of the bill. If the shipper instructs the carrier not to deliver the goods to the lawful holder of the bill, the carrier may be liable to the holder of the bill for the damages caused by compliance with the shipper’s instructions. The carrier, after compensating the loss suffered by the holder of the bill, may then recover his loss against the shipper in accordance with the provision of the right of control.

2. China’s Judicial Practice
Case 1: Zhongda Textiles Co., Ltd. v “K” Line (China) Ltd.
2.1 The key facts   On 2nd February 2002, the carrier “K” Line (China) Ltd. (“K” Line) issued a set of straight bills of lading to the shipper Zhongda Textiles Co., Ltd. (Zhongda) for the carriage of goods from Shanghai to Jakarta. Due to the consignee’s non-payment, on 2nd April Zhongda instructed “K” Line to return the goods back to Shanghai. “K” Line did not follow this instruction. On 13th August, “K” Line notified Zhongda that the goods were under the control of the Indonesian police. Zhongda commenced proceedings in the Shanghai Maritime Court and claimed damages from “K” Line.
2.2 Judgements of first instance and final instance   It was held in the first instance that there was no evidence to prove the damage to or the loss of the goods and the plaintiff thus failed in his claim. Zhongda appealed to the Shanghai Higher Court asserting that the Contract Law 1999 shall apply to this case. Accordingly, Zhongda was entitled to request the return of the goods, and “K” Line was liable for the total loss of the goods since he failed to follow the shipper’s request to ship back the goods to Shanghai. In the final instance, it was held that according to the Maritime Code 1993, Zhongda as the shipper was not entitled to modify the contract of carriage unilaterally in the circumstance where the goods had already arrived at the port of destination. In fact, Zhongda and “K” Line had never entered into any agreement regarding the return of the goods. Therefore, Zhongda was not entitled to request the return of the goods, and the appeal was dismissed.
2.3 Non-application of the right of control   The court understood that Zhongda’s request for the return of goods was in substance a modification of the contract of carriage, and such a request must be agreed upon by the carrier. As to Article 308 in the Contract Law 1999, the Higher Court denied its application and held that the Maritime Code 1993 was the applicable law in this case. First of all the provisions regarding the carriage of goods in the Contract Law 1999 are the regulations for all kinds of transportation, whereas the Maritime Code deals specifically with carriage of goods by sea. Obviously the Maritime Code is a special law comparing with the Contract Law which is a general law for carriage of goods. Furthermore, in the Contract Law, there are no special conditions for the shipper’s right to modify the contract of carriage of goods by sea. It indicated that such right cannot be applied in the carriage of goods by sea. By contrast, the Maritime Code, as the special law for the carriage by sea, provides specific provisions for the carriage of goods by sea, for instance, Article 89 of the Code provides that the shipper is entitled to rescind the contract of carriage before the commencement of the ship’s voyage from the loading port. According to the principle of the priority of the application of special law, the Higher Court held that the Maritime Code should apply to this case. The Maritime Code does not confer any right on the shipper to unilaterally modify the contract after the arrival of the goods at the port of destination. And “K” Line has never agreed with the request of modification to the contract, namely the return of the goods. Therefore, Zhongda has no right to order the return of the goods back to the loading port or claim the loss of the goods due to the non return of them.
2.4 Review of the case   This case shows the cautious attitude of judges for the application of the right of control in the carriage of goods by sea. In fact, the provisions in the Contract Law cannot be cited simply for the circumstances in the Maritime Code. For example, there is no definition of the shipper in the Contract Law. It may be understood generally that the shipper is the party who enters into the contract of carriage of goods with the carrier. However, there are two kinds of person who may become the shipper in the Maritime Code. One is the person by whom or in whose name or on whose behalf a contract of carriage of goods by sea has been concluded with the carrier, and another is the person by whom or in whose name or on whose behalf the goods have been delivered to the carrier involved in the contract of the carriage of goods by sea.  Furthermore, the Maritime Code provides the definitions of both the carrier and the actual carrier.  It is doubtful whether the carrier involved in the right of control in the Contract Law refers to the contractual carrier or both of the carriers in the Maritime Code for the contract of the carriage of goods by sea. Last but not least, the Contract Law does not address the function of the negotiable bill of lading as a document of title, which is an important issue in the carriage of goods by sea. All these obstacles may hinder the application of the right of control in the judicial practice in mainland China.
Case 2: Mingxing Co., Ltd. v Wanhai Shipping Co., Ltd.
