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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, 07 June 17
MARKET INSIGHT - PANOS MAKRINOS
2017 undoubtedly began with very optimistic signs for the future of the Oil & Gas industry on the back of the Vienna Agreement. OPEC and non-OP ...
Tuesday, 06 June 17
THE FREIGHT MARKET WAS CONTINUE TO TUMBLE THIS PAST WEEK
COALspot.com: The Freight market continued to tumble this past week, as BDI and cape index showed a negative trend week over week.
The Baltic ...
Friday, 02 June 17
THE WORLD COAL ASSOCIATION HAS RESPONDED TO THE WITHDRAWAL OF THE UNITED STATES FROM THE PARIS AGREEMENT
“This decision is the result of a failure to build a genuine coalition on climate action that recognises the role of all technologies, includ ...
Friday, 02 June 17
MOL SIGNS COAL TRANSPORT DEAL WITH THERMAL POWERTECH CORPORATION INDIA LIMITED
MOL Signs Coal Transport Deal with Thermal Powertech Corporation India Limited - Contributing to a Stable Power Supply in India -
Jun ...
Friday, 02 June 17
U.S THE PAST WEEK'S COAL PRODUCTION ESTIMATE UP 4.4% - EIA
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totaled an estimated 15 million short tonnes ...
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- Savvy Resources Ltd - HongKong
- LBH Netherlands Bv - Netherlands
- Global Green Power PLC Corporation, Philippines
- Videocon Industries ltd - India
- Rio Tinto Coal - Australia
- Pendopo Energi Batubara - Indonesia
- SMG Consultants - Indonesia
- Cement Manufacturers Association - India
- GN Power Mariveles Coal Plant, Philippines
- Mintek Dendrill Indonesia
- Electricity Generating Authority of Thailand
- Neyveli Lignite Corporation Ltd, - India
- Samtan Co., Ltd - South Korea
- Miang Besar Coal Terminal - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Semirara Mining and Power Corporation, Philippines
- Indo Tambangraya Megah - Indonesia
- Kideco Jaya Agung - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Electricity Authority, New Zealand
- The University of Queensland
- Straits Asia Resources Limited - Singapore
- Gujarat Mineral Development Corp Ltd - India
- Ministry of Mines - Canada
- San Jose City I Power Corp, Philippines
- Metalloyd Limited - United Kingdom
- Toyota Tsusho Corporation, Japan
- Posco Energy - South Korea
- Kalimantan Lumbung Energi - Indonesia
- Chettinad Cement Corporation Ltd - India
- Tata Chemicals Ltd - India
- ASAPP Information Group - India
- Wood Mackenzie - Singapore
- Cigading International Bulk Terminal - Indonesia
- Energy Link Ltd, New Zealand
- Renaissance Capital - South Africa
- Pipit Mutiara Jaya. PT, Indonesia
- Petron Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- Intertek Mineral Services - Indonesia
- Sakthi Sugars Limited - India
- Australian Commodity Traders Exchange
- Bhoruka Overseas - Indonesia
- Kobexindo Tractors - Indoneisa
- Vizag Seaport Private Limited - India
- Chamber of Mines of South Africa
- Goldman Sachs - Singapore
- Marubeni Corporation - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Mjunction Services Limited - India
- Kepco SPC Power Corporation, Philippines
- Power Finance Corporation Ltd., India
- Central Electricity Authority - India
- International Coal Ventures Pvt Ltd - India
- Parry Sugars Refinery, India
- Coalindo Energy - Indonesia
- Heidelberg Cement - Germany
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Minerals Council of Australia
- Bukit Baiduri Energy - Indonesia
- Makarim & Taira - Indonesia
- Aditya Birla Group - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Oldendorff Carriers - Singapore
- Orica Australia Pty. Ltd.
