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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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Monday, 24 April 17
THE FREIGHT MARKET WAS DOWN WEEK OVER WEEK EXCEPT FOR HANDYSIZE SEGMENT
COALspot.com: The Freight market was fell, week over a week as all segments show a negative downward trend except Handy Size segment this past week ...
Friday, 21 April 17
US WEEKLY COAL OUTPUT ON THE UP, EIA DATA SHOWS
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totalled an estimated 14.9 million short ton ...
Thursday, 20 April 17
SHIPPING POOLS: DON'T JUST DIVE IN - MOORE STEPHENS
Shipping pools can be an attractive option for ship owners and operators, particularly in difficult markets and during periods of economic uncertai ...
Thursday, 20 April 17
THE DRY BULK MARKET IS STILL ON ITS UPWARD MOMENTUM - ALLIED SHIPPING
Having gone through the first quarter of the year and with the Easter break having no come and gone, it seems as though the dry bulk market is stil ...
Thursday, 20 April 17
CHINA'S IMPORT OF IRON ORE TO PROPEL DRY BULK SHIPPING DEMAND IN 2017 - PETER SAND
China's import of iron ore will continue to be a key driver for the demand growth in 2017 for the dry bulk shipping industry, alongside shippin ...
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- Kartika Selabumi Mining - Indonesia
- Energy Development Corp, Philippines
- Standard Chartered Bank - UAE
- Banpu Public Company Limited - Thailand
- Agrawal Coal Company - India
- Samtan Co., Ltd - South Korea
- Barasentosa Lestari - Indonesia
- Vizag Seaport Private Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Manunggal Multi Energi - Indonesia
- Coal and Oil Company - UAE
- Xindia Steels Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Commonwealth Bank - Australia
- Holcim Trading Pte Ltd - Singapore
- Rashtriya Ispat Nigam Limited - India
- Bukit Baiduri Energy - Indonesia
- Central Java Power - Indonesia
- Timah Investasi Mineral - Indoneisa
- Eastern Coal Council - USA
- Kohat Cement Company Ltd. - Pakistan
- Independent Power Producers Association of India
- Mercator Lines Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bayan Resources Tbk. - Indonesia
- Uttam Galva Steels Limited - India
- Meralco Power Generation, Philippines
- Bhushan Steel Limited - India
- Jindal Steel & Power Ltd - India
- Globalindo Alam Lestari - Indonesia
- Oldendorff Carriers - Singapore
- LBH Netherlands Bv - Netherlands
- Directorate Of Revenue Intelligence - India
- PetroVietnam Power Coal Import and Supply Company
- Pendopo Energi Batubara - Indonesia
- Trasteel International SA, Italy
- Miang Besar Coal Terminal - Indonesia
- Petron Corporation, Philippines
- Electricity Authority, New Zealand
- SN Aboitiz Power Inc, Philippines
- Global Business Power Corporation, Philippines
- Mercuria Energy - Indonesia
- White Energy Company Limited
- Gujarat Mineral Development Corp Ltd - India
- Kepco SPC Power Corporation, Philippines
- Interocean Group of Companies - India
- Edison Trading Spa - Italy
- Georgia Ports Authority, United States
- Kapuas Tunggal Persada - Indonesia
- Vedanta Resources Plc - India
- Malabar Cements Ltd - India
- Mjunction Services Limited - India
- TeaM Sual Corporation - Philippines
- Jaiprakash Power Ventures ltd
- CIMB Investment Bank - Malaysia
- GVK Power & Infra Limited - India
- Orica Australia Pty. Ltd.
