Introduction
The principles of general average have evolved from ancient times as a means of compensating parties with a common interest in a maritime venture, if property has to be sacrificed or expenditure incurred, to save the venture as a whole. From its simple origin as an agreement between merchants, general average has matured into a complex branch of shipping law governed by precise rules and conventions.
This chapter deals with the following:
What is General Average?;
Who are interested parties and how is General Average assessed?;
When is General Average declared?;
Ship Agents and Surveyors;
The Master's role.
What is General Average?
The main principles of general average are contained in the York-Antwerp Rules, 1974. The Rules define a general average act as follows:
"There is a general average act when, and only when, any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure."
In the context of marine insurance, the word "average" means a partial loss. General average must be distinguished from "particular average" which means an insured loss. For example, if fire is discovered on board a laden vessel, the following items make up the general average loss:
1. Cost of damage caused by water or any other methods used to extinguish the fire;
2. Cost of repair if ship's structure has to be altered to gain access to fire;
3. Value of any cargo damaged or jettisoned during efforts to control fire;
4. Cost of using the ship's equipment and the wages of the crew during the general averageincident.
In another example, if a vessel runs aground in a dangerous position, the following items would make up the general average loss:
1. Cost of tugs to refloat the vessel, including the value of any salvage award;
2. Cost of running ship's engines and other equipment to assist refloating;
3. Cost of discharging cargo into lighters and the cost of reloading;
4. Cost of pollution removal if cargo has been jettisoned and the value of the lost cargo;
5. Stores consumed and wages paid to crew during the general average incident.
It is important to note that items of particular average are not calculated as part of the general average loss. In the grounding and fire situation, for example, damage caused to vessel as aconsequence of the grounding would not be a part of the general average loss, but would forma hull and machinery claim
Who are the Interested Parties and how is General Average assessed?
The general average incident will necessarily involve some part of the cargo or ship beingsacrificed or extra expenditure being incurred to save the entire venture. The interested parties to the maritime venture, normally the ship owner, the cargo owner, and the charterer, will compensate the party who has suffered the general average loss by making contributions inproportion to the value of their relative interests in the venture as a whole.
The ship owner's interest in the venture is determined by the current value of the vessel at the termination of the venture. Time charter hire is normally excluded from owner's total interest but may be included depending on the terms of the charter. In voyage charters, the amount of bunkers on board. would be included in the ship owner's valuation.
The time charterer's interest in the venture is determined by the value of bunkers remaining on board at the time of the incident, plus the freight at risk on the voyage.
The cargo owner's interest is determined by the sound market value of the cargo on the last day of discharge.
The assessment of each party's contribution is called an "average adjustment". In recent times, the principles by which an adjustment is made are generally governed by the "York-Antwerp Rules, 1974". The rules ensure that all average adjustments conform to an international standard.
An average adjuster makes the adjustment. The average adjuster is appointed by the ship owner to collect all the facts surrounding the incident, to collect guarantees from various parties before cargo is discharged, and to ensure payment of the contributions. The adjuster will have all the facts and figures at his disposal, and thus, in addition to calculating the contributions due from each party, he will be requested frequently to adjust any resulting hull claim.
When is General Average declared?
The ship owner normally makes the declaration, but in certain countries any one of the interested parties may initiate an adjustment. A declaration must be made before the delivery of the cargo.Ship owners usually will allow delivery of the cargo when the other interested parties to the venture provide suitable security (usually in the form of average bonds), sufficient to cover their contribution.
Ship Agents and Surveyors
Following a general average incident, ship agents and surveyors play a significant role. A ship agent, in addition to the normal duties of port and husbandry agency, will assist the Master in the aftermath of a general average incident to make a declaration, which complies with the local law and custom of the port. Once the average adjuster has confirmed that security has been obtained from all the interested parties, the agent is instructed by the ship owner to permit delivery of the cargo. If cargo has been discharged to lighten the vessel, or cargo has been transshipped to a final destination, the agent will be responsible for keeping full and complete records of all movements and expenditure attributable to the general average.
After any incident, a large number of surveyors representing various interests will descend on the vessel. Some of these surveyors will not be involved directly in the general average process, for example, those acting on behalf of hull underwriters, the classification society, or state officials. However, if it has become necessary to sacrifice or discharge a part of the cargo before arrival at the final destination stated on the bill of lading, the ship owner will appoint surveyors to report on the condition and quantity of cargo. Such surveyors usually called general average surveyors,will act in the interests of all the parties involved (and may also represent hull and machinery interests). If possible, the account representing expenditure incurred should be examined and approved by the general average surveyor before settlement.
On the other hand, surveyors appointed by cargo interests only represent the interests of their client. They may criticize the action taken by the Master or allege that the vessel was unseaworthy (unseaworthiness is discussed in detail in chapter 1). Therefore, if an incident occurs which may give rise to a general average act and, if time permits (for example, in a grounding incident), the Master should consult owners and cargo interests to discuss the best possible course of action. Prior consultation may resolve disagreements and help to avoid later disputes.
The Master's Role
The Master must be prepared to assume the widest possible role in solving all the problems created by an incident if there is an urgent need to do so and assistance is not readily available.Apart from good seamanship and reasonable judgment, the Master must ensure that the history of the incident is recorded accurately and fully. The record should include details of all actions taken by the various parties involved and include their names and organizations. If possible, the Master should ensure that a photographic record of the events is made. The Master's evidence will be crucial, as it is usual for a year or more to elapse between the incident and issue of the "Statement of General Average".
