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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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Thursday, 04 May 17
SUPRAMAX: INDO COAL ROUNDS LEVELS WITH DELIVERY CHINA IS TRADING AROUND LOW $6K, TRIP BACK TO CHINA
Supramax
The short week brought weaker rates across all routes. Supras from USG to Japan were fixed around $19-20 k daily and from ECSA to ECI $1 ...
Wednesday, 03 May 17
MALAYSIA SEEMS AS BIGGEST ADARO COAL IMPORTER IN Q1' 17
COALspot.com: In 1Q17, 30% of Adaro's sales went to Indonesia, the data from unaudited consolidated financial statement shows.
Malaysia ca ...
Wednesday, 03 May 17
MARKET INSIGHT - STELIOS KOLLINTZAS
The overall performance of each sector within the edible oil markets has remained poor for the past weeks. Apart from the veg oil exports fro ...
Tuesday, 02 May 17
THE FREIGHT MARKET CONTINUE TO SLUMP THIS PAST WEEK
COALspot.com: The Freight market continues to slump this past week, as all segments except Handy Size show a negative downward trend.
The Balt ...
Friday, 28 April 17
U.S PRODUCED LESS COAL THIS PAST WEEK COMPARED TO THE PREVIOUS WEEK - EIA
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totaled an estimated 14 million short tons ( ...
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- Globalindo Alam Lestari - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Indonesian Coal Mining Association
- New Zealand Coal & Carbon
- Gujarat Sidhee Cement - India
- Uttam Galva Steels Limited - India
- ASAPP Information Group - India
- Parry Sugars Refinery, India
- Kalimantan Lumbung Energi - Indonesia
- Georgia Ports Authority, United States
- Maheswari Brothers Coal Limited - India
- Power Finance Corporation Ltd., India
- Formosa Plastics Group - Taiwan
- Siam City Cement PLC, Thailand
- GMR Energy Limited - India
- Indika Energy - Indonesia
- Marubeni Corporation - India
- Kepco SPC Power Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- SN Aboitiz Power Inc, Philippines
- Chettinad Cement Corporation Ltd - India
- Samtan Co., Ltd - South Korea
- Borneo Indobara - Indonesia
- Bukit Makmur.PT - Indonesia
- Ambuja Cements Ltd - India
- Bangladesh Power Developement Board
- PetroVietnam Power Coal Import and Supply Company
- PTC India Limited - India
- IHS Mccloskey Coal Group - USA
- Romanian Commodities Exchange
- Africa Commodities Group - South Africa
- Antam Resourcindo - Indonesia
- Independent Power Producers Association of India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Meralco Power Generation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Wilmar Investment Holdings
- Latin American Coal - Colombia
- Rio Tinto Coal - Australia
- Coal and Oil Company - UAE
- MS Steel International - UAE
- Star Paper Mills Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Eastern Coal Council - USA
- Mercuria Energy - Indonesia
- Economic Council, Georgia
- Cement Manufacturers Association - India
- ICICI Bank Limited - India
- Renaissance Capital - South Africa
- SMC Global Power, Philippines
- Ministry of Transport, Egypt
- Cigading International Bulk Terminal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Lanco Infratech Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- San Jose City I Power Corp, Philippines
- Intertek Mineral Services - Indonesia
- Baramulti Group, Indonesia
- International Coal Ventures Pvt Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- CNBM International Corporation - China
- Eastern Energy - Thailand
- Bharathi Cement Corporation - India
- Vizag Seaport Private Limited - India
- Commonwealth Bank - Australia
- Goldman Sachs - Singapore
- Central Electricity Authority - India
- Rashtriya Ispat Nigam Limited - India
- Malabar Cements Ltd - India
- Posco Energy - South Korea
- Ministry of Finance - Indonesia
- Wood Mackenzie - Singapore
- Iligan Light & Power Inc, Philippines
- Orica Australia Pty. Ltd.
