Emergency Contact The application of the ‘knock-for-knock’ clause under Chinese law Home Latest updates News The application of the ‘knock-for-knock’ clause under Chinese law 23 May 2024 Download View PDF Sign up for alerts Introduction Knock-for-knock clauses, widely used in contracts related to towage and offshore work, generally maintain the principle that damage and loss to property or personnel suffered by a party’s “group” (as defined in the relevant contract) is borne by that party regardless of fault. It is popular due to the certainty achieved in the allocation of liability and is widely recognised in common law jurisdictions. However, the legal effect of knock-for-knock indemnity under certain civil law jurisdictions is not so straightforward. Chinese lawyer Jasmine Liu of Wintell & Co shares a recent judgment in China where the knock-for-knock indemnity principle was upheld. Ping An Property Insurance Company of China, Ltd. Shanghai Branch vs Nanhai Rescue Bureau of the Ministry of Transport of PRC [1] The background In October 2016, an agreement (the “Agreement”) was signed for the barge Tai Xin 1 (the “Barge”) to be towed by tug Nan Hai Jiu 115 (the “Tug”) to a nearby typhoon shelter, due to an imminent typhoon. The Agreement was a bespoke contract but adopted knock-for-knock terms by reference to BIMCO TOWHIRE (as Appendix 1), providing that each party would be responsible for their own property and personnel; and that each party would indemnify the other in respect of such liabilities (the "K4K Clause”). During the towage, the main towing cable (owned by the Tug) broke due to severe weather, the Barge drifted and finally grounded on a reef. The Barge remained grounded on the site for more than two months, incurring significant salvage and repair costs. No personal injury or pollution resulted from the incident. The local Maritime Safety Administration (the “MSA”) investigated the casualty, as is customary, and attributed the incident to a combinat