The fact that a general average act can occur in any international waters, or on the high seas, raises the questions of which law and jurisdiction should apply to the general average adjustments. But, if the Rules are incorporated into the contract, they will govern the adjustment of general average. They provide a complete code and, by the general rule of interpretation, they ‘shall apply to the exclusion of any law and practice inconsistent with them’, if the parties to a contract have adopted them.
The York-Antwerp Rules are voluntary. Therefore, where they are not incorporated into a charter-party or bill of lading, they do not apply. The question therefore arises as to which jurisdiction a general average act falls within, where no mention is made of the York-Antwerp Rules.
These Rules consist of a set of lettered rules, followed by a set of numbered rules. The lettered rules from A to G state the general principles, while the numbered rules (I to XXIII) are specific and deal with commercial practicability; they qualify the general principles.
Thus, in construing the 1974 York-Antwerp Rules, the lettered rules enunciate the general principles, and the numbered rules settle how the general principles are to be applied in what might, otherwise, be doubtful cases. Roche J further stated:
In any question of a lacuna in the lettered rules, therefore, or an issue of conflict between the lettered and the numbered rules, the rules should be read as a whole, and the result in a particular case will be a matter of construction of the rules in the context of the circumstances. Whether a literal and purposive approach of interpretation, or a strict interpretation of the rules should be adopted, would depend on the circumstances of a case.
Although, in practice, most parties insert rider clauses into their charter-parties which provide for the application of the York-Antwerp Rules, there can be instances where this does not happen. The authorities in this area are supportive of the view that, in the absence of any contrary agreement, general average is governed by the law of the place where the maritime adventure ends, although the parties can agree a different place.
The classic examples of an extraordinary sacrifice that will be allowed in general average is the jettisoning of part of the cargo (Rule I); or causing damage to the ship or cargo for the purpose of making a jettison (Rule II); or pouring water into the holds to extinguish a fire on board a ship and thereby damaging the cargo carried in such holds, including damage by beaching or scuttling a burning ship (Rule III); or voluntary stranding (Rule V); or damage done to machinery or boilers when the ship is aground (Rule VII); or ship’s materials and stores burnt for fuel for the common safety (Rule IX).
The above are subject always to the operation of the York-Antwerp Rules. For example, Rule I of YAR states that: “…No jettison of cargo shall be made good as general average, unless such cargo is carried in accordance with the recognised custom of the trade…” Similarly, damage to the ship’s machinery or boilers shall only be allowed as general average where such damage is occasioned in attempting to refloat her (Rule VII).
Generally, expenditure that will be allowed as general average will come under one of the following examples:
-Additional expenses which would not normally be allowed as general average, but which replace expenses that would normally be classed as general average (Rule F).
– Expenses incurred in saving the ship and cargo from loss or damage. Classic examples include: the engagement of salvage services following a stranding; the cost of employing lighters to transfer cargo in order to lighten the vessel; and the employment of towage services (Rule X).
– Expenses incurred in lightening the ship when ashore (Rule VIII).
– Expenses for wages etc in port of refuge (Rule XI).
– Expenses for temporary repairs either at the port of loading or a port of refuge (Rule XIV).
– Port of refuge expenses.
Many expenses that are incidental to port of refuge expenses are expressly provided for in Rules X and XI of the York-Antwerp Rules.
The Role of General Average in the Maritime Industry
“General Average” is a term used in the maritime industry to define shares in a common loss during maritime accident.
Defined by York Antwerp rules 1994 of General Average, these rules lay guidelines for the distribution of loss in an event when cargo has to be jettisoned in order to save the ship, crew, or the remaining cargo.
The rule states the apportionment of losses amongst the parties involved in any maritime adventure in case of an extra ordinary sacrifice or if the expenditure is made intentionally with proper justification that the causes for the same involved preserve the other property from risk of being lost.
