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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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Wednesday, 14 June 17
HANDYSIZES AND PANAMAXES ENJOY THE TIGHTEST SUPPLY - PANOS TSILINGIRIS
The dry and the tanker shipping segments have dissimilar exposure to supply-driven opportunity (or risk). While the vintage (i.e., over 15 years ol ...
Tuesday, 13 June 17
THE TANKER FREIGHT MARKET IS STILL UNDER PRESSURE - GEORGE LAZARIDIS
News of U.S. inventory decline has hit the market by surprise with prices of the commodity showing some quick revival as OPEC continues to push wit ...
Monday, 12 June 17
THE BALTIC DRY INDEX TOOK A POSITIVE STEP
COALspot.com: The Freight market incline this past week compared to the previous week, as BDI, Cape and Panamax indexes show a positive trend week ...
Friday, 09 June 17
U.S WEEKLY COAL OUTPUT WAS FLAT WEEK OVER WEEK - EIA
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totaled an estimated 15 million short tonnes ...
Wednesday, 07 June 17
INDO HBA INDEX SEE LARGEST DROP SINCE FEBRUARY 2017
COALspot.com: Indonesian coal benchmark price decline 9.96% in June, government data showed.
The benchmark price of Indonesian thermal coal de ...
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Showing 2026 to 2030 news of total 6871 |
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- Medco Energi Mining Internasional
- Bangladesh Power Developement Board
- Pipit Mutiara Jaya. PT, Indonesia
- PTC India Limited - India
- Australian Coal Association
- Neyveli Lignite Corporation Ltd, - India
- Dalmia Cement Bharat India
- VISA Power Limited - India
- Aboitiz Power Corporation - Philippines
- TeaM Sual Corporation - Philippines
- London Commodity Brokers - England
- LBH Netherlands Bv - Netherlands
- European Bulk Services B.V. - Netherlands
- Wood Mackenzie - Singapore
- Tata Chemicals Ltd - India
- Standard Chartered Bank - UAE
- Jindal Steel & Power Ltd - India
- Indo Tambangraya Megah - Indonesia
- Therma Luzon, Inc, Philippines
- Indika Energy - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Bhatia International Limited - India
- Eastern Coal Council - USA
- Bukit Makmur.PT - Indonesia
- Bharathi Cement Corporation - India
- Borneo Indobara - Indonesia
- Indogreen Group - Indonesia
- Sarangani Energy Corporation, Philippines
- Global Business Power Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Wilmar Investment Holdings
- Larsen & Toubro Limited - India
- Bhoruka Overseas - Indonesia
- Siam City Cement PLC, Thailand
- Australian Commodity Traders Exchange
- Straits Asia Resources Limited - Singapore
- Barasentosa Lestari - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Formosa Plastics Group - Taiwan
- Timah Investasi Mineral - Indoneisa
- India Bulls Power Limited - India
- Posco Energy - South Korea
- Ceylon Electricity Board - Sri Lanka
- Attock Cement Pakistan Limited
- Energy Development Corp, Philippines
- Africa Commodities Group - South Africa
- Sree Jayajothi Cements Limited - India
- White Energy Company Limited
- PNOC Exploration Corporation - Philippines
- CNBM International Corporation - China
- Goldman Sachs - Singapore
- Agrawal Coal Company - India
- Manunggal Multi Energi - Indonesia
- Oldendorff Carriers - Singapore
- Bulk Trading Sa - Switzerland
- Kideco Jaya Agung - Indonesia
- Kaltim Prima Coal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Mintek Dendrill Indonesia
- Tamil Nadu electricity Board
- Offshore Bulk Terminal Pte Ltd, Singapore
- SMG Consultants - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Maheswari Brothers Coal Limited - India
- Baramulti Group, Indonesia
- Electricity Generating Authority of Thailand
- Meenaskhi Energy Private Limited - India
- Global Green Power PLC Corporation, Philippines
- Rio Tinto Coal - Australia
- Directorate General of MIneral and Coal - Indonesia
- Rashtriya Ispat Nigam Limited - India
- South Luzon Thermal Energy Corporation
- Banpu Public Company Limited - Thailand
- Cement Manufacturers Association - India
- Kobexindo Tractors - Indoneisa
- Makarim & Taira - Indonesia
- Parliament of New Zealand
- Chettinad Cement Corporation Ltd - India
- Meralco Power Generation, Philippines
- Interocean Group of Companies - India
- The State Trading Corporation of India Ltd
- IHS Mccloskey Coal Group - USA
- Jaiprakash Power Ventures ltd
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mercator Lines Limited - India
- Toyota Tsusho Corporation, Japan
