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Response to CMI Questionnaire General Average









1.                  Should the scope of the YAR be reduced to the principle of the common safety?


The views of our members are divided on this point.


The representatives of hull and cargo insurers are in favour of the reduction.


The representatives of shipowners and those of average adjusters are opposed to any reduction, and are also of the view that it is in any event too early to be contemplating such a radical change only six years after the adoption of the new York Antwerp Rules 1994, which have  not been demonstrated to work unsatisfactorily.           The representatives of P and I insurers also see no particular need for a change. In responding to the more detailed questions set out in question 2 these members expressed their opinions without prejudice to this overall view.


Other members consider that, in view of the dissatisfaction of hull and cargo insurers with the present system, it is time to reappraise it, but they feel that further study is required into the consequences of such a reduction and into alternative means of insuring the expenses which would be excluded from general average if the proposal was adopted. They would be unwilling to decide whether the scope of the YAR should be reduced in accordance with IUMI=s proposals until the results of such a study were known, although this would not necessarily have to delay a wider reappraisal of the system in the meantime.


It was noted that the preamble to the question, which suggests that under the early versions of the York Antwerp Rules GA was confined to the common safety, has no counterpart in the IUMI Report, and is not wholly accurate.  The original York Rules of 1864 allowed certain port of refuge expenses, including crew wages, after the point of safety had been reached, and with the introduction of the York Antwerp Rules 1890 the allowances of port of refuge expenses were effectively as extensive as those under the current Rules.   The allowances are therefore of  long standing rather than being the result of recent changes, and the effect of this is that there is little or no practical experience of the operation of a GA system which is confined to the common safety. Some representatives were of the view that determining the point of time nat which the common safety has been achieved may in some cases be far from easy. A similar issue arises in relation to salvage, and sometime gives rise to sharp differences of opinion: see for example The Troilus [1951] AC 820.


2.1 Whether sacrifices and expenses should be allowed only if made or incurred while ship and cargo are in the grip of a peril.


The phrase Ain the grip of a peril@ might be understood as meaning that the peril must actually have begun to operate before any allowances can be made.   This has never represented English law, under which the peril must be real, but need not be immediate, and the British MLA, including those members who are in favour of reducing the scope of YAR to the principle of common safety, sees no need for any reappraisal of what constitutes a sufficient degree of peril. Moreover, the IUMI Report did not itself suggest that the peril must have begun to operate.


We suspect, however, that the real thrust of the question is probably whether the GA allowances should cease as soon as the common safely had been attained, and that subsequent expenses (in practice mainly port of refuge expenses incurred for the safe prosecution of the voyage) should be excluded.   So understood, the question seems to raise exactly the same issue as question 1, and the views of our members are the same as their views on that question.  Even if the allowances ceased when the common safety was attained  expenses incurred as a direct result of a GA sacrifice for the common safety (e.g. the cost of repairs to the ship of damage caused by sacrifice) would continue to be allowed whenever incurred.



2.2 Temporary repairs


Temporary repairs are of two categories (1) those allowed in their own right, such as temporary repairs of damage caused by sacrifice, or when effected for the common safety, and (2) those effected at a port of refuge for the safe prosecution of the voyage, which are allowable only on a substituted expense basis. The British MLA sees no need to disallow the first category, the allowance of which is not in conflict with the IUMI proposals. So far as concerns the second category, those in favour of restricting GA to the principle of the common safety were naturally in favour of disallowing these, whereas those in favour of retaining the present scheme of YAR considered that temporary repairs, as other substituted expenses, should continue to be allowed. However it is considered by some of these members that temporary repairs give rise to special problems which can and perhaps should be addressed. In particular that they often add value to the vessel which lasts beyond the end of the common adventure and enable the shipowner to effect permanent repairs at a place where they can be done considerably more economically thn would have been the case at the port of refuge. 



2.3 Crew wages


Those members who favour reducing the scope of YAR to common safety also, not surprisingly, favour abolition of allowances for crew wages etc. after reaching the port of refuge and achieving the point of safety (except during delay caused by making good damage caused by sacrifice). The majority of those in favour of the present system saw no reason to alter the allowance of crew wages. However, a few members saw the allowance of crew wages as infringing the principle that loss through delay should be disallowed, and consider that there may be a case for abolishing this allowance even if the other Rule X and XI allowances are retained.



2.4 Cost of discharging, storing and reloading cargo


Those in favour of reducing general average to the common safety favour disallowing costs of discharging (except when necessary for the common safety), storing and reloading cargo. Those in favour of the present system see no need to alter them.



