1 critical analysis of y.a.r. ‘common safety’ and ‘common benefit’ rules based on equity: a...

8/12/2019 1 Critical analysis of Y.A.R. common Safety and common benefit rules based on equity: A legal alibi for the con

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Critical analysis of Y.A.R. common Safety and common

benefit rules based on equity: A legal alibi for the

continuing survival of general average?

Tafsir Matin

March, 2011


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Table of contents

Introduction........................................................................................................................3

Chapter 1

1.1 Origin of Average signifying equitable practice......................................................41.2 Safe preservation of equitable benefaction from pristine times..................................51.3 Examining the principles governing the equitable practice of general average..........61.4 Common Benefit v. Common Safety..........................................................................7

Chapter 2

2.1 Inconsistencies in the realm of uniformity....................................................................82.2 The York Antwerp Rules 1950 contrasted with The York Antwerp Rules 1974.........92.3 The York Antwerp Rules 1994: Subtle differences with former rules........................102.4 Y.A.R. 2004: restriction on former rules resulting conformity to common safety......11

Chapter 3

3.1 Unrealized attempts to modify York Antwerp Rules 2004.........................................123.2 Different national approaches relating to general average..........................................133.3 Analysing the equitable idea underlying common benefit contribution and

distribution...................................................................................................................14

3.4 Hindrances of common benefit rules unveiled..........................................................15

Chapter 4

4.1 A persuasive ground for survival................................................................................174.2 A legal alibi resulting in redundancy?.........................................................................184.3 Evaluation of the alternatives......................................................................................194.4 To abolish or not to abolish.........................................................................................20


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Conclusion...........................................................................................................................21

References...........................................................................................................................22


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Introduction

As far as modern shipping commerce goes, it is by now understood that general average in its

entirety has outgrown its parameters. It is invoked at the termination of every common

maritime adventure where somewhere along the route imminent peril was defended with

extraordinary sacrifices for the common safety and common benefit of the parties where the

losses suffered by any of the parties by average was indemnified by equitable contribution

made by others. Simple as this approach may sound, it is apparent that this institution has had

serious repercussions on the face of equitable distribution. It has been detected to be

inextricably connected to salvage. However, when it comes to incorporating International

legislations in the context of commercial shipping the only logic behind framing every rule

lays in the expediency and convenience it bestows upon the maritime industry. But the fate of

it that was hanging in the balance seemed to escape its ultimate death and the objections

forwarded against its advantages are revived time and again with no viable solutions. But prior

to condemning any legal regime, it must be accorded with the benefit of its doubt. Since equity

is perceptibly the only armour the institution of general average has, the scope of this paper is

limited to the analysis and examination of the dominant equitable notions of common benefit

and common safety. Since this anachronism has survived for two millennia on the same

principle, the paper commences with a dissection of its terminology emphasising on its

inherent meaning which signifies equitable practice followed by a brief trace of its roots (of)

Immediately after the equitable principles have been discussed this paper highlights the

inconsistencies that prevail in the system and an attempt is made in trying to extract the

changes brought about in trying to subside those inconsistencies by the York Antwerp Rules

related to the common safety and common benefit principles which is done by

distinguishing the three immediate rules. Then an insight is given into the desired changes that

did not take a turn to reality and the different national approaches that pertain to the core

principles of general average. This paper proceeds to scrutinise the common benefit

contribution and distribution systems and an endeavour is made to unveil the inherent vices of

the procedures. The voyage of this essay reaches its threshold by revising the crucial element

of the institution of general average i.e. equity and this is done by weighing its pros and cons.

Alternative schemes are investigated and the essay concludes by answering the question as to

whether the intrinsic principles constitute a legal alibi and whether the legal alibi should be

suppressed by eradication or should the contamination led by its usage be simplified.


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Chapter 1

1.1 Origin of Average signifying equitable practiceThe code Constitutum Usus of the city of Pisa (dating from about A.D. 1160) leaves a dim

trace of the expansion of a technical term from the common Italian word avere (the having of

property) which is applied throughout the code to imply the ground of contribution or

contributory value and hence, it shall be equalised over totum avere (all the property remaining

in the ship).1 In a Genoese code (A.D 1341) the word averia or avaria has come to mean

expenses or decadence of the common good and thusconnotes a charge on the entire property

and in a statute of Ancona of 1397, the term varea is used to indicate the contribution itself.2

However hypothetical the origin of the terms avere, averia or varea may seem, the term

average is fundamentally used in connection with partial loss and when associated with

particular average it connotes to accidental damage to insured property.3However, when it is

applied in connection with general average it pertains to a rule of the sea and can colligate

to purposive sacrifice of property at risk in a common adventure incorporated in all contracts of

carriage.4 The word general has been conjoined owing to the fact that the owners of the

vessel and cargo are required to absorb a proportionate share of the loss with a view to

indemnify the owner of the vessel or cargo that was singled out for the sacrifice. Founded on

an implied contract between carrier and cargo owners, general average is an equitable practice

of distribution and contribution which has substantially stood the test of time. An incisive

definition of general average in terms of equitable distribution has been emphasised by

Lawrence J. in the case of Birkleyv. Presgrave5which was adopted insubsequent cases

6. The

principle that, what is in imminent danger sacrifice for the sake of all shall be restored by the

1Lowndes and Rudolf, General Average and the York Antwerp Rules,1990, Published by Sweet and

Maxwell Limited,p. 7, para. 00.12.2Ibid.

3Robert H Brown,Dictionary of Marine Insurance Terms and Clauses, Fifth edition, 1989, Published

by Witherby & Company Limited,p. G3.4Ibid.

5 (1801), 1 East 220, per Lawrence, J, at p. 228, where it is stated that , [a]ll loss which arises in

consequence of extraordinary sacrifices made or expenses incurred for the preservation of the ship and

cargo comes within general average, and must be borne proportionately by all who are interested..6 See Covington v.Roberts (1806) 2B. & P.N.R., 378, Job v. Langton (1856) 6 E. & B., 779-790,

Svendsen v. Wallace (1884) 13 Q.B.D., 69-73, where Brett M.R. has complimented words of

Lawrenece J. as highest authority and stated that, [i]t has been considered to be one of the many happy

expositions of mercantile law made by that learned person, in terms so broad and so accurate, as toshrew that he was one of the greatest mercantile lawyers who has ever adorned our profession in this

country.


