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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, 31 May 17
MARKET INSIGHT - KONSTANTINOS KAKAVITSAS
In the next episode of the oil market; The market reacts to OPEC’s production cut extension, the US shale oil producers are ruining the carte ...
Tuesday, 30 May 17
MARKET ANALYSIS - GEORGE LAZARIDIS
Despite the fair performance that has been noted in the Chinese economy over the past 5 months, we have started to see an increase in the skepticis ...
Friday, 26 May 17
MOST COAL PLANTS IN THE UNITED STATES WERE BUILT BEFORE 1990 - EIA
Coal-fired electricity generators accounted for 25% of operating electricity generating capacity in the United States and generated about 30% of U. ...
Friday, 26 May 17
U.S WEEKLY COAL OUTPUT ESTIMATE UP 6.3% W/W
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totalled an estimated 14.3 million short ton ...
Wednesday, 24 May 17
LR MARKET IT SEEMS THAT EARNINGS ARE STILL UNDER PRESSURE - INTERMODAL
As we are approaching the summer season, the Clean Product market appears poised to become more challenging, either on East or West of Suez.
L ...
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- Cigading International Bulk Terminal - Indonesia
- Therma Luzon, Inc, Philippines
- Bukit Baiduri Energy - Indonesia
- Mintek Dendrill Indonesia
- Star Paper Mills Limited - India
- Uttam Galva Steels Limited - India
- Salva Resources Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Oldendorff Carriers - Singapore
- Indo Tambangraya Megah - Indonesia
- Maheswari Brothers Coal Limited - India
- Kartika Selabumi Mining - Indonesia
- The State Trading Corporation of India Ltd
- Heidelberg Cement - Germany
- Ambuja Cements Ltd - India
- Thai Mozambique Logistica
- PNOC Exploration Corporation - Philippines
- Coastal Gujarat Power Limited - India
- Directorate Of Revenue Intelligence - India
- Coalindo Energy - Indonesia
- Price Waterhouse Coopers - Russia
- Singapore Mercantile Exchange
- IEA Clean Coal Centre - UK
- Standard Chartered Bank - UAE
- Orica Australia Pty. Ltd.
- CNBM International Corporation - China
- Medco Energi Mining Internasional
- Rashtriya Ispat Nigam Limited - India
- Kepco SPC Power Corporation, Philippines
- Africa Commodities Group - South Africa
- Australian Commodity Traders Exchange
- Miang Besar Coal Terminal - Indonesia
- Gujarat Sidhee Cement - India
- Global Business Power Corporation, Philippines
- Goldman Sachs - Singapore
- The Treasury - Australian Government
- Makarim & Taira - Indonesia
- Madhucon Powers Ltd - India
- GMR Energy Limited - India
- Ind-Barath Power Infra Limited - India
- Karaikal Port Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Savvy Resources Ltd - HongKong
- Wilmar Investment Holdings
- Bahari Cakrawala Sebuku - Indonesia
- Ministry of Mines - Canada
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Billiton Holdings Pty Ltd - Australia
- London Commodity Brokers - England
- Maharashtra Electricity Regulatory Commission - India
- Vizag Seaport Private Limited - India
- Global Green Power PLC Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- White Energy Company Limited
- Jaiprakash Power Ventures ltd
- Trasteel International SA, Italy
- Pendopo Energi Batubara - Indonesia
- Independent Power Producers Association of India
- PetroVietnam Power Coal Import and Supply Company
- Vedanta Resources Plc - India
- GAC Shipping (India) Pvt Ltd
- SN Aboitiz Power Inc, Philippines
- Videocon Industries ltd - India
- Globalindo Alam Lestari - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Leighton Contractors Pty Ltd - Australia
- Chamber of Mines of South Africa
- Agrawal Coal Company - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Thiess Contractors Indonesia
- Coal and Oil Company - UAE
- Electricity Authority, New Zealand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Samtan Co., Ltd - South Korea
- Neyveli Lignite Corporation Ltd, - India
- Kaltim Prima Coal - Indonesia
- Grasim Industreis Ltd - India
- ASAPP Information Group - India
- South Luzon Thermal Energy Corporation
- TeaM Sual Corporation - Philippines
- AsiaOL BioFuels Corp., Philippines
- Merrill Lynch Commodities Europe
- Pipit Mutiara Jaya. PT, Indonesia
- Ministry of Transport, Egypt
- Timah Investasi Mineral - Indoneisa
- Siam City Cement - Thailand
- Mjunction Services Limited - India
- Central Electricity Authority - India
