General Average – Differing codes

1. General Averageⁱ (“GA”) is a long-established principle of Maritime Law and is available as of right and which means that even if it is not provided in the contract (contract of affreightments / Bills of Lading (“Bs/L”)), parties in a maritime adventure can seek contributions from parties who have benefited out of a sacrifice or expenditure incurred for the benefit of all. To avoid differences in practices, contracts invariably provide for the York Antwerp Rulesⁱⁱ (“YAR”) to be the basis for GA adjustments. The first edition of the YAR was of 1890 and since then there have been subsequent editions to consider developments in law together with the requirements of trade. There is however a lag in the use of these updated rules given that some of them are not popular to ownersⁱⁱⁱ or that parties are happy with the prevailing position and do not wish to immediately change to the latest version. The most commonly used rules in Container Bs/L remain the YAR 1994^iv. While there are many differences in the earlier and later rules, the main issues arising in adjustment are on the provision of commission on funds^v and interest on losses made good in GA^vi.
2. We had sighted some GA Adjustments for container vessels in which the adjustment considered the application of the relevant YAR’s solely based on the Bs/L issued to cargo interests. The mechanistic application of the YAR’s closest to Bs/L issued to the cargo interests^vii may be the correct way to adjust if all the Bs/L are issued by Owners. However, the fact is that Bs/L issued in container vessels are rarely issued by Owners but by Container Operators in their individual capacity (which may include VOCC’s and NVOCC’s). This being the case, we submit that one must look at all of the contracts involved, and which should include Charterparties (“C/P”’s), Slot C/P’s, Bs/L Contracts (both overlying and underlying), etc.
3. Operators may charter the vessel on either Time or Voyage C/P^viii (the C/Ps would invariably provide for the application of a specific YAR to be applied to adjust GA’s) and in turn, contract down the line by slot C/P’s and / or Bs/L (which may be of a VOCC or a NVOCC) with other parties. Both the slot C/P^ix and the Bs/L^x contracts would provide for the application of a specific YAR to be applied to adjust GA’s.
4. Accordingly, any adjustment should consider the YAR provided in the contract closest to the cargo and property. If this should result in a reduction in the recovery to any of the property interests^xi, then this shortfall should be borne by the party closest up the chain and who contracted on differing conditions than that provided in their contract with the overlying party (i.e. if the BL issued to the cargo interests by the NVOCC provides for YAR 1994^xii, then the cargo interests would contribute based on this code. However, if the overlying contract between the NVOCC and the Vessel Owners provides for YAR 2016^xiii, then the Vessel Owners would be entitled to expect payment of GA’s based on this code and any shortfall should be borne by the NVOCC’s as they had contracted on a different edition of the YAR). On the other hand, if there is any positive difference due to the difference in codes, then this amount should be credited on a pro-rata basis back to the property interests who paid contributions due to a code which allowed for higher recoverability.
5. With respect to recovery from Insurers (both Hull and Cargo), this should also be based upon the YAR provided in the Insurance policy^xiv. Given that we have argued that any shortfall should be borne by the party who has provided for a different version (see 4 above), the question is whether this party (say Owner^xv, Operator^xvi or NVO^xvii) could seek recovery for these shortfalls under their liability policies. Unfortunately, based on the wordings of commonly used liability policies, there appears to be no provision for recovery of this shortfall and therefore this would have to be borne by the respective parties themselves.
6. Given that this is a recurring issue, one of the ways to deal with this is to ensure that the contracts all provide for the same YAR’s to apply. Alternatively, the GA Clause listed in the Bs/L can provide for the most expansive edition of the YAR^xviii and which would mean that the chances of any shortfall are limited.

^i. See an article on “What is General Average?”
^ii. See an article on origin of York Antwerp Rules.
^iii. YAR 2004 is not popular to Owners and is rarely provided in the contract of affreightments.
^iv. Our web search on the Bills of Lading terms and Conditions from Top 10 container Lines reveals that barring Zim, all other lines expressly provided the adjustment for General Average to be based on the YAR 1994. With respect to Zim, while the GA Clause provides for YAR 1994, it is succeeded by words and any amendments thereof and therefore on the basis of The Star Antares, the York Antwerp Rules 2016 would apply.
^v. Rule XX of YAR 1994 provides for a commission of 2 per cent on general average disbursements other than wages and maintenance of master, officer ….where the successive editions do not provide for any such commission.
^vi. Rule XXI of the YAR 1994 provides for a rate of 7% per annum whereas YAR 2016 provides for the 12 month ICE Libor increased by four percentage points (which can amount to 11% per annum).
^vii. See discussion on Differing Codes of General Average in 50.83 in Lowndes & Rudolf, XV ed.
^viii. See Clause 15(b) of Boxtime 2004 which provides for YAR 1994.
^ix. Clause 19 of Slothire 1993 and which provides for YAR 1974 and any subsequent amendments therefore (which would mean the application of YAR 2016).
^x. Most of the Liner Bills of Lading (Maersk, MSC, CMA CGM) provide for the application of the YAR 1994. The TT Series 100 BL commonly used by Transport Operators provides for YAR 1974 whereas the TT Series 500 Seaway BL provides for YAR 1994.
^xi. We have not considered freight given that Freight is invariably not on risk in Bills of Lading issued for container shipments.
^xii. Interest provision of 7% per annum.
^xiii. Interest for 2024 would exceed 11% – there is a 3% gap from the YAR 1994 rules.
^xiv. Cl 8 of IHC 2003 provides for the application of YAR 1994 whereas clause 11.3 of the ITCH 1/10/83 provides for the application of YAR 1974. The Institute Cargo Clauses 2009 do not specifically mention any code but provides for the determination of the code to be basis the governing contract of carriage and which would be the Bs/L issued to the cargo interests.
^xv. Rule 41 of GARD Rules for Ships 2024 states
1. The Association shall cover:
a. the proportion of general average, special charges or salvage which a Member may be entitled to claim from cargo or from any other party to the marine adventure and which is not legally recoverable solely by reason of a breach of the contract of carriage. Where contributing cargo or any other contributing asset belongs to the Member, the Member shall be entitled to recover from the Association as if that contributing asset had belonged to a third party;
b. the Ship’s proportion of general average, special charges or salvage not recoverable under the Hull Policies solely by reason of the value of the Ship being assessed for contribution to general average or salvage at a value in excess of the sums insured under the Hull Policies, provided that cover shall only be available under this Rule 41(b) in any particular case if the Association shall in its absolute discretion so determine.
^xvi.Section 11 of Charterers P&I Club Terms and Conditions 2023 states “Liability for the Assured’s proportion of general average, special charges, or salvage in respect of freight at risk and / or bunkers owned by the Assured.
^xvii. TT Club Transport and Logistics Operators 2023 wordings Cover for General Average as provided in Clause 1.6 in T5 states “Cargo’s contribution for which you are liable and which you cannot recover from your customer.
^xviii. We believe that the clause could provide YAR 1994 or any subsequent amendments / editions in force and which would mean, on the basis of The Star Antares, the application of the latest edition of the YAR.