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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, 10 May 17
MARKET INSIGHT - INTERMODAL
Up until a few weeks ago, demo deals were being concluded at just a fraction below $400/ldt. Last time we saw demo prices around that level was in ...
Tuesday, 09 May 17
DRY BULK TRADE IS STILL HEAVILY RELIANT ON CHINA - GEORGE LAZARIDIS
We have seen an overall cool down in the dry bulk and tanker markets over the final two weeks of April, sparking worries amongst ship-owners that t ...
Monday, 08 May 17
INDONESIAN COAL PRICE REFERENCE RISES FOR SECOND STRAIGHT MONTH IN MAY
COALspot.com: Indonesian government declared coal benchmark price rose in May, government data showed.
The benchmark price of Indonesian therm ...
Monday, 08 May 17
OCEAN BULK CARGO RATES FALL FURTHER THIS PAST WEEK
COALspot.com: The Freight market continues to slump this past week, with all segments show a negative downward trend week over week.
The Balti ...
Monday, 08 May 17
US WEEKLY COAL OUTPUT ON THE DOWN - EIA
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totaled an estimated 13.8 million short tons ...
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Showing 2051 to 2055 news of total 6871 |
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- Vedanta Resources Plc - India
- Chettinad Cement Corporation Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Commonwealth Bank - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Coalindo Energy - Indonesia
- PNOC Exploration Corporation - Philippines
- Baramulti Group, Indonesia
- Trasteel International SA, Italy
- Kumho Petrochemical, South Korea
- Oldendorff Carriers - Singapore
- Medco Energi Mining Internasional
- PowerSource Philippines DevCo
- San Jose City I Power Corp, Philippines
- Gujarat Sidhee Cement - India
- Makarim & Taira - Indonesia
- Price Waterhouse Coopers - Russia
- Bayan Resources Tbk. - Indonesia
- Thiess Contractors Indonesia
- The Treasury - Australian Government
- Toyota Tsusho Corporation, Japan
- Ministry of Transport, Egypt
- Straits Asia Resources Limited - Singapore
- Marubeni Corporation - India
- Tata Chemicals Ltd - India
- Global Coal Blending Company Limited - Australia
- Goldman Sachs - Singapore
- Directorate General of MIneral and Coal - Indonesia
- MS Steel International - UAE
- Deloitte Consulting - India
- Holcim Trading Pte Ltd - Singapore
- OPG Power Generation Pvt Ltd - India
- CNBM International Corporation - China
- Standard Chartered Bank - UAE
- Kideco Jaya Agung - Indonesia
- Larsen & Toubro Limited - India
- Rashtriya Ispat Nigam Limited - India
- TeaM Sual Corporation - Philippines
- Parry Sugars Refinery, India
- Leighton Contractors Pty Ltd - Australia
- Karaikal Port Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- Bulk Trading Sa - Switzerland
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Global Business Power Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Binh Thuan Hamico - Vietnam
- Indogreen Group - Indonesia
- SMC Global Power, Philippines
- Thai Mozambique Logistica
- Kalimantan Lumbung Energi - Indonesia
- Bhushan Steel Limited - India
- Coal and Oil Company - UAE
- South Luzon Thermal Energy Corporation
- Manunggal Multi Energi - Indonesia
- Sindya Power Generating Company Private Ltd
- Pendopo Energi Batubara - Indonesia
- Kobexindo Tractors - Indoneisa
- Metalloyd Limited - United Kingdom
- Iligan Light & Power Inc, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- Parliament of New Zealand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- LBH Netherlands Bv - Netherlands
- Gujarat Mineral Development Corp Ltd - India
- Globalindo Alam Lestari - Indonesia
- Sojitz Corporation - Japan
- Ambuja Cements Ltd - India
- Petron Corporation, Philippines
- Riau Bara Harum - Indonesia
- McConnell Dowell - Australia
- Meralco Power Generation, Philippines
- Directorate Of Revenue Intelligence - India
- Sarangani Energy Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Bhatia International Limited - India
- Alfred C Toepfer International GmbH - Germany
- Kapuas Tunggal Persada - Indonesia
- Orica Mining Services - Indonesia
- Xindia Steels Limited - India
- Jorong Barutama Greston.PT - Indonesia
- GVK Power & Infra Limited - India
- Heidelberg Cement - Germany
- Intertek Mineral Services - Indonesia
- Central Java Power - Indonesia
- Bukit Makmur.PT - Indonesia
- Sree Jayajothi Cements Limited - India
- CIMB Investment Bank - Malaysia
- Bharathi Cement Corporation - India
- VISA Power Limited - India
- PTC India Limited - India
- Sical Logistics Limited - India
- Edison Trading Spa - Italy
- ICICI Bank Limited - India
- Agrawal Coal Company - India
- Indian Energy Exchange, India
- Kohat Cement Company Ltd. - Pakistan
- India Bulls Power Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Indian Oil Corporation Limited
- New Zealand Coal & Carbon
- Orica Australia Pty. Ltd.