- Coalindo Energy - Indonesia
- Miang Besar Coal Terminal - Indonesia
- South Luzon Thermal Energy Corporation
- Dalmia Cement Bharat India
- Holcim Trading Pte Ltd - Singapore
- Essar Steel Hazira Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Barasentosa Lestari - Indonesia
- Global Business Power Corporation, Philippines
- Standard Chartered Bank - UAE
- London Commodity Brokers - England
- LBH Netherlands Bv - Netherlands
- European Bulk Services B.V. - Netherlands
- Manunggal Multi Energi - Indonesia
- Australian Coal Association
- TNB Fuel Sdn Bhd - Malaysia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Savvy Resources Ltd - HongKong
- Bhoruka Overseas - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Banpu Public Company Limited - Thailand
- Tamil Nadu electricity Board
- Deloitte Consulting - India
- India Bulls Power Limited - India
- Heidelberg Cement - Germany
- Mintek Dendrill Indonesia
- Sarangani Energy Corporation, Philippines
- Bhatia International Limited - India
- Aboitiz Power Corporation - Philippines
- Salva Resources Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Price Waterhouse Coopers - Russia
- Petrochimia International Co. Ltd.- Taiwan
- OPG Power Generation Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Leighton Contractors Pty Ltd - Australia
- Sree Jayajothi Cements Limited - India
- Pendopo Energi Batubara - Indonesia
- McConnell Dowell - Australia
- SMG Consultants - Indonesia
- Xindia Steels Limited - India
- White Energy Company Limited
- Semirara Mining and Power Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indian Energy Exchange, India
- Toyota Tsusho Corporation, Japan
- Parliament of New Zealand
- The State Trading Corporation of India Ltd
- Bank of Tokyo Mitsubishi UFJ Ltd
- GVK Power & Infra Limited - India
- Sojitz Corporation - Japan
- Merrill Lynch Commodities Europe
- Pipit Mutiara Jaya. PT, Indonesia
- Videocon Industries ltd - India
- Energy Development Corp, Philippines
- Krishnapatnam Port Company Ltd. - India
- Global Green Power PLC Corporation, Philippines
- Altura Mining Limited, Indonesia
- The Treasury - Australian Government
- Attock Cement Pakistan Limited
- Medco Energi Mining Internasional
- Sindya Power Generating Company Private Ltd
- Gujarat Electricity Regulatory Commission - India
- Mjunction Services Limited - India
- Bayan Resources Tbk. - Indonesia
- Central Java Power - Indonesia
- Aditya Birla Group - India
- Meenaskhi Energy Private Limited - India
- Therma Luzon, Inc, Philippines
- Karaikal Port Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Sakthi Sugars Limited - India
- Carbofer General Trading SA - India
- TeaM Sual Corporation - Philippines
- Coastal Gujarat Power Limited - India
- Thai Mozambique Logistica
- The University of Queensland
- Trasteel International SA, Italy
- Bulk Trading Sa - Switzerland
- Simpson Spence & Young - Indonesia
- Agrawal Coal Company - India
- Kobexindo Tractors - Indoneisa
- Bhushan Steel Limited - India
- Binh Thuan Hamico - Vietnam
- Kapuas Tunggal Persada - Indonesia
- Orica Mining Services - Indonesia
- Oldendorff Carriers - Singapore
- Vedanta Resources Plc - India
- Siam City Cement - Thailand
- Metalloyd Limited - United Kingdom
- Jindal Steel & Power Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Global Coal Blending Company Limited - Australia
- Australian Commodity Traders Exchange
- Riau Bara Harum - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Grasim Industreis Ltd - India
- Chamber of Mines of South Africa
- Directorate Of Revenue Intelligence - India
- Straits Asia Resources Limited - Singapore
- Asmin Koalindo Tuhup - Indonesia
- Tata Chemicals Ltd - India
- Port Waratah Coal Services - Australia
- Petron Corporation, Philippines
- Indo Tambangraya Megah - Indonesia
- Planning Commission, India
- Mercator Lines Limited - India
- Timah Investasi Mineral - Indoneisa
- PNOC Exploration Corporation - Philippines
- VISA Power Limited - India
- Larsen & Toubro Limited - India
- Kartika Selabumi Mining - Indonesia
- Ministry of Mines - Canada
- PowerSource Philippines DevCo
- Jaiprakash Power Ventures ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Gujarat Mineral Development Corp Ltd - India
- Singapore Mercantile Exchange
- Electricity Authority, New Zealand
- Interocean Group of Companies - India
- Indian Oil Corporation Limited
- CIMB Investment Bank - Malaysia
- Makarim & Taira - Indonesia
- Kumho Petrochemical, South Korea
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Thiess Contractors Indonesia
- Madhucon Powers Ltd - India
- Bukit Baiduri Energy - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Semirara Mining Corp, Philippines
- Energy Link Ltd, New Zealand
- Bahari Cakrawala Sebuku - Indonesia
- Electricity Generating Authority of Thailand
- Minerals Council of Australia
- Edison Trading Spa - Italy
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Anglo American - United Kingdom
- Ind-Barath Power Infra Limited - India
- Kaltim Prima Coal - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Kideco Jaya Agung - Indonesia
- Sical Logistics Limited - India
- Indogreen Group - Indonesia
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