The doctrine of warranties in marine insurance originated in English law and was incorporated into China’s Maritime Code 1992. However, the early Chinese regime provided only a brief reference to warranties and left many practical issues unresolved including the insurer’s right of termination, the timing of discharge, and liability during the period between breach and termination. As a result, judicial practice became inconsistent and uncertain.
The latest 2025 revision of China’s Maritime Code now represents a significant attempt to modernise this area of marine insurance law. Although the reform does not fully mirror the approach of the UK Insurance Act 2015, it clearly departs from the traditional “all or nothing” consequences of breach of warranty, achieving a more balanced allocation of risk between insurer and insured.
Risk-based liability
Under article 235 of the earlier Maritime Code 1992, an insurer could terminate the contract or amend the insurance terms once a warranty was breached. The provision, however, said little about how these rights operated in practice.
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Tahota Law Firm
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In particular, the code did not clarify when termination became effective or whether the insurer remained liable for losses occurring after breach but before termination. This legislative silence created substantial uncertainty.
The position in English law had meanwhile already changed considerably following the Insurance Act 2015. The traditional rule under the historic Marine Insurance Act 1906 – where breach of warranty automatically discharged the insurer from liability – was abolished.
Instead, breach merely suspends liability until the breach is remedied. Section 11 of the 2015 act further prevents insurers from relying on breaches unrelated to the actual loss. The reform was widely regarded as an attempt to soften the harshness of traditional warranty doctrine.
China’s revised Maritime Code 2025 now appears to have been influenced by these developments. Article 261 expressly regulates the insurer’s right of termination following breach of warranty. The insurer must notify the insured in writing and termination only takes effect once the notice reaches the insured.
This clarification aligns marine insurance law more closely with general contract principles and resolves a longstanding ambiguity under the previous regime. The new provision also introduces a clearer allocation of liability across different periods. Losses occurring before the breach remain recoverable, while losses after termination are excluded.
More importantly, the revised code now addresses the “gap period” between breach and termination. During this interval, the insurer is generally exempt from liability.
But two important exceptions apply: first, the insurer remains liable if the insured proves the breach had no influence on the occurrence of the maritime peril; and second, liability continues where the breach had already been remedied before the loss occurred.
These exceptions significantly reduce the severity of the traditional warranty doctrine. Taken together, they suggest that the revised regime no longer allows insurers to rely automatically on every breach of warranty, but instead considers whether the breach had any influence on the occurrence of maritime peril.
Although the revised code adopts the term “influence” rather than “causation”, the legal effect is similar. Insurers can no longer rely as easily on purely technical breaches that bear no connection to the loss itself. In this respect, the reform reflects a broader international trend towards proportionality and fairness in insurance law.
Open questions
The revised Maritime Code also strengthens procedural protection for insured parties. Article 249 now requires insurers using standard-form clauses to draw attention to terms materially affecting the insured’s interests, including deductible clauses or exclusion clauses.
Upon request, insurers must also explain such clauses clearly. Failure to do so may prevent the clause from becoming part of the contract unless the insurer can show the insured knew, or ought to have known, its content.
This reform is particularly important in the context of warranty clauses, which traditionally operate as strict risk-allocation mechanisms. In practice, the insured may not fully appreciate the legal effect of breach. The new notice-and-explanation requirement therefore improves procedural fairness and limits the possibility of insurers relying on obscure standard terms.
Nevertheless, uncertainties remain. Notably, the revised code still does not provide a statutory definition of “warranty”. Earlier draft proposals reportedly attempted to define the concept by reference to English law, but the final version omitted such provisions. As a result, uncertainty persists regarding which clauses constitute warranties and how warranties should be distinguished from exclusion clauses or conditions precedent.
This omission matters because Chinese courts traditionally rely heavily on statutory interpretation rather than judicial precedent. Previous cases have demonstrated inconsistent approaches to warranty clauses. Some courts required warranties to be expressly stated in writing, while others recognised implied warranties based on trade usage and commercial practice.
Without clearer statutory guidance, similar inconsistencies are likely to continue.
The revised code also removes previous requirements that the insured immediately notifies the insurer upon breach of warranty. While this avoids imposing excessive procedural burdens on the insured, it may create new disputes concerning when the insurer acquired knowledge of the breach – and whether termination rights were exercised within a reasonable time.
Takeaway
Overall, China’s updated Maritime Code 2025 marks a meaningful step towards a more balanced system of marine insurance law. The reform improves the previous regime by clarifying termination procedures, limiting the legal effect of breach and introducing a more flexible risk-based approach.
At the same time, the absence of a clear definition of warranties means that judicial interpretation will continue to play a central role in shaping the practical boundaries of the new regime.
Still, compared with the strict traditional approach inherited from English marine insurance law, the revised system is more moderate and commercially realistic. Although the reform remains incomplete, it represents an important transition in the development of Chinese marine insurance law.
Shengnan Jia is?a?partner at Tahota?Law Firm and?a?PhD in commercial and maritime law from?City St George’s,?University of London. She can be reached by phone at +86?139?1113?4604?and by email at?shengnan.jia@tahota.com.
