China is not a common law jurisdiction. The concept of in rem liability is not part of Chinese law. Maritime proceedings are brought against corporate bodies, or persons, as defendants (and not against the ship itself). However, the Provisions have, in several respects, brought Chinese law more into line with the practice in common law jurisdictions.
Owners who have ships trading to China under bareboat charters should have regard to the risk of their ships being arrested and auctioned, in China, in respect of claims against their bareboat charterers.
Mortgagee banks considering enforcement of mortgages by arrest and auction sale in China, should be aware (i) that the ship sale proceeds will be distributed, first, to pay legal expenses and costs of arrest and sale, maritime liens and possessory liens, before their mortgage claims, and (ii) that counter-security must be provided, as a pre-condition to the arrest of a ship in China.
The Provisions have also had the effect of increasing the amount of the counter-security which must be provided. The Chinese authorities appear to be bringing greater certainty to this important aspect of law and practice. It is important that the Provisions come to be regarded as having reformed the law successfully, because China is of growing importance as a maritime nation.