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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, 30 March 17
PANAMAX : ACTIVITY IN THE PANAMAX MARKET HAS INCREASED SUBSTANTIALLY IN BOTH HEMISPHERES - FEARNLEYS
Supramax
This week we were looking at prolonged activity from ECSA, mostly with grain cargoes to Far East and SE Asia, where Ultras to SE Asia fi ...
Thursday, 30 March 17
THE ROLE OF COAL IN THE ENERGY SUPPLY OF THE EU-28: HANS-WILHELM SCHIFFER
The European Union (EU-28) is one of the largest economies in the world, with a gross domestic product (GDP) of €14,635 billion in 2015. It ha ...
Wednesday, 29 March 17
MARKET INSIGHT - NASOS SOULAKIS
Shipowners will always look for market signals in order to gauge market perception and decide upon which strategy to follow next. And while owners ...
Monday, 27 March 17
THE FREIGHT MARKET CONTINUED TO FIRM WEEK OVER WEEK
COALspot.com: The Freight market was continuing to firming up.
The Baltic Exchange, tracking rates for ships carrying dry bulk commodities ros ...
Friday, 24 March 17
ADARO INDONESIA'S COAL SALES VOLUME INCREASED SLIGHTLY TO 54.1 MILLION TONES IN 2016
COALspot.com: PT. Adaro Indonesia, Indonesia’s second largest coal miner’s sales volume increased slightly to 54.1 million tones (Mt) i ...
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- Bayan Resources Tbk. - Indonesia
- Banpu Public Company Limited - Thailand
- Eastern Energy - Thailand
- Vizag Seaport Private Limited - India
- Latin American Coal - Colombia
- IHS Mccloskey Coal Group - USA
- Electricity Generating Authority of Thailand
- London Commodity Brokers - England
- Indika Energy - Indonesia
- International Coal Ventures Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Iligan Light & Power Inc, Philippines
- Bhushan Steel Limited - India
- Thiess Contractors Indonesia
- Samtan Co., Ltd - South Korea
- Ceylon Electricity Board - Sri Lanka
- Coal and Oil Company - UAE
- Global Coal Blending Company Limited - Australia
- Neyveli Lignite Corporation Ltd, - India
- Australian Coal Association
- Mintek Dendrill Indonesia
- The State Trading Corporation of India Ltd
- Formosa Plastics Group - Taiwan
- Mjunction Services Limited - India
- European Bulk Services B.V. - Netherlands
- Chamber of Mines of South Africa
- Ind-Barath Power Infra Limited - India
- McConnell Dowell - Australia
- Leighton Contractors Pty Ltd - Australia
- Deloitte Consulting - India
- Thai Mozambique Logistica
- Semirara Mining Corp, Philippines
- Sakthi Sugars Limited - India
- TeaM Sual Corporation - Philippines
- GAC Shipping (India) Pvt Ltd
- Indonesian Coal Mining Association
- Kalimantan Lumbung Energi - Indonesia
- SN Aboitiz Power Inc, Philippines
- Barasentosa Lestari - Indonesia
- Interocean Group of Companies - India
- AsiaOL BioFuels Corp., Philippines
- Economic Council, Georgia
- The University of Queensland
- Pipit Mutiara Jaya. PT, Indonesia
- Jindal Steel & Power Ltd - India
- Indogreen Group - Indonesia
- Manunggal Multi Energi - Indonesia
- Xindia Steels Limited - India
- Australian Commodity Traders Exchange
- Bhoruka Overseas - Indonesia
- Makarim & Taira - Indonesia
- Maheswari Brothers Coal Limited - India
- Jaiprakash Power Ventures ltd
- Parliament of New Zealand
- Merrill Lynch Commodities Europe
- Petron Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Rio Tinto Coal - Australia
- Toyota Tsusho Corporation, Japan
- Kaltim Prima Coal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Minerals Council of Australia
- Kideco Jaya Agung - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- ICICI Bank Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kepco SPC Power Corporation, Philippines
- New Zealand Coal & Carbon
- Coalindo Energy - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Krishnapatnam Port Company Ltd. - India
- MS Steel International - UAE
- Kohat Cement Company Ltd. - Pakistan
- Lanco Infratech Ltd - India
- Kartika Selabumi Mining - Indonesia
- Aboitiz Power Corporation - Philippines
- Therma Luzon, Inc, Philippines
- Karaikal Port Pvt Ltd - India
- Meenaskhi Energy Private Limited - India
- Edison Trading Spa - Italy
- Meralco Power Generation, Philippines
- South Luzon Thermal Energy Corporation
- Posco Energy - South Korea
- Alfred C Toepfer International GmbH - Germany
- Rashtriya Ispat Nigam Limited - India
- Orica Australia Pty. Ltd.