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contribution of all, as enshrined in general average demonstrates equity and natural justice to

a greater extent. It is now statutorily defined by the Marine Insurance Act, 1906 section 6.

1.2 Safe preservation of equitable benefaction from pristine timesThe foremost evidence of an expression of the law of general average (fragment of ancient

Greek legislation) composes the text for a chapter in the Digest of Justinian.7 A succinct

assertion8in the specific digest comprises the proposition and example of peculiar communism

in the Rhodian law.9 Contemplation of the law of equity among the sea faring men is

hypothetically antediluvian.10Segments of Rhodian law regarding general average and jettison

ingrained in Roman law is denoted as the footing of contemporary continental European legal

systems.11 Germinating through the Roman lex maritima the principles upholding equitable

augmentation from sacrificing for general safety was ultimately codified in maritime rules of

medieval times, more specifically in Consolata del Mare of Barcelona and a collection of

judgments delivered in some court of Bordeaux amalgamated in Roles d Oleron12 which

emerged as the pillar of English maritime law which was enveloped in the Black Book of

Admiralty.13

Although its general affirmation in major maritime regimes, at the dawn of 18th

century, the divergence in the applicability of general average in terms of contribution in the

common law jurisdiction paved the way for the drafting of the first set of international rules for

its adjustment titled York Antwerp Rules 1877.14 Subject to a series of amendments and

7John Donaldson, C.S. Staughton and D.J. Wilson, The Law of General Average and the York-Antwerp

Rules, Tenth edition, 1975, Stevens & Sons Limited, p. 3, pp. 1, where the title of the digest has been

stated as Lege Rhodia Cavetur ut si levandae navis gratis jactus mercium factus contributione

sarciatur quod pro omnibusdatum ext.8 See F.D. Rose, General Average: Law and practice, Second edition, 2005, T & F Informa UK

Limited, p. 1, where the expression in Justinians Digest has been stated [t]he Rhodian law decrees

that if in order to lighten a ship merchandise is thrown overboard, that which has been given for all

shall be replaced by the contribution of all.9Supra note 7.

10

See C. Abbott, A Treatise of the Law relative to Merchant Ships and Seamen, First edition, 1802,London, p. 273 where it is stated that, [t]he principle of this general contribution is known to bederived from the ancient laws of Rhodes, being adopted into the Digest of Justinian with an express

recognition of it's [sic.] true origin. The wisdom and equity of the rule will do honour to the memory of

the state, from whose code it has been derived, as long as maritime commerce shall endure.11

Proshanto K. Mukherjee, Essentials of General Average: A Synoptic Overview of an Ancient

Maritime Law, Lund University/World Maritime University, p. 4. See also W. W. Buckland,A Manual

of Roman private Law, 1926, The Cambridge Law Journal, Published by the Cambridge University

Press, p. 23, whereby it is stated that the sentenceembedded in the chapter of the digest titledDe Lege

Rhodia de Jactu has been termed as a specimen which acknowledges its foundations from the Rhodian

Law.12

Supra note 1, pp. 6-7, where it is revealed that article 8, 9 and 35 of Roles d Oleron unequivocally

cogitates jettisoning of goods and cutting off mast for the safe preservation of the ship.13

Ibid.14Leslie J. Buglass, General Average and the York/Antwerp Rules, 1974: American Law and Practice,

1974, Published by Cornell Maritime Press Inc., p. 4, para. 3.


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additions over the years15

, the rules in turn came to be known as the York Antwerp Rules 1974

(as amended 1990), the York Antwerp Rules 1994 (35thCMI conference) and finally a revised

set of rules approved by the Comite Maritime International (hereinafter, referred to as CMI) on

4th June 2004 (38thCMI conference) in Vancouver known as the York Antwerp Rules 2004

were recommended, safely preserving the long standing practice of equitable endowment.16

1.3 Examining the principles governing the equitable practice of general averageIn Societe Nouvelle d Armement v. Spillers and Bankers Ltd

17, Sankey J. espoused the

statutory definition of general average where it was held that the general average expenditure

can be induced with a view to avert extraordinary and uncanny endangerments at sea.18

However, the term extraordinary expenditure should not be interpreted as attainment of

carriers obligations by means of ordinary measures under the contract of carriage.19Rule A20

of the York Antwerp Rules (2004) constrains the ambit of general average act to any

extraordinary expenditure or sacrifice intended for common safety. Then again, under the

terms of Rule Athe extraordinary sacrifice or expenditure must be intentionally and reasonably

accomplished.21

From a practical perspective, the incorporation of this term is to denote the

idiosyncrasies that distinguish the resultant loss from accidental loss.22 A transparent

interpretation would be that, if the property was wasted by accident, it would not have the same

bearing as opposed to property which was sacrificed. Moreover, Rule Aof the York Antwerp

Rules 2004 furnishes the point that intentional act must be coupled with a view to preserving

all interests implicated in a common maritime adventure.23 A general average claim, cannot

under any circumstances relate to sacrifice or expenditure for any fraction of the property of

the particular adventure, but may eventually act as a charge on the owner of that fraction of

15

The York Antwerp Rules 1890, the York Antwerp Rules 1924, the York Antwerp Rules 1950.16Ibid.17

[1917] 1 K.B. 865, where it was held that, a general average expenditure must be incurred to avoid

extraordinary and abnormal peril.18

Supra note 1, tenth edition, 1975, Stevens &Sons Limited, p. 27, para. 49.19

Arnould, Law of Marine Insurance and Average, Sixteenth edition, 1981, Sweet and Maxwell

Limited, para. 920-921.20

See the York Antwerp Rules 2004 (Rule A), although the York Antwerp Rules to a very greater

extent incorporates elements from the common benefit doctrine, it is general average in its classical

form which is confirmed in its general definition and observed in Rules A, which contains essential

elements i.e. danger, community, intentional, reasonable sacrifice and extraordinary measures.21

Supra note 1, p. 67.22

Ibid.23

Report by the UNCTAD (United Nations Conference on Trade and Development), secretariat ,General Average: A preliminary review, Thirteenth session, Geneva, 11 November 1991, p. 10, para.

