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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, 23 May 17
TANKERS WEEKLY MARKET NOTE - ALLIED
It’s been a turbulent couple of weeks on the oil front, with the effectiveness of OPEC’s policy being under debate amongst most traders ...
Monday, 22 May 17
THE SHIPPING INDEX DECLINES AGAIN
COALspot.com: The Freight market again decline this past week, as BDI and all other indexes show a negative trend week over week.
The Baltic E ...
Friday, 19 May 17
U.S WEEKLY COAL OUTPUT UP 1.2% WEEK OVER WEEK - EIA
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totalled an estimated 13.5 million short ton ...
Thursday, 18 May 17
SUPRAMAX : COAL TRIPS TO CHINA WITH VESSELS OPEN INDO HAVE BEEN FIXED AROUND $8000
Supramax
Atlantic market has stayed quiet with no substantial developments.
Cont to Med scrap cargoes have concluded around 11k says Fearnle ...
Thursday, 18 May 17
SOUTHEAST ASIA CAN ACCELERATE ACHIEVEMENT OF PARIS AGREEMENT GOALS - WCA
Low emissions coal in Asia reduces more CO2 emissions than renewable investment in Western Europe.
Investing in low emissions coal plants in S ...
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- Merrill Lynch Commodities Europe
- Ministry of Finance - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Lanco Infratech Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Bukit Makmur.PT - Indonesia
- Orica Australia Pty. Ltd.
- Therma Luzon, Inc, Philippines
- Cement Manufacturers Association - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Siam City Cement - Thailand
- Independent Power Producers Association of India
- Banpu Public Company Limited - Thailand
- Miang Besar Coal Terminal - Indonesia
- Straits Asia Resources Limited - Singapore
- Barasentosa Lestari - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Dalmia Cement Bharat India
- Salva Resources Pvt Ltd - India
- Petron Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- IHS Mccloskey Coal Group - USA
- Africa Commodities Group - South Africa
- Coalindo Energy - Indonesia
- VISA Power Limited - India
- Georgia Ports Authority, United States
- Posco Energy - South Korea
- Port Waratah Coal Services - Australia
- Deloitte Consulting - India
- GMR Energy Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- The University of Queensland
- India Bulls Power Limited - India
- Formosa Plastics Group - Taiwan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bukit Baiduri Energy - Indonesia
- Bhatia International Limited - India
- Bayan Resources Tbk. - Indonesia
- Manunggal Multi Energi - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Timah Investasi Mineral - Indoneisa
- Samtan Co., Ltd - South Korea
- TNB Fuel Sdn Bhd - Malaysia
- Asmin Koalindo Tuhup - Indonesia
- Riau Bara Harum - Indonesia
- European Bulk Services B.V. - Netherlands
- Mjunction Services Limited - India
- Chettinad Cement Corporation Ltd - India
- Videocon Industries ltd - India
- Mercator Lines Limited - India
- Makarim & Taira - Indonesia
- Leighton Contractors Pty Ltd - Australia
- ASAPP Information Group - India
- Renaissance Capital - South Africa
- Marubeni Corporation - India
- Thiess Contractors Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Australian Coal Association
- Sojitz Corporation - Japan
- Electricity Authority, New Zealand
- SN Aboitiz Power Inc, Philippines
- SMC Global Power, Philippines
- Standard Chartered Bank - UAE
- Parry Sugars Refinery, India
- Rio Tinto Coal - Australia
- Savvy Resources Ltd - HongKong
- Pipit Mutiara Jaya. PT, Indonesia
- Global Coal Blending Company Limited - Australia
- Antam Resourcindo - Indonesia
- Singapore Mercantile Exchange
- Trasteel International SA, Italy
- Thai Mozambique Logistica
- Gujarat Sidhee Cement - India
- Indian Oil Corporation Limited
- Mercuria Energy - Indonesia
- Romanian Commodities Exchange
- CNBM International Corporation - China
- Carbofer General Trading SA - India
- Meralco Power Generation, Philippines
- Heidelberg Cement - Germany
- Tamil Nadu electricity Board
- Simpson Spence & Young - Indonesia
- Bulk Trading Sa - Switzerland
- Bharathi Cement Corporation - India
- Global Green Power PLC Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- McConnell Dowell - Australia
- Baramulti Group, Indonesia
- ICICI Bank Limited - India
- Kepco SPC Power Corporation, Philippines
