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Friday, 07 July 17
SHOULD WE BE AVOIDING GENERAL AVERAGE? - ALEX KEMP
 KNOWLEDGE TO ELEVATE
Calls for general average to be abolished are nearly as old as the regime itself. A representative of Lloyd’s attended the eponymous Antwerp Conference in 1873 and latterly described general average as a “a nest of fraud and abuses, a lurking place for speculation and waste”. Even in 1913 commentators were complaining about the increasing size of vessels and the volume of bills of lading they created. The Chairman of the US Association of Average Adjusters said of general average that year “the time, trouble, expense and delay are out of all proportion to the benefit achieved”. These comments are surprisingly familiar and it is interesting to see that the same weakness in general average are made today.
Unsurprisingly those involved in transporting or insuring cargo have little love for the regime, when they are usually the paying party. There have been calls in the past for the loss to simply lie where it falls for the respective hull and cargo insurers to absorb. A key piece of research by Mr Matthew Marshall of the Institute of London Underwriters for the IUMI Tokyo conference in 1994 (updated to 1999) really energized the modern debate. His work highlighted the fact that 10% of the cost of general average was adjusters’ fees and another 10% commission (something that has now been abolished in the most recent rules). Perhaps most importantly it was suggested that the majority of general average events were the fault of the ship owner. This helped lead to the ill-fated York-Antwerp Rules 2004 which have now been replaced.
Whilst the York-Antwerp Rules 2004 may now have been replaced with a more moderate regime, the circumstances which give rise to criticism of general average are more relevant than ever. Many commentators have written about the increasing size of container ships, the increasing complexity of their contracts of carriage and the severe impact this has on the cost and time required to adjust such a general average event. This observations were again aired in the negotiations to the York-Antwerp Rules 2016.
For the time being, at least, general average does not seem to be in any grave threat of abolition and the status quo (broadly speaking) will continue. However, that doesn’t mean to say that the market is not evolving and adapting to meet the reality of modern general average. General average absorption clauses have long been a feature of H&M policies as a way to avoid low value general average events. Their limits have increased as vessel size and casualty complexity has increased. We have seen examples of such limits being as much as US$1 million.
However, more recently parties involved in container shipping have taken even more aggressive steps. Vessel sharing agreements and slot charters used in the management of container ships often now contain provisions which compel the parties to “consult” to determine whether they can absorb all the general average sacrifices and losses and to try and persuade the Owners not to declare general average. Often these agreements go further and compel the parties to absorb general average between the parties up to a limit of say US$0.5 million (this should be distinguished from a general average adsorption clause in a H&M policy). This shows a commercial decision in container shipping that general average, in principle, should be avoided as it is not in the interests of shippers, who are the customers of container lines.
It is easy to see why. With adjuster’s fees, through no fault of their own, to collect security often running into the hundreds of thousands of dollars and adjustments taking anything up to a decade, it is an unattractive way to deal with losses arising from a casualty in complex container casualties. As a result we have seen container lines go further than the provisions in their contractual agreements in the aftermath of a casualty and enter into bespoke agreements resolving to fund all general average expenses and sacrifice on certain terms. More often than not this prevents any need to collect general average security or obtain cargo documentation for the entire manifest. This simply leaves the carriers to deal with cargo claims (be them sacrifice or otherwise) in the usual way. One might say that this places a greater financial burden on the carriers who are absorbing cargo’s proportion of general average from their bottom line (such a voluntary liability would not ordinarily be insured by the carrier) as ordinarily, cargo’s proportion of general average would be reimbursed by cargo insurers. This may simply be the effect of what is undoubtedly an extremely competitive market place for container shipping, notwithstanding recent mergers.
Ultimately, whether parties should be considering more aggressive steps to avoid general average following an incident, will depend upon the nature of the casualty, the scale of expenses/sacrifice, the legal regimes involved and the number parties. Clearly, the benefits of modifying the “usual” general average process will be greatest in a container casualty scenario but that’s not say that it should not be considered when other types of vessel are involved.
By: Alex Kemp, Senior Associate at Solicitors Holman Fenwick Willan LLP and Associate of the Association of Average Adjusters
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Friday, 30 June 17
U.S. WEEKLY COAL OUTPUT SLIGHTLY DOWN
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totaled an estimated 15.6 million short tonn ...
Wednesday, 28 June 17
SHIPPING MARKET INSIGHT - TIMOS PAPADIMITRIOU
From the beginning of the year until now SnP activity has changed significantly. To put things into perspective, after a fast and furious q1 on the ...