- Holcim Trading Pte Ltd - Singapore
- Minerals Council of Australia
- Tata Chemicals Ltd - India
- LBH Netherlands Bv - Netherlands
- Offshore Bulk Terminal Pte Ltd, Singapore
- Georgia Ports Authority, United States
- Semirara Mining and Power Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Deloitte Consulting - India
- Sinarmas Energy and Mining - Indonesia
- Altura Mining Limited, Indonesia
- Petron Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Sical Logistics Limited - India
- Semirara Mining Corp, Philippines
- Bhoruka Overseas - Indonesia
- Edison Trading Spa - Italy
- Meenaskhi Energy Private Limited - India
- Kobexindo Tractors - Indoneisa
- Renaissance Capital - South Africa
- Bukit Makmur.PT - Indonesia
- Toyota Tsusho Corporation, Japan
- Global Coal Blending Company Limited - Australia
- Eastern Coal Council - USA
- PTC India Limited - India
- Bayan Resources Tbk. - Indonesia
- Attock Cement Pakistan Limited
- Meralco Power Generation, Philippines
- Interocean Group of Companies - India
- Lanco Infratech Ltd - India
- Binh Thuan Hamico - Vietnam
- Cement Manufacturers Association - India
- Mercuria Energy - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Ministry of Finance - Indonesia
- Kideco Jaya Agung - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- MS Steel International - UAE
- Intertek Mineral Services - Indonesia
- Larsen & Toubro Limited - India
- Parliament of New Zealand
- Antam Resourcindo - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Kumho Petrochemical, South Korea
- Xindia Steels Limited - India
- VISA Power Limited - India
- Bharathi Cement Corporation - India
- Posco Energy - South Korea
- Central Java Power - Indonesia
- Borneo Indobara - Indonesia
- OPG Power Generation Pvt Ltd - India
- Port Waratah Coal Services - Australia
- Alfred C Toepfer International GmbH - Germany
- Banpu Public Company Limited - Thailand
- CIMB Investment Bank - Malaysia
- India Bulls Power Limited - India
- Sindya Power Generating Company Private Ltd
- SMG Consultants - Indonesia
- Romanian Commodities Exchange
- Energy Link Ltd, New Zealand
- SMC Global Power, Philippines
- Indonesian Coal Mining Association
- Economic Council, Georgia
- Barasentosa Lestari - Indonesia
- ICICI Bank Limited - India
- Energy Development Corp, Philippines
- Tamil Nadu electricity Board
- PowerSource Philippines DevCo
- Formosa Plastics Group - Taiwan
- Sarangani Energy Corporation, Philippines
- Bhushan Steel Limited - India
- Siam City Cement PLC, Thailand
- New Zealand Coal & Carbon
- McConnell Dowell - Australia
- Dalmia Cement Bharat India
- Mercator Lines Limited - India
- International Coal Ventures Pvt Ltd - India
- Wood Mackenzie - Singapore
- IHS Mccloskey Coal Group - USA
- Indogreen Group - Indonesia
- Eastern Energy - Thailand
- Asmin Koalindo Tuhup - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- Malabar Cements Ltd - India
- Bulk Trading Sa - Switzerland
- Aditya Birla Group - India
- Electricity Generating Authority of Thailand
- Sakthi Sugars Limited - India
- Essar Steel Hazira Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- GN Power Mariveles Coal Plant, Philippines
- Sree Jayajothi Cements Limited - India
- Sojitz Corporation - Japan
- Manunggal Multi Energi - Indonesia
- Australian Coal Association
- Straits Asia Resources Limited - Singapore
- Ceylon Electricity Board - Sri Lanka
- Riau Bara Harum - Indonesia
- Bhatia International Limited - India
- Planning Commission, India
- TNB Fuel Sdn Bhd - Malaysia
- Anglo American - United Kingdom
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indian Energy Exchange, India
- Rio Tinto Coal - Australia
- Latin American Coal - Colombia
- The University of Queensland
- Aboitiz Power Corporation - Philippines
- Marubeni Corporation - India
- Bangladesh Power Developement Board
- GVK Power & Infra Limited - India
- Commonwealth Bank - Australia
- Metalloyd Limited - United Kingdom
- Orica Mining Services - Indonesia
- Baramulti Group, Indonesia
- Karbindo Abesyapradhi - Indoneisa
- San Jose City I Power Corp, Philippines
- Parry Sugars Refinery, India
- Carbofer General Trading SA - India
- European Bulk Services B.V. - Netherlands
- Power Finance Corporation Ltd., India
- Indian Oil Corporation Limited
- Directorate General of MIneral and Coal - Indonesia
- Indika Energy - Indonesia
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