Lex Causae
129 The Chou Shan also contends that this Court would have to apply Chinese law because the lex causae is the law of the place of the wrong, namely, China's EEZ. That applies even for special rules applicable to maritime torts. In all cases except where the tort occurs on the high seas, the lex causae is the law of the littoral state that asserts jurisdiction and rights over the waters: MacKinnon v The Iberia Shipping Company Limited (1955) SC 20 and Union Shipping New Zealand Ltd v Morgan (2002) 54 NSWLR 690.
130 The Chou Shan stresses that the EEZ of a country is not the high seas. To suggest otherwise would be to ignore the developments in international and domestic law since UNCLOS entered into force. Where the collision and damage occurs in China's EEZ, Chinese law will be the lex causae: Lord Collins of Mapesbury, Briggs A, Dickson A, Harris J, Dicey, Morris & Collins on the Conflict of Laws (Sweet & Maxwell Ltd, 2012, 15th ed, vol 2, pp 2215-2216). Chinese law regulates navigation in China's EEZ, liability for pollution in China's EEZ and the protection of fisheries and the marine environment in China's EEZ. The collision and the resultant pollution and damage are intimately connected with China's regulation of the EEZ and therefore, the Chou Shan argues, the collision is governed by Chinese law.
131 The Chou Shan says the proposition can be tested by asking whether or not Australian law would govern a claim had a collision occurred in Australia's EEZ. It is clear, the Chou Shan argues, that Australia does regulate its own EEZ. The Commonwealth regulates Australia's EEZ by virtue of the Seas and Submerged Land Act 1973 (Cth): see ss 10A-10C. In particular, s 139 - s 140 of the Navigation Act 2012 (Cth) (Navigation Act) will be contravened if a vessel is operated in a manner that causes pollution or damage to the marine environment in Australia's EEZ. Australia also asserts jurisdiction over the navigation of foreign vessels within Australia's EEZ pursuant to s 175 and s 176 of the Navigation Act.
132 The Chou Shan argues that the control by China over its own EEZ in the same way that Australia controls its EEZ renders irrelevant and inapplicable the question posed by the plurality in Blunden v The Commonwealth of Australia (2003) 218 CLR 330 (at [23]) per Gleeson CJ, Gummow, Hayne and Heyden JJ, namely:
Where, as in this case, the relevant events giving rise to a "maritime tort" occurred on the high seas, one asks, what body of law other than that in force in the forum has any better claim to be regarded by the forum as the body of law dispositive of the action litigated in the forum?
133 The Chou Shan contends that Chinese law has the best claim to be regarded as the law governing the collision. The extent of liability, if any, of the Chou Shan to the plaintiffs for the collision and vice versa will be governed and limited by Chinese law. Once this is so, it attracts Chinese defences. Chinese law caps or limits the claims that may be made against both the CCF and the Chou Shan in the manner explained by Mr Chen. According to Australian law, those limits are substantive and, thus, governed by Chinese law. As noted by Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ in John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503 (at [100]), '[A]ll questions about the kinds of damage, or amount of damages that may be recovered, would likewise be treated as substantive issues governed by the lex loci delicti'.
134 It follows, the Chou Shan argues, that it is entitled to limit liability to the CCF interests, if any, under the provisions of Ch 11 of the Maritime Code. It submits that any juridical advantage perceived by the plaintiffs in bringing this proceeding in order to access the higher limit of liability under Australian law is illusory.
135 As observed by Callinan J in Regie Nationale des Usines Renault SA v Zhang (2002) 210 CLR 491 (at 563):
No doubt, courts in Australia can and do regularly apply foreign law, but it would be vain to claim that they can, or would do it with the same familiarity and certainty as the courts of the jurisdiction in which it was created.
136 Foreign law must be proven as a matter of fact and it must be applied by a judge who does not have a day to day familiarity with its workings. Here, those matters are further complicated by the need to translate the laws into English and the further fact that courts in China will clearly hear and determine the same questions. This also means a prospect of conflicting judgments. There is no dispute that the system of law that is to be applied by the Australian court in disposing of a claim made in a proceeding before it is a relevant factor for determining whether the Australian court is a 'clearly inappropriate forum' for the determination of that claim. What is in dispute between the parties, however, is the contention by the Chou Shan that this Court would have to apply Chinese law in the determination of the claim.
137 The law governing liability is not without its complexity. Shortly put, the submission for the Chou Shan is that as the accident occurred in China's EEZ where there is control by the littoral state of many aspects of the maritime legalities and as the accident did not occur on the high seas, it is clear Chinese law applies.
138 In contrast, the plaintiffs are emphatic that the lex causae of the collision is not Chinese law. The collision did not occur in China and is not subject to Chinese law simply because it occurred within the waters of China's EEZ.
139 In this regard, the plaintiffs contend that although Art 56(1)(a) UNCLOS, entitled 'Rights, Jurisdiction and Duties of the Coastal State in the Exclusive Economic Zone', confers 'sovereign rights' on the coastal state in the EEZ for the purpose of exploring and exploiting the natural resources of the water column, seabed and subsoil of the EEZ, it does not confer full sovereignty. Rather, it is a set of rights specifically relating to exploration, exploitation, conservation and management of the natural resources within the EEZ: in this regard note the discussion by Finn J in Akiba v Queensland (No 3) (2010) 204 FCR 1 (at [729]-[730]).
