THE PRACTICAL APPLICATION OF GENERAL AVERAGE

THE PRACTICAL VIEW OF GENERAL AVERAGE

By Peter Maina (MICS), Shipping & Logistics Professional, Trainer: Mombasa, Kenya: 04/05/2013.

The law of general average is a legal principle of maritime law applied by shipping lines and ship owners in solving maritime accidents which are deemed to have been deliberate encountered with intention of saving the adventure from incurring a total peril.

According to law of general average, all parties in a sea adventure proportionally share any losses resulting from a voluntary sacrifice of part of the ship or cargo incurred deliberately to save the whole adventure in an event of emergency that was likely to result to a total loss.

In the event of a danger faced at sea, crew members often have precious little time in which to determine precisely whose cargo they are jettisoning ie. to be thrown overboard. Thus, to avoid quarrelling that could waste valuable time, there arose the equitable practice whereby all the merchants whose cargo landed safely would be called on to contribute a portion, based upon a share or percentage, to the merchant or consignee whose goods had been thrown overboard to avoid possible total loss.

For example, a ship arriving at the port of Mombasa may face a risk of sinking while approaching the port. If the shipmaster and the crews realize the ship is about to sink due to much weight, they may decide to throw some containers overboard to save the ship from sinking. If they fail to do so, it means the whole ship would sink and all the goods will be lost including the ship, the containers and any other machinery onboard. Thus some cargo will be thrown overboard and the ship becomes safe. In this case, then it is only good for those who benefited to share the loss with those whose cargo was sacrificed to save the adventure. This is what brings about the concept of general average.  

General average traces its origins in ancient maritime law but it remains part of the admiralty law of most countries.

It is effect as per the York Antwerp rules

Usually on arriving at a port of discharge the shipmaster appears before a magistrate or notary public declaring that during the course of the voyage, there occurred an event which led to an extra ordinary sacrifice being made to save the voyage from a total loss.

Extracts from ship logbook are used as evidence. The ship logbook is a booklet containing a record of all events and occurrences on board the ship throughout the voyage and port stays.

For general average to be declared, the following conditions must be clear:

1.      There must be a common danger / or risk

2.      The risk must be real

3.      It must be endangering the risk of all cargoes and not one individual

4.      The loss must have been incurred in effort to save adventure from a total loss

5.      The effort must have been successful

When general average occurs, the losses are shared proportionately by all interested parties who include:

1.      Owners of cargoes – shippers

2.      Charterers

3.      Ship owner

4.      Owners of leased in containers

5.      Owners of hired / leased cargo handling equipments on board at the times

The losses are evaluated and calculated by Average adjusters who are specialists in General average. General average adjusters are special ship / valuation companies who specialize is evaluation the value of loss incurred, its magnitude and also determine each party’s contribution.  

Several conditions and requirements are set by ship owners for his agent to follow before release of cargo as adjusters proceed with evaluation process. It should be noted that a port / shipping agent is relied upon by all parties to ensure general average contributions are received before release of cargo.

To obtain cargo, consignee through his clearing agent must fulfill or submit the / part of the following documents:

-          General average claim form

-          General average valuation form.

-          Bank guarantee / Letter of indemnity

-          Cash deposit if required

The port agent is required to demonstrate his expertise while administering general average by:

-          Professionally advising the consignee and their clearing agents on what is general average, how its incurred and why the costs have to be shared.

-          To keep the clearing agents and the consignees fully informed about position of the ship, cargo and process of general average.

-          To keep all parties informed and to communicate with them on the requirements, contributions and any other details arising.

-          To supervise his staff on the general average procedures so that they can act effectively

The agent earns as a result of his expertise the following:

-          Special fees for executing general average on behalf of interested parties

-          Communication fees / allowances

-          Overtimes for extra hours worked by him and his staff while executing general average

GENERAL AVERAGE DISPUTES.

There have been so many disputes between interested parties on certain circumstances whether they qualify as general average or not. Most people argue that ship owners have attempted to protect themselves from certain expenses by declaring certain events as general average. This has been a source of many maritime legal battles and which continue to be addressed. This cases include:

-          Cases of piracy and hijacking of the ship

-          Deviation of the ship to proceed for repairs

-          Collision of the ship

Question on whether above and others not listed qualify as general average has been at discretion of the courts of law. Many people however argue that most lawyers and judges lack understanding on maritime issues and hence amicable judgments are not arrived at.

I trust for find the write resourceful and helpful to your career and exams. I also trust you can judge circumstance to qualify if they are general average or not.