The underlying cause which led to introduction of General Average was, in event of the grave situations where safety of ship, crew members and cargo was jeopardized. It’s always a difficult decision for ship’s crew to take appropriate action to save the interests of cargo owners and the ship. The time constraints in such exigencies don’t allow the ship’s crew to decide which cargo to jettison and which to leave. Consequently there would be a hot debate arising among cargo and ship owners as to whose cargo has been jettisoned and whose interests compromised. The loss being totally on the account of the person whose cargo has been discharged. Thus, in order to regulate unprejudiced interests of all those parties who enter into a common maritime venture, a powerful tool named General Average was introduced, in the York Antwerp rules of 1890 and later reviewed and amended recently in 1994.
The clauses of General Average under the York Antwerp Rules 1994 can be simplified as under:
– A loss is deemed to be considered under general average if and only if the reason of sacrifice is extraordinary or the sacrifice is reasonably made for the purpose of common safety for preserving the property involved. For instance, capsizing due to inclement weather condition, shifting of cargo leading to excessive listing of vessel.
– When two or more vessels are pushing or towing and are involved in a commercial reason, then general average applies if they disconnect from each other in order to preserve the vessel and the cargo.
– General average shall be applied only for those losses which are linked directly with the material value of the cargo carried or the vessel. Any claims arising due to the delay, a loss or expense caused due to loss of market or any indirect loss must not be accounted into general average.
– Each party’s share in the general average should not be determined by fault based approach. The risk borne by all should be equal in all aspects. Though if one of the parties’ actions has resulted in the loss, legal actions can be taken against those actions.
– Average adjusters are individuals or institutions looking after claims arising due to general average. The parties of a general average claim should send a written notice to them within 12 months from the date of termination of the common maritime agreement between the parties involved. If they do not receive this notice the adjusters are entitled to proceed with all available information with them
– If a vessel or cargo is damaged by water, including damage by beaching or sinking a burning ship in order to extinguish the fire, then that damage shall be countable as general average. Also if a vessel is grounded intentionally for common safety, it excludes damage caused by smoke or heat of fire.
– If salvage operations are carried out in order to save or prevent the loss of cargo, or to prevent or reduce an environmental damage, the expenditures involved and the remunerations to salvers should be allowed in general average (This has CHANGED under YAR-2004 and SALVAGE IS NOT INCLUDED as General Average, but mostly YAR-1994 is being followed in the world).
– If any vessel has been grounded and the cargo is liable to get damaged, then efforts can be made to refloat the vessel. However if such efforts cause damage to boilers or machinery of the vessel it shall be made as general average.
– The procuring expenses of any cargo, fuel or ship’s stores upon being discharged as per general average act shall be admitted into general average.
– Loss of freight incurred to the owner by due to loss or damage of cargo should be included in general average , however it is important to deduct from it the expenses which would have incurred by the owner for carriage as they were not actually incurred.
– If cargo is sold in damaged condition, the general average amount is the difference between net sound and net damaged value.
Voluntary, or Intentionally and Reasonably Made
The rule paramount which is found in YAR 1994 and 2004 (but not in the 1974 Rules) provides that: ‘In no case shall there be any allowance for sacrifice or expenditure unless reasonably made or incurred’.
The word ‘voluntary’, in Article 66 of the Marine Insurance Act 1906, has been replaced with the term ‘intentionally’ in Rule A of the York-Antwerp Rules. This appears in all three recent York-Antwerp Rules revisions: 1974, 1994 and 2004. This emphasises the fact that, just because a decision was made under extreme pressure, when there was no effective alternative, this will not of itself be enough for the act to lose its voluntary nature. The requirement of intention means that the general average act must be made or incurred with the sole objective of preserving the interests involved from peril.
Causation in General Average and Fault
Rule C of the YAR states that only such losses, damages or expenses which are the direct consequence of the general average act shall be allowed as general average; and Rule E provides that the onus of proof is upon the party claiming in general average to show that the loss or expense claimed is properly allowable as general average. Section 66(1) of the Marine Insurance Act 1906 allows recovery in general average for losses ‘caused by or directly consequential to’ a general average act.
Thus, the claimant has to prove that his loss was a direct consequence of a general average act to recover contribution. The defendant has the burden of showing a break in the chain of causation.