- Due to the different practices in the adjustment General Average, there was clamor for uniformity and which led to the establishment of the York Antwerp Rules, commonly known as YAR (it started with The York Rules 1864 followed by The York Antwerp Rules 1877, 1890, 1924, 1950, 1974, 1990 amendment to the 1974 Rules, 1994, 2004 and the latest being the 2016 Rules). Which rules would apply would depend on what is incorporated into the contract of affreightment (Charter party and / or Bills of Lading). Given that Owners are invariably in a stronger bargaining power vis-à-vis the Charterers / Cargo Interests, the contract would invariably incorporate YAR most favorable to Owners. Perhaps, this is the reason why YAR 2004 failed to take up and the majority of contracts continued to incorporate either YAR 1974 or YAR 1994.
- The CMI, who are the custodians of the YAR since 1950, initiated a revision in 2012 so as to try and achieve consensus on the next revision of the Rules so as to achieve “buy in”. The YAR 2016 appears to have achieved the “buy in” of at least the owners and therefore we believe that future contracts will start incorporating these rules. However, the impression we get is that the parties involved in considering the changes were mainly representing Owners interests1. Accordingly, we would suggest that other stake holders (Cargo owners, Time Charterers, Intermediaries (Operators / NVOCC’s)) be invited to participate in any future revisions of the YAR. This would lead to early buy-in of the new YAR by other participants and also go a long way to avoid any challenge or litigation2 to deny the General Average (GA for short) adjustment.
- We believe that the YAR 2016 could be further improved to ensure equity (and which was the basis for the development of GA). Some aspects of GA as provided in the YAR 2016 (and also the earlier versions) allow the costs incurred by Owners to be recovered and which would not be allowed say under English Law. This is obviously a result of the stronger bargaining power of Owners. However, in an inter-connected world, changes would have to be made to achieve the right balance between the interests of Owners and other parties. Otherwise, there would be renewed clamor for removing GA3. Having said that, it is submitted that GA plays a very important role, and the absence of it, would in fact, be detrimental to trade. Accordingly, we would prefer GA to be available but with changes allowing for it be more “fairer”.
- We would suggest the following amendments for consideration for future revision of YAR 2016:
- Rule C (3): Demurrage, loss of market, and any loss or damage sustained or expense incurred by reason of delay, whether on the voyage or subsequently, and any indirect loss whatsoever, shall not be allowed as general average provided the parties declaring general average have done everything possible to ensure that voyage is not disrupted and that actions necessary for the common benefit have been taken promptly (words in italics added by us): We would suggest these additions given that if Owners or any other party delay in taking reasonable actions, then they should be held responsible for the losses arising from this delay4.
- Rule F: Any additional expense incurred in place of another or similar expense which would have been allowable as general average shall be deemed to be general average and so allowed without regard to the saving, if any, to other interests, but only up to the amount of the general average expense avoided (words in italics added by us).
The UK Supreme Court decision on The Longchamp5 reveals that the Court took a purposive instead of a literal approach. As the YAR 2016 were published prior to the judgement, we would suggest that the wordings be amended to ensure that there is no further disagreement in the effect of this Rule.
- Rule VI (b) (iii) on Salvage Remuneration – salved values are manifestly incorrect and there is a significantly incorrect apportionment of salvage expenses and with the additional costs which may be incurred for the adjustment to be borne by the parties who have declared the manifestly incorrect details (words in italics added by us).
- Rule XI (a) allows for the inclusion of Wages and Maintenance in the GA Kitty. We would prefer to limit this allowance to a fixed sum say up to a maximum of USD 2,500 per day or on the basis of a scale depending on the type and tonnage of the vessel. We make this suggestion considering that some vessels, in the liner Industry, are deliberately flagged in some jurisdictions for other considerations such as allowing the vessel owner to participate in government cargo. While the reasons for flagging is understandable, the effect is that the crewing costs are not in line with other vessels flagged in different jurisdictions i.e. the wages and maintenance differ depending on the nationality of the crew6. In the Market Briefing7 of 21st March 2017 provided by Mr Willum Richards, the present Chairman of the Association of Average Adjusters, he stated that the Italian Insurance Market provided for a standard amount for reimbursement for the costs of superintendent’s expenses. Using this as an example, we would prefer that the sums charged for Wages and Maintenance be “fixed” instead of it being affected by the flag in which the vessel is registered.
