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 being sacrificed or extra expenditure being incurred to save the entire venture. The interested parties to the maritime venture, normally the shipowner, the cargo owner, and the charterer, will compensate the party who has suffered the general average loss by making contributions in proportion to the value of their relative interests in the venture as a whole.

The shipowner’sinterest 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 onboard would be included in the shipowners valuation.

The time charterer’sinterest in the venture is determined by the value of bunkers remaining onboard at the time of the incident, plus the freight at risk on the voyage.

The cargo owner’sinterest 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, 1994. The rules ensure that all average adjustments conform to an international standard. The adjustment is made by an average adjuster.The average adjuster is appointed by the shipowner to collect all the facts surrounding the incident and to collect guarantees from various parties before cargo is discharged. 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 frequently requested to adjust any resulting hull claim.

When is general average declared?

The declaration is normally made by the shipowner, 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. Shipowners usually will allow delivery of the cargo when the other interested parties to the venture provide suitable security sufficient to cover their contribution.

 Nature of evidence required

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 will be instructed by the ship operator to permit delivery of the cargo. If cargo has been discharged to lighten the vessel, or cargo has been transhipped 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 operator 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 criticise the action taken by the master or allege that the vessel was unseaworthy — as discussed above. 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 ship operators and cargo interests to discuss the best possible course of action. Prior consultation may resolve disagreements and help to avoid later disputes.

In most cases of general average, the main evidence 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. The survey reports will be supported by witness statements and the vessel’s records. 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:

• Casualty reports prepared by the master.

• Survey reports prepared by attending surveyors.

• Log extracts and other available records from the vessel.

• Copies of communications/instructions relating to the incident.

• Statements, which are prepared by owner’s solicitors, taken from personnel involved in the incident.

• Details of all expenses incurred as a consequence of the general average act fully supported by invoices (including onward charges for cargo if transhipped).

• Salvage award.

• Copies of all port papers covering the period during which the incident occurred.

• Full cargo manifest and valuation information for cargo.

• Vessel’s valuation adjusted for any damage repairs allowable in general average.

• Statement of fuels and stores consumed and labour used during the general average act.

• All documentation covering the security provided by all interested parties.

Report

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 judgement, the master must ensure that the history7 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 organisations. 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 salvor’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 the next section below).

Case study

Background to the incident

A 30,000 deadweight tons bulk carrier was time chartered into a service carrying to carry bulk grain from North America to Europe. The time charterers sub-chartered the vessel on a time charter basis to carry steel and containers Westbound across the Atlantic.

Under the sub-charter the vessel loaded in one Northern European port:

- steel coils in holds 1,2,3 and 5

- in hold number 4 a mix of twenty-eight 20 foot and 40 foot containers were loaded in a stack in the hatch square.

On passing Lands End, at the extreme Western tip of England, at 2000 hrs.the vessel started to encounter a Westerly swell coming in from the Atlantic. The vessel started to roll and pitch. At 2130 hrs there was a loud crashing sound. The master was called to the bridge. The third mate and chief officer were sent to investigate. In number 4 hold they found that the stack of containers had fallen over to starboard. Two large pieces of machinery parts from some containers were moving violently between the collapsed stack and crashing into the ships side.

Upon reporting the situation to the master, fearing for the safety of ship and cargo, the decision was taken to divert to the port of Cork, on the South coast of Ireland, as a port of refuge. A note of protest was lodged and General Average declared upon arrival Cork.

Because of lack of suitable facilities in Cork, the collapsed stack and loose machinery parts were secured and the vessel proceeded to Liverpool where suitable cranes and labour was available to remove the collapsed containers and their contents.

G.A. adjusters were appointed and G.A. security was obtained from cargo interests. The offloading and remedial steps to get the containerised cargo reconditioned and put back on board took three weeks. General Average expenditure amounted to a figure close to U.S. $400,000. Particular Average damage to the cargo was quantified at more than U.S. $1,500,000.

A number of the individual cargo owners presented their damage and loss claims to the shipowner, as carrier under the bills of lading, and also challenged their obligation to contribute to the General Average expenditure.