140 In my view, the EEZ is neither part of the territorial sea nor part of the high seas. Rather, it is a sui generis in nature being situated between the territorial sea and the high seas: Churchill, RR and Low, AV, The Law of the Sea (Manchester University Press, 1985) (at p 130). The legal regime which applies within the EEZ is determined in UNCLOS by reference to the specific activity in question. If a particular activity is contemplated in Pt V of UNCLOS, then the coastal state, arguably, has the right to regulate in respect of that activity but if it does not, then the state does not have the right to do so. The plaintiffs argue that the conduct and navigation of vessels is not an activity contemplated by Pt V, therefore UNCLOS does not confer upon coastal states the general right to regulate or control navigation of vessels within the EEZ. In fact Art 58(1) and Art 87 generally preserve the traditional freedoms of the high seas particularly in respect of navigation within the EEZ. There is only an abrogation of this freedom where a particular navigational activity coincides with any of the functional bases of coastal state power within the EEZ. It follows, therefore, that the coastal state may make laws relating to pollution within the EEZ. However, its sovereignty does not extend to generally regulating the conduct of ships in the material context, namely, the navigation of ships resulting in a collision and consequential property damage to vessels.
141 The argument for the plaintiffs is that within a littoral state's EEZ, responsibility for regulating navigation of vessels remains with the flag state of the vessel, and that a littoral state must not claim sovereignty with respect to the EEZ by, amongst other things, purporting to regulate navigation within this part of the sea. This is made clear by Art 94(3)(c) of UNCLOS which expressly provides that is the responsibility of the flag state to take such measures as necessary for vessels flying its flag to ensure safety at sea with regard to the use of signals, the maintenance of communications and the prevention of collisions. This provision of UNCLOS applies within the EEZ by virtue of Art 59(2) because it is not incompatible with Pt V of UNCLOS.
142 In short, the waters of the EEZ are not part of the territory of China nor part of the high seas. A collision occurring in the waters of the EEZ does not occur in China. There is no general application of the laws of China to the EEZ. As Professor Zhao noted, China does not exercise sovereignty with respect to the law regulating ship collisions or navigation generally within its EEZ but does regulate within specific legal areas such as pollution.
143 The plaintiffs also argue that the Chou Shan's contention that, except where the tort occurs in the high seas, the lex causae will be the law of the littoral state that asserts jurisdiction and rights over the waters is not correct. They argue:
the authorities relied upon for that assertion do not make it good. MacKinnon and Union Shipping New Zealand Ltd involved torts occurring on vessels in the territorial sea of the Dominican Republic and Australia respectively while The "Omega King" [2011] 2 Lloyds Rep 206 concerned a tort in the territorial waters of the United Kingdom. Those decisions do not provide authority for the proposition contended for by the Chou Shan because of the distinction between the territorial sea and the EEZ.
there is no authority for the proposition that the presence of a ship in the EEZ renders it subject to all of the laws of the littoral state and, in particular, those governing navigation. The citation from Dicey, Morris and Collins on The Conflict of Laws (see pp 2215-2216) makes it clear that the rights granted in the EEZ are restricted. It is only if the activity giving rise to the dispute is associated with the exercise of those limited rights that there is sufficient connection to establish the law of the littoral state of the EEZ as the lex causae.
there was no activity giving rise to the collision which was connected closely or otherwise with the exercise of the exploitation of natural resources under the EEZ. The comparison with Australia discussed above does not assist the Chou Shan. Australia does not assert jurisdiction over the navigation of foreign vessels in Australia's EEZ by reason of s 175 and s 176 of the Navigation Act. Section 175 does not apply Pt 3 of that Act to foreign vessels in Australia's EEZ. None of the provisions of the Navigation Act apply Australian law to such vessels other than in limited respects permitted by UNCLOS to expressly protect certain interests and also in relation to pollution.
it follows, therefore, that the determination of the claim for damages by the plaintiffs would fall for assessment by application of Australian choice of law principles. There is no presumption that Chinese law will apply because a collision occurred in China's EEZ.
much of the evidence of the experts was focused on how Chinese law would apply but that is not the question presently falling for consideration. The substantive law governing the plaintiffs' claim in this Court will be determined by reference to the lex loci delicti: Regie Nationale des Usines Renault SA (at 520). Although China exercises certain rights over the EEZ, in terms of a navigation collision, it occurred in a region of the seas over which no country exercises sovereignty of the kind which would regulate the liability of the Chou Shan and/or the plaintiffs arising from the collision. Thus, the lex loci dilicti is legally indistinguishable for present purposes from the high seas.
144 In any event, the plaintiffs argue, even if Chinese law does apply, that would not, taken alone, provide sufficient support for a conclusion that this Court is a 'clearly inappropriate forum' to hear the plaintiffs' claim against the Chou Shan or for the present proceeding to be stayed on that basis. However, there are clearly practical considerations arising that need to be taken into account.
145 The plaintiffs stress that even if, contrary to their primary submission, Chinese law is to be applied to the determination of the present claim, there is nothing to indicate that the applicable Chinese law is relevantly or materially any different to Australian law or that any Australian judge would have any difficulty in applying that law. All the indications are that in ascertaining respective faults of the Chou Shan and the CCF, a Chinese court would apply the COLREGs. There is no evidence of any difference in approach between Australia and China in determining fault.
146 Obviously, there is a significant advantage to the plaintiffs having security established here. In China, the plaintiffs would have to share the limitation fund established by the Chou Shan interests in China with any other persons wishing to bring a claim against the owners of the Chou Shan arising from the collision. This was a factor (amongst others) taken into account by Rares J in The Ship "Xin Tai Hai" (No 2) (at [143]). The practical outcome of a stay of this proceeding may be to result in greatly reduced prospects of recovery by the plaintiffs of claims under, effectively, the LLMC 76, rather than the 1976 Convention as amended by the 1996 Protocols which applies under Australian law. Although the limitation available under Chinese law may be functionally similar to that applicable under the LLMCA, the amount of the security is significantly different.