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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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- Borneo Indobara - Indonesia
- Iligan Light & Power Inc, Philippines
- Tata Chemicals Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Meralco Power Generation, Philippines
- Bangladesh Power Developement Board
- Gujarat Electricity Regulatory Commission - India
- MS Steel International - UAE
- Australian Coal Association
- Power Finance Corporation Ltd., India
- SMG Consultants - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Attock Cement Pakistan Limited
- Electricity Generating Authority of Thailand
- Siam City Cement - Thailand
- Essar Steel Hazira Ltd - India
- Georgia Ports Authority, United States
- Semirara Mining and Power Corporation, Philippines
- Eastern Coal Council - USA
- Bharathi Cement Corporation - India
- Latin American Coal - Colombia
- Indian Energy Exchange, India
- Rashtriya Ispat Nigam Limited - India
- SN Aboitiz Power Inc, Philippines
- Ind-Barath Power Infra Limited - India
- Sical Logistics Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Samtan Co., Ltd - South Korea
- Independent Power Producers Association of India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indika Energy - Indonesia
- ICICI Bank Limited - India
- Central Java Power - Indonesia
- Riau Bara Harum - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Videocon Industries ltd - India
- Central Electricity Authority - India
- Salva Resources Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Metalloyd Limited - United Kingdom
- Bayan Resources Tbk. - Indonesia
- Orica Australia Pty. Ltd.
- Neyveli Lignite Corporation Ltd, - India
- The University of Queensland
- Uttam Galva Steels Limited - India
- Grasim Industreis Ltd - India
- Mintek Dendrill Indonesia
- Eastern Energy - Thailand
- Sarangani Energy Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Manunggal Multi Energi - Indonesia
- Commonwealth Bank - Australia
- Miang Besar Coal Terminal - Indonesia
- Rio Tinto Coal - Australia
- Kideco Jaya Agung - Indonesia
- The Treasury - Australian Government
- Sakthi Sugars Limited - India
- Ambuja Cements Ltd - India
- European Bulk Services B.V. - Netherlands
- Indonesian Coal Mining Association
- Bhushan Steel Limited - India
- Lanco Infratech Ltd - India
- Xindia Steels Limited - India
- Global Green Power PLC Corporation, Philippines
- Parry Sugars Refinery, India
- Holcim Trading Pte Ltd - Singapore
- Aditya Birla Group - India
- Bukit Baiduri Energy - Indonesia
- Global Coal Blending Company Limited - Australia
- Vedanta Resources Plc - India
- Sindya Power Generating Company Private Ltd
- Trasteel International SA, Italy
- Electricity Authority, New Zealand
- Tamil Nadu electricity Board
- Goldman Sachs - Singapore
- Chettinad Cement Corporation Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Kalimantan Lumbung Energi - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Jaiprakash Power Ventures ltd
- Star Paper Mills Limited - India
- Karaikal Port Pvt Ltd - India
- Port Waratah Coal Services - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Barasentosa Lestari - Indonesia
- Bhatia International Limited - India
- CNBM International Corporation - China
- Petron Corporation, Philippines
- Heidelberg Cement - Germany
- Coal and Oil Company - UAE
- Antam Resourcindo - Indonesia
- Toyota Tsusho Corporation, Japan
- Thiess Contractors Indonesia
- Orica Mining Services - Indonesia
- PTC India Limited - India
- AsiaOL BioFuels Corp., Philippines
- Indogreen Group - Indonesia
- Simpson Spence & Young - Indonesia
- Ministry of Mines - Canada
- Kapuas Tunggal Persada - Indonesia
- Makarim & Taira - Indonesia
- TeaM Sual Corporation - Philippines
- Kepco SPC Power Corporation, Philippines
- Africa Commodities Group - South Africa
- Larsen & Toubro Limited - India
- San Jose City I Power Corp, Philippines
