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