37.


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property so saved.24

The necessity of peril is an important phenomenon that besieges the

concept of general average. In Vlassopoulos v. British and Foreign Marine Insurance Co Ltd

(The Makis)25,the authentic existence of a peril which need not be imminent in nature has been

emphasised upon.26

1.4Common Benefit v. Common SafetyA dearth of consistency is observed as different states have different legal rules, most notably

between English and American rules.27

Under the domain of traditional English law, general

average pertains to common safety broadly interpreted as conservation of the property involved

in the common adventure.28On the contrary, Continental legal system has stressed on the safe

continuation of the voyage termed as common benefit.29 As opposed to the English law

concept, the Continental legal system favours the ship-owner by contribution of expenses

within general average for the continuation of the common adventure.30

English law considers

general average as an expenditure which is incurred as an outcome of such act which is

indispensable to bring the common adventure to a place of safety.31

Although Rule A

corresponds to the English view of attainment of safety (distinct from American law as it does

not extend to contain expenditures for common benefit and safe prosecution of common

adventure) yet specific numbered rules permit certain expenditures of such nature.32

And since

the rule of interpretation refers that the numbered rules should predominate the lettered rules,

the expenditures for satisfying common benefit are approved under the York Antwerp Rules.33

The discord that exists between the common law and the York Antwerp Rules should not be

amplified owing to the fact that repairs to enable continuation of the adventure has been

included within general average by English law as long as they are identified as losses

consequent upon a general average act.34

24

Supra note 19, para. 918.25[1929] lK.B. 187-200.

26Supra note 22, para. 39, See also Lowndes and Rudolf, p. 75 where Roche J. is of the opinion that,

[i]t is not necessary that the ship should be actually in the grip or even nearly in the grip of the disaster

that may arise from the danger. It would be a very bad thing if shipmasters had to wait until the state of

things arose in order to justify them doing an act which would be a general average act.27

F.D. Rose, General Average: Law and Practice, 1997, First edition, Published by LLP Reference

Publishing, p. 8.28

Ibid.29

Ibid.30

Ibid.31

Ibid.32

Supra note 22.33

A. L. Parks, The Law and Practice of Marine Insurance and Average, 1988, Volume 1, Published byStevens and Sons, pp. 13-14.34

Supra note 26, p. 9.


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Chapter 2

2.1 Inconsistencies in the realm of uniformity

The uniformity which the York Antwerp Rules seek to address is circumscribed as they do not

embrace every angle of general average. The rules have been developed since mid-nineteenth

century with a view to removing inconsistencies developed between municipal laws, and for

reaching general matters of detail and principle. The York Antwerp Rules 1864, 1877 and 1890

dealt with matters of detail and the latter York Antwerp Rules have enshrined matters of detail

and principle simultaneously. The ubiquity of the rules do not require their enforcement as a

kind of customary law, specifically since the content is subject to revision and due to the fact

that since more than one edition of the rules is used in practice, there exists a gap in uniformity

to constitute a current custom.35 However, the wide recognition is reflected in its frequent

annexation in charter parties, bills of lading and marine insurance in standard form clauses and

the parties are at will to exercise the right to opt the desired edition of rules necessary to apply

to their relationship.36

The complexities which arise are three dimensional, the first of which

relates to the fact that the parties who consent to be bound by the rules maybe obliged by more

than one edition.37Then again, the rules that are incorporated by the parties may be amended

by them.38

The final part of this complexity is revealed when different relationship of parties

entangled in the same maritime adventure is governed by different versions of the rules. 39It is

a common phenomenon that parties are inclined towards familiar forms rather than undergo

risk potential dubiety posed by new ones. A probable solution may be to draft a form with an

inbuilt updating mechanism the effect of which is a question of construction.40 But on this

account questions may be gathered whether it was updated according to the latest version when

35

Supra note 8, p11.36Ibid.

37Ibid., See e.g. Macieo Shipping Ltd. v. Clipper Shipping Lines (The Clipper Sao Luis) [2000] 1

Lioyds Rep 645, [40], where general average was to be adjusted, by virtue of a charter party on the

New York Produce exchange form (1946) form, pursuant to the York-Antwerp Rules 1924 as

amended. Indeed an argument put forth in 2004 generating against the York Antwerp Rules 2004 was

that the York Antwerp Rules 1994 did not receive sufficient time to gain noteworthy acceptance so as

to replace the York Antwerp Rules 1974.38

Ibid., The New York Produce exchange does not only incorporate the York Antwerp Rules 1924 but

also provides that general average can also be adjusted, stated and settled according to Rules 1 to Rules

1 to 15, inclusive, 17 to 22, inclusive, and Rule F of York Antwerp Rules 1924...39

Ibid.40

Ibid., p. 13, where an example has been laid down which states that a stipulation that a stipulation

that general average shall be adjusted according to York Antwerp Rules 1974, as amended 1990, or anysubsequent modification thereof could refer to revisions of the 1974 edition of the Rules but not

necessarily to subsequent editions of the Rules or amendments thereto.


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the form was drafted, when the contract was concluded, when general average act was

accomplished, or when adjustment was made.

2.2 The York Antwerp Rules 1950 contrasted with The York Antwerp Rules 1974

The York Antwerp Rules 1974 (hereinafter, referred to as Y.A.R. 1974) was designed quite

similar to that of the York Antwerp Rules 1950 (hereinafter, referred to as Y.A.R. 1950). As is

observed, the lettered rules have undergone no alterations; however, certain parts of the

numbered rules which entail practical implications with respect to common safetyand common

benefithave undergone modification. Rule III which relates to extinguishing fire on shipboard

has had one radical adjustment i.e. the previous exclusion in the second half of the Rule41has

been deleted and a new provision has been added to the rule to exclude any allowance in

general average for damage by smoke or heat, however caused.42 The wording remains of

spars of Rule IV of Y.A.R. 1950 has been changed to parts of the ship in Y.A.R. 1974 and

an addition, or are effectively lost by accident has been added to the second half of the Rule.

