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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, 03 October 17
RIO TINTO COMPLETES FIRST FULLY AUTONOMOUS RAIL JOURNEY IN WESTERN AUSTRALIA
Rio Tinto has successfully completed the first fully autonomous rail journey at its iron ore operations in the Pilbara region of Western Australia ...
Tuesday, 03 October 17
ALLIED MARKET ANALYSIS
It seems as though the future of the oil trade was once again put into the spotlight, as the Asia Pacific Petroleum Conference took place last week ...
Friday, 29 September 17
U.S WEEKLY COAL OUTPUT DROPS FOR THE FIFTH WEEK IN A ROW, EIA DATA SHOWS
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totalled an estimated 14.7 million short ...
Thursday, 28 September 17
SUPRAMAX: S.CHINA TRIP TO INDIA HAS BEEN FIXED AT AROUND US$ 11000 - FEARNLEYS
Supramax
The hot market seen the last weeks in the Pacific has softened as the Golden week holiday in China approaches and the October shipments ...
Thursday, 28 September 17
THE 'UNREASONABLE' COST OF CASUALTY REPAIRS: ASSOCIATION OF AVERAGE ADJUSTERS CHAIRMAN DETAILS CLAIMS DILEMMAS
KNOWLEDGE TO ELEVATE
The ‘unreasonable’ cost of casualty repairs: Association of Average Adjusters chairman details claims dilemma ...
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Showing 1926 to 1930 news of total 6871 |
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- Kartika Selabumi Mining - Indonesia
- Makarim & Taira - Indonesia
- Straits Asia Resources Limited - Singapore
- Bukit Makmur.PT - Indonesia
- TeaM Sual Corporation - Philippines
- Australian Coal Association
- Electricity Authority, New Zealand
- Billiton Holdings Pty Ltd - Australia
- Parry Sugars Refinery, India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Directorate General of MIneral and Coal - Indonesia
- Kaltim Prima Coal - Indonesia
- Xindia Steels Limited - India
- The Treasury - Australian Government
- Chettinad Cement Corporation Ltd - India
- Siam City Cement PLC, Thailand
- The University of Queensland
- Thai Mozambique Logistica
- The State Trading Corporation of India Ltd
- SN Aboitiz Power Inc, Philippines
- Videocon Industries ltd - India
- Maheswari Brothers Coal Limited - India
- Formosa Plastics Group - Taiwan
- Krishnapatnam Port Company Ltd. - India
- Riau Bara Harum - Indonesia
- Orica Mining Services - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Bulk Trading Sa - Switzerland
- Lanco Infratech Ltd - India
- Sojitz Corporation - Japan
- Eastern Energy - Thailand
- Goldman Sachs - Singapore
- Semirara Mining Corp, Philippines
- Eastern Coal Council - USA
- TNB Fuel Sdn Bhd - Malaysia
- Directorate Of Revenue Intelligence - India
- Petron Corporation, Philippines
- San Jose City I Power Corp, Philippines
- Interocean Group of Companies - India
- Altura Mining Limited, Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Iligan Light & Power Inc, Philippines
- Timah Investasi Mineral - Indoneisa
- Simpson Spence & Young - Indonesia
- Uttam Galva Steels Limited - India
- Edison Trading Spa - Italy
- Parliament of New Zealand
- Global Green Power PLC Corporation, Philippines
- Minerals Council of Australia
- Ministry of Transport, Egypt
- Global Coal Blending Company Limited - Australia
- Intertek Mineral Services - Indonesia
- Jindal Steel & Power Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Rio Tinto Coal - Australia
- Banpu Public Company Limited - Thailand
- Singapore Mercantile Exchange
- Sakthi Sugars Limited - India
- Tata Chemicals Ltd - India
- Wood Mackenzie - Singapore
- Meenaskhi Energy Private Limited - India
- Thiess Contractors Indonesia
- Deloitte Consulting - India
- Madhucon Powers Ltd - India
- Gujarat Sidhee Cement - India
- London Commodity Brokers - England
- Cigading International Bulk Terminal - Indonesia
- Central Electricity Authority - India
- Baramulti Group, Indonesia
- PTC India Limited - India
- AsiaOL BioFuels Corp., Philippines
- Mercator Lines Limited - India
- Trasteel International SA, Italy
- Africa Commodities Group - South Africa
- Bhatia International Limited - India
- White Energy Company Limited
- Vedanta Resources Plc - India
- Energy Development Corp, Philippines
- Commonwealth Bank - Australia
- Latin American Coal - Colombia
- SMG Consultants - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Price Waterhouse Coopers - Russia
- Samtan Co., Ltd - South Korea
- International Coal Ventures Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- VISA Power Limited - India
