REPORT OF THE BMLA REPORT OF THE BMLA GENERAL AVERAGE SUB COMMITTEE FOR 1997
N.G. Hudson (Chairman) and M. Marshall (Secretary)
York/Antwerp Rules 1994 - the extent of implementation
At a meeting of the Committee on 8 January 1998 members reviewed the current status of the York/Antwerp Rules and developments in the field of general average during the past year.
The Chamber of Shipping has confirmed that it no longer issues any shipping documents (they are all now produced by BIMCO). It is understood that all relevant BIMCO shipping documents are being amended to refer to the 1994 Rules when they are revised. However, this means that some documents may not be amended for several years to come. One BIMCO document revised during 1997 and incorporating reference to the new Rules was the Baltic Wood Charterparty 1973 (revised 1997) known as NUBALTWOOD.
Some owners, among them P&O/Nedlloyd, are inserting the Rules but with qualifying clauses. For example, the qualifying clause used by P&O/Nedlloyd qualifies the 1994 Rules with the words "the test of reasonableness in the Rule paramount being made on the basis of what was known at the time of the general average act and not subsequently with the benefit of hindsight."
Other owners documents refer to "the 1994 Rules or subsequent amendments thereto". Some doubt must be expressed on such wording - it does not clarify how "official" the amendment has to be, or indeed whether the 1994 Rules could count as an amendment of the 1974 Rules. They might be regarded instead as a completely new set of Rules (though the CMI adoption wording actually describes the 1994 Rules as an amendment).
The Committee recognizes, in the case of contracts referring to previous edition of the YAR, that it is the general practice of average adjusters to invite all contributing interests to agree that the adjustment be prepared in accordance with the latest edition of the YAR. This invitation is almost always accepted.
The Committee also considers that where existing documents incorporating reference to the YAR 1974 (or any earlier version) have been or are sought to be up-dated by inserting the words or any subsequent amendment thereto it would be prudent to qualify those words by adding adopted by the Comité Maritime International.
Charterparty amendments - P & I Club Circular
Some tanker charterers have begun excluding pollution prevention measures from the amounts recoverable in general average under their charterparties. The following note has been circulated by members of the International Group to all Club members explaining the position:
Oil Pollution Claims
General Average Charterparty Clauses
In the past liabilities voluntarily incurred by an owner in saving or attempting to save the ship or cargo fell into general average and were therefore paid by cargo and hull underwriters. An example might be claims arising from a deliberate discharge into the sea of part of the cargo in order to save the ship and the rest of the cargo. This was strongly objected to by hull and cargo underwriters, who argued that such liability should always be paid by the clubs. An agreement was reached in drafting the York Antwerp Rules 1994 that actual environmental damage would never be allowed in general average and it would always fall for the account of the clubs, but that preventive measures would be allowed in certain circumstances. A number of oil companies, particularly Exxon, have inserted in their charters clauses which amend the YAR 94 and attempt to restrict prevention measures falling into general average if oil has already escaped. Thus, owners and their clubs could possibly be faced with paying claims which should under YAR 1994 be paid by hull and cargo underwriters. The Boards of all clubs are being asked whether club rules should be amended so that such claims should only be recoverable by the discretion of the Board. An agreed note is being submitted to all Boards as follows:-
Prior to 1994, the York Antwerp Rules (YAR) allowed the recovery of pollution expenses and liabilities in general average in wide range of circumstances. For example, clean up expenses and the cost of third party pollution claims arising out of jettisoning oil to refloat a vessel were usually allowable in general average.
As a result of increasing reluctance on the part of property underwriters to accept pollution risks in general average, there was considerable pressure to exclude all pollution costs and liabilities from general average where the YAR were revised in 1994.
YAR 1994 represents a hard fought compromise between the clubs and property underwrites. Whilst the cost of pollution clean up and third party pollution liabilities following a spillage are now generally excluded from general average under Rule C of YAR 1994, the cost of preventive measures where no spill has occurred are allowable.
YAR 1994 also provides that the cost of preventing or minimising environmental damage is recoverable in general average under Rule XI(d) if incurred, inter alia, as a condition of entry into or departure from port of refuge.
Although this erosion of the shipowners entitlement to recover pollution costs in general average was regrettable, it was considered an acceptable price to pay for the continued existence of YAR as an internationally accepted general average regime which has served the industry well over the years.
In 1997, a new and rather curious challenge to YAR 1994 has emerged. Following the termination of the TOVALOP and CRISTAL agreements at 20 February 1997, it was necessary to modify the widely used Tovalop Charter Party Clause recommended by clubs. Several leading oil company charterers sought to introduce a new clause which included a provision which prevented the shipowner from recovering any oil pollution expenses whatsoever in general average.
