Page 8 House to House NVOC’s and general average

General average applies “when something has happened which has threatened the voyage and has also required payment of extraordinary costs ” The explosion and fire on Examples of GA (and thus are entitled to seek board the Hyundai Fortune Common examples of general contributions from other interests). average acts with resulting property Hence, all property interests must affected a very large number loss and expenses include: collectively be taken into account of containers which had been in an adjustment. Normally the on their way to Europe, and Jettison, discharging, storing, shipowner appoints a specialised consequently also very many and re-loading of cargo; or stranding firm of general average adjusters the ship in order to refloat; to deal with all aspects. They act intermediaries (whether they fairly and impartially on behalf of Loss of or damage to cargo call themselves forwarders, all property interests (not just for through fire extinguishment; NVOC’s, NVOCC’s, logistics the ship) and are responsible for Employment of lighters to lighten collecting the right levels and forms operators or consolidators) a ship which otherwise would sink; of security, as well as calculating and their clients. the correct contributing proportions. Towage - if a ship suffers from engine breakdown; While general average is a very The importance of good records ancient maritime institution, it is Engaging salvage services In the aftermath of an incident, a fairly rare occurrence these days. the adjusters can only work from It therefore, comes as no surprise Obligation to pay records such as the ship’s manifest and will usually write to the company to note that the ocean carrier’s For shippers it is important to note recorded as the ocean carrier’s demand for GA guarantees has that the obligation to pay general contractual partner, although that caused problems for shippers average attaches to the cargo, not person may not be the actual owner and intermediaries alike: very few to the contract. The responsibility to of the goods. Therefore, if an understand how it operates in pay the contributions lies with the intermediary receives any request practice. Harry Lee from the cargo-owners and cannot be for security from the shipping line’s Club’s Hong Kong office explains: devolved onto the shoulders of an general average adjusters, he intermediary, even if they actually should relay the documents to When GA applies made the booking or the contract his client or, if ownership and title General average applies when of carriage with the actual carrier. have already passed through something has happened which has The contributions are assessed on transfer of the bill of lading, to the threatened the voyage and has also the net landed value of cargo at consignee. Difficulties sometimes required payment of extraordinary the termination of the adventure arise when there are two or more costs (or material sacrifice (underlining the principle that intermediaries in the contractual intentionally and reasonably made) general average is a sacrifice for chain, but the rule remains the in an attempt to avoid the common the common good). If consignments same: the responsibility lies with peril. It is similar to mutual insurance have been lost (perhaps deliberately the cargo-owner. in that the burden of the sacrifices jettisoned to save the ship) those and expenditures are spread cargo-owners are also entitled to The adjuster protects everybody’s equitably amongst the parties get a contribution to their losses rights by exercising a lien (with- (shipowner and cargo-owner alike) from everyone else. whose interests have been holding release) on all cargo and property preserved. The lien preserved; it applies irrespective of In a nutshell, the existence of a can be discharged by provision of any party’s fault in carrying out the cost/risk sharing mechanism is security or cash deposit. In other contract of carriage. Even though conducive in preventing the words, the shipowners will not, the cargo interests are immediate premature and disputed and they cannot, release any victims of a marine casualty due to abandonment of the voyage. cargo delay, loss or damage, they shipment unless its owner has are still liable to make contributions Legal duties made an agreement, backed by financial guarantees, to contribute to general average. The shipowner has a legal duty to general average. Letters from the protect the interests of the property average adjusters will state clearly owners who have sustained sacrifice August 06 Page 9

what the cargo owners need to do to collect details relating to any disputes take several years to reach for the purpose of obtaining release loss/damage since this must be the courts. Also, carriers are entitled or on-forwarding of the shipments. deducted from the contribution. to liability exemptions by law, In general, both average bonds (to Adjustment usually takes months international conventions or be signed by the cargo owners) and and is made in accordance with the contract. Our advice to transport guarantees (issued by banks or York/Antwerp Rules as provided for operators is that they should try to cargo underwriters to back the in the contract of carriage. explain that it is in their clients’ best average bonds) must be signed. interests to follow the general An average bond is an undertaking Role of the salvor average instructions immediately from the cargo receiver promising On some occasions a third party and get their cargoes released, to contribute once adjustments are salvor may have assisted in saving instead of spending too much time finalised in due course. The Lloyds the voyage. At law, all benefited arguing about liability. Average Bond is a widely used parties must give an award to the standard form in shipping practice. salvor who also has a right of lien on No worries goods saved. The process is similar Shippers who have ‘all risks’ cargo In relation to consolidated to, but distinct from, the collection insurance need not worry about any containerised (or, “LCL”) shipments, of general average contributions. of these matters, as their marine it is worth noting that one cargo Again, this is a matter for the cargo- insurers will take care of everything owner’s failure to provide average owners, not the intermediary. that has to be done. Yet another bond and security may lead to Usually the salvors ask for security good reason for ensuring that your withholding of the whole freight to discharge the lien. Sometimes, clients have taken out proper container. The simple reason is that but not always, the shipowners insurance cover for their goods in the average adjusters cannot release (or the general average adjusters) transit. any shipment on which guarantee to may take up the collection of contribute is still outstanding. salvage securities as well to avoid Of necessity, this is only a brief duplication of effort. Payment of overview of a complex subject. Marine insurance protection award to salvors and average Readers wishing to find out more The good news is that, if the cargo adjusters’ remuneration are part about general average may find was protected by marine insurance, of general average. the Club’s Stoploss bulletin No. 11 general average contributions will be helpful which is available from the paid by insurers. All the cargo-owner Finally, if the general average is Club's website under publications has to do in those circumstances is caused as a result of one of the www.ttclub.com to pass the documents to the parties’ actionable fault (i.e. breach insurer, who will look after all the of duty not exempted by contract paper work. or by law), that fault can give rise to a defence or counter-claim. If neither consignors nor consignees One possible example is when an have taken out cargo insurance, unseaworthy ship has caused the whichever of them is the cargo- accident which deprives the owners The good news is that, if owner will have to provide an of liability exemptions under the acceptable guarantee, either Hague-Visby Rules. the cargo was protected by in cash or from a first-class bank. marine insurance, general Nevertheless, liability under the Once the cargo has been delivered, contract of carriage and general “ average contributions will the average adjusters will gather average contributions are separate together the required information issues entirely. On the other hand, be paid by insurers. in relation to the details of the whether the carriers should be liable accident, identity of the parties, for causing a marine casualty is sacrifice and expenditure, and the always a complicated question of property values. They will also law and fact not answerable contact the cargo/property interests overnight indeed typically such ”