- GVK Power & Infra Limited - India
- IEA Clean Coal Centre - UK
- Anglo American - United Kingdom
- Formosa Plastics Group - Taiwan
- Deloitte Consulting - India
- Ceylon Electricity Board - Sri Lanka
- Edison Trading Spa - Italy
- CNBM International Corporation - China
- Jorong Barutama Greston.PT - Indonesia
- Larsen & Toubro Limited - India
- Bukit Makmur.PT - Indonesia
- GAC Shipping (India) Pvt Ltd
- Antam Resourcindo - Indonesia
- Parliament of New Zealand
- Jindal Steel & Power Ltd - India
- The State Trading Corporation of India Ltd
- Vijayanagar Sugar Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Commonwealth Bank - Australia
- Agrawal Coal Company - India
- Sree Jayajothi Cements Limited - India
- Bangladesh Power Developement Board
- South Luzon Thermal Energy Corporation
- Madhucon Powers Ltd - India
- Bhatia International Limited - India
- Altura Mining Limited, Indonesia
- Uttam Galva Steels Limited - India
- PetroVietnam Power Coal Import and Supply Company
- CIMB Investment Bank - Malaysia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Africa Commodities Group - South Africa
- MS Steel International - UAE
- Orica Mining Services - Indonesia
- Central Java Power - Indonesia
- Coal and Oil Company - UAE
- Vedanta Resources Plc - India
- Indonesian Coal Mining Association
- TeaM Sual Corporation - Philippines
- SMC Global Power, Philippines
- Directorate Of Revenue Intelligence - India
- Standard Chartered Bank - UAE
- Attock Cement Pakistan Limited
- Kaltim Prima Coal - Indonesia
- Trasteel International SA, Italy
- Banpu Public Company Limited - Thailand
- Riau Bara Harum - Indonesia
- Maheswari Brothers Coal Limited - India
- Timah Investasi Mineral - Indoneisa
- Carbofer General Trading SA - India
- Economic Council, Georgia
- Karbindo Abesyapradhi - Indoneisa
- New Zealand Coal & Carbon
- Global Business Power Corporation, Philippines
- Thiess Contractors Indonesia
- Binh Thuan Hamico - Vietnam
- Planning Commission, India
- Merrill Lynch Commodities Europe
- Billiton Holdings Pty Ltd - Australia
- Independent Power Producers Association of India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Lanco Infratech Ltd - India
- Port Waratah Coal Services - Australia
- Semirara Mining Corp, Philippines
- Dalmia Cement Bharat India
- Indian Oil Corporation Limited
- Essar Steel Hazira Ltd - India
- Siam City Cement PLC, Thailand
- Bayan Resources Tbk. - Indonesia
- Barasentosa Lestari - Indonesia
- Manunggal Multi Energi - Indonesia
- Sindya Power Generating Company Private Ltd
- Meralco Power Generation, Philippines
- Thai Mozambique Logistica
- Bahari Cakrawala Sebuku - Indonesia
- Gujarat Sidhee Cement - India
- Romanian Commodities Exchange
- Global Coal Blending Company Limited - Australia
- Mercator Lines Limited - India
- European Bulk Services B.V. - Netherlands
- VISA Power Limited - India
- Alfred C Toepfer International GmbH - Germany
- Price Waterhouse Coopers - Russia
- IHS Mccloskey Coal Group - USA
- Indian Energy Exchange, India
- Rashtriya Ispat Nigam Limited - India
- Georgia Ports Authority, United States
- India Bulls Power Limited - India
- PTC India Limited - India
- Interocean Group of Companies - India
- ICICI Bank Limited - India
- Star Paper Mills Limited - India
- PNOC Exploration Corporation - Philippines
- Iligan Light & Power Inc, Philippines
- Simpson Spence & Young - Indonesia
- GMR Energy Limited - India
- AsiaOL BioFuels Corp., Philippines
- Ambuja Cements Ltd - India
- Therma Luzon, Inc, Philippines
- Ind-Barath Power Infra Limited - India
- McConnell Dowell - Australia
- Kartika Selabumi Mining - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Medco Energi Mining Internasional
- Singapore Mercantile Exchange
- Baramulti Group, Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Energy Development Corp, Philippines
- Borneo Indobara - Indonesia
- Ministry of Transport, Egypt
- Aboitiz Power Corporation - Philippines
- SN Aboitiz Power Inc, Philippines
- Bhushan Steel Limited - India
- Coastal Gujarat Power Limited - India
- Gujarat Electricity Regulatory Commission - India
- Kumho Petrochemical, South Korea
- Salva Resources Pvt Ltd - India
- Eastern Energy - Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- White Energy Company Limited
- OPG Power Generation Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Kohat Cement Company Ltd. - Pakistan
- Ministry of Finance - Indonesia
- London Commodity Brokers - England
- Bulk Trading Sa - Switzerland
- Meenaskhi Energy Private Limited - India
- Sinarmas Energy and Mining - Indonesia
- Australian Coal Association
- Sical Logistics Limited - India
- Mercuria Energy - Indonesia
- Siam City Cement - Thailand
- Malabar Cements Ltd - India
- Sojitz Corporation - Japan
- TNB Fuel Sdn Bhd - Malaysia
- The Treasury - Australian Government
- Bank of Tokyo Mitsubishi UFJ Ltd
- Karaikal Port Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Eastern Coal Council - USA
- PowerSource Philippines DevCo
- Tamil Nadu electricity Board
- Xindia Steels Limited - India
- Grasim Industreis Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Latin American Coal - Colombia
- Bharathi Cement Corporation - India
- Krishnapatnam Port Company Ltd. - India
- Wilmar Investment Holdings
- Indika Energy - Indonesia
- Indogreen Group - Indonesia
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