- London Commodity Brokers - England
- Therma Luzon, Inc, Philippines
- Riau Bara Harum - Indonesia
- Bangladesh Power Developement Board
- Bhatia International Limited - India
- Singapore Mercantile Exchange
- Sarangani Energy Corporation, Philippines
- Indogreen Group - Indonesia
- Wood Mackenzie - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Krishnapatnam Port Company Ltd. - India
- Heidelberg Cement - Germany
- MS Steel International - UAE
- Aditya Birla Group - India
- Latin American Coal - Colombia
- Price Waterhouse Coopers - Russia
- Ministry of Mines - Canada
- Sindya Power Generating Company Private Ltd
- Dalmia Cement Bharat India
- Rio Tinto Coal - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Africa Commodities Group - South Africa
- Sree Jayajothi Cements Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Mintek Dendrill Indonesia
- Kaltim Prima Coal - Indonesia
- CNBM International Corporation - China
- Medco Energi Mining Internasional
- International Coal Ventures Pvt Ltd - India
- Australian Coal Association
- Attock Cement Pakistan Limited
- Iligan Light & Power Inc, Philippines
- Chamber of Mines of South Africa
- Cement Manufacturers Association - India
- Bukit Makmur.PT - Indonesia
- The University of Queensland
- Chettinad Cement Corporation Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- European Bulk Services B.V. - Netherlands
- India Bulls Power Limited - India
- Gujarat Sidhee Cement - India
- The State Trading Corporation of India Ltd
- Thai Mozambique Logistica
- South Luzon Thermal Energy Corporation
- Sojitz Corporation - Japan
- VISA Power Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Essar Steel Hazira Ltd - India
- Savvy Resources Ltd - HongKong
- Semirara Mining and Power Corporation, Philippines
- Tamil Nadu electricity Board
- IEA Clean Coal Centre - UK
- Antam Resourcindo - Indonesia
- PNOC Exploration Corporation - Philippines
- Grasim Industreis Ltd - India
- Star Paper Mills Limited - India
- Siam City Cement PLC, Thailand
- SMC Global Power, Philippines
- Central Electricity Authority - India
- Simpson Spence & Young - Indonesia
- Kumho Petrochemical, South Korea
- Tata Chemicals Ltd - India
- Romanian Commodities Exchange
- Bhoruka Overseas - Indonesia
- Siam City Cement - Thailand
- Anglo American - United Kingdom
- Electricity Generating Authority of Thailand
- Ministry of Transport, Egypt
- ICICI Bank Limited - India
- Maheswari Brothers Coal Limited - India
- Meenaskhi Energy Private Limited - India
- Makarim & Taira - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Petrochimia International Co. Ltd.- Taiwan
- Economic Council, Georgia
- Renaissance Capital - South Africa
- Parry Sugars Refinery, India
- Sinarmas Energy and Mining - Indonesia
- PTC India Limited - India
- Intertek Mineral Services - Indonesia
- Binh Thuan Hamico - Vietnam
- PowerSource Philippines DevCo
- Sical Logistics Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- IHS Mccloskey Coal Group - USA
- Minerals Council of Australia
- Formosa Plastics Group - Taiwan
- Bahari Cakrawala Sebuku - Indonesia
- GAC Shipping (India) Pvt Ltd
- ASAPP Information Group - India
- Toyota Tsusho Corporation, Japan
- Eastern Energy - Thailand
- Coalindo Energy - Indonesia
- Ind-Barath Power Infra Limited - India
- Energy Link Ltd, New Zealand
- Sakthi Sugars Limited - India
- Thiess Contractors Indonesia
- Deloitte Consulting - India
- GMR Energy Limited - India
- Straits Asia Resources Limited - Singapore
- Indian Energy Exchange, India
- Karbindo Abesyapradhi - Indoneisa
- Cigading International Bulk Terminal - Indonesia
- Metalloyd Limited - United Kingdom
- Kideco Jaya Agung - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Alfred C Toepfer International GmbH - Germany
- Merrill Lynch Commodities Europe
- San Jose City I Power Corp, Philippines
- Semirara Mining Corp, Philippines
- Baramulti Group, Indonesia
- McConnell Dowell - Australia
- Australian Commodity Traders Exchange
- Marubeni Corporation - India
- Global Coal Blending Company Limited - Australia
- Global Green Power PLC Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Goldman Sachs - Singapore
- Lanco Infratech Ltd - India
- Aboitiz Power Corporation - Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- The Treasury - Australian Government
- Bulk Trading Sa - Switzerland
- Planning Commission, India
- Posco Energy - South Korea
- SMG Consultants - Indonesia
- Videocon Industries ltd - India
- New Zealand Coal & Carbon
- Coastal Gujarat Power Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Madhucon Powers Ltd - India
- Power Finance Corporation Ltd., India
- AsiaOL BioFuels Corp., Philippines
- Karaikal Port Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Parliament of New Zealand
- Salva Resources Pvt Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bharathi Cement Corporation - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Larsen & Toubro Limited - India
- Indo Tambangraya Megah - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- OPG Power Generation Pvt Ltd - India
- Indika Energy - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Ministry of Finance - Indonesia
- Indonesian Coal Mining Association
- Altura Mining Limited, Indonesia
- Orica Mining Services - Indonesia
- Ambuja Cements Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indian Oil Corporation Limited
- Port Waratah Coal Services - Australia
- Directorate General of MIneral and Coal - Indonesia
- Carbofer General Trading SA - India
- Wilmar Investment Holdings
- Borneo Indobara - Indonesia
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