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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, 04 April 17
THE IRON ORE HAS BEEN ABLE TO KEEP ITS GROWTH PATH FAIRLY WELL; THERE IS STILL ONE PART OF THE WORLD THAT IS STILL HEAVILY COMMITTED TO COAL
With the close of March having let us with a very positive after taste and having witnessed near the end of the month the Baltic Dry Index at its h ...
Monday, 03 April 17
WORLD COAL TRADE STABLE IN 2016: DEMAND SHIFTS TO SOUTH-EAST ASIA - ASSOCARBONI
ASSOCARBONI: Coal confirmed as the leading fuel for electricity generation, accounting for 40% of overall production in 2016.
World coal trade ...
Monday, 03 April 17
DRY BULK RATES CONTINUING TO FIRMING UP
COALspot.com: The Freight market was continuing to firming up. Baltic Panamax Index rose 12.81 percent week over week.
The Baltic Exchang ...
Friday, 31 March 17
U.S. COAL PRODUCTION INCREASE SLIGHTLY WEEK OVER WEEK
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totaled an estimated 14.5 million short tons ...
Thursday, 30 March 17
WHERE AN AGREEMENT FAILS TO DELIVER - WATSON FARLEY & WILLIAMS
KNOWLEDGE TO ELEVATE
Watson Farley & Williams acted for MRI Trading AG in a leading case on ‘agreements to agree’ that was fin ...
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- Malabar Cements Ltd - India
- Chettinad Cement Corporation Ltd - India
- Thai Mozambique Logistica
- Energy Link Ltd, New Zealand
- Petron Corporation, Philippines
- Videocon Industries ltd - India
- Orica Australia Pty. Ltd.
- Indian Oil Corporation Limited
- Medco Energi Mining Internasional
- Petrochimia International Co. Ltd.- Taiwan
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Romanian Commodities Exchange
- Makarim & Taira - Indonesia
- TeaM Sual Corporation - Philippines
- Ministry of Transport, Egypt
- Mintek Dendrill Indonesia
- Billiton Holdings Pty Ltd - Australia
- Grasim Industreis Ltd - India
- Star Paper Mills Limited - India
- Leighton Contractors Pty Ltd - Australia
- Bukit Baiduri Energy - Indonesia
- Price Waterhouse Coopers - Russia
- Cigading International Bulk Terminal - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Global Green Power PLC Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- Agrawal Coal Company - India
- Siam City Cement PLC, Thailand
- Riau Bara Harum - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Manunggal Multi Energi - Indonesia
- SMG Consultants - Indonesia
- Essar Steel Hazira Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Gujarat Sidhee Cement - India
- Latin American Coal - Colombia
- Ministry of Finance - Indonesia
- European Bulk Services B.V. - Netherlands
- Bahari Cakrawala Sebuku - Indonesia
- Bharathi Cement Corporation - India
- Kideco Jaya Agung - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Thiess Contractors Indonesia
- The Treasury - Australian Government
- PNOC Exploration Corporation - Philippines
- Coal and Oil Company - UAE
- Barasentosa Lestari - Indonesia
- Sakthi Sugars Limited - India
- MS Steel International - UAE
- Salva Resources Pvt Ltd - India
- Karaikal Port Pvt Ltd - India
- GMR Energy Limited - India
- Wilmar Investment Holdings
- Kumho Petrochemical, South Korea
- Ceylon Electricity Board - Sri Lanka
- Directorate General of MIneral and Coal - Indonesia
- Kartika Selabumi Mining - Indonesia
- Xindia Steels Limited - India
- Attock Cement Pakistan Limited
- Coastal Gujarat Power Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Indo Tambangraya Megah - Indonesia
- Straits Asia Resources Limited - Singapore
- Tamil Nadu electricity Board
- VISA Power Limited - India
- Carbofer General Trading SA - India
- Timah Investasi Mineral - Indoneisa
- CNBM International Corporation - China
- Anglo American - United Kingdom
- Gujarat Electricity Regulatory Commission - India
- LBH Netherlands Bv - Netherlands
- Jindal Steel & Power Ltd - India
- Therma Luzon, Inc, Philippines
- Sindya Power Generating Company Private Ltd
- Bank of Tokyo Mitsubishi UFJ Ltd
- Global Coal Blending Company Limited - Australia
- South Luzon Thermal Energy Corporation
- Cement Manufacturers Association - India
- Sarangani Energy Corporation, Philippines
- Economic Council, Georgia
- Standard Chartered Bank - UAE
- Sree Jayajothi Cements Limited - India
- London Commodity Brokers - England
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Miang Besar Coal Terminal - Indonesia
- Mercator Lines Limited - India
- Iligan Light & Power Inc, Philippines
- Savvy Resources Ltd - HongKong
- India Bulls Power Limited - India
