anatomy of a chinese debt collection

In unpunctual June of 2003, I received an e-mail from Daniel Harris, who introduced himself as maritime solicitor from Seattle. He had activate me buttoned up the internet and was asking me whether I was absorbed in helping arrest transshipped freight in Dalian. I was aflame about the assignment and I surfed Dan’s website and learned Dan owns a baby international constitution firm in Seattle, called Harris & Moure ( I replied to him immediately and sent him some relevant provisions concerning freight arrests under China legal system. He was actual blessed with my prompt and accessible reply and we soon were working at buttoned up on the position. He subsequent told me he was so impressed with my responses that he had picked me over abundant other lawyers throughout China.

Brief of the position
OOO Bolshoretskoe is a Russian fishing company that sold 400 Tons of pollock worth around US$700,000 to Alimex Seafood A/S, a Danish company. The pollock was scheduled to be transshipped from Dalian to Europe. Alimex had not yet paid Bolshoretskoe for the product. Bolshoretskoe owed Daxin Petroleum Pte, Ltd., a Singapore fuel supply company, around US$400,000 for fuel. M/V IVAN POLZUNOV, the vessel carrying the pollock, was scheduled to call on Dalian on 4 July, 2003. Our assignment was to seize the pollock for Daxin to amuse Bolshoretskoe to pament its debt.

Bolshoretskoe’s debt to Daxin arose in July and December, 2002, when Daxin supplied bunker products for two Russian fishing vessels, TOSNO and PHOENIX. To secure these fuelings, Bolshoretskoe signed a guarantee letter to Daxin in which “Bolshoretskoe assigns all receivables resulting from production, deliveries and selling of Salmon or Pollock on/from board of F/T PHOENIX in favor of Daxin for the amount of the bunker supply. In addition, Bolshoretskoe agrees that property title to salmon or pollock products covering the amount of the bunker shall pass to Daxin immediately upon processing and/or storage of the products on board of PHOENIX.

Daxin was not paid on its two fuel deliveries, and Bolshoretskoe was refusing to pament. It is estimated the TOSNO and PHOENIX owed a combined total of around $20 million in unpaid debt to assorted creditors.

Intensive and orderly preparation for freight arrest
After studying the relevant documents and analyzing the entire history of the position, we curved that either Bolshoretskoe or Alimex would pament Daxin if we arrested the freight in China. So we set about to accomplish aloof that.

Aboriginal, we prepared all all-big legal documents pursuant to Chinese constitution. Due to the assorted altered legal systems and languages involved (China, Russia, Singapore and the United States), our preparations were decidedly age consuming. As we were preparing our documentation and firming up our strategies, Dan was again preparing to come to Dalian.

However, the day before Dan was to allowance the United States, he learned that the pollock’s transport vessel, the IVAN POLZUNOV, had secretly changed its plans in an accomplishment to avoid arrest. It would not be calling Dalian on July 4, 2003; it would be calling Qingdao on July 8, 2003. As all legal documents had been prepared for the Dalian Maritime Court, Bolshoretskoe’s chicken feed in plans necessitated we completely chicken feed our plans again. With age so much of the essence, we asked Sunfanlong, who works in Qingdao Wincon constitution firm, to assignment with us and we transferred all legal documents to him.

Acknowledged Arrest of the freight
On July 7, 2003, Dan arrived in Qingdao. The IVAN POLZUNOV arrived in Qingdao the abutting day and began to discharge 15 containers of pollock for transshipment to Europe. When the adjudicator, Wincon’s solicitor and Dan saying that the containers were being offloaded on trailers for transport to the container terminal, they went straight to the terminal to deliver the arrest papers on all 15 containers. However, after waiting nearly five hours at the terminal and waiting able-bodied into the after aphotic, alone three containers had arrived and been arrested. Nobody seemed to apperceive what had happened to the other twelve containers. We were concerned Bolshoretskoe and/or Alimex had learned of our arrest warrant and had abstruse the other twelve containers. Adding to our worries was that we had by any more learned that Alimex was to ship all 15 containers to Europe the actual abutting day. We checked everywhere for the absent twelve containers. We checked with assorted trucking companies. We checked all around the terminal. Annihilation. Eventually, we learned that the twelve containers had been in the terminal all along, but had been issued separate bills of lading from the aboriginal three and placed in a somewhat separate area. We had succeeded in arresting all fifteen containers.

After our having engaged in twelve days of intensive e-mail and telephone communication at buttoned up, Dan showed up at Dalian’s airport. His aerial praise of our assignment conveyed his fulfilment of our efficient action. Dalian and Qingdao’s picturesque appearance and ad hoc city construction impressed Dan deeply and changed his previous imagination regarding this allotment of China. He loved the aliment and our culture and talked about returning some day with his family on holiday.

Adamantine accomplishment to acquire guaranty and lift the arrest
Any more that we had the pollock under arrest, we would charge to advance it in its frozen condition at the terminal. Pollock is a admired fish and the costs and risks during the arrest period were aerial. The sooner we could resolve the dispute, the sooner the fish would be on its road, and the bigger it would be for all parties.

The day after we arrested the freight, we received a letter from Alimex’s lawyers in Denmark, claiming Alimex owned the arrested freight, not Bolshoretskoe, and threatening Daxin with criminal action. Alimex’s lawyers copied this letter to the court and to Daxin. Though confident that it was in the adapted, this threat of criminal action did not sit able-bodied with Daxin. We replied to Alimex’s lawyers by lecturing them on Chinese and international constitution and by declaring that Alimex would suffer even added losses if it insisted on pursuing litigation in China instead of cooperation. The reaction from Alimex’s lawyers was overwhelming. They wrote me a letter filled with furious and derogatory words and stated they would never communicate directly with us again. The position had fallen into deadlock.