- Siam City Cement - Thailand
- Grasim Industreis Ltd - India
- Coastal Gujarat Power Limited - India
- Vizag Seaport Private Limited - India
- Dalmia Cement Bharat India
- Wood Mackenzie - Singapore
- Energy Development Corp, Philippines
- Eastern Coal Council - USA
- Asmin Koalindo Tuhup - Indonesia
- Singapore Mercantile Exchange
- Indonesian Coal Mining Association
- Tamil Nadu electricity Board
- Kaltim Prima Coal - Indonesia
- Australian Commodity Traders Exchange
- Indo Tambangraya Megah - Indonesia
- Latin American Coal - Colombia
- Karbindo Abesyapradhi - Indoneisa
- Salva Resources Pvt Ltd - India
- Eastern Energy - Thailand
- Kartika Selabumi Mining - Indonesia
- Aboitiz Power Corporation - Philippines
- Essar Steel Hazira Ltd - India
- Meenaskhi Energy Private Limited - India
- Simpson Spence & Young - Indonesia
- Port Waratah Coal Services - Australia
- Indika Energy - Indonesia
- Timah Investasi Mineral - Indoneisa
- Pipit Mutiara Jaya. PT, Indonesia
- PetroVietnam Power Coal Import and Supply Company
- GN Power Mariveles Coal Plant, Philippines
- Mercuria Energy - Indonesia
- Africa Commodities Group - South Africa
- Banpu Public Company Limited - Thailand
- ASAPP Information Group - India
- Bukit Baiduri Energy - Indonesia
- Renaissance Capital - South Africa
- The University of Queensland
- Bhoruka Overseas - Indonesia
- Electricity Authority, New Zealand
- Krishnapatnam Port Company Ltd. - India
- Ministry of Finance - Indonesia
- Independent Power Producers Association of India
- Mjunction Services Limited - India
- Formosa Plastics Group - Taiwan
- Star Paper Mills Limited - India
- Uttam Galva Steels Limited - India
- IEA Clean Coal Centre - UK
- Interocean Group of Companies - India
- Energy Link Ltd, New Zealand
- GAC Shipping (India) Pvt Ltd
- Maharashtra Electricity Regulatory Commission - India
- Antam Resourcindo - Indonesia
- Jaiprakash Power Ventures ltd
- Mercator Lines Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Central Electricity Authority - India
- Therma Luzon, Inc, Philippines
- Georgia Ports Authority, United States
- Savvy Resources Ltd - HongKong
- Electricity Generating Authority of Thailand
- Kepco SPC Power Corporation, Philippines
- Altura Mining Limited, Indonesia
- White Energy Company Limited
- Wilmar Investment Holdings
- Australian Coal Association
- Billiton Holdings Pty Ltd - Australia
- Sakthi Sugars Limited - India
- Planning Commission, India
- Maheswari Brothers Coal Limited - India
- Ind-Barath Power Infra Limited - India
- Barasentosa Lestari - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Borneo Indobara - Indonesia
- Lanco Infratech Ltd - India
- Rio Tinto Coal - Australia
- Chamber of Mines of South Africa
- Semirara Mining and Power Corporation, Philippines
- Cement Manufacturers Association - India
- London Commodity Brokers - England
- Power Finance Corporation Ltd., India
- Ministry of Mines - Canada
- SMG Consultants - Indonesia
- Attock Cement Pakistan Limited
- Carbofer General Trading SA - India
- GMR Energy Limited - India
- Mintek Dendrill Indonesia
- Gujarat Electricity Regulatory Commission - India
- Neyveli Lignite Corporation Ltd, - India
- Videocon Industries ltd - India
- Cigading International Bulk Terminal - Indonesia
- Posco Energy - South Korea
- Bank of Tokyo Mitsubishi UFJ Ltd
- AsiaOL BioFuels Corp., Philippines
- The State Trading Corporation of India Ltd
- Siam City Cement PLC, Thailand
- Samtan Co., Ltd - South Korea
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Economic Council, Georgia
- Malabar Cements Ltd - India
- Anglo American - United Kingdom
- Aditya Birla Group - India
- Semirara Mining Corp, Philippines
- European Bulk Services B.V. - Netherlands
- Bangladesh Power Developement Board
- Madhucon Powers Ltd - India
- Ceylon Electricity Board - Sri Lanka
- SN Aboitiz Power Inc, Philippines
- Romanian Commodities Exchange
- Minerals Council of Australia
- Miang Besar Coal Terminal - Indonesia
- Global Green Power PLC Corporation, Philippines
- Merrill Lynch Commodities Europe
- Sinarmas Energy and Mining - Indonesia
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