National Associations unanimously suggested that Rule V relating to voluntary stranding of

Y.A.R. 1950 should remain consistent in Y.A.R. 1974, but the West German Association

acknowledged that difficulties (arising in determining under Y.A.R. 1950 whether a ship would

inevitably drive on shore or rocks) would be eliminated regarding differences between

voluntary standing where the vessel would certainly drive on shore or on rocks and other

voluntary stranding.43 Hence, this speculation received support and simplification was

achieved in Rule V relating to voluntary stranding. Rule VI of Y.A.R. 1950 (carrying press

of sail-damage to or loss of sails) was abolished as obsolete in Y.A.R. 1974 and substituted by

salvage remuneration. Although major maritime states apart from the United Kingdom of

Great Britain and Northern Ireland (hereinafter, referred to as the United Kingdom) invariable

treated salvage as general average, the British adjusters frequently differentiated between

general average and salvage and to overcome this hindrance, this commutation was essential.44

The words including loss or damage due to compounding of engines or such measures of

Rule V1 of Y.A.R 1950 were expunged in the Y.A.R. 1974 because compounding engines

were in abeyance with modern ships and the French text of 1950 did not conform with the

41 See York Antwerp Rules 1950, Rule III, where the second half of the rule states that, no

compensation should be made for damage to such portions of the ship and bulk cargo, or to such

separate packages of cargo, as have been on fire.42

Supra note 1, p. 290.43Ibid.

44Ibid., p. 300.


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English text and required harmonization.45

The cost of towage assistance which was

overlooked in the second paragraph of rule X (a) of Y.A.R. 1950 was successfully adjoined in

Y.A.R. 1974. Moreover, the sub-rule of X (b) of Y.A.R. 1974 was rearranged for precision and

states that the storage expenses shall be admitted only up to the date of condemnation of the

voyage or up to the date of cargo if the condemnation takes place before that date.

2.3 The York Antwerp Rules 1994: Subtle differences with former rules

The introduction of rule paramount which poses a bar on allowance for sacrifice or

expenditure (unless reasonably made or incurred) is a unique feature of the York Antwerp

Rules 1994 (hereinafter, referred to as Y.A.R 1994).46 The first part of Rule II which remained

unaltered in Y.A.R. 1974 has been technically broadened from damage to loss or damage

and from ship and cargo to property involved in common maritime adventure.47 The

exception as settled in Rule III has endured a change in words by a further elaboration of the

term heat which reads in Y.A.R. 1994 as heat of the fire. While the Y.A.R. 1974 excluded

any allowance for damage by heat however caused, the Y.A.R. 1994 excluded damage caused

by fire.48

Rule V which relates to voluntary stranding and which underwent simplification in

Y.A.R 1974 has only been refined by additional words loss or damage to the property in the

common maritime adventure.49

This is to ensure that no pollution or environmental liabilities

are accepted as general average.50 Similarly, Rule VIIII of the Y.A.R. 1974 has also been

allocated with the words to the property involved in the common maritime adventure.51Then

again, Rule IX of Y.A.R. 1950 which was repeated verbatim in Y.A.R. 1974 has experienced

modification where the word cargo was added in the title to the original ships materials and

stores burnt for fuel.52

Moreover, the calculation of general average under this rule shall be

credited with the estimated cost of the fuel which would otherwise have been exhausted, as

opposed to the previous complex rule where tracking down of the price current at the ships

last port of departure at the date of her leaving was essential. 53Therefore, under the Y.A.R.

1994 the ship-owner is entitled to claim in general average for ships materials and stores burnt

45Ibid., p. 304.

46See the York Antwerp Rules 1994, Promulgation date October 1994, Comite Maritime International,

, visited on 7 March 2011.47

Ibid.48

Report by the UNCTAD (United Nations Conference on Trade and Development), Secretariat,General Average: Reform of the System, Geneva, 9 March 1995, p. 10, para. 2.49

Ibid.50

Supra note 41, p. 10, para. 3.51

Ibid.52Ibid.

53Ibid.


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for fuel even if insufficient supply of fuel has been provided, and even though the ship was

unseaworthy as far as the provision of fuel was concerned.54

2.4 Y.A.R. 2004: restriction on former rules resulting conformity to common safety

The International Union of Marine Insurers (hereinafter, referred to as the IUMI) articulated

discontentment with the revised rules of Y.A.R. 1994 and reasonings in favour and against of

certain rules were forwarded by an International Sub-Committee meeting at Bordeaux, the final

version of which was made ready for the recent 38th

CMI conference at Vancouver.55

IUMIs

clarification to the existing problems was aimed at reducing the number of general average by

limiting it to common safetysituations which did not accumulate support for the fact that the

existing system of dividing costs operated immaculately.56A significant opposition formed by

delegations for exclusion of Rule VI regarding salvage remuneration and amendments of

Rule XI and XIV was disregarded by the representatives of ship-owning interests.57

The

drawbacks for inclusion of salvage revolved around the unnecessary duplication of the

apportionment of salvage remuneration between contributing interests and in major cases the

proportions did not change significantly resulting in relatively high cost of readjustment.58

During the Y.A.R. 1974 revision the old Rule VI was substituted with the current rule in order

to ensure uniformity in International practice.59

But the delegates of Vancouver opted for the

exclusion of the first paragraph which was replaced60and associated minor amendments were

also made to paragraphs b) and c) where the extent to which salvage is re-admitted when paid

by one party on behalf of others is on very limited terms. This reversed the amendment of 1990

54Supra note 41, p. 11.

55Richards Hogg Lindley, Average Adjusters and Maritime Claims Consultants, Commentary on the

York Antwerp Rules 2004,pp. 1-4,, visited

on 9 March 2011.56

Ibid.57

Ibid, where it has been explained that the International Chamber of Shipping Delegates (ICS)

asserted in the conference that it was premature to consider promulgation of a new set of rules beforeY.A.R. 1994 had become a norm.58

Ibid.59

Supra note 1, p. 257, para. 6.11, where it is explained in brief, that the divergence of British practice

occurred during the later part of 19th

century when adjusters began to distinguish between general

average and salvage on grounds of principle with salvage being apportioned over values pertaining at

the place where the services ended. Lowndes and Rudolf goes on to state that, in 1926 the British

Association of Average Adjusters passed a rule of practice permitted the allowance of commission and

interest on salvage awards, but the divergence in practice regarding inclusion of salvage awards in

general average was not finally resolved until a further rule of practice in 1942.60

The York Antwerp Rules 2004, Comite Maritime International,

, visited on 11 March 2011, where the substituted

paragraph reads as, [s]alvage payments, including interests thereon and legal fees associated with such

payments, shall lie where they fall and shall not be allowed in General Average,...the unpaidcontribution to salvage due from that party shall be credited in the adjustment to the party that has paid

it, and debited to the party on whose behalf the payment was made.


