The Shanghai Maritime Court has seized a Japanese ship owned by Mitsui O.S.K. Lines (MOL). The vessel, Baosteel Emotion, was seized to provide payment for a judgment against MOL relating to the use (and eventual loss) of two Chinese ships by the firm during World War II. Financial Times called the seizure “an unprecedented asset confiscation for wartime compensation.”
The seizure of Baosteel Emotion is perhaps the most dramatic turn in a case that has dragged on since the 1930s. In 1936, the Chinese company Chung Wei Steamship Co. leased two ships for one year to a Japanese shipping line, Daido Kaiun. However, in 1937 the ships were commandeered by the Japanese navy, which did not pay any leasing fees to Chung Wei. Both ships eventually sank while in the service of Japan’s navy. For decades, the Chen family (the owners of Chung Wei Steamship Co.) have been unsuccessfully trying to receive payment for the ships from Daido Kaiun’s successor firm, Mitsui O.S.K.
In 2007, the Shanghai Maritime Court ruled in favor of the Chen family, and demanded 2.9 billion yen ($28 million) in compensation from MOL. The court upheld the ruling in 2010, and in 2011 China’s Supreme Court rejected a final appeal from MOL. The current seizure of the Baosteel Emotion is a direct result of that verdict. According to Xinhua, the Shanghai court says “it will dispose of the ship if MOL continues to refuse to fulfill its obligation.”Enjoying this article? Click here to subscribe for full access. Just $5 a month.
For its part, a Mitsui spokesperson told Financial Times that the company had been in the middle of negotiations with the Chen family about a settlement. “We are very surprised about their sudden decision. We cannot accept it,” the spokesperson said. The official statement on MOL’s website also emphasizes that the seizure was sudden and disrupted efforts at reaching a settlement. South China Morning Post, however, reports that the ship was only seized after negotiations between the Chens and Mitsui had failed. In a similar case, MOL was able to reach an out-of-court settlement with the Dah Loh Industrial Co. last year after the Shanghai Maritime Court ruled in Dah Loh’s favor.
In response, Chief Cabinet Secretary Yoshihide Suga called the “sudden seizure” of the Baosteel Emotion “extremely regrettable.” He warned that the move “is likely to have, in general, a detrimental effect on Japanese businesses working in China.” Suga also said that the seizure of the ship is in violation of the 1972 joint communique between China and Japan, which normalizes relations between the two countries. In that communique, “in the interest of the friendship between the Chinese and the Japanese peoples,” the Chinese government “renounce[d] its demand for war reparation from Japan.”
Foreign Ministry spokesman Qin Gang tried to differentiate the seizure from the controversial issue of wartime compensation. Instead, he said the Shanghai court’s action was merely “enforcement measures” related to an “ordinary [case] involving commercial contract disputes.” Qin also emphasized that “Chinese government remains committed to and safeguards all the principles of the  Joint Communique.”
Qin’s comments speak to a fundamental difference of interpretation over the war reparations clause of the 1972 communique. Beijing believes that the renunciation of war reparations only applies to official, government-to-government requests for compensation. In other words, private entities (such as the Chen family) are still entitled to seek compensation from other private firms (like MOL).
Still, China has in the past discouraged such cases. Speaking to Financial Times, Shen Dingli of Fudan University tied the Baosteel Emotion incident to the general deterioration in China-Japan ties. “In the past they [China’s government] might have discouraged suits like this but now they don’t stand in the way,” Shen said. Given China’s recent emphasis on Japan’s wartime history, an increase in war-related suits might be a part of China’s general strategy to call attention to Japan’s wartime actions.
In addition to the MOL case, in February a court in Beijing accepted the first-ever class-action case on behalf of Chinese citizens seeking compensation for forced labor during World War II. While China’s Foreign Ministry has tried to downplay the Baosteel Emotion incident as part of a typical commercial case, the forced labor lawsuit has obvious political undertones. According to China Daily, the citizens sought not only compensation from Japanese firms Mitsubishi Materials and Mitsui Mining and Smelting, but also for “apologies to be carried in mainstream media in China and Japan.” China Daily wrote that the case “will increase pressure on Japan to correct its interpretation of its militarist history,” a clear political goal.
By contrast, the claim against MOL has been treated as a more straight-forward commercial case. The original judgment was passed in 2007, before the current round of increased China-Japan tensions. Still, the first-ever seizure of a major asset to provide compensation linked to World War II losses may well make large Japanese firms nervous. The real question is whether the seizure of Baosteel Emotion represents an aberration, part of a specific legal case, or whether it will set a precedent.