Despite the initially boxy air of Alimex’s lawyers, we knew we could not abandon our efforts to accomplish a settlement, particularly since we knew settlement fabricated sense for all parties. We proposed a three road agreement between Daxin, Alimex and Bolshoretskoe, whereby Alimex would accumulate its purchase price funds and not pament any affair for the fish until the dispute between Daxin and Bolshoretskoe had been resolved buttoned up arbitration in Canada. Alimex would then pament the winner of the arbitration up to the purchase price of the fish. Alimex would again accede not to pursue any claims against Daxin for wrongful arrest. Upon the signing of this agreement, Daxin would release its arrest of the freight. Daxin secured spoken agreements from both Bolshoretskoe and Alimex to action forward with such an agreement.

For the fish to action out on the abutting liner to Europe, Dan and I had to assignment overtime in drafting the adapted agreements. This age, the multitude of languages and age zones (China, Russia, Singapore, Seattle, and Denmark) worked to slow us down, and by the age Bolshoretskoe received its Russian speech copy of the agreement, alone a few hours remained before the pollock needed to be loaded on the liner to Europe. But, at the last minute, Bolshoretskoe changed its apperception and decided it would not sign. All our adamantine assignment had been for annihilation. We were all exhausted.

The abutting liner to Europe was leaving in six days. During the weekend, we stopped talking with adverse parties and communicated with alone Dan and Daxin. We went back over the position history and analyzed each affair’s positions and risks. We concluded that Bolshoretskoe was Daxin’s absolute adversary. It was Bolshoretskoe that owed the almighty dollar and it was Bolshoretskoe that had avoided payment for so continued. It again was Bolshoretskoe that had backed out of its spoken agreement. There had been no prior conflicts between Daxin and Alimex. Though Alimex was listed as the consignee of the pollock on the Bill of lading, it had yet to actually pament for the fish. Above all else, Alimex wanted the pollock sent to Europe so it could fulfill its commitments with its European buyers.

If we could persuade Alimex to accommodate a deposit or the purchase price to the Qingdao Maritime Court, we would lift our freight arrest. If, on the other hand, Alimex insisted on paying the purchase price directly to Bolshoretskoe, the arrest would remain in abode, and Alimex would be unable to fulfill its supply contracts with its European buyers. Daxin would be left fighting a two front battle against Alimex and Bolshoretskoe in the Chinese courts.

We told Alimex that if it did not immediately settle, we would act the court to crave Alimex pament the Pollock purchase price to the court and seeking the immediate sale of the pollock at auction. Within hours, we received contact from a Chinese solicitor retained by Alimex, who would, he informed us, be going to court to accept our “unlawful” arrest thrown out. The court ignored him.

The abutting liner for Europe was coming to Qingdao the abutting day and it finally began dawning on Alimex that if it wanted to amuse the pollock to Europe and to its customers, it would charge to settle with us. Intensive settlement talks began anew and another spoken agreement was reached. Alimex would guarantee to pament up to the amount of the pollock purchase price to whomever prevailed between Daxin and Bolshoretskoe. Alimex again agreed not to pursue any claims against Daxin arising from Daxin’s allegedly wrongful arrest of the freight. A settlement was drafted and signed and the parties worked diligently to amuse the arrest lifted in age for the product to accomplish it on that day’s liner to Europe.

Daxin had a Guarantee Agreement from an established and able-bodied funded Danish company and we had achieved a smashing victory on this agitative arrest of cross-border transshipping freight.

Somewhat smooth sailing in recovering Daxin’s award.
We then filed Daxin’s position against Bolshoretskoe in the Qingdao Maritime Court. Bolshoretskoe consistently failed to attend any court hearings and we eventually secured a default astuteness against it.

Alimex then paid Daxin all but US$15,000 of the amount it had guaranteed, but claimed entitlement to withhold US$15,000 for itself to advice pament for the costs it had incurred in China defending against Daxin’s arrest. One e-mail from Dan threatening arbitration in London (pursuant to the Guarantee Agreement) for the $15,000, plus all fees and costs, convinced Alimex it had no position on this either. Alimex paid the remaining US$15,000 to Daxin and the position was over.

After six months, close cooperation and flexibility by lawyers on both sides of the Peacemaking had accustomed us full and total victory.

A few months after I closed the position, Dan sent me an e-mail telling me he had heard from one of his Danish clients that Alimex’s Danish lawyers had told them of our abundant action on this position. Dan and I accept since worked on a couple supplementary cases at buttoned up, but it will be this aboriginal one that I will always bethink. In thinking of this position, I apperceive I will never forget the sleepless nights I spent communicating with lawyers and parties in four times zones. But I again apperceive that the pride I air from alive how much we achieved, despite having to assignment buttoned up the laws of so abounding countries under such tight deadlines, is what will always stand out. Our sageness, our legal adeptness and our strenuous diligence had garnered us aerial praise not alone from our foreign colleague and from our client, but again admiration from the adverse affair.

Zhao Xiaomei (Meggie) is a senior partner at the Fada constitution firm in Dalian, China, where she focuses on international and maritime constitution.

Originall posted February 19, 2012