- Rule XIII (a) – New for Old – This provides for a reduction of 1/3 on the costs of material used if the vessel is more than 15 years to cater for betterment. While this may have been correct in wooden ships, this may not be correct for the vessels constructed of steel. Accordingly, this rule can be done away with for ships constructed of steel or a more appropriate standard be considered to remove the aspect of betterment.
- Rule XVII – Contributory Values:
- (a) (iii) The value of the ship shall be assessed without taking into account the beneficial or detrimental effect of any demise or time charterparty to which the ship may be committed and with the valuation being submitted by the Owners (words in italics added by us): We suggest the addition of these wordings given that it is the practice for the costs incurred for vessel valuation to be included in the GA. However, with respect to the other parties, the onus is on them to provide the value to the Average Adjusters. Accordingly, it is only correct that Owners should also be held to the same standard.
- Consideration of other equipment such as Containers: The value of equipment such as containers shall be assessed on the basis of the replacement value of the equipment at the place where the adventure would terminate for the equipment without considering any beneficial or detrimental effect to its use which it may be committed (words in Italics added by us)8: The Advisory Committee of the Association of Average Adjusters provided an opinion in 1975 (G 13) on the value recommended to be adopted for Contributory Values and Amounts Made Good. The opinion suggests that the value to be adopted should be the current replacement costs less depreciation. For simplification purposes, the Committee suggested the use of the Insured value of the container. Given that containers may be underinsured and further container values, at least for specialized containers (Reefers, Tank Containers, etc), may be of significant value, we would submit that it should be based on the replacement costs (and not with depreciation) as is the case of a vessel. Alternatively, the Association of Average Adjusters Advisory Committee should be asked to revisit this topic given that their advice was provided 43 years earlier.
- Rule XXII – Treatment of Cash Deposits: Addition of the below:
(e) If excessive cash deposits have been collected, Owners to be liable for the losses arising from the collection of the excessive deposits sought together with the interest rate as provided in Rule XXI (b) (words in italics added by us): We make this suggestion as we have seen requests for excessive security and which puts unfair pressure on the other interests.
(f) Any cash deposit collected will be used for expenditure and interests until three months after the date of issue of the general average adjustment, due allowance being made for any payment on account by the contributory interests provided Owners and other claimants or their Insurers provide counter-security for the expenses / sacrifices which they have incurred. Failure to provide any counter-security would result in the cash deposits being maintained in an interest bearing account and with the parties not being entitled to any interests as provided in Rule XXI: We think it appropriate that cash deposits should be used to fund the GA and, in this way, allow these funds to earn interests as would be earned by losses allowed in GA (Rule XXI).
- An additional clause for Dispute Resolution for resolving disputes arising from the average adjustment: If a party is unhappy with the adjustment provided by the Average Adjuster, a dispute would arise and which which would frequently lead to litigation. Given that the YAR are meant for adoption worldwide, we would prefer that such disputes be arbitrated instead of litigated (such as provided for Salvage by way of Lloyds Salvage Arbitration). Accordingly, we would prefer the development of a “free standing” arbitration clause as suggested in Point 4 of our earlier article – Arbitration Clause in Liner Bills of Lading – Is it Workable?9. We would prefer that the wordings of the arbitration clause together with the procedure be discussed and adopted by consensus.
5.While there may be many other points / suggestions to ensure that future revisions of YAR are fit for purpose, we have listed some points which could make the adjustment of GA more equitable. It is submitted that there is always scope of improvement. We would be also grateful if readers would comment with their thoughts on this aspect. As the revisions are now paced at around 10-12 years, it would be preferable to test the latest YAR i.e. YAR 2016 and consider further amends / additions to make the YAR more fit for purpose.
We are aware that there are more qualified people to comment on these issues and we would be happy to hear their comments and publish their views. The views expressed here together with all errors are entirely ours.
- If we are wrong on this aspect, we are happy to be wrong. Perhaps, future revisions could clearly mention participants together with the stake holders they represent, and which will go to the early adoption of the revised Rules.
- See General Average Judgements of 2017 published by Thomas Miller Law.
- See article of Gard “General Average – To abolish or not to abolish, that is the question and Paper of Nick Gooding on General Average – Time for a Change.
- We had commented on the delay in our earlier article – General Average – Issues arising in Container Shipping.
- 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.
- See comparison of US and Foreign Flag operating Costs.
- See page 9 of the IUA-AAA Market Seminar 21 September 2017.
- See our earlier article on Value of Containers.
- See our earlier article on Arbitration Clause in Liner Bills of Lading – Is it workable?