2.5 The key facts   On 26th September 2003, the carrier Wanhai Shipping Co., Ltd. (Wanhai) carried the goods from Shanghai to Bangkok, and issued a set of order bills of lading to the shipper Mingxing Co., Ltd. (Mingxing).  The goods arrived at the port of discharge in Bangkok on 7th October but were detained by the local customs due to the lack of bills of lading, the unsettled customs declaration and the uncleared customs duty. Mingxing still hold the full set of the bills of lading when the goods arrived Bangkok. Respectively on 28th November and 31st December, Mingxing requested Wanhai to return the goods back to Shanghai. In the end, the goods were sold by auction on 10th June 2004 in Bangkok. Mingxing claimed that according to Article 308 of the Contract Law 1999, he was entitled to request the carrier to return the goods and the carrier was obliged to follow his instruction. Mingxing suffered the loss of the goods and thereby begun proceedings against Wanhai in the Shanghai Maritime Court.

2.6 The judgement on the issue   The court construed the phrase “may request” in Article 308 to mean that the shipper under the contract of carriage only had a right to raise the request, but whether such request would be ultimately followed by the carrier would depend on the carrier’s decision. The court compared this phrase with Article 91 of the Maritime Code  under which the carrier, under certain circumstances, is unilaterally “entitled to”  discharge the goods at a different place of destination. The court pointed out that the phrases “be entitled to” in the Maritime Code and “may request” in the Contract Law indicate clearly the difference between the unilateral right and mutual consent. The court understood that the Contract Law was a general law for all kinds of carriage of goods. Accordingly, it covered every mode of transportation and thus did not contain strict and specific provisions like those found in the Maritime Code. Therefore, it was held that the carrier was not legally obliged to comply with shipper’s request by returning the goods under Article 308 in the Contract Law 1999.
2.7 Comments on the case   Although the shipper’s right to request the carrier to return the goods is not within the extent of the right of control in the Rotterdam Rules, such right has the same legal essence with the other rights under the right of control in the Contract Law 1999. Therefore, it is important to review the implications of this case for the study of the right of control. Since there is no official interpretation of Article 308 from the National Congress, judges therefore have the liberty to interpret this article for various judicial purposes in different contexts. On the other hand, the interpretation of the difference between the phrases “may request” and “be entitled to” indicates that the right of control in the Contract Law is not a unilateral legal obligation imposed on the carrier, but a right to issue an offer pending the carrier’s acceptance. The request under the right of control can take effect only if the carrier is agreeable to follow the shipper’s request. Furthermore, like the right of control in the Rotterdam Rules, which may be varied by the agreement of parties, Article 308 of the Contract Law may lose its mandatory application if it just provides an operational guide for reference by shippers and carriers in the practice of sea carriage.
Case 3: Heilongjiang Export and Import Co., Ltd. v Brilliant Logistics Group Inc. and others
2.8 The key facts   Heilongjiang Export and Import Co., Ltd. (Heilongjiang Company) contracted with Brilliant Logistics Group Inc. (Brilliant) for the carriage of goods to Baltimore on 9th October 1999. On 18th October Brilliant issued a set of order bills of lading. On 29th November, Heilongjiang Company instructed Brilliant not to deliver the goods without the full set of the bills of lading, or without his express consent in writing. Brilliant accepted such instruction. On 16th December, Heilongjiang Company instructed that the goods were to be carried to Los Angeles. On 11th January 2000, Heilongjiang Company was notified that the goods had been delivered against the surrender of two originals of the bills of lading, which was against the Heilongjiang Company’s express instructions not to surrender the goods without the full set of the original bills of lading. In the Guangzhou Maritime Court, Heilongjiang Company claimed against Brilliant for damages for the loss of the cargo. Brilliant alleged that the bills of lading in question were order bills, and Heilongjiang Company was neither the order person on the bills nor the consignee of the goods. Although Heilongjiang Company held one of the original bills of lading, the bills of lading stated on their face that once one original bill of lading had been surrendered in exchange of the goods, all other bills of lading would become void. Therefore, when the consignee surrendered two of the original bills, Brilliant was obliged to deliver the goods to the consignee and the remaining one held by Heilongjiang Company became void. Brilliant was thus not liable to Heilongjiang Company under the contract evidenced by the bills of lading. Although Heilongjiang Company instructed Brilliant to change the place of destination because it had a dispute with the buyer (i.e. consignee holding the two of the original bills) in a sale contract, Heilongjiang Company was not entitled to impose an extra obligation on Brilliant beyond the original contract of carriage.