If salvage services are involved, the Master should ensure that a full record is made of the salver’s actions and the equipment used. This evidence, together with an assessment of the dangers involved, will determine the level of the salvage award (further information on salvage may be found in chapter 8).
In most cases of general average, the main evidence used for the adjustment is obtained from the various survey reports. The Master should ensure that a clear and accurate account of events is given to surveyors. Witness statements and the vessel’s records will support the survey reports. When draft surveys and other calculations are being performed, it is advisable for the Master to ensure that a responsible officer is on hand to guide and assist the surveyor.
Examples of documentation used to prepare the adjustment are as follows:
1. Casualty reports prepared by the Master;
2. Survey reports prepared by attending surveyors;
3. Log extracts and other available records from the vessel;
4. Copies of communications/instructions relating to the incident;
5. Statements, which are prepared by owner's solicitors, taken from personnel involved in the incident;
6. Details of all expenses incurred as a consequence of the general average act fully supported by invoices (including onward charges for cargo if transshipped);
7. Salvage award;
8. Copies of all port papers covering the period during which the incident occurred;
9. Full cargo manifest and valuation information for cargo;
10. Vessel's valuation adjusted for any damage repairs allowable in general average;
11. Statement of fuels and stores consumed and labor used during the general average act;
12. All documentation covering the security provided by all interested parties.
APPENDIX
Case History
The subject vessel was a large bulk carrier with nine holds and with the bridge, engine room, and accommodation aft. She was let on an N.Y.P.E. time charter and was carrying a cargo of wheat, loaded in all holds, from the U.S. Gulf to Europe. The general average adjustment in this case was made according to the "York-Antwerp Rules, 1974".
Day 1
The vessel sailed from the load port during the morning and proceeded downstream under the Masters orders and the pilot's advice. At 1626 hours, the vessel touched bottom. The various attempts to free her using the helm and engines failed. With the assistance of the pilot boat, it was established that the vessel was aground 200 feet to the west of the channel, resting on a bottom of soft mud and silt. It was also established that two channel buoys used to position thevessel were 300 feet west of their charted location. It was calculated that the vessel was 17, OOOMT aground.
Owners retained a local Salvage Master and tugs to try and free the vessel.
Days 2-4
Three attempts to free the vessel using up to eight tugs failed. The owners terminated the services of the local Salvage Master.
Days 5-13
During this period, a local firm was contracted to remove a portion of the cargo with vacuvators into a lightering vessel, chartered by owners. Due to the poor performance of the vacuvators and a dispute over the employment of stevedores, this method was abandoned. The small amount of cargo discharged was reloaded. An international salvage company was then retained to take charge of the operation on the basis of cost plus fifteen percent. A program was planned to dredge a channel from the bow of the vessel to the main navigational channel and also to create achannel along the port side of the vessel. Additional dredging was proposed around the ship's side to break the suction imposed by the mud.
Days 14-20
The dredging operations were commenced and completed.
Day 21
Five tugs were engaged to pull the vessel into the dredged channel and into the main channel.The attempt failed as the ground reaction was too great to allow the vessel to float free.
Days 22-27
All the interested parties agreed that the best course of action was to discharge 17,OOOMT of cargo to enable the vessel to refloat. A crane barge and two cargo barges were located, inspected, and brought to the vessel.
Days 28-36
The discharge of the cargo into approved barges began. The parties decided to load both barges while the weather was fine rather than risk a twenty-four hour delay in a refloating attempt in which time the weather may have deteriorated.
Day 37
A total of 15,OOOMT of cargo was discharged. Four tugs were engaged, and the vessel was successfully refloated.
Days 38-43
The vessel berthed at the nearest facility, which could accommodate her for reloading of the discharged cargo. Extensive survey work was undertaken to ensure that no damage had occurred to the hull, machinery, or cargo during the grounding. After bunkering, the vessel sailed for her original destination.
The following parties were involved in this particular salvage operation:
· Owners' representatives and Master - from owners' staff;
· Salvage Association representative - hull and machinery underwriters;
· Salvage Association representative - loss of hire underwriters;
· Salvage Association representative - general average interests;
· Independent surveyor - cargo underwriters;
· Salvage Master - owners' consultant;
· Class surveyor - vessel's classification society;
· Ship's agent - local co-ordination and representation;
· Contractors' representatives - various firms involved throughout operation;
· Local state officials - environmental interests.
During all stages of the discharge and reloading operation, a strict watch was kept on the condition, quantity, and quality of the cargo. The resulting surveys showed that 9OMT of cargo had been lost during handling, and that 2OMT had been contaminated by water in the barges. The value of the lost cargo was made good in the adjustment and credited to cargo owners. The value of the contaminated cargo was made good by a claim on distressed cargo underwriters.
The expenditure allowed in the general average adjustment included the following:
· Cost of pilotage/towage and launch service;
· Salvage Masters fees and expenses;
· Cost of helicopter services and local transportation;
· Hire of vacuvators/equipment and labor;
· Charter expenses for lightering vessel;
· Insurance premiums for all stages of the operation (cargo, vacuvators, disbursements,and other vessels);
· Hire of dredging equipment;
· Agent's fees and expenses;
· &#...
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