Is it Time for Taiwan to Modernise its Commercial Maritime Laws?

Written by Jason Chuah.

Image credit: 高雄港 拖船 by earl258/Flickr, license CC BY-NC 2.0

Taiwan, with her economic strength in shipping, could perhaps be likened to a first-class marathon athlete running in the Olympics with flipflops unless it modernises its commercial maritime law.

UNCTAD reports in its 2019 Shipping Outlook Report that Taiwan ranks 11 in terms of “ownership of world fleet ranked by dead-weight tonnage.” This is one place above the UK and only two places below the US. In terms of monetary value, it is ranked number seven in the world for ownership of bulk carriers (excluding oil tankers) and in the top 20 ship owning countries by value. Yang Ming and Evergreen are in the top 20 of terminal operators in the global league table. Excluding ports in the PRC, Kaohsiung in Taiwan is in the top 3 East Asian ports based on the 2019 data. Another significant maritime activity is shipbuilding, which has been promoted and supported by governments of different complexions since the 1970s. This is following the establishment of the China Shipbuilding Corporation (CSBC). There is no doubt that shipping is crucial to the Taiwanese economy. It is probably trite to state how important the sea is to the socio-cultural life of the Taiwanese people.

Indeed, in 2019, the Legislative Yuan passed the Ocean Basic Act (海洋基本法), which – alongside the Ocean Affairs Council’s White Paper – sought to promote a more proactive approach to the island’s commitments to a sustainable marine and maritime sector. It was also to facilitate a more robust profile in the international arena. Reference is also made in the White Paper to economic, taxation and human resource support. Moreover, the Ministry of Transport and Communications is currently reviewing reform proposals.

All this augurs well an improved direction of travel for the Taiwanese maritime economy, if not indeed, the general domestic economy.

It is in this context that it is worthwhile for lawmakers to revisit the Maritime Act, which was last amended in 2009 but continues to carry shipping law norms dating back to the 1920s. Despite the international political situation making it difficult for Taiwan to sign up to international maritime conventions — including the regulations enacted by the International Maritime Organisation — there is, by and large, deliberate alignment of Taiwanese law with those international regulations.

That said, there remain significant challenges applying the current Maritime Act to today’s highly technology-driven and globalised world of shipping. Thus, better clarity about the frame and roadmap for the new law would be welcome. Notwithstanding the proposals already submitted to the government on legal change, there are suggestions that there are several key elements which might be relevant (given the internationalist spirit of the current policy) to the overhaul of the maritime legal architecture.

First, one should recall that the Maritime Act mirrors to an appreciable extent the Hague Visby Rules of 1924. These are international rules made a time prior to containerisation, integrated shipping supply networks, computerised technology and environmentalism. In England these old rules continue to apply. However, being an old common law country, England has the advantage of numerous judicial decisions having been made, over a long course of time, relating to those rules. Those judicial precedents provide thus a reliable jurisprudence built on those rules. Taiwan, as a civil law jurisdiction, does not enjoy this system of judicial precedent building and must, therefore, seize the opportunity to reform the law accordingly.

Secondly, Taiwan has become a highly respected “port state” in the sense of its voluntary assumption of IMO sanctioned measures for ensuring maritime safety, security and environmental protection. It is reasoned that that external outlook should continue, and the Maritime Act should be reviewed to support better those measures ordained by the IMO and other international agencies. That said, it is suggested that not being within the IMO umbrella of nations does allow Taiwan to take stock of some of the more controversial measures introduced by the IMO (and other international bodies) and decide, for itself, whether they are worth complete adherence. At the same time, where vital interests need protecting, Taiwan does not need to wait for the grinding international law-making machinery of the IMO to bring about change. It could make provision as it deems fit. One area where prompt legislative movement might be useful is arguably in regulating and facilitating shipping technologies, such as blockchains, autonomous shipping, drones at sea etc.

Thirdly, given the importance of shipbuilding and ship ownership in Taiwan, it would be useful to improve the law dealing with ship mortgages, security interests and enforcement of those interests. With the growing need to introduce green shipping finance to the sector and for Taiwanese and international investors, along with shipping companies to grow green shipping finance, providing clarity on how security interests and remedies based on the ship as collateral is critical.

Fourthly, Taiwan, if it is to have a global role in shipping, it needs to demonstrate a preparedness to recognise foreign jurisdiction and foreign law clauses in shipping contracts. Prevailing industry expectations are for a court to give effect to an agreement to sue or be sued in the court of the parties’ choice. A refusal to recognise such an agreement by relying on some technical objections — such as a clause nominating a foreign court not being found on the front of the relevant shipping document, or that the holder of the relevant shipping document is not one of the initial contracting parties etc.—flies in the face of international norms. Thus, a sluggishness on the part of Taiwan to give recognition to the kind of principles of international allocation of jurisdiction as contained in the Hague Choice of Court Convention 2005 would be a retrogressive step. By the same token, Taiwanese law’s espousal of choice of foreign law clauses in the shipping contract must be unambiguous.

Fifthly, the success of commercial maritime law depends on the effectiveness of the legal remedies available to the litigants Clarification on the law on arresting ships would be helpful. Other areas worth reviewing include the law relating to withholding goods as security for payment, and the law dealing with compensation for late or non-payment of freight and other debts. A particular vexed subject is to what extshippingent ships, belonging to different entities in the same corporate group, could (and should) be arrested. The law should not allow corporate groups to use smoke and mirrors to shield themselves from liability.

Space does not permit further comment on other areas of commercial maritime law which could benefit from reform. Perhaps it might be apposite to close with a note about education and training in anticipation of the development of a thoroughly modernised system of maritime law in Taiwan. Whilst it is a truism to say that some civil law countries – such as Germany and the Netherlands – have produced impressive tomes of maritime law knowledge, global shipping (for all sorts of reasons ) has hitherto been influenced by the English common law. Hence, active encouragement of better interaction between homegrown maritime law professionals, academics and students with their counterparts in traditional common law jurisdictions, notably England, Singapore and Hong Kong, would not be misplaced.

Jason Chuah is Associate Dean and Professor of Commercial and Maritime Law at City, University of London. His recent book “Research Handbook on Maritime Law” (published by Edward Elgar) was nominated the Best New Commercial Law Books 2020 by BookAuthority.

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