- Cigading International Bulk Terminal - Indonesia
- Anglo American - United Kingdom
- Asmin Koalindo Tuhup - Indonesia
- Bulk Trading Sa - Switzerland
- Sinarmas Energy and Mining - Indonesia
- Renaissance Capital - South Africa
- Ministry of Transport, Egypt
- Timah Investasi Mineral - Indoneisa
- Coastal Gujarat Power Limited - India
- International Coal Ventures Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Agrawal Coal Company - India
- Bahari Cakrawala Sebuku - Indonesia
- Wood Mackenzie - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Thai Mozambique Logistica
- Maharashtra Electricity Regulatory Commission - India
- Kumho Petrochemical, South Korea
- Baramulti Group, Indonesia
- The State Trading Corporation of India Ltd
- GN Power Mariveles Coal Plant, Philippines
- McConnell Dowell - Australia
- Alfred C Toepfer International GmbH - Germany
- Banpu Public Company Limited - Thailand
- Altura Mining Limited, Indonesia
- GAC Shipping (India) Pvt Ltd
- Kobexindo Tractors - Indoneisa
- Medco Energi Mining Internasional
- Parliament of New Zealand
- Oldendorff Carriers - Singapore
- Malabar Cements Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Energy Link Ltd, New Zealand
- Carbofer General Trading SA - India
- Wilmar Investment Holdings
- Bhoruka Overseas - Indonesia
- PowerSource Philippines DevCo
- Coalindo Energy - Indonesia
- Indian Oil Corporation Limited
- LBH Netherlands Bv - Netherlands
- Jindal Steel & Power Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Price Waterhouse Coopers - Russia
- Kaltim Prima Coal - Indonesia
- Edison Trading Spa - Italy
- ASAPP Information Group - India
- PNOC Exploration Corporation - Philippines
- Dalmia Cement Bharat India
- Chamber of Mines of South Africa
- Ministry of Finance - Indonesia
- GVK Power & Infra Limited - India
- Binh Thuan Hamico - Vietnam
- Economic Council, Georgia
- Kartika Selabumi Mining - Indonesia
- Vizag Seaport Private Limited - India
- Australian Commodity Traders Exchange
- Minerals Council of Australia
- White Energy Company Limited
- Offshore Bulk Terminal Pte Ltd, Singapore
- SMC Global Power, Philippines
- Romanian Commodities Exchange
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- New Zealand Coal & Carbon
- Bukit Makmur.PT - Indonesia
- Cement Manufacturers Association - India
- Singapore Mercantile Exchange
- GMR Energy Limited - India
- IEA Clean Coal Centre - UK
- Directorate Of Revenue Intelligence - India
- PetroVietnam Power Coal Import and Supply Company
- Billiton Holdings Pty Ltd - Australia
- Merrill Lynch Commodities Europe
- Petrochimia International Co. Ltd.- Taiwan
- Globalindo Alam Lestari - Indonesia
- Mjunction Services Limited - India
- Marubeni Corporation - India
- India Bulls Power Limited - India
- Sojitz Corporation - Japan
- Meenaskhi Energy Private Limited - India
- OPG Power Generation Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- VISA Power Limited - India
- Energy Development Corp, Philippines
- Therma Luzon, Inc, Philippines
- Global Business Power Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Interocean Group of Companies - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sree Jayajothi Cements Limited - India
- Siam City Cement PLC, Thailand
- Gujarat Mineral Development Corp Ltd - India
- Deloitte Consulting - India
- Semirara Mining Corp, Philippines
- Madhucon Powers Ltd - India
- Mercuria Energy - Indonesia
- Formosa Plastics Group - Taiwan
- Maheswari Brothers Coal Limited - India
- Posco Energy - South Korea
- IHS Mccloskey Coal Group - USA
- London Commodity Brokers - England
- Standard Chartered Bank - UAE
- Planning Commission, India
- Gujarat Sidhee Cement - India
- Aboitiz Power Corporation - Philippines
- Mercator Lines Limited - India
- Kohat Cement Company Ltd. - Pakistan
- South Luzon Thermal Energy Corporation
- Straits Asia Resources Limited - Singapore
- Intertek Mineral Services - Indonesia
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