Following discussions between owners, charterers and clubs, most charterers have now abandoned this clause and have accepted that pollution costs may be included in general average to the extent permitted by YAR 1994.
However, one or two charterers, including Exxon, have re-drafted the original clause which now provides that whenever there has been an escape or discharge of oil from the vessel, none of the resulting costs may be included in general average. Whilst less onerous from the shipowners point of view than the original clause, in that it allows recovery in general average of the cost of preventive measures where no spill has occurred, this clause still derogates from YAR 1994 in that the effect of excluding some of the costs which would otherwise be recoverable under Rule XI(d) irrespective of whether or not a spill has occurred.
As an example, where a vessel which has been aground and spilled oil seeks to enter a port of refuge, but is not permitted to do so by the port authority unless she is boomed and accompanied by skimmers, the cost of such preventive measures would normally be recoverable in general average under Rule XI(d) but would be excluded by the re-drafted Exxon Clause.
In May 1997, a group circular was sent to all tanker members recommending that they should refuse to accept any charter party clause which attempted to exclude pollution costs from general average to any greater extent than provided by YAR 1994.
The Rules of most clubs do not make it clear that pollution costs will not be recoverable under the pollution rule to the extent that they would have been recoverable in general average according to YAR 1994.
In order to ensure that the cover afforded by all group clubs to their members is as similar as possible, all club boards are to be consulted on the issue of whether or not club rules should make it clear that any member who accepts the revised Exxon clause, or any similar clause, may prejudice his P&I cover to the extent that he forfeits the right to recover pollution costs in general average which would otherwise have been recoverable under YAR 1994.
If the Board takes the view that Club cover should not extent to pollution costs normally recoverable in general average under YAR 1994, the following additional proviso will be required in Rule 20.14:-
there shall be no recover from the Club in respect of any liabilities, costs and expenses which would have fallen into general average if the contract of carriage under which any cargo is carried had been subject to the York Antwerp Rules 1994 unamended, unless the Board in its discretion otherwise determines".
Adjustments received by insurers
Insurers report that there have been hardly any adjustments so far received on the basis of the 1994 Rules. It appears that the 1974 Rules were introduced more quickly than the 1994 Rules. It has been suggested that one possible reason for this is the decline in the number of general average claims in many trades since the 1950s, making the system less significant for owners.
Other developments - AIDE/Average Adjusters
A report has been released by the Council of AIDE giving the conclusions of a study into the relationship between general average and safety at sea. This study had been undertaken with a view to providing information to the International Maritime Organisation. Copies of the report are available from the Secretary of the BMLA.
Presentation of Fees
Most members of the Association of Average Adjusters had agreed a new procedure which was implemented in July 1997. It provides for a breakdown of fees to be supplied by the adjuster if the amount of adjustment fees were challenged by underwriters. The breakdown of fees would be examined in such circumstances by a panel of three adjusters.
Oil Pollution Avoidance - Measures taken by a third party
Some doubt has recently been expressed whether pollution avoidance measures taken by a third party independently of the wish of the Master of a ship could be included within a general average. For example, a marine pollution authority or coastguard might decide to take action and then recover some or all of the cost from the shipowner.
It is understood that the position is not entirely straightforward. In UK law it is likely that if an action has been taken with which the master would probably have concurred if he had been in a position to do so at the time the action was taken, the courts would regard the expenditure as allowable in general average. Case law dating back to the 1890s seems to confirm this (see Lowndes & Rudolf). On the other hand American law is more ambiguous on the position with at least one judgement going in the opposite direction..
Rules XVI and XVII
The AAA continues to look at the problem of valuation under Rules XVI and XVII. A report has not yet appeared, partly because AIDE is now also considering the same issue.
Membership of the Committee
The current membership of the Committee is as follows:-
N Geoffrey Hudson (Chairman)
Matthew Marshall (Secretary)
Gary Bradshaw (Eagle Star)
Ben Brown (Clyde & Co)
Donald Chard (Chamber Of Shipping)
Nick Gooding (I C Agnew)
Patrick Griggs (Ince & Co)
Linda Howlett (Chamber Of Shipping)
Charles Mawdsley (Charles Taylor)
William Birch Reynardson
John Richardson (P & O Containers)
Ken Scott (Holmes Hardingham Walser Johnston Winter)
Ian Stevens (Lloyds Claims Office)
David Williams (Lloyds Claims Office)