2.5 Substituted expenses


In the view of the majority of members of the British MLA there is no objection in principle to substituted expenses, which embody the general requirement to mitigate loss, and they should continue to be allowed.  This view is not shared by the representatives of hull and cargo insurers, who see the allowance of substituted expenses as inconsistent with the philosophy behind the IUMI proposals - namely that sacrifices and expenses should allowed only if made or incurred for the common safety. It is, of course, recognised that if GA is confined to the principle of the common safety the opportunities for the allowance of substituted expenses will be greatly reduced, if not entirely eliminated.



2.6 Non-separation agreements


With the exception of the property insurance representatives the British MLA does not favour any change in this regard, since it is impossible to prohibit non-separation agreements, and the non-separation agreement in Rule G, which the parties can adapt as they choose, fulfils a useful practical function as a model, and assists the parties to reach agreement on the terms on which cargo is forwarded; the Bigham clause prevents abuse. It should be noted that if allowances in GA cease once the ship and cargo are out of danger there rarely if ever be any need for such agreements.



2.7 Abolition of Rules X and XI


Those members of the British MLA in favour of restricting GA to the principle of the common safety are in favour of terminating the Rule X and XI allowances in general as soon as the common safety has been achieved, but permitting them up to that point.   The views on crew wages etc and costs of cargo operations are set out in the answer to questions 2.3 and 2.4 above.



3.  Non-compliance with ISM or STCW


The effect of Rule D is to leave all questions of fault outside the scope of YAR.   As a matter of English law, a party resisting contribution on the grounds of fault must simply show that the event which gave rise to the general average was caused by the actionable fault, under the applicable law, of the person claiming contribution. In the vast majority of cases the practical effect of this is that he must demonstrate a breach of the contract of carriage construed  according to its governing law.


The British MLA regards it as unnecessary and undesirable that there should be any departure from this system, or that the YAR should start to concern themselves with fault.   Moreover the suggestion that any non-compliance with ISM or STCW should be considered as fault is open to the following additional objections:

(1)               where the non-compliance causes or contributes to the event which gives rise to the general average the provision is largely unnecessary, since the non-compliance will almost invariably amount to a failure to exercise due diligence to make the ship seaworthy/properly manned; it will therefore amount to actionable fault under the contract of carriage and will provide a defence to a claim for contribution;

(2)               where the non-compliance does not cause or contribute to the event there is no reason why it should affect rights of contribution in any way.


The representatives of property insurers pointed out that the IUMI Report envisaged that the failure to comply with ISM or STCW should be causative before it deprived the the shipowner of the right to collect GA contributions from other contributing parties, and did not propose that any non-compliance should be considered as fault; the IUMI proposals were simply intended to act as a reminder that owners should comply with international safety conventions. The majority of members saw no need for such a reminder in the YAR. 



4.  Should salvage, if settled separately, not be distributed in G.A.


Whilst recognising that there are some cases in which distribution of salvage in GA will yield a fairer result than leaving each party to bear his own liability to the salvor, the British MLA is of the view that additional complications to which it gives rise are disproportionate to the benefit, and that the IUMI proposal should be adopted.



5.  Should expenses of preventing or minimising damage to the environment be allowed?


Under an adjustment governed by YAR 1974, at any rate where English law applied, a wide variety of pollution liabilities and expenses were recoverable.   All that it was necessary to show was that they were reasonably incurred as an incident of a GA act, or as a direct consequence of such an act.   The purpose, and the effect, of the provisions introduced in 1994 is not to introduce or increase allowances in GA in respect of liabilities and expenses, as the question appears to suggest, but to limit them.   The provisions were introduced in 1994 at the  request of hull and cargo underwriters, who did not wish to be seen to be insurers of pollution liabilities, hence the restriction of the allowances to costs and expenses of preventing or minimising damage to the environment, thereby excluding any allowances in respect of liability in damages for pollution already occurred.   The carefully defined expenses admissible under Rule XI(d) were determined upon after elaborate discussions between the interested parties, and the British MLA sees no need to change them.   Nor, it appears, does IUMI, since question 5 does not appear to have any counterpart in their proposals.


It should also be noted that if the allowances under XI(d)(i) were abolished there would be an incentive for shipowners to conclude Ano cure no pay@ salvage agreements (the effect of which would be that ship and cargo would each be liable to pay a salvage award, which would reflect the salvor=s efforts in preventing or minimising environmental damage) rather than making a fixed price contract, when the latter might be considerably more advantageous in all other respects.



6.                    Should the YAR include a time bar?


The British MLA sees no objection in principle to a time bar, provided that the time limit is not unreasonably short (the period of two years after the publication of the adjustment or six years after the completion or abandonment of the voyage was suggested). It has to be recognised, however, that a provision of this nature will not be effective in all jurisdictions, since a number of legal systems impose time bars which cannot be departed from by private contract.