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brining Y.A.R. 2004 parallel to English law. Then again, wages of master, officers and crew

during detention of ship at the port of refuge which was payable under former rules was

restricted in Y.A.R 2004 conforming it to the English law of common safety demarcating it

fromcommon benefit.

Chapter 3

3.1 Unrealized attempts to modify York Antwerp Rules 2004

Recommendations were placed by marine insurers to redefine general average as provided in

Y.A.R. 1994 and embody only extraordinary sacrifice and expenditure intentionally and

reasonably made in time of peril.61The sole purpose of this futile intent was to exclude certain

costs incurred at the port of safety and to eradicate certain parts of the lettered Y.A.R. 1994

that connects to common benefitprinciple. Then again, the proposal forwarded by IUMI to

substitute the phrase common maritime adventure by common safety failed to receive

affirmation and hence, status quo was maintained.62

Moreover, Rules IX, X, XI and XII of

Y.A.R. 1994 were the few rules which were based on common benefit principle. Y.A.R. 2004

has abrogated crew wages from the port of refuge and by curtailing these wages it now fully

reflects English law on general average.63

Apart from these proposals, the motion that the

liability to contribute in general average must be dependant on the ship-owner complying with

the requirements of the International Safety Management (ISM) code and the Seafarers

Training, Certification and Watch-keeping (STCW) code was forwarded which resulted in

non-acceptance.64Part acceptance of abolition of 2% commission proposed by insurers was a

significant attempt to bring the Y.A.R. 2004 in line with the English law. The rate of interest

however, was to be adjusted periodically and proclaimed by Comite Maritime International.65

Lastly, the abolition of substituted expenses brought the rules of general average consistent

with English law since substituted expenses was absent in its concept. These actions have

certainly defeated the very purpose of uniformity which the York Antwerp Rules have attained

over the years.

61 Tony Fernandez, Marine Insurance: Adjustment of General Average Losses York Antwerp Rules

2004 Changes and Challenges, Bimaquest Volume V, Issue 2, July 2005,

, visited on 11 March 2011,

p. 20.62

Ibid.63

Ibid.,p. 22.64Ibid.

65Ibid.


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3.2 Different national approaches relating to the general average

The York Antwerp Rules are not denoted as legislative acts and appear as an International

standard contract for the settlement of general average and is applicable when parties to the

common adventure have agreed to implement them.66Distinctive clauses of general average

are comparatively infrequent since national legislation on this specific subject is not

mandatory. The rules on common benefit and common safety have acquired global

acquiescence, however the United States of America (hereinafter, referred to as U.S.A) have

acted indisposed towards this content. The contracts of affreightment of American carriers

inculcate that the York Antwerp Rules are to be complemented by the American system of

practice in terms of subjects which are not governed by the rules.67The maritime codes of four

Nordic countries comprehend particulars of general average.68 The Swedish Maritime Code

1994 at chapter 17 section 1 adopts the Y.A.R. 1974.69

Then again, the Maritime Code of the

Peoples Republic of China 1993 at chapter 10, article 193 is a transparent vision of the notion

common safety.70

The articles (article 194 to article 202) embedded in this code are succinct

and reflects a very narrow view of a hackneyed York Antwerp Rules relating to general

average. However, article 203 provides flexibility to the parties engaged in the common

66Knut S. Selmer, The Survival of General Average: A necessity or an Anachronism, 1958, Published

by Oslo University Press, p. 58.67

Supra note 14, p. 12 where it has been further explained that the American system does not

acknowledge the general average clause as comprised in the contract of affreightment which governs

the adjustment of general average and it is observed that general averages occurring when the vessel is

in ballast may have to be balanced according to the American law and practice which is stipulated in

the American policies on vessels, whether the vessel is under charter or not.68

William Tetley, General Average now and in the future,

, visited on 11 March 2011, p.36, whereby it

is stated that the four countries are Denmark, Finland, Norway and Sweden. They adopted a common

maritime code, which came into force on October 1, 1994 and one such code is the Sjlagen (Swedish

Maritime Code) of June 9, 1994, SFS 1994, no. 1009, to which all subsequent references will be made.

For the text of the Swedish Maritime Code in Swedish and English, see The Swedish MaritimeCode/Sjlagen, 2 Ed., Skrifter utgivna av Axel Ax:son Johnsons Institut fr Sjrtt och Annan

Transportrtt nr 22, Jure AB Bokhandel, Stockholm, 2001, being the Swedish Maritime Code 1994,

updated to June 30, 2000.69

The Swedish Maritime Code 1994,

,

visited on 11 March 2011, where in Chapter 17 section 1 it is stated that, [t]he significance and

apportionment of general average is governed by the York Antwerp Rules 1974 unless otherwise

agreed.70Maritime Code of the Peoples Republic of China, promulgated by Order No. 64 of the President ofthe People's Republic of China on November 7, 1992, and effective as of July 1, 1993),


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adventure to opt out of chapter 10 by corresponding to a different set of rules and it is an

undecided matter (of the code) as to whether the parties can opt out altogether.71Moreover, the

French ship-owners to a great extent retain their rights to opt whether settlement is to be

reached via York Antwerp Rules or under French law, the aim of which is to utilize the French

rules pertaining to the fact that the vessel shall contribute with half of its value and that loss of

time during repairs of general average will be allowed.72

3.3 Analysing the equitable idea underlying common benefit contribution and

distribution

The legitimate and equitable notion that intentional renouncement of common goods at time of

imminent danger should be indemnified by common contribution is an impenetrable feature of

general average. The contribution generates from the other parties whose property has been

protected and those who have undergone losses, whereby the latter is indemnified to the

position of the former.73The fault factor as inscribed in this concept has resulted in friction

between English law and American law.74

However, the question is finally dealt with by the

York Antwerp Rule D.75

The equitable factors embedded in the concept conclude with

impartial distribution76, in the light of criticism which may not pertain to be practical to effect

an apportionment every time salvage costs benefiting several interests have been induced.77

However, it can not be argued that it is equitable to extinguish this unbiased distribution.

