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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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Tuesday, 20 June 17
WORLD ECONOMY SHOWS A MORE OPTIMISTIC TREND
During the past weeks, we have seen many organizations and think tanks show a more optimistic face with regards to the world economy. The World Ban ...
Monday, 19 June 17
PANAMAX RATES HELP BALTIC INDEX TO A POSITIVE MOVE
COALspot.com: The Freight market rose very marginally this past week compared to the previous week, as BDI and Panamax indexes show a positive tren ...
Friday, 16 June 17
WEEKLY U.S. COAL PRODUCTION RISES; UP 24.1% Y/Y
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totaled an estimated 15.5 million short tonn ...
Thursday, 15 June 17
SUPRAMAX NICKEL ORE FROM PHILIPPINES TO S. CHINA PAYING AROUND MID $10000 - FEARNLEYS
Supramax
Market looked more promising from both sides of the basins. Within Atlantic USG returned with tick better rates seen as tonnage kept tig ...
Wednesday, 14 June 17
WORLD COAL PRODUCTION FELL BY 6.2%, THE LARGEST ANNUAL DECLINE ON RECORD - BP
COALspot.com: The 2017 edition of the BP Statistical Review of World Energy, shows global energy markets continuing to undergo long-term changes as ...
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Showing 2021 to 2025 news of total 6871 |
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- Pendopo Energi Batubara - Indonesia
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- Mercuria Energy - Indonesia
- Mintek Dendrill Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Kaltim Prima Coal - Indonesia
- Electricity Generating Authority of Thailand
- Electricity Authority, New Zealand
- Aboitiz Power Corporation - Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Globalindo Alam Lestari - Indonesia
- London Commodity Brokers - England
- Ministry of Finance - Indonesia
- Rio Tinto Coal - Australia
- San Jose City I Power Corp, Philippines
- Mercator Lines Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- VISA Power Limited - India
- GAC Shipping (India) Pvt Ltd
- Australian Commodity Traders Exchange
- Semirara Mining and Power Corporation, Philippines
- Edison Trading Spa - Italy
- Indian Oil Corporation Limited
- Malabar Cements Ltd - India
- Binh Thuan Hamico - Vietnam
- Sindya Power Generating Company Private Ltd
- Singapore Mercantile Exchange
- Dalmia Cement Bharat India
- Jaiprakash Power Ventures ltd
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- Toyota Tsusho Corporation, Japan
- Independent Power Producers Association of India
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- Sarangani Energy Corporation, Philippines
- The Treasury - Australian Government
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- Gujarat Electricity Regulatory Commission - India
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- Simpson Spence & Young - Indonesia
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- Global Coal Blending Company Limited - Australia
- Posco Energy - South Korea
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- Kumho Petrochemical, South Korea
- Sinarmas Energy and Mining - Indonesia
- ASAPP Information Group - India
- McConnell Dowell - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Parliament of New Zealand
- Altura Mining Limited, Indonesia
- GMR Energy Limited - India
- Port Waratah Coal Services - Australia
- Vizag Seaport Private Limited - India
- Aditya Birla Group - India
- Indonesian Coal Mining Association
- Carbofer General Trading SA - India
- MS Steel International - UAE
- Renaissance Capital - South Africa
- GVK Power & Infra Limited - India
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- Mjunction Services Limited - India
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- Banpu Public Company Limited - Thailand
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- Sojitz Corporation - Japan
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- Economic Council, Georgia
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- SMC Global Power, Philippines
- Central Electricity Authority - India
- Thai Mozambique Logistica
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- IEA Clean Coal Centre - UK
- Meralco Power Generation, Philippines
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- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Xindia Steels Limited - India
- Billiton Holdings Pty Ltd - Australia
- Neyveli Lignite Corporation Ltd, - India
- Australian Coal Association
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Planning Commission, India
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- Sakthi Sugars Limited - India
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- Vedanta Resources Plc - India
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- Gujarat Mineral Development Corp Ltd - India
- Thiess Contractors Indonesia
- Therma Luzon, Inc, Philippines
- Orica Mining Services - Indonesia
- Wilmar Investment Holdings
- SN Aboitiz Power Inc, Philippines
- Power Finance Corporation Ltd., India
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- Chamber of Mines of South Africa
- Timah Investasi Mineral - Indoneisa
- Coal and Oil Company - UAE
- Salva Resources Pvt Ltd - India
- Parry Sugars Refinery, India
- OPG Power Generation Pvt Ltd - India
- Anglo American - United Kingdom
- Uttam Galva Steels Limited - India
- Baramulti Group, Indonesia
- TeaM Sual Corporation - Philippines
- Energy Link Ltd, New Zealand
- PNOC Exploration Corporation - Philippines
- Eastern Coal Council - USA
- Bukit Baiduri Energy - Indonesia
- White Energy Company Limited
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- Marubeni Corporation - India
- Manunggal Multi Energi - Indonesia
- European Bulk Services B.V. - Netherlands
- Star Paper Mills Limited - India
- New Zealand Coal & Carbon
- Tamil Nadu electricity Board
- Global Business Power Corporation, Philippines
- Indogreen Group - Indonesia
- Kideco Jaya Agung - Indonesia
- Interocean Group of Companies - India
- Samtan Co., Ltd - South Korea
- Jindal Steel & Power Ltd - India
- Ind-Barath Power Infra Limited - India
- Coastal Gujarat Power Limited - India
- Leighton Contractors Pty Ltd - Australia
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- The State Trading Corporation of India Ltd
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- Semirara Mining Corp, Philippines
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- Kobexindo Tractors - Indoneisa
- Commonwealth Bank - Australia
- Latin American Coal - Colombia
- Kohat Cement Company Ltd. - Pakistan
- Deloitte Consulting - India
- Price Waterhouse Coopers - Russia
- Videocon Industries ltd - India
- Straits Asia Resources Limited - Singapore
- Energy Development Corp, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Central Java Power - Indonesia
- Alfred C Toepfer International GmbH - Germany
- CNBM International Corporation - China
- The University of Queensland
- Georgia Ports Authority, United States
- Metalloyd Limited - United Kingdom
- Standard Chartered Bank - UAE
- Bhushan Steel Limited - India
- Minerals Council of Australia
- Oldendorff Carriers - Singapore
- Africa Commodities Group - South Africa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Intertek Mineral Services - Indonesia
- Bhatia International Limited - India
- Wood Mackenzie - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Grasim Industreis Ltd - India
- Larsen & Toubro Limited - India
- Global Green Power PLC Corporation, Philippines
- Heidelberg Cement - Germany
- Bhoruka Overseas - Indonesia
- Essar Steel Hazira Ltd - India
- IHS Mccloskey Coal Group - USA
- International Coal Ventures Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Borneo Indobara - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Goldman Sachs - Singapore
- Ministry of Mines - Canada
- Karaikal Port Pvt Ltd - India
- Trasteel International SA, Italy
- Directorate Of Revenue Intelligence - India
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- Meenaskhi Energy Private Limited - India
- Holcim Trading Pte Ltd - Singapore
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- Merrill Lynch Commodities Europe
- Karbindo Abesyapradhi - Indoneisa
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- Ministry of Transport, Egypt
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- Siam City Cement PLC, Thailand
- Bukit Makmur.PT - Indonesia
- Bangladesh Power Developement Board
- PowerSource Philippines DevCo
- Petron Corporation, Philippines
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- AsiaOL BioFuels Corp., Philippines
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- Bulk Trading Sa - Switzerland
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