On the buyer's request, the plaintiff carrier released the goods to the buyer without presentation of the original bill of lading. The reason for the non-presentation of the original bill of lading was the buyer’s failure to pay the seller as agreed in their trade contract. The seller filed a claim against the plaintiff carrier for losses.

The paramount clause on the back of the bill of lading provided that 'The receiving, keeping, transport, and delivery of the goods shall be governed by the clauses of the transport agreement evidenced by the bill of lading, including ... (3) clauses of the Carriage of Goods by Sea Act of the United States of 1936, or the provisions on disputes arising from transport contracts made by any court with imperium of a country in which the Hague Rules of 1921, amended by the Brussels Convention of 1924, are effective'.

The applicable law issue had been considered in all the three trials of this case. The first and second trial courts held that the Chinese Maritime Code was the applicable law, since in this case the place where the consequence of infringement occurred, the domicile of the plaintiff, and the place of issue of the bills of lading were all within China. The case was thus more closely related to Chinese law.

In the application for retrial, the plaintiff claimed that, according to the primary clause of bill of lading, the applicable law should be either the Carriage of Goods by Sea Act 1936 (US) (COGSA) or the Hague Rules.

Held: Appeal granted.

The Supreme People's Court held that the paramount clause clearly provided the application of COGSA or the Hague Rules. This clause had been agreed between both parties. Such selection of the applicable law was legal and valid.

The Supreme People's Court further held that art 1 of the Hague Rules provides that those Rules only apply to carriage contracts that are related to bills of lading serving as documents of title. The bills of lading of this case were non-negotiable bearer bills of lading, and thus had no effect on the proof of property rights in the goods. Furthermore, the Hague Rules do not include provisions on how the carrier should deliver the goods under a bearer bill of lading. Therefore, the applicable law of this case should be COGSA.