- Altura Mining Limited, Indonesia
- Bhushan Steel Limited - India
- Iligan Light & Power Inc, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Coal and Oil Company - UAE
- OPG Power Generation Pvt Ltd - India
- Economic Council, Georgia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ind-Barath Power Infra Limited - India
- SMC Global Power, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Vedanta Resources Plc - India
- Star Paper Mills Limited - India
- GAC Shipping (India) Pvt Ltd
- Indian Energy Exchange, India
- Videocon Industries ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Deloitte Consulting - India
- Romanian Commodities Exchange
- Port Waratah Coal Services - Australia
- The Treasury - Australian Government
- Ambuja Cements Ltd - India
- Globalindo Alam Lestari - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Siam City Cement - Thailand
- Ministry of Transport, Egypt
- Sindya Power Generating Company Private Ltd
- Parry Sugars Refinery, India
- Samtan Co., Ltd - South Korea
- Central Java Power - Indonesia
- Electricity Authority, New Zealand
- AsiaOL BioFuels Corp., Philippines
- Cigading International Bulk Terminal - Indonesia
- PowerSource Philippines DevCo
- Ministry of Mines - Canada
- GVK Power & Infra Limited - India
- MS Steel International - UAE
- ICICI Bank Limited - India
- SN Aboitiz Power Inc, Philippines
- The University of Queensland
- GMR Energy Limited - India
- Kepco SPC Power Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Essar Steel Hazira Ltd - India
- Marubeni Corporation - India
- Central Electricity Authority - India
- Gujarat Electricity Regulatory Commission - India
- Thiess Contractors Indonesia
- Edison Trading Spa - Italy
- Kumho Petrochemical, South Korea
- Vizag Seaport Private Limited - India
- San Jose City I Power Corp, Philippines
- Billiton Holdings Pty Ltd - Australia
- Gujarat Mineral Development Corp Ltd - India
- Independent Power Producers Association of India
- Energy Link Ltd, New Zealand
- Intertek Mineral Services - Indonesia
- Semirara Mining Corp, Philippines
- CIMB Investment Bank - Malaysia
- Petron Corporation, Philippines
- Sakthi Sugars Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Riau Bara Harum - Indonesia
- Thai Mozambique Logistica
- Planning Commission, India
- Indonesian Coal Mining Association
- Pendopo Energi Batubara - Indonesia
- Metalloyd Limited - United Kingdom
- Coalindo Energy - Indonesia
- Bukit Baiduri Energy - Indonesia
- Merrill Lynch Commodities Europe
- Trasteel International SA, Italy
- Binh Thuan Hamico - Vietnam
- Miang Besar Coal Terminal - Indonesia
- Renaissance Capital - South Africa
- Salva Resources Pvt Ltd - India
- Orica Mining Services - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Simpson Spence & Young - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Commonwealth Bank - Australia
- Savvy Resources Ltd - HongKong
- Holcim Trading Pte Ltd - Singapore
- McConnell Dowell - Australia
- Bayan Resources Tbk. - Indonesia
- Gujarat Sidhee Cement - India
- Anglo American - United Kingdom
- Global Coal Blending Company Limited - Australia
- Latin American Coal - Colombia
- Malabar Cements Ltd - India
- International Coal Ventures Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Singapore Mercantile Exchange
- Leighton Contractors Pty Ltd - Australia
- Ministry of Finance - Indonesia
- Madhucon Powers Ltd - India
- Coastal Gujarat Power Limited - India
- Grasim Industreis Ltd - India
- Sical Logistics Limited - India
- Georgia Ports Authority, United States
- Power Finance Corporation Ltd., India
- Directorate Of Revenue Intelligence - India
- Lanco Infratech Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Price Waterhouse Coopers - Russia
- Karaikal Port Pvt Ltd - India
- Aditya Birla Group - India
- Kapuas Tunggal Persada - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Heidelberg Cement - Germany
- Carbofer General Trading SA - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- New Zealand Coal & Carbon
- Minerals Council of Australia
- TNB Fuel Sdn Bhd - Malaysia
- Uttam Galva Steels Limited - India
- IEA Clean Coal Centre - UK
- Mjunction Services Limited - India
- Krishnapatnam Port Company Ltd. - India
- Sojitz Corporation - Japan
- Chamber of Mines of South Africa
- Indian Oil Corporation Limited
- ASAPP Information Group - India
- Mercuria Energy - Indonesia
- Antam Resourcindo - Indonesia
- Xindia Steels Limited - India
- Eastern Energy - Thailand
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