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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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Wednesday, 14 June 17
HANDYSIZES AND PANAMAXES ENJOY THE TIGHTEST SUPPLY - PANOS TSILINGIRIS
The dry and the tanker shipping segments have dissimilar exposure to supply-driven opportunity (or risk). While the vintage (i.e., over 15 years ol ...
Tuesday, 13 June 17
THE TANKER FREIGHT MARKET IS STILL UNDER PRESSURE - GEORGE LAZARIDIS
News of U.S. inventory decline has hit the market by surprise with prices of the commodity showing some quick revival as OPEC continues to push wit ...
Monday, 12 June 17
THE BALTIC DRY INDEX TOOK A POSITIVE STEP
COALspot.com: The Freight market incline this past week compared to the previous week, as BDI, Cape and Panamax indexes show a positive trend week ...
Friday, 09 June 17
U.S WEEKLY COAL OUTPUT WAS FLAT WEEK OVER WEEK - EIA
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totaled an estimated 15 million short tonnes ...
Wednesday, 07 June 17
INDO HBA INDEX SEE LARGEST DROP SINCE FEBRUARY 2017
COALspot.com: Indonesian coal benchmark price decline 9.96% in June, government data showed.
The benchmark price of Indonesian thermal coal de ...
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- Indo Tambangraya Megah - Indonesia
- Economic Council, Georgia
- Anglo American - United Kingdom
- Meenaskhi Energy Private Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Planning Commission, India
- Bayan Resources Tbk. - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Electricity Generating Authority of Thailand
- Rio Tinto Coal - Australia
- OPG Power Generation Pvt Ltd - India
- Georgia Ports Authority, United States
- Parliament of New Zealand
- Siam City Cement PLC, Thailand
- European Bulk Services B.V. - Netherlands
- Agrawal Coal Company - India
- International Coal Ventures Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Bharathi Cement Corporation - India
- Ministry of Finance - Indonesia
- Eastern Coal Council - USA
- Leighton Contractors Pty Ltd - Australia
- Pendopo Energi Batubara - Indonesia
- South Luzon Thermal Energy Corporation
- Power Finance Corporation Ltd., India
- Intertek Mineral Services - Indonesia
- London Commodity Brokers - England
- Merrill Lynch Commodities Europe
- Manunggal Multi Energi - Indonesia
- Toyota Tsusho Corporation, Japan
- Kalimantan Lumbung Energi - Indonesia
- Africa Commodities Group - South Africa
- Medco Energi Mining Internasional
- Cement Manufacturers Association - India
- Globalindo Alam Lestari - Indonesia
- Renaissance Capital - South Africa
- Iligan Light & Power Inc, Philippines
- Posco Energy - South Korea
- Vizag Seaport Private Limited - India
- Makarim & Taira - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Petron Corporation, Philippines
- Aditya Birla Group - India
- Independent Power Producers Association of India
- Tamil Nadu electricity Board
- PNOC Exploration Corporation - Philippines
- Bhoruka Overseas - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Coal and Oil Company - UAE
- Tata Chemicals Ltd - India
- Sakthi Sugars Limited - India
- Wilmar Investment Holdings
- Xindia Steels Limited - India
- Antam Resourcindo - Indonesia
- The State Trading Corporation of India Ltd
- Therma Luzon, Inc, Philippines
- Parry Sugars Refinery, India
- Chamber of Mines of South Africa
- Price Waterhouse Coopers - Russia
- Borneo Indobara - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Coastal Gujarat Power Limited - India
- Global Green Power PLC Corporation, Philippines
- SMC Global Power, Philippines
- GMR Energy Limited - India
- TeaM Sual Corporation - Philippines
- Indika Energy - Indonesia
- GVK Power & Infra Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Chettinad Cement Corporation Ltd - India
- SN Aboitiz Power Inc, Philippines
- Bhushan Steel Limited - India
- CIMB Investment Bank - Malaysia
- Vijayanagar Sugar Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Thiess Contractors Indonesia
- Formosa Plastics Group - Taiwan
- Kobexindo Tractors - Indoneisa
- Kapuas Tunggal Persada - Indonesia
- Kideco Jaya Agung - Indonesia
- Bukit Makmur.PT - Indonesia
- Australian Coal Association
- Banpu Public Company Limited - Thailand
- Sree Jayajothi Cements Limited - India
- ASAPP Information Group - India
- Meralco Power Generation, Philippines
- Lanco Infratech Ltd - India
- Orica Australia Pty. Ltd.
