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General Average – Back to Basics – 2

Jagan - October 31, 2017 - 1 comment

  1. The English Supreme Court, on 25th Oct 2017, provided its long awaited decision on The Longchamp allowing Owners the  expenses incurred for the crew during the period the vessel was detained whilst Owners were negotiating the quantum of the ransom demanded by the pirates. The appeal was heard by a 5-member panel and while the judgement was not unanimous (Lord Mance dissented), the majority decision was provided by Lord Neuberger and with whom Lord Clarke, Lord Sumption and Lord Hodge agreed. The dissenting judgement given by Lord Mance was however on other reasons than those provided by the Court of Appeal.
  2. We had, in our earlier article, General Average – Back to Basics, argued that adjustment of General Average should be accomplished, by taking a purposive rather than a literal approach, of the York Antwerp Rules (in this case, of 1974). In para 29 of the judgement, Lord Neuberger states “Given that the Rules represent an international arrangement, it is particularly inappropriate to adopt an approach to their interpretation which involves reading in any words or qualification. As already mentioned, it appears to me that, as a matter of ordinary language, Rule F applies to the negotiation period expenses for the reasons given in para 26 above. To imply some qualification such as the requirement that those expenses must have been incurred so as to achieve an “alternative course of action” appears to me to be very dangerous. In the same way as an international convention or treaty, the Rules should be interpreted by a United Kingdom court “unconstrained by technical rules of English law, or by English legal precedent, but on broad principles of general acceptation”, to quote Lord Wilberforce in James Buchanan & Co Ltd v Babco Forwarding & Shipping (UK) Ltd [1978] AC 141, 152. As Lord Hobhouse said in King v Bristow Helicopters Ltd [2002] 2 AC 628, para 148, in relation to an article in the Warsaw Convention, “it is the unadorned language of the article to which attention must be directed”.”
  3. The amounts in dispute was for approx. USD 160,000. Given that this matter has progressed up to the English Supreme Court, the sums expended by both parties (Owners and Cargo interests) would easily have surpassed the claimed amounts. As costs follow the event, the winning party would be entitled to recover a portion of their costs. However, it is unlikely that the winning party (Owners in this case) would recover all of their costs. The issue which we would wish to highlight out is while certainty in law has been achieved on this aspect, it has been achieved at great cost, probably surpassing the amounts at stake.
  4. The principles of General Average on this point have now been decided by the English Supreme Court and therefore all future English General Average adjustments would have to keep this in mind i.e. the costs incurred by Owners for crew wages during the period of negotiation with Pirates would be allowable under General Average (unless the York Antwerp Rules are amended on this point).

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1 comment

  1. […] The Supreme Court Judgement of The Longchamp can be viewed here. See also our earlier articles on General Average Back to Basics& General Average Back to Basics – 2. […]

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