- Larsen & Toubro Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Gujarat Electricity Regulatory Commission - India
- Global Business Power Corporation, Philippines
- GMR Energy Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Independent Power Producers Association of India
- CIMB Investment Bank - Malaysia
- Sinarmas Energy and Mining - Indonesia
- Posco Energy - South Korea
- PetroVietnam Power Coal Import and Supply Company
- Aboitiz Power Corporation - Philippines
- IHS Mccloskey Coal Group - USA
- Rashtriya Ispat Nigam Limited - India
- South Luzon Thermal Energy Corporation
- Indian Energy Exchange, India
- Alfred C Toepfer International GmbH - Germany
- Kobexindo Tractors - Indoneisa
- Toyota Tsusho Corporation, Japan
- Port Waratah Coal Services - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ambuja Cements Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Sarangani Energy Corporation, Philippines
- Energy Link Ltd, New Zealand
- Coalindo Energy - Indonesia
- Sindya Power Generating Company Private Ltd
- LBH Netherlands Bv - Netherlands
- Siam City Cement - Thailand
- Jorong Barutama Greston.PT - Indonesia
- Star Paper Mills Limited - India
- Indika Energy - Indonesia
- Sical Logistics Limited - India
- Kideco Jaya Agung - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Electricity Generating Authority of Thailand
- Standard Chartered Bank - UAE
- Leighton Contractors Pty Ltd - Australia
- Bukit Baiduri Energy - Indonesia
- Mercuria Energy - Indonesia
- Chamber of Mines of South Africa
- Dalmia Cement Bharat India
- Globalindo Alam Lestari - Indonesia
- Therma Luzon, Inc, Philippines
- Metalloyd Limited - United Kingdom
- Romanian Commodities Exchange
- Bukit Asam (Persero) Tbk - Indonesia
- Planning Commission, India
- Central Java Power - Indonesia
- Ind-Barath Power Infra Limited - India
- Binh Thuan Hamico - Vietnam
- ASAPP Information Group - India
- Karaikal Port Pvt Ltd - India
- Heidelberg Cement - Germany
- Vizag Seaport Private Limited - India
- Cement Manufacturers Association - India
- Ministry of Mines - Canada
- CNBM International Corporation - China
- Indogreen Group - Indonesia
- MS Steel International - UAE
- Medco Energi Mining Internasional
- Manunggal Multi Energi - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Wilmar Investment Holdings
- Anglo American - United Kingdom
- PNOC Exploration Corporation - Philippines
- Agrawal Coal Company - India
- IEA Clean Coal Centre - UK
- Asmin Koalindo Tuhup - Indonesia
- Mintek Dendrill Indonesia
- Sree Jayajothi Cements Limited - India
- Barasentosa Lestari - Indonesia
- Renaissance Capital - South Africa
- Bangladesh Power Developement Board
- GAC Shipping (India) Pvt Ltd
- Indonesian Coal Mining Association
- Holcim Trading Pte Ltd - Singapore
- Australian Commodity Traders Exchange
- European Bulk Services B.V. - Netherlands
- PowerSource Philippines DevCo
- Attock Cement Pakistan Limited
- Bharathi Cement Corporation - India
- GN Power Mariveles Coal Plant, Philippines
- India Bulls Power Limited - India
- Marubeni Corporation - India
- Indian Oil Corporation Limited
- Coal and Oil Company - UAE
- Malabar Cements Ltd - India
- Mjunction Services Limited - India
- Antam Resourcindo - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Carbofer General Trading SA - India
- SMC Global Power, Philippines
- McConnell Dowell - Australia
- Bhushan Steel Limited - India
- Indo Tambangraya Megah - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Grasim Industreis Ltd - India
- GVK Power & Infra Limited - India
- Savvy Resources Ltd - HongKong
- ICICI Bank Limited - India
- Coastal Gujarat Power Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Jaiprakash Power Ventures ltd
- Ministry of Finance - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Kumho Petrochemical, South Korea
- New Zealand Coal & Carbon
- Bayan Resources Tbk. - Indonesia
- Tamil Nadu electricity Board
- Borneo Indobara - Indonesia
- Kepco SPC Power Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Salva Resources Pvt Ltd - India
- Georgia Ports Authority, United States
- Meralco Power Generation, Philippines
- Merrill Lynch Commodities Europe
- Bank of Tokyo Mitsubishi UFJ Ltd
- Economic Council, Georgia
- Orica Australia Pty. Ltd.
- Power Finance Corporation Ltd., India
- Pendopo Energi Batubara - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Oldendorff Carriers - Singapore
- OPG Power Generation Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Aditya Birla Group - India
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