71Supra note 67.

72Supra note 65.

73Supra note 23, p. 15, para 59.

74Ibid., p. 16, paras. 62-64, where it has been elaborated that, in the cases, The Carron Park (1890)

15P.D. 203 and Milburn v. Jamaica Fruit Co (1900) 2Q.B.540. it has been opined that if is the ship-

owner is relieved by the contract of carriage from liability of unseaworthiness, his right to contribution

cannot be affected if unseaworthiness necessitated general average sacrifice or expenditure, since the

fault does not tantamount to an actionable wrong. On the other hand, before the Harter Act came intoforce in the United States, any such clause which entitled the ship-owner to general average

contribution was held to be invalid. Ultimately, in the decision of the Supreme Court in The Irrawaddy

[(1897) 17lU.S.187.] it held that the Harter Act prevented the ship-owner from becoming liable in

damages but under no circumstances did it affect the general average claim.75

Supra note 60, The York Antwerp Rules, Rule D which states that [r]ights to contribution in general

average shall not be affected, though the event which gave rise to the sacrifice or expenditure may have

been due to the fault of one of the parties to the adventure, but this shall not prejudice any remedies or

defences which may be open against or to that party in respect of such fault.76

Supra note 19, para. 974, where it is explained that, the contribution is made among those who have

suffered loss by sacrifice or expenditure and the underlying principle of such contribution is to

establish the position of the person suffering the loss in the same position as the owners of other

interests. However, there are dissenting opinions as to whether the right to contribution emanates from

implied contract or from ancient maritime law. See Burton v. English (1883) 12Q.B.D.218, per Brett,M R at pp 220-221, Strang Steel & Co v. Scott (1899) 14 A.C. 601, pp 607-608.77

Supra note 65, Chapter IV, p. 121.


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In weighing both the concepts of natural justice it may be perceived that common

benefitcannot be suited with common safetyin the same platform due to the fact that common

safetyis chained to perceptible reality.78

A further analysis of common interest investigates

that the cessation of the voyage in accordance with various contracts of affreightment has the

same implication and therefore, should be achieved by common contribution. Hypothetically if

the ship-owner is considered to be a debtor, the distribution of common benefit expenses

connote that the ship-owner is partly released from his obligations and suffices as a

supplementary compensation for overcoming voyage hindrances due to average.79

It may be

justified to come to the assistance of the debtor by transferring some risks of unforeseen

hindrances to the other party. Nevertheless, this solution demands critical, extensive and above

all unexpected obstacles to have been met.80 To furnish the ship-owner with supplementary

compensation for every call at a port of refuge emancipates him from obligations to a greater

extent than the general law of contract provides for. Apart from upholding the concept of

equity, the common benefit distribution provides a bar for unnecessary sacrifice by the

master.81

The master will attempt to reach safety with the least total costs as it is the only way

out for the owners. The distribution of common benefitmay also be interpreted from the point

that, the apportionment of costs incurred at the port of refuge and for the purpose of completing

the carriage makes it more easy to arrive at practical arrangements which are of equal interest

to the ship-owner and to the cargo owner.

3.4 Hindrances of common benefit rules unveiled

The concept of common benefit distribution has been unveiled by renowned authors as

inessential on the point that the shield against unforeseen losses may be compensated by

insurance.82It is assumed that there is no technical objection i.e. charging the hull underwriter

with risk of exceptional expenses incurred by ship-owner to redeem ship and cargo and the

entire process is a matter of a question of assimilation of insurance conditions. 83Although the

psychological implication of the necessity for common benefitdistributionconnotes recourse

for the cargo owners against the ship whereas the ship-owner would be predisposed to sacrifice

78Ibid.

79Ibid., p. 122.

80Ibid.

81Ibid., p. 123.

82 Supra note 66, p. 289, where Professor Knut Selmer has in brief outlined a concrete criticism on

general average with the statement that a consideration of the economic aspect of general average willfavour a complete suppression of the entire institution.83

Ibid.


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cargo to a larger extent.84

In modern maritime industry this is certainly perceived as a myth.

With far stretching laws that have evolved today, the ideology that surrounds the deliberate

extinguishing of cargos for the safe continuance of the voyage and ultimately reaching the port

of safety is merely an exaggeration. The only defence sprung in support of this distribution is

that the equitable sharing expedites the system to arrive at practical arrangements of expenses

which results in a smooth winding up of complex averages.85However, it can be argued that an

abolition of the common benefit rule will subdue these irrational unexpected costs. Alternate

cheaper yet effective ways to cover the extra transport costs should be looked into by the

carrier which could equalize the economic pressure on the parties in a less-complicated way.

But with the new innovation in marine insurance with respect to extraordinary transport costs,

the underwriters may require the ship to be repaired with the cargo on board which may

conflict with the cargo underwriters opinion, who would not endorse any deviation.86 But

consultation with the cargo owner would presumably pave the way for flexibility in this arena

of conflict.

The common benefitcontribution which is a redundant financial practice has been termed

by imminent writers as an extravagant undertaking.87

In calculating the losses, both hidden

costs and extra charge on cargo interests are imposed on the parties.88 An investigation

carried out by the IUMI (between 1982 and 1988) transparently indicates that the great

majority of contributions are small in relation to the total value at risk.89 Then again, the

adjustment of the entire process involves a great deal of work by the parties to the contribution

and average adjuster, surveyor, broker, agent etc.90 The economic effect of general average

system may not only be measured in terms of further costs innate in the system but also by

displacement of total costs from one set of interests to another. The additional costs apart from

the administrative costs play a major role in persuading the insurers to seek recourse to lawyers

84

Ibid., p. 291.85Ibid., p. 292.86

Ibid., p. 293.87

Supra note 1, p.6, para 00.11, See also Supra note 66, p.290 where it has been deduced that, the

statistical records of Norwegian overseas fleet gives a basis for a rough estimate where the direct

expenses in collection average bonds, establishing the general average losses and dividing the bill

between contributory interests constitute a charge of 6-7% of the general average amount proper.88

Supra note 66.89

Report by the UNCTAD (United Nations Conference on Trade and Development), secretariat , Theplace of General Average in Marine Insurance Today, Geneva, 8 March 1994, p. 25, para. 108, where

the chart indicates that at least 50% of all incidents lead to contributions of 2.5%, with 2/3s under 5%.90

Ibid., p.30, para.123, See also Charley and Giles, Shpping Law, Eighth edition, 1987, Published by

Bell and Bain Limited, p. 303, where it has been stressed that the actual exercise of lien on cargo would

in contemporary times work great adversity because the process of working out or even adjusting theamounts owing by way of contribution from the various interests involved is very prolonged and

ultimately time consuming.