2.9 The judgements of first instance and final instance   The court of the first instance held that the bill of lading was the document against which the carrier promised to deliver the goods. Brilliant’s delivery of the goods against the surrender of two of the original bills of lading was not illegal. Therefore, after the delivery of the goods, the remaining bill of lading held by Heilongjiang Company became void, and therefore Heilongjiang Company’s claim was rejected. Heilongjiang Company appealed, asserting that according to Article 308 of the Contract Law, it was entitled to require Brilliant to follow its instruction, and Brilliant was liable when it failed to do so. In the second instance, Guangdong Higher Court held that Brilliant legally delivered the goods against the surrender of the bills of lading and thus was not liable to Heilongjiang Company. As to Article 308 of the Contract Law which confers the right on the shipper to dispose of the goods before the delivery of them to the consignee, the higher court construed that the consignee in this Article meant the consignee nominated in the bill of lading, namely the consignee in the straight bill of lading. Other consignees as ordered or as the holder of the order or bearer bills of lading were not the consignee referred to in Article 308. In other words, Article 308 applied only to the dispute concerning the straight bill of lading. In this case, the order bills of lading were issued.  Therefore, Heilongjiang Company was not entitled to give instructions to modify the contract of carriage. It was held that the practice of bills of lading must be respected for the protection of bona fides third party and the appeal was accordingly dismissed.
2.10 Review of the case   This case indicates that even though Article 308 in the Contract Law is considered, it is not unconditionally applied in carriage of goods by sea. The courts recognised the shipper’s right under Article 308, but pointed out that the Contract Law kept silent about the conditions for the execution of the right.  The courts understand that the shipper is not absolutely entitled to such right in any circumstance; and its request for modification of the contract must be restricted in certain sea carriage contracts. When negotiable bills of lading are issued, once such bills are negotiated from the shipper to another person, the shipper loses the rights under the bills and accordingly is not entitled to the right under Article 308. Therefore, the shipper is not entitled to instruct the carrier to stop the goods in transit, return the goods, change the place of destination or change the consignee if the shipper is no longer holding the full set of bills of lading.  The judiciary’s opinions reflect that the right of control in the carriage of goods by sea is only applicable in limited circumstances only.

3. Right of Control in the Rotterdam Rules
3.1 Extent of the right of control   In the Rotterdam Rules, the right of control means a right of the controlling party to give or modify instructions in respect of goods that do not constitute a variation of a contract of carriage, obtain delivery of the goods before their arrival at the place of destination and replace the consignee by any other person including the controlling party itself. The period of exercising such right is the same to that of responsibility of the carrier.
3.2 The controlling party   The right of control can be transferred and, therefore, the controlling party could be the shipper, consignee, holder of bills of lading or any other person depending on whether a transport document is issued or what kind of transport document is issued.  Provided that the instructions under the right of control can reasonably be executed without interference with the normal operations of the carrier, the carrier shall execute the instructions. However, in any event, the controlling party shall reimburse the carrier for any reasonable additional expense and indemnify the carrier against the loss or damaged thus caused. Furthermore, the carrier is entitled to a security from the controlling party for the amount of expected additional expense, loss or damage and, he may refuse to execute the instructions if such security is not provided.  Besides the right of control, the controlling party is also the only person that may agree with the carrier to variations to the contract of carriage.  On the other hand, as an obligation, the controlling party, on request of the carrier, shall provide relevant information, instructions or documents relating to the goods that the carrier may reasonably need for the performance of the contract of carriage.
3.3 Execution and liability   If the instructions cannot be reasonably executed, the carrier can refuse to follow them and deliver the goods in accordance with the contract of carriage. Conversely, if the instructions can be reasonably executed, the carrier shall execute the instructions and the delivery of goods pursuant to the instructions is deemed to be the delivery at the place of destination. Otherwise the carrier shall be liable for loss of or damage to the goods or for delay in delivery subject to the liability regime in the Rotterdam Rules.
3.4 Requirement and variations   Except the right to give or modify instructions in respect of goods, the instructions of variation under the right of control are required to be stated in a transport document or incorporated in electronic transport record, whereas a non-negotiable transport document that does not require its surrender for delivery of goods or an electronic record thereof expresses such statement or incorporation only upon the request of the controlling party.  However, even if there is such requirement of the statement or incorporation in a transport document or electronic record if any, the parties to the contract of carriage are free to vary the effect of such right of variation, the period of validity of such right, the execution of the right and the transferability of the right where no negotiable transport document or electronic record thereof, or non-negotiable transport document that requires surrender has been issued.
3.5 Review of the right of control   The right of control in the Rotterdam Rules, in legal sense, is a right to change the agreed delivery of goods. It is not a new right in law, but a commercial need that shippers may have in practice. Such right is not under a contract of carriage, but a modification of a contract of carriage. And the execution of such right is not based on the mutual consent but on the unilateral right which does not need the consent of the carrier. However, it is not a mandatory right because it can be varied by parties. It thereby makes the right of control a complicated operating guide for changing the agreed delivery of goods. This obviously is not the task of an international legislation. On the other hand, although such right exists in some non-sea carriage conventions, it must be admitted that the non-sea transport documents, such as airway bills, are not documents of title like the bills of lading. Therefore, the simple transplanting of such right in the carriage of goods including the sea segment is a rough and unrealistic risk.
