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