Monday, 26 June 17
PANAMAX/KAMARMAXES HAD A STRONG WEEK WITH RATES RISING IN MOST AREAS OF THE MARKET - BALTICEXCHANGE
Capesize
A dark cloud appeared to have descended over the market for the big ships with rates continuing to slide in all areas. There was a repor ...
Friday, 23 June 17
U.S. WEEKLY COAL PRODUCTION TOTALED APPROXIMATELY 15.8 MMST; UP 1.8% W/W
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totaled an estimated 15.8 million short tonn ...
Wednesday, 21 June 17
MARKET INSIGHT - SHIPPING
Looking back at March and April shipping reports when the dry bulk indexes were starting to move up, a number of shipping analysts were stating tha ...
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Showing 2016 to 2020 news of total 6871 |
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- Cigading International Bulk Terminal - Indonesia
- Central Java Power - Indonesia
- Planning Commission, India
- Coastal Gujarat Power Limited - India
- Cement Manufacturers Association - India
- Therma Luzon, Inc, Philippines
- Bukit Baiduri Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- Goldman Sachs - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Bhatia International Limited - India
- White Energy Company Limited
- Electricity Authority, New Zealand
- Eastern Coal Council - USA
- Simpson Spence & Young - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Sree Jayajothi Cements Limited - India
- Economic Council, Georgia
- Australian Coal Association
- Samtan Co., Ltd - South Korea
- Petrochimia International Co. Ltd.- Taiwan
- Rashtriya Ispat Nigam Limited - India
- Savvy Resources Ltd - HongKong
- Sarangani Energy Corporation, Philippines
- Sical Logistics Limited - India
- Uttam Galva Steels Limited - India
- Orica Australia Pty. Ltd.
- Coal and Oil Company - UAE
- SN Aboitiz Power Inc, Philippines
- Ministry of Transport, Egypt
- Kobexindo Tractors - Indoneisa
- Kohat Cement Company Ltd. - Pakistan
- Salva Resources Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Parliament of New Zealand
- Vedanta Resources Plc - India
- Eastern Energy - Thailand
- Grasim Industreis Ltd - India
- Holcim Trading Pte Ltd - Singapore
- McConnell Dowell - Australia
- Bhushan Steel Limited - India
- New Zealand Coal & Carbon
- The University of Queensland
- OPG Power Generation Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Ind-Barath Power Infra Limited - India
- Binh Thuan Hamico - Vietnam
- Ambuja Cements Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Mjunction Services Limited - India
- GMR Energy Limited - India
- Tata Chemicals Ltd - India
- Standard Chartered Bank - UAE
- Offshore Bulk Terminal Pte Ltd, Singapore
- Trasteel International SA, Italy
- Essar Steel Hazira Ltd - India
- Oldendorff Carriers - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Chettinad Cement Corporation Ltd - India
- Indika Energy - Indonesia
- Madhucon Powers Ltd - India
- Bhoruka Overseas - Indonesia
- LBH Netherlands Bv - Netherlands
- Ministry of Mines - Canada
- Aditya Birla Group - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Africa Commodities Group - South Africa
- South Luzon Thermal Energy Corporation
- Indian Energy Exchange, India
- Medco Energi Mining Internasional
- CIMB Investment Bank - Malaysia
- London Commodity Brokers - England
- Bukit Asam (Persero) Tbk - Indonesia
- Kumho Petrochemical, South Korea
- Directorate Of Revenue Intelligence - India
- Borneo Indobara - Indonesia
- Georgia Ports Authority, United States
- Intertek Mineral Services - Indonesia
- Malabar Cements Ltd - India
- Posco Energy - South Korea
- Videocon Industries ltd - India
- Bukit Makmur.PT - Indonesia
- Anglo American - United Kingdom
- IHS Mccloskey Coal Group - USA
- The Treasury - Australian Government
- Wood Mackenzie - Singapore
- Mintek Dendrill Indonesia
- Leighton Contractors Pty Ltd - Australia
- Gujarat Electricity Regulatory Commission - India
- Kideco Jaya Agung - Indonesia
- Central Electricity Authority - India
- Jaiprakash Power Ventures ltd
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Iligan Light & Power Inc, Philippines
- Thai Mozambique Logistica
- Bayan Resources Tbk. - Indonesia
- Global Green Power PLC Corporation, Philippines
- Antam Resourcindo - Indonesia
- Indian Oil Corporation Limited