3.6 Impact of potential application   Although the concept of right of control in China Contract Law 1999 troubled settlement of some maritime cases, Chinese judicial practice maintained the recognition of the practice of bill of lading and proved the difficulty of the application of such right for the carriage of goods by sea in China. Provided that the Rotterdam Rules apply in China in future, the right of control in the Rules may change the status quo in China and even make a mess of the tradition of the carriage of goods by sea. Assuming the right of control in the Rules apply to those three cases above, such right will apply to case 1 because the Rules are for the carriage wholly or partly by sea, and the shipper’s request becomes shipper’s right which no longer needs the carrier’s consent in case 2. Even though the right of control may apply to the straight bill of lading in case 3, the carrier may still refuse to return the goods if he believes that such return is unreasonable. The standard of reasonableness can only increase the uncertainty of judicial practice, to say nothing of the variations of the right of control which provide the carrier with a liberty to exclude the application of such right.

4. Reflection on the Rotterdam Rules
4.1 Criticism on the right of control   Mr. Zhu Zengjie expressed reservation towards the Rotterdam Rules and thought that the chapter of the right of control is unnecessary, and a few articles supplementary to the shipper and the shipping documents are enough.  Mr. Anthony Diamond QC explained that stoppage in transitu is a peculiar right that is little understood in practice, and differs among countries. He warned seriously that the new convention was approaching a very obscure area of law.  He even suggested that the chapter of the right of control should be deleted from the Rotterdam Rules.  The Maritime Law Association of the United States stated that there is no basis for having the contracts of sale and carriage tied together. The Association pointed out that the carrier should not have to keep track of the sale contract. It was felt that the problem may not be so bad in the straight bill of lading context, but when the bill of lading is negotiable there may be unknown third parties who have rights in the goods subjecting the carrier to unreasonable commercial risks if the shipper gives instructions.  European Shippers’ Council believed that the new Rules could put some shippers in a worse position than that of the pre-1924 liability environment. For example, the controlling shipper must reimburse the carrier for any reasonable additional expense incurred and indemnify it without limitation against loss suffered in execution of the instructions. Therefore, the Council proposed that EU member states refuse to sign up to the Rotterdam Rules until or unless adequate protection has been given to shippers and accepted by shippers’ representatives.
4.2 UCC: appropriate law reference   From the perspective of shipping practice, if modification of delivery of goods is necessary, it is not urgent to confer on the shipper a right to modify the delivery; it is important to clarify  from whom the carrier may follow instructions for the delivery of goods. Uniform commercial Code (UCC)  provides a solution for this point in Section 7-303 as follows:
“(a) Unless the bill of lading otherwise provides, a carrier may deliver the goods to a person or destination other than that stated in the bill or may otherwise dispose of the goods, without liability for misdelivery,  on instructions from:
(1) the holder of a negotiable bill;
(2) the consignor on a nonnegotiable bill even if the consignee has given contrary instructions;
(3) the consignee on a nonnegotiable bill in the absence of contrary instructions from the consignor, if the goods have arrived at the billed destination or if the consignee is in possession of the tangible bill or in control of the electronic bill; or
(4) the consignee on a nonnegotiable bill, if the consignee is entitled as against the consignor to dispose of the goods.
(b) Unless instructions described in subsection (a) are included in a negotiable bill of lading, a person to which the bill is duly negotiated may hold the bailee according to the original terms.”

Conclusion
The rescript of Emperor Antoninus of ancient Greek ran: “Let it be judged by the Rhodian Law which deals with nautical matters, so far as that is not directly contrary to our own law. For I am lord of the whole world, but the law is lord of the sea.” This is considered as an early recognition of the difficulties encountered even by the most powerful nations in seeking to regulate the international transaction of shipping merchants exclusively by their own laws.  China’s current judicial practice proves how unacceptable it is to introduce the right of control in the carriage of goods by sea. Given the concept of the right of control is necessary in law, Section 7-303 of UCC may be acceptable provisions for consideration of international legislation. It has been suggested that in order to create a contemporary and uniform law and provide for modern door-to-door transport including an international sea carriage (as the Rotterdam Rules aim to), adopting a new multimodal convention along the lines of the UN Convention on International Multimodal Transport of Goods may be better than the Rotterdam Rules themselves.  Without doubt, the debate and discussion about the Rotterdam Rules will continue in the future.