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 a 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 extraordinary sacrifice or if the expenditure is made intentionally with the proper justification that the causes for the same involved preserve the other property from risk of being lost.

The underlying cause which led to the introduction of General Average was, in event of the grave situations where the safety of the ship, crew members and cargo was jeopardized.

It’s always a difficult decision for the 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 the 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. E.g.  Capsizing due to inclement weather conditions, shifting of cargo leading to the excessive listing of the 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 the general average

• Each party’s share in the general average should not be determined by a fault-based approach. The risk borne by all should be equal in all aspects. However 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 the 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 the common safety, it excludes damage caused by smoke or heat of the fire
• If salvage operations are carried out in order to save or prevent the loss of cargo or to prevent or reduce environmental damage, the expenditures involved and the remunerations to salvors should be allowed in general average

• 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 a 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 due to loss or damage of cargo should be included in the general average. However, it is important to deduct from it the expenses which would have been 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

Disclaimer: The authors’ views expressed in this article do not necessarily reflect the views of Marine Insight. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Marine Insight do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader.

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About Author

Abhishek Bhanawat is a chief officer who has worked on various types of tankers. He specializes in Crude Oil and Product Tankers. He is highly passionate about his work and loves to sail.

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