- SN Aboitiz Power Inc, Philippines
- Bayan Resources Tbk. - Indonesia
- Deloitte Consulting - India
- Indonesian Coal Mining Association
- Kepco SPC Power Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- Maheswari Brothers Coal Limited - India
- Semirara Mining and Power Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Singapore Mercantile Exchange
- Bhatia International Limited - India
- GVK Power & Infra Limited - India
- Bhushan Steel Limited - India
- Coalindo Energy - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- CIMB Investment Bank - Malaysia
- PowerSource Philippines DevCo
- Sical Logistics Limited - India
- Parliament of New Zealand
- GAC Shipping (India) Pvt Ltd
- Electricity Generating Authority of Thailand
- Central Electricity Authority - India
- Vijayanagar Sugar Pvt Ltd - India
- Orica Mining Services - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Goldman Sachs - Singapore
- Vizag Seaport Private Limited - India
- Aboitiz Power Corporation - Philippines
- Formosa Plastics Group - Taiwan
- Port Waratah Coal Services - Australia
- Metalloyd Limited - United Kingdom
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Banpu Public Company Limited - Thailand
- Planning Commission, India
- PetroVietnam Power Coal Import and Supply Company
- The University of Queensland
- Energy Development Corp, Philippines
- Tata Chemicals Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Samtan Co., Ltd - South Korea
- Indika Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Renaissance Capital - South Africa
- Meenaskhi Energy Private Limited - India
- Power Finance Corporation Ltd., India
- Marubeni Corporation - India
- Africa Commodities Group - South Africa
- Dalmia Cement Bharat India
- Wood Mackenzie - Singapore
- Alfred C Toepfer International GmbH - Germany
- Posco Energy - South Korea
- Kalimantan Lumbung Energi - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- IEA Clean Coal Centre - UK
- McConnell Dowell - Australia
- IHS Mccloskey Coal Group - USA
- Baramulti Group, Indonesia
- ICICI Bank Limited - India
- Meralco Power Generation, Philippines
- Ind-Barath Power Infra Limited - India
- Merrill Lynch Commodities Europe
- Ministry of Mines - Canada
- OPG Power Generation Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Toyota Tsusho Corporation, Japan
- Bangladesh Power Developement Board
- Lanco Infratech Ltd - India
- Trasteel International SA, Italy
- SMC Global Power, Philippines
- Mjunction Services Limited - India
- Holcim Trading Pte Ltd - Singapore
- Bhoruka Overseas - Indonesia
- Australian Commodity Traders Exchange
- Madhucon Powers Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Kapuas Tunggal Persada - Indonesia
- Georgia Ports Authority, United States
- New Zealand Coal & Carbon
- Altura Mining Limited, Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Bukit Makmur.PT - Indonesia
- Indogreen Group - Indonesia
- Parry Sugars Refinery, India
- Oldendorff Carriers - Singapore
- ASAPP Information Group - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Binh Thuan Hamico - Vietnam
- Jaiprakash Power Ventures ltd
- Antam Resourcindo - Indonesia
- Borneo Indobara - Indonesia
- Indian Energy Exchange, India
- Ambuja Cements Ltd - India
- Electricity Authority, New Zealand
- Pendopo Energi Batubara - Indonesia
- Siam City Cement - Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- Edison Trading Spa - Italy
- Chamber of Mines of South Africa
- Heidelberg Cement - Germany
- The State Trading Corporation of India Ltd
- Gujarat Mineral Development Corp Ltd - India
- International Coal Ventures Pvt Ltd - India
- Commonwealth Bank - Australia
- Kobexindo Tractors - Indoneisa
- Uttam Galva Steels Limited - India
- Global Business Power Corporation, Philippines
- Rio Tinto Coal - Australia
- PTC India Limited - India
- Larsen & Toubro Limited - India
- Semirara Mining Corp, Philippines
- Bulk Trading Sa - Switzerland
- Kaltim Prima Coal - Indonesia
- White Energy Company Limited
- Simpson Spence & Young - Indonesia
- Eastern Energy - Thailand
- Eastern Coal Council - USA
- Minerals Council of Australia
- San Jose City I Power Corp, Philippines
- Vedanta Resources Plc - India
- Aditya Birla Group - India
- Independent Power Producers Association of India
- Australian Coal Association
- Sojitz Corporation - Japan
- Interocean Group of Companies - India
- Central Java Power - Indonesia
- Mercuria Energy - Indonesia
- Intertek Mineral Services - Indonesia
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