- Bhatia International Limited - India
- Marubeni Corporation - India
- Holcim Trading Pte Ltd - Singapore
- Indian Energy Exchange, India
- Bukit Makmur.PT - Indonesia
- Heidelberg Cement - Germany
- Semirara Mining and Power Corporation, Philippines
- Indian Oil Corporation Limited
- Videocon Industries ltd - India
- PNOC Exploration Corporation - Philippines
- Uttam Galva Steels Limited - India
- Ministry of Mines - Canada
- Commonwealth Bank - Australia
- Electricity Authority, New Zealand
- Jorong Barutama Greston.PT - Indonesia
- PowerSource Philippines DevCo
- CIMB Investment Bank - Malaysia
- San Jose City I Power Corp, Philippines
- Goldman Sachs - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Global Business Power Corporation, Philippines
- Sical Logistics Limited - India
- Borneo Indobara - Indonesia
- GMR Energy Limited - India
- Malabar Cements Ltd - India
- Anglo American - United Kingdom
- Asmin Koalindo Tuhup - Indonesia
- Georgia Ports Authority, United States
- The Treasury - Australian Government
- Riau Bara Harum - Indonesia
- Central Electricity Authority - India
- TNB Fuel Sdn Bhd - Malaysia
- Gujarat Sidhee Cement - India
- Bangladesh Power Developement Board
- Tamil Nadu electricity Board
- Coastal Gujarat Power Limited - India
- Globalindo Alam Lestari - Indonesia
- CNBM International Corporation - China
- Eastern Coal Council - USA
- Intertek Mineral Services - Indonesia
- Directorate Of Revenue Intelligence - India
- Maharashtra Electricity Regulatory Commission - India
- Siam City Cement - Thailand
- Baramulti Group, Indonesia
- LBH Netherlands Bv - Netherlands
- Price Waterhouse Coopers - Russia
- Standard Chartered Bank - UAE
- Planning Commission, India
- Pendopo Energi Batubara - Indonesia
- Siam City Cement PLC, Thailand
- White Energy Company Limited
- Chettinad Cement Corporation Ltd - India
- India Bulls Power Limited - India
- ASAPP Information Group - India
- Simpson Spence & Young - Indonesia
- Medco Energi Mining Internasional
- Carbofer General Trading SA - India
- Energy Development Corp, Philippines
- Wilmar Investment Holdings
- Indo Tambangraya Megah - Indonesia
- Salva Resources Pvt Ltd - India
- Mercuria Energy - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Bulk Trading Sa - Switzerland
- Ambuja Cements Ltd - India
- Central Java Power - Indonesia
- Mercator Lines Limited - India
- PTC India Limited - India
- Vedanta Resources Plc - India
- Trasteel International SA, Italy
- Savvy Resources Ltd - HongKong
- SMG Consultants - Indonesia
- Star Paper Mills Limited - India
- Oldendorff Carriers - Singapore
- Gujarat Electricity Regulatory Commission - India
- Cement Manufacturers Association - India
- Power Finance Corporation Ltd., India
- Sojitz Corporation - Japan
- Tata Chemicals Ltd - India
- Attock Cement Pakistan Limited
- Port Waratah Coal Services - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Renaissance Capital - South Africa
- Independent Power Producers Association of India
- Sindya Power Generating Company Private Ltd
- Wood Mackenzie - Singapore
- Gujarat Mineral Development Corp Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kumho Petrochemical, South Korea
- Billiton Holdings Pty Ltd - Australia
- Grasim Industreis Ltd - India
- Romanian Commodities Exchange
- Aditya Birla Group - India
- VISA Power Limited - India
- Kapuas Tunggal Persada - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Metalloyd Limited - United Kingdom
- Singapore Mercantile Exchange
- GVK Power & Infra Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Cigading International Bulk Terminal - Indonesia
- Agrawal Coal Company - India
- Global Green Power PLC Corporation, Philippines
- Africa Commodities Group - South Africa
- Kobexindo Tractors - Indoneisa
- IEA Clean Coal Centre - UK
- Straits Asia Resources Limited - Singapore
- Binh Thuan Hamico - Vietnam
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Essar Steel Hazira Ltd - India
- Bharathi Cement Corporation - India
- Petrochimia International Co. Ltd.- Taiwan
- OPG Power Generation Pvt Ltd - India
- Larsen & Toubro Limited - India
- Sinarmas Energy and Mining - Indonesia
- Altura Mining Limited, Indonesia
- Dalmia Cement Bharat India
- Timah Investasi Mineral - Indoneisa
- Antam Resourcindo - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Bukit Baiduri Energy - Indonesia
- Parry Sugars Refinery, India
- Ministry of Transport, Egypt
- Orica Mining Services - Indonesia
- Madhucon Powers Ltd - India
- SMC Global Power, Philippines
- Sree Jayajothi Cements Limited - India
- Sarangani Energy Corporation, Philippines
- Ministry of Finance - Indonesia
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