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to challenge the validity of general average on behalf of cargo interest which makes the entire

process prolonged.91

Chapter 4

4.1 A persuasive ground for survival

The codification of general average was questioned in the primary complaint demonstrated in

1864 emanating from the marine insurance industry where the remunerators of maritime risks

could not visualise the same merits which formed the foundation of its inception. 92Beforehand,

the IUMI Committee in 1948 contended that the principle of equity and its historical roots were

concrete grounds of retention of general average.93The positive vibration that wreaks from this

age-old rule is the striking feature of sacrificing common good at times of peril at sea is to be

indemnified by common contribution. However clich this feature may be, the contribution and

distribution based on equality appeals more than any other fair system in the maritime arena.

From a technical point of view it has been insinuated by Professor Selmer that the logic behind

the introduction of the rules of fairness largely contributes to the community of danger which is

established via loading of a vessel with cargos not owned by the ship-owner.94A mandatory

expectation that cannot be overlooked at this point which is entwined with the entire concept of

equity is the term reasonable. When the danger takes its toll and sacrifice is inevitable, the

intuition that works among the parties is that the low-priced items on board should be

jettisoned rather than the over-priced general cargo. But the master who is bestowed with

benefit of any doubts with regards to the choices and actions may opt to sacrifice the over-

priced cargo which can be elevated with greater ease.95

The exact principle governs the case of

expenditure, where the master may face legal challenges on the ground of unreasonableness in

terms of measures adopted which resulted in the expenditure.96 The force of equity holds a

91Ibid., p. 31.

92 Proshanto K. Mukherjee, The Anachronism in Maritime Law that is General Average , Lund

University/World Maritime University, p. 3.93

Supra note 23, p. 27, para. 103. See also Supra note 66, p. 288 where it has been emphasised that

salvage costs and other sacrifices made for common good at a time of peril at sea have been

proportionately shared by those whose property was threatened by destruction and the apportionment

which results therewith bears the whole weight of the unbroken tradition of thousands of years.94

Supra note 66, where it has been further stated that there is hardly any other situation where common

danger occurs so frequently.95

Supra note 1, p. 106, para. A.96.96

Ibid., p. 107, where reference has been drawn to Anderson v. Ocean S.S. Co. [1884] 10 A.C. (107

H.L.), where the owners of cargo carried on board theAchilles refused to pay the amount in its entiretyof general average in respect of towage expenses on the grounds that the amount paid by the ship-

owner to the towage contractor was exorbitant and the sum paid was unreasonable.


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strong ground in the face of elimination, which among other factors still remains to be

persuasive.

4.2 A legal alibi resulting in redundancy?

Re-examining the principles that revolves around general average ultimately narrows down to

the question as to whether equity as a concrete defence for the continuing survival of general

average has outlived its usefulness.97 It has been inscribed as an incongruous rule of

contemporary sea-borne commerce where decisions of abolishing the rule have somehow

concluded in reformation.98 A comparative study on Y.A.R. transparently deduces that the

rules which should pertain to international unification on the face of modification have been

left in disarray. Deactivating the common benefit allowance which is considered to be an

apotheosis in general average was on the verge of elimination.99Despite sparking a debate for

dismantling this allowance it consequentially appeared as a modified version of the former rule

injected with the similar contaminated principles.100Another firm argument held on behalf of

general average is the undesirability on grounds of public policy of intruding in any way with

the discretion of the master in time of peril which according to Selmer rests on dubious

assumptions.101 Although repetitious but it is a fact that marine insurance has made this

practice redundant and nevertheless, this redundant practice is time-consuming and the

adjustment is a combination of complex mathematical precision which gives rise to conflict of

laws102. In an effort to amalgamate the positive influence of general average it becomes

apparent that the drawbacks chained to it are concealed behind the facade of equity. The

justification of equity is only a legal alibi resulting in redundancy which has kept an

anachronism alive in contemporary maritime-commerce.

97Supra note 92,

98Ibid., pp. 8-9, See also Supra note 1, para. 90.04, where it has been pointed out that the main

argument for the abolitionists rest upon the fact that what was once a vital commercial necessity is no

longer such and on the contrary it is portrayed as a costly and unnecessary anachronism which takes

several years to sort out a settle.99

Supra note 92, p. 14.100

Ibid.101

Supra note 23, p. 29, para. 109, where a series of questions were aimed at the masters knowledge

over general average, the apportionment of sacrifice from an economic perspective and the real choice

between alternatives available in times of danger.102

Ibid., p. 25, point (l) where it is stated that failure to bring about unification of the rules have lead toincreasing difficulties as cargos under the same average are consigned to ports of discharge in other

countries where the applicable law is different.