- Attock Cement Pakistan Limited
- Mintek Dendrill Indonesia
- Anglo American - United Kingdom
- Ambuja Cements Ltd - India
- International Coal Ventures Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Grasim Industreis Ltd - India
- Parliament of New Zealand
- Australian Commodity Traders Exchange
- Interocean Group of Companies - India
- Sinarmas Energy and Mining - Indonesia
- Sree Jayajothi Cements Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Globalindo Alam Lestari - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Bank of Tokyo Mitsubishi UFJ Ltd
- Cigading International Bulk Terminal - Indonesia
- Planning Commission, India
- Ind-Barath Power Infra Limited - India
- Aditya Birla Group - India
- Jindal Steel & Power Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- White Energy Company Limited
- Central Java Power - Indonesia
- OPG Power Generation Pvt Ltd - India
- PowerSource Philippines DevCo
- Economic Council, Georgia
- Kobexindo Tractors - Indoneisa
- Borneo Indobara - Indonesia
- Directorate Of Revenue Intelligence - India
- Star Paper Mills Limited - India
- Larsen & Toubro Limited - India
- Electricity Generating Authority of Thailand
- GVK Power & Infra Limited - India
- IEA Clean Coal Centre - UK
- PNOC Exploration Corporation - Philippines
- Essar Steel Hazira Ltd - India
- Altura Mining Limited, Indonesia
- Power Finance Corporation Ltd., India
- Pendopo Energi Batubara - Indonesia
- Energy Link Ltd, New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Vedanta Resources Plc - India
- Eastern Coal Council - USA
- Global Business Power Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- The State Trading Corporation of India Ltd
- Uttam Galva Steels Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Jaiprakash Power Ventures ltd
- Kartika Selabumi Mining - Indonesia
- Siam City Cement PLC, Thailand
- TeaM Sual Corporation - Philippines
- SMG Consultants - Indonesia
- Bhoruka Overseas - Indonesia
- London Commodity Brokers - England
- Ministry of Transport, Egypt
- Tata Chemicals Ltd - India
- Intertek Mineral Services - Indonesia
- Maheswari Brothers Coal Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Energy Development Corp, Philippines
- Meenaskhi Energy Private Limited - India
- Iligan Light & Power Inc, Philippines
- Xindia Steels Limited - India
- MS Steel International - UAE
- Sical Logistics Limited - India
- Kaltim Prima Coal - Indonesia
- Commonwealth Bank - Australia
- Indonesian Coal Mining Association
- Gujarat Mineral Development Corp Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Wilmar Investment Holdings
- Sindya Power Generating Company Private Ltd
- Kideco Jaya Agung - Indonesia
- PTC India Limited - India
- Wood Mackenzie - Singapore
- Eastern Energy - Thailand
- Indo Tambangraya Megah - Indonesia
- LBH Netherlands Bv - Netherlands
- Toyota Tsusho Corporation, Japan
- CIMB Investment Bank - Malaysia
- Chamber of Mines of South Africa
- South Luzon Thermal Energy Corporation
- Rashtriya Ispat Nigam Limited - India
- Central Electricity Authority - India
- Coastal Gujarat Power Limited - India
- Price Waterhouse Coopers - Russia
- Goldman Sachs - Singapore
- Bhushan Steel Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Karaikal Port Pvt Ltd - India
- The Treasury - Australian Government
- Kalimantan Lumbung Energi - Indonesia
- Semirara Mining Corp, Philippines
- Indogreen Group - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Binh Thuan Hamico - Vietnam
- Minerals Council of Australia
- Sakthi Sugars Limited - India
- Medco Energi Mining Internasional
- San Jose City I Power Corp, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Metalloyd Limited - United Kingdom
- Oldendorff Carriers - Singapore
- Latin American Coal - Colombia
- Edison Trading Spa - Italy
- GAC Shipping (India) Pvt Ltd
- New Zealand Coal & Carbon
- Vizag Seaport Private Limited - India
- Semirara Mining and Power Corporation, Philippines
- Orica Mining Services - Indonesia
- Bangladesh Power Developement Board
- Agrawal Coal Company - India
- Ministry of Mines - Canada
- Malabar Cements Ltd - India
- Indika Energy - Indonesia
- Indian Energy Exchange, India
- Madhucon Powers Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Coal and Oil Company - UAE
- Kumho Petrochemical, South Korea
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