- Star Paper Mills Limited - India
- Orica Mining Services - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Salva Resources Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Sojitz Corporation - Japan
- Kartika Selabumi Mining - Indonesia
- Barasentosa Lestari - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- India Bulls Power Limited - India
- Sindya Power Generating Company Private Ltd
- Ind-Barath Power Infra Limited - India
- MS Steel International - UAE
- San Jose City I Power Corp, Philippines
- CNBM International Corporation - China
- Videocon Industries ltd - India
- Carbofer General Trading SA - India
- ICICI Bank Limited - India
- Singapore Mercantile Exchange
- Gujarat Sidhee Cement - India
- SMG Consultants - Indonesia
- Altura Mining Limited, Indonesia
- Semirara Mining Corp, Philippines
- Uttam Galva Steels Limited - India
- VISA Power Limited - India
- Deloitte Consulting - India
- Karaikal Port Pvt Ltd - India
- The University of Queensland
- Sinarmas Energy and Mining - Indonesia
- PTC India Limited - India
- Madhucon Powers Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Baramulti Group, Indonesia
- Port Waratah Coal Services - Australia
- Ministry of Mines - Canada
- Mercuria Energy - Indonesia
- Sical Logistics Limited - India
- Coalindo Energy - Indonesia
- Jaiprakash Power Ventures ltd
- Vedanta Resources Plc - India
- Larsen & Toubro Limited - India
- Mercator Lines Limited - India
- Mintek Dendrill Indonesia
- Electricity Authority, New Zealand
- Indian Oil Corporation Limited
- Karbindo Abesyapradhi - Indoneisa
- Oldendorff Carriers - Singapore
- Latin American Coal - Colombia
- Savvy Resources Ltd - HongKong
- Ministry of Transport, Egypt
- Krishnapatnam Port Company Ltd. - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- McConnell Dowell - Australia
- Simpson Spence & Young - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Global Coal Blending Company Limited - Australia
- Bukit Baiduri Energy - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Binh Thuan Hamico - Vietnam
- Rashtriya Ispat Nigam Limited - India
- Interocean Group of Companies - India
- Maharashtra Electricity Regulatory Commission - India
- Kumho Petrochemical, South Korea
- Standard Chartered Bank - UAE
- Grasim Industreis Ltd - India
- Minerals Council of Australia
- Kaltim Prima Coal - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Metalloyd Limited - United Kingdom
- Siam City Cement - Thailand
- Indogreen Group - Indonesia
- Bangladesh Power Developement Board
- LBH Netherlands Bv - Netherlands
- Ceylon Electricity Board - Sri Lanka
- Straits Asia Resources Limited - Singapore
- PowerSource Philippines DevCo
- Trasteel International SA, Italy
- Heidelberg Cement - Germany
- Marubeni Corporation - India
- Thai Mozambique Logistica
- Edison Trading Spa - Italy
- Bukit Asam (Persero) Tbk - Indonesia
- Mjunction Services Limited - India
- Wood Mackenzie - Singapore
- Eastern Energy - Thailand
- Commonwealth Bank - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Romanian Commodities Exchange
- Bahari Cakrawala Sebuku - Indonesia
- Central Electricity Authority - India
- Miang Besar Coal Terminal - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Central Java Power - Indonesia
- Malabar Cements Ltd - India
- The Treasury - Australian Government
- Petrochimia International Co. Ltd.- Taiwan
- New Zealand Coal & Carbon
- Aboitiz Power Corporation - Philippines
- Directorate Of Revenue Intelligence - India
- Alfred C Toepfer International GmbH - Germany
- Holcim Trading Pte Ltd - Singapore
- Indian Energy Exchange, India
- Bulk Trading Sa - Switzerland
- Bhatia International Limited - India
- Indonesian Coal Mining Association
- Riau Bara Harum - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Attock Cement Pakistan Limited
- Australian Commodity Traders Exchange
- Energy Link Ltd, New Zealand
- Goldman Sachs - Singapore
- GAC Shipping (India) Pvt Ltd
- IHS Mccloskey Coal Group - USA
- Energy Development Corp, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Jindal Steel & Power Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- White Energy Company Limited
- Ambuja Cements Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kepco SPC Power Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Dalmia Cement Bharat India
- Timah Investasi Mineral - Indoneisa
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