Grandinite

Check out these three links:

Chinese ‘harass’ US Navy surveillance ship, Pentagon says

US warships head for South China Sea after standoff

Analysis: so much more than a naval water fight

After this little altercation, China now expresses concern over its treasury holdings:

Bloomberg: China’s Premier Wen ‘Worried’ on Safety of Treasuries

WSJ: Wen Voices Concern Over China’s U.S. Treasurys

MyWay: China “worried” about US Treasury holdings

Let me get this straight. Back in February, Hillary Clinton travelled to China, where she essentially told the Chinese not to worry, and to keep buying U.S. debt. Last Sunday, three weeks after Clinton’s visit, the US Navy is trying to pass through international waters in which China claims jurisdiction, as part of its Exclusive Economic Zone. The Chinese claim the US vessel was engaged in espionage, and so they harassed it.

The root of the conflict is a jurisdiction matter, as the Times describes:

Beijing has rejected the US account and demanded that the United States cease what it calls illegal activities in the South China Sea. The Chinese maintain the area is part of the country’s exclusive economic zone.

Washington insists that the area is part of international waters and that US ships have a legal right to operate there.

As of yesterday, Obama has dispatched warships to China in order to send a message, just as the Senate gears up for a vote on the LOST sea Treaty, which some say could clear up some of the confusion. China has condemned the deployment of destroyers, stating that the altercation is separate from the Obama Presidency.

The real battle is over who has jurisdiction. China is claiming jurisdiction over waters the US sees as being international. What if something symbolic, or a little deeper is happening here?

Check this out:

The Meaning of Adimiralty Jurisdiction
Many of the peculiarities of admiralty actions have been removed by legislation and court decisions. What remains is not simply the legacy of a long history and tradition but a function of the specific needs of maritime commerce.

Aside from the actual form of the proceedings, actions in admiralty were, and still are, of two types: in personam and in rem. The in personam suit is typical of any other jurisdiction or branch of law. The in rem proceeding, on the other hand, is virtually unknown outside of admiralty. The basis of the in rem proceeding is the maritime lien. Upon the occurrence of certain events or the non-fulfillment of obligations arising out of a contract or condition, maritime law gives the aggrieved party a right defined as a property interest in the vessel or other tangible thing involved in the amount of the accrued liability. This right is called a maritime lien. The difference between the maritime lien and other types of liens is that it is generally independent of possession and is not extinguished by transfer to a bona fide purchaser without notice of its existence. Although a personal maritime liability may exist without a lien, the lien itself may vest even though the owner of the burdened vessel is not himself liable.

The way to enforce a maritime lien is the above mentioned procedure in rem which is an action directly against the vessel burdened by the lien. The vessel against which the lien is asserted is taken into the custody of the court. The owner of the vessel, who conducts the defense, will normally post a bond, thus securing the release of the vessel. If the lien is established on the merits, the vessel is sold at auction through an officer of the court, with the proceeds going to the lienor up to an amount sufficient to satisfy the lien. It is important to note that, while a suit in personam can be brought either in the federal courts (where jurisdiction is present due to diversity of citizenship) or at common law in state courts, a proceeding in rem can only be brought in the federal court as a court of admiralty. LINK

And . . .

Vessel Arrest and Maritime Liens
Members of the maritime community often find that a vessel owner or charterer refuses to pay for services or supplies provided to a vessel or has defaulted on a promissory note. The failure on the part of the vessel owner or charterer to pay for dockage, supplies, repairs, labor, materials, gas, oil, food, etc., results in the marina operator, marine supplier, vessel repairer, seaman, salvor, preferred ship mortgage holder, or other supplier having a maritime lien against a vessel. A maritime lien is an established maritime law principle, which is enforced by procedures unique to maritime law. The existence of the maritime lien permits the lien holder to have the vessel arrested or seized by the U.S. Marshal to enforce its lien. Due to the unique and complicated nature of enforcing maritime liens, maritime lien holders need the experience of Maritime Legal Resources when they have an unpaid maritime debt and need to assert their rights to collect upon it. LINK

Undoubtedly, China is sending Hillary and Barack a message, but this admiralty law concept of liens and in rem jurisdiction reveals some of the underlying subtext. The US saw it fit to proffer up some reassurance to China concerning its massive T-Bill holdings. But if you go into a bank, owing them $1,000, and you tell them you can’t pay, it’s your problem. It’ll mark up your credit rating like financial leprosy. But if you waltz into that same bank owing them a few billion dollars, it’s the bank’s problem.

In other words, when Hillary Clinton says “don’t worry, we’re good for it”, that’s the tipping point that confirmed previous suspicions. When China found a US warship in international waters, it tried to assert its jurisdiction in an attempt, quite possibly, to exercise jurisdiction in rem. While they didn’t arrest the US warship, I wonder what would have happened if they had. Would it have set some sort of precedent? Was China trying to collect payment in rem by arresting the boat itself? When viewed through the lens of admiralty law and maritime liens, both these actions show that China is very concerned over the ability of the USS America to keep its financial ship afloat.