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4.3 Evaluation of the alternatives

The first alternative scheme proposed was that the ship should bear the strain of all general

average sacrifices and expenditure simultaneously.103

In the light of the Hague Rules and

Hague-Visby Rules104 this alternative scheme is visibly objectionable which defeats the very

purpose of its inception i.e. equitable contribution.105 Article 5(1) of The Hamburg Rules106

denotes that the carrier is accountable to indemnify any loss or damage in case of fire unless it

is proved that reasonable measures were adopted to avoid the occurrence and consequence and

the wide acceptance of the Hamburg Rules may inhibit average adjustment in case of fire to be

drawn up.107A significant alternative in lessening the intricate system of adjustment is to allow

the sacrifices to lie where they fall with the apportionment of expenditure to be continued.108

This attempt of partial abolition as an alternative scheme dissects the sacrifices of the common

maritime adventure where sacrifices of ship is borne by the ship-owner or underwriters and

sacrifices of cargo would fall upon the cargo owners or the insurers.109

Neither Professor

Selmer nor Lowndes recognizes this alternative to be flawless mostly because partial abolition

(by permitting sacrifices to lie where they fall) would barely reduce the number of adjustments

since they are likely to be incurred in nearly every case.110

In examining the complete abolition

of the common benefitdistribution scheme it must be assured that the gap would not be filled

by a substituted system such as salvage i.e. the accountability of ship-owner for salvage

applicable to the cargo.111 Nevertheless, the distinguished writers of leading American texts

have implicitly pointed out that the absolute abolition would under no circumstances leave any

such gap if supplemented with appropriate adjustments in hull and cargo policies and liability

coverage in carriage contracts.112 But doubts as to the veracity of this supplementation as

pointed out by Lowndes is that it cannot be obtained by the current hull insurance conditions

103

Ibid., p.37, para. 131.104 The International Convention for the Unification of Certain Rules of Law Relating to Bills of

Lading, 1924 (Hague Rules), , visited

on 17 March 2011, and the Hague Rules as amended by the Brussels Protocol of 1968 (Hague-Visby

Rules), < http://www.jus.uio.no/lm/sea.carriage.hague.visby.rules.1968/doc.html >, visited on 17 March

2011.105

Supra note 1, paras. 90.11-90.25.106

The United Nations Convention on Carriage of Goods by Sea, 1978 (Hamburg Rules),

, visited on 17 March 2011.107

Supra note 23, p.37. paras. 132-133.108

Ibid., p.38, para. 136.109

C. H. Johnson, General Average: Abolition , International Codification or Reform, in a paper read

before the Insurance Institute of Liverpool, 11 February 1925, p. 312.

111Supra note 1, para. 90..16.



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and additional policy of insurance is required by the ship-owner which in contemporary terms

is referred to general average attaching to cargo.

4.4 To abolish or not to abolish

The vital questions in wrapping up the discussions of a glorious concept shrouded in antiquity

are as to whether it should be eradicated or whether the procedures should be simplified. 113

These were the common questions which vibrated for a long time due to the reason that

whenever the questions regarding abolition was raised, the pressure for abolition dissipated,

made a u-turn and finally the table turned towards modification (simplification). The

satisfactory conclusion drawn by Professor Selmer was that abolition is the final word. A set of

sharp words i.e. elaboration and elimination were used by Comite Maritime International in

1982 where the former words related to arrangements of a new insurance while the latter

corresponded to the contemporary general average distribution system.114

Beforehand, proper

investigation should be set up to identify the best means of those arrangements that could act as

a surrogate to the existing prolonged and critical system. Then again, the inherent

complications followed by redundancy is best solved by contracting it out in bills of lading,

charter-parties and other contracts or incorporate a clause excluding the application of general

average.115

International acceptance of this action is superficial from the point of view that it

has never acted as an impediment in confronting other regimes and where majority acceptance

was not obtained, the eventual arrangement is negotiating compromise.116Compromise would

be in another term an implied mode of accepting reformation or modification of the previous

rules. Seven years into the future after the last revision of Y.A.R. it may be assumed to be too

soon to reflect on simplification or reform of the system before the technical, service and

expenditure problems have been considerably consulted by the insurance interests concerned.

Under the given circumstances if potential insurance solutions do not provide a viable answer,

then simplification of the general average system coupled with the York Antwerp Rules may

be updated and conclusions may be drawn as to whether rules along with the numbers are to be

restricted, modified or made flexible. Under the common safety principle, any sacrifice which

embraces cost of seeking a port of refuge and staying there should be borne by the party who is

hit by the loss or incurs the expenses. Moreover, certain parts of the common safety rules

which mostly accord to the English system must be re-examined as not to defeat the purpose of


114

Ibid., p.49., para. 173.115Supra note 68, p. 39.



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achieving International unification. A complete abolition of the common benefit principles

would require that the ship-owner should be able to insure extra expenses which might be

incurred in respect of termination of the transport on account of average which may technically

be substituted by general freight cover117 Abolishment whether it be the entire concept or

partial is (depended) on how much the entire weight of the inner significance of general

average can be shifted to other systems. But indeed this theory as propounded by authors with

farsightedness can perceive the fact that abrogation of the general average system will bring a

renaissance in the contemporary marine-industry.

Conclusion

General average is a dignified institution. The charges constituted against it are owned by the

modern era of shipping industry which has become exhausted by its outdated usage. When the

term modern shipping is dragged in, it echoes in mind a system devoid of complication and a

matured system worthy to meet the technicalities through which the stakes of common

adventure can be laid upon. And to that extent it cannot be adjudged to meet the contemporary

criterions. Its continuing survival is an exaggeration of a concept belonging to an ancient era

for which it was designed to be compatible. The push and pull factors of elimination have been

constant and the reformed rules of Y.A.R. do not leave any traces of innovation. Reiteration on

substitute marine insurance arrangements coupled with adjustments in hull and cargo policies

and exclusion of general average from carriage contracts is just embedded in theory without

any pragmatic initiatives to actually transform them in practice. In the words of Professor W.

Tetley the abolition of this institution can be brought by an International convention

supplemented by mandatory national statutes but with all due respect to this authentic

perception, the chances of such convention is unforeseeable. The inherent principle of equity

is an excuse for safe preservation of a theory which in reality should have been acknowledged

as an eminent concept in a state of debris. With the given analysis of the so called distribution

system it under no circumstances provides to be an advantage for the subsidence and

indemnification of damages undergone by the co-adventurers in times of imminent peril. The

proponents of the revolutionary proposition need to set aside this antique entity camouflaged

by a legal alibi and eradicate the anachronism from the face of modern maritime commerce.



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Charley and Giles, Shpping Law, Eighth edition, 1987, Published by Bell and Bain Limited.

Donaldson, John; Staughton, C.S and Wilson, D.J, The Law of General Average and the York-Antwerp Rules, Tenth edition, 1975, Stevens & Sons Limited.

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