China Shipbuilding and Ship Repair Disputes: A Guide for Foreign Shipowners and Yards

Introduction

China is the world's largest shipbuilder, and most serious newbuilding and repair disputes end up before one of its maritime courts. A foreign shipowner or yard facing one needs three things straight at the outset: what kind of contract they actually signed, what security rights attach to the ship, and which court will hear the case. Get the first wrong and the whole analysis runs off the rails.

A threshold fact first: China's Maritime Law was comprehensively revised in 2025 — adopted on 28 October 2025 and in force since 1 May 2026. Article numbers in older commentary do not always match the revised text, so citations should always be checked against the official version.

A Shipbuilding Contract Is Not a Sale of Goods

The first conceptual point is the most consequential. Under Chinese law a shipbuilding contract is treated as a contract for work (承揽合同) under the PRC Civil Code, not a contract of sale. That changes the default rules: the yard builds the ship to the owner's specification, the owner typically pays in instalments tied to construction milestones, and the owner retains a right of supervision and inspection over the build. Title and risk do not pass in the same way they would for goods, and the remedies for a defective build are those for defective work rather than for non-conforming goods. Drafting that ignores this classification — for example, by importing a sale-of-goods warranty wholesale — creates mismatches that courts then have to repair.

Maritime Liens and the Yard's Lien Under the Revised Law

Security is where shipbuilding disputes get expensive. Under the revised Maritime Law, maritime liens (船舶优先权) are set out in Article 22, which lists the claims that enjoy priority against the ship — historically including crew wages, death and personal-injury claims, tonnage dues and certain salvage claims, among others. The order of satisfaction among competing claims, and the shipyard's possessory lien (船厂留置权) for shipbuilding and repair work, are governed by Article 30 of the revised law, not by the article number used in older editions of the statute. The practical point for a shipowner is that a yard which has not been paid for repair or construction work can, within the statutory framework, assert a lien over the vessel — and that lien ranks in a specific position in the satisfaction order, so an owner who pays the wrong creditor first may pay twice.

Where the Dispute Lands: Jurisdiction

China's ten maritime courts have specialised jurisdiction over maritime matters. For shipbuilding and ship repair disputes, jurisdiction is determined under Article 6 of the Special Maritime Procedure Law, read together with item 12 of the Supreme People's Court's Interpretation on maritime court jurisdiction (法释〔2016〕4号). The maritime court may also exercise jurisdiction through the arrest of the vessel or other maritime property as security, which is frequently the reason a foreign party finds itself in a Chinese maritime court at all. Because the operative article numbers and case-allocation rules are technical, confirm them against the official text before filing.

What Foreign Owners Should Fix Before Keel-Laying

Freeze the specification. The single largest source of shipbuilding disputes is an open or ambiguous specification. Lock drawings, class notation and performance standards before the contract is signed.
Tie payments to verified milestones. Milestone payments should be triggered by objective, independently verifiable completion, not by the yard's self-certification.
Allocate builder's risk. Decide expressly who bears loss before delivery, and require builder's risk insurance naming the right beneficiary.
Secure refund guarantees. If the owner advances pre-delivery instalments, require a refund guarantee from a bank acceptable to the owner, not a parent-company comfort letter.
Choose the forum and law deliberately. A London arbitration clause does not stop a Chinese yard from arresting the vessel in China, so coordinate the dispute clause with the security reality.

A Practical Playbook

Classify the contract as a contract for work and draft warranties accordingly.
Map the security rights — maritime liens under Article 22 and the yard's lien and order of satisfaction under Article 30 of the revised law.
React to an arrest immediately — counter-security and the 30-day action window run fast.
Preserve build records — drawings, change orders, payment records and inspection reports are the evidence a maritime court will actually read.
Confirm current article numbers against the official text of the revised Maritime Law before citing them.

For the cargo-side counterpart — notices, limitation periods and vessel arrest — see Shipping Disputes in China: Cargo Claims, Demurrage and Vessel Arrest, or contact us to discuss a specific shipyard or repair dispute.

How Tianni Law Firm Can Help

Tianni Law Firm (江苏天倪律师事务所), based in Nanjing, Jiangsu, advises shipowners, shipyards, suppliers and lenders on shipbuilding and ship repair disputes in China. Our work includes contract drafting and review, maritime liens and yard-lien claims, vessel arrest and counter-security, and the enforcement of judgments and arbitral awards against ships and other maritime property.