- Wilmar Investment Holdings
- Ministry of Finance - Indonesia
- PTC India Limited - India
- PetroVietnam Power Coal Import and Supply Company
- VISA Power Limited - India
- Thiess Contractors Indonesia
- Global Business Power Corporation, Philippines
- Edison Trading Spa - Italy
- Mercator Lines Limited - India
- Romanian Commodities Exchange
- Maharashtra Electricity Regulatory Commission - India
- Meenaskhi Energy Private Limited - India
- Dalmia Cement Bharat India
- Riau Bara Harum - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Star Paper Mills Limited - India
- GAC Shipping (India) Pvt Ltd
- Carbofer General Trading SA - India
- Xindia Steels Limited - India
- Sakthi Sugars Limited - India
- Jorong Barutama Greston.PT - Indonesia
- MS Steel International - UAE
- Bank of Tokyo Mitsubishi UFJ Ltd
- Metalloyd Limited - United Kingdom
- Electricity Generating Authority of Thailand
- Gujarat Sidhee Cement - India
- Merrill Lynch Commodities Europe
- Toyota Tsusho Corporation, Japan
- Gujarat Mineral Development Corp Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Agrawal Coal Company - India
- ICICI Bank Limited - India
- SMC Global Power, Philippines
- Barasentosa Lestari - Indonesia
- Mercuria Energy - Indonesia
- Coalindo Energy - Indonesia
- Global Coal Blending Company Limited - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bharathi Cement Corporation - India
- Karbindo Abesyapradhi - Indoneisa
- International Coal Ventures Pvt Ltd - India
- Rio Tinto Coal - Australia
- Pendopo Energi Batubara - Indonesia
- Commonwealth Bank - Australia
- Formosa Plastics Group - Taiwan
- Power Finance Corporation Ltd., India
- Sindya Power Generating Company Private Ltd
- Aboitiz Power Corporation - Philippines
- Chamber of Mines of South Africa
- European Bulk Services B.V. - Netherlands
- Parry Sugars Refinery, India
- Jindal Steel & Power Ltd - India
- Indonesian Coal Mining Association
- PowerSource Philippines DevCo
- San Jose City I Power Corp, Philippines
- India Bulls Power Limited - India
- Singapore Mercantile Exchange
- AsiaOL BioFuels Corp., Philippines
- Kaltim Prima Coal - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Orica Mining Services - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Independent Power Producers Association of India
- Port Waratah Coal Services - Australia
- Siam City Cement - Thailand
- Minerals Council of Australia
- Energy Development Corp, Philippines
- Billiton Holdings Pty Ltd - Australia
- Maheswari Brothers Coal Limited - India
- Kapuas Tunggal Persada - Indonesia
- Kepco SPC Power Corporation, Philippines
- Altura Mining Limited, Indonesia
- Kartika Selabumi Mining - Indonesia
- Karaikal Port Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Latin American Coal - Colombia
- Tamil Nadu electricity Board
- Sojitz Corporation - Japan
- Lanco Infratech Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Semirara Mining and Power Corporation, Philippines
- Marubeni Corporation - India
- The State Trading Corporation of India Ltd
- Petron Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- TNB Fuel Sdn Bhd - Malaysia
- Banpu Public Company Limited - Thailand
- Globalindo Alam Lestari - Indonesia
- Bangladesh Power Developement Board
- Heidelberg Cement - Germany
- Attock Cement Pakistan Limited
- ASAPP Information Group - India
- GVK Power & Infra Limited - India
- Neyveli Lignite Corporation Ltd, - India
- IEA Clean Coal Centre - UK
- Indogreen Group - Indonesia
- Meralco Power Generation, Philippines
- Australian Commodity Traders Exchange
- Ceylon Electricity Board - Sri Lanka
- Deloitte Consulting - India
- Bahari Cakrawala Sebuku - Indonesia
- Baramulti Group, Indonesia
- TeaM Sual Corporation - Philippines
- Siam City Cement PLC, Thailand
- Semirara Mining Corp, Philippines
- Makarim & Taira - Indonesia
- Larsen & Toubro Limited - India
- Energy Link Ltd, New Zealand
- Kalimantan Lumbung Energi - Indonesia
- Price Waterhouse Coopers - Russia
- CNBM International Corporation - China
- Interocean Group of Companies - India
- PNOC Exploration Corporation - Philippines
- GN Power Mariveles Coal Plant, Philippines
- Renaissance Capital - South Africa
- SMG Consultants - Indonesia
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