General Average is one of the fundamental propositions enshrined within maritime law. Under this premise all partners in a maritime undertaking share the risk on a pro rata basis.
What is General Average in shipping and what are some examples?
Principle of General Average
The ancient Greeks drew this concept up when considering vessel and/or cargo abandonment. The idea was, however, probably far older. Over time and as the proposition matured other risks and damages were identified. It was a big step forward when payment in coins was recognized as being essentially the same as forfeiting land or goods.
Independent of insurance
For centuries General Average has been an accepted and integral part of shipping. Those involved in shipping people and goods realized they needed some form of protection against rare types of events. In this, General Average was acknowledged and is a separate entity relative to marine insurance. Nowadays, shipping and freight underwriters generally apportion General Average losses and contributions when writing their insurance policies. General Average is not, however, their main concern. Indeed, General Average is not fully grasped when insurance matters are neglected initially.
Uniformity is recent
The concept of General Average was not globally standardized until the 20th century. Prior to that there were major variations, both legal and practical, worldwide. Given the global nature of maritime transport this was clearly problematic. Several times resolution was sought via global standardization, Ultimately, however, the solution was found via the York-Antwerp Rules.
Essential features of General Average in shipping
There is a General Average act when, and only when, any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure.
The above is how ‘Rule A’ of the ‘York-Antwerp Rules 1974’ defines a General Average act.
Let us identify and examine each of the features present in this definition.
Sacrifice or expenditure must be extraordinary.
Normal costs or damages sustained by a marine transport company in meeting its contractual obligations do not constitute General Average. For instance, marine equipment affected by a ship foundering is considered differently to equipment breakage or deterioration at sea.
Running a ship’s turbines when not at sea is deemed abusive and unacceptable. Running the turbines at sea, however, is deemed regular and acceptable regardless of the risk to vessel and freight, and what was done to resolve the problem. Any loss resulting from the latter is not covered by ‘General Average’. In order to be covered by the term there must be commitment and resolve; it could not be unavoidable. It is not possible to ‘sacrifice’ something if losing it was preordained and unalterable.
Real and substantial peril must exist
In order to be covered by the term ‘General Average’ it is imperative there be risk and danger to the vessel and cargo. It does not have to be immediate but it must be genuine and considerable.
There is a fine line between things done to protect all in the face of impending danger and those done in order to stave off potential risk. We do not detail those differences now but provide two examples as clarification.
A ship at sea and drifting with no engine power is considered to be in immediate danger. This applies even if the weather and seas are mild and there seems to be no further danger. If, however, a captain reasonably decides to seek safe harbor to avoid bad weather, this is not generally considered as General Average.
Need for common safety
Anything done must be for the sake of overall wellbeing, not just a percentage thereof. As an example, consider a ship freighting goods required to be kept under refrigeration. The cooling system malfunctions while the ship is in a hot climate. The master would have to make for the nearest port so the machinery could be fixed. Under these circumstances the risk is solely to the freight in the cool rooms. The vessel and any other materials being carried are unaffected and could finish their journey. In such an instance, the premise of ‘General Average’ does not apply.
Another illustration would be a vessel transporting costly freight being sent to various traders getting beached on a shoal. The captain has some of the freight offloaded, thus lightening the ship so it moves off the shoal and is once more afloat. Once any damage has been made good the ship is able to sail on, carrying the remaining freight to its destination.
Clearly there might have been alternatives available to the captain. He could, for example, have called for assistance to get the ship hauled from the shoal. This, however, could have done more harm than good. It might cause a breach to the ship’s hull, thus potentially putting the freight in danger of water damage. He could also have attempted to get the ship off the shoal by using his own machinery on board. This too, however, could risk breaching the hull and would likely also harm the engines and other machinery. All these options may well cause damages or discrimination to the venture stakeholders.
Removes conflict of interest
It is not unusual for disagreement to occur relative to how best the causative event could have been avoided. The freight consigner might consider a different option would have been better. He might also feel another consignee’s freight should have been jettisoned rather than his. The concept of General Average was created to preclude and/or resolve such arguments.
General Average removes conflict and ensures all consigners share equally in any losses realized through dumping of any of the freight on board. The consigner whose goods have been dumped because of General Average is no worse off than the consignors whose freight was not dumped.
The principle of General Average and its enactment in the York-Antwerp Rules gives a ship’s captain some freedom. He can, in such instances, determine the best way forward according to his own wisdom and experience. He must decide on the wisest path forward, in his opinion, to keep the vessel and freight safe. He does not need to consider any differences between the shipowners and freight consignors; he can consider everything as a whole.
Essential features of general average in shipping
Examples of general average events
Below are some instances which might involve General Average.
Stranding and running aground
Damage to the vessel and machinery when refloated has costs that can be General Averaged. These may include:
- Loss or damage to cargo by jettison or having to be forced to discharge
- Costs for discharging, storing and reloading cargo that was discharged
- Costs of refuge in port
Fire destroying cargo or ship
The only cost General Averaged is refuge in port when damage to a vessel, or the cargo it was carrying, has occurred from extinguishing a fire.
Shortage of Bunkers
The only cost General Averaged when a cargo is jettisoned is refuge in port.
Shifting of cargo in heavy weather
The only costs General Averaged when a cargo is jettisoned or expenses when making refuge in port.
Other general average events
The only cost that can be General Averaged when damage to a vessel or detention in port has resulted from heavy weather, collision, machinery breakdown or some other accident is refuge in port.
Any of these events may give rise to a claim for salvage services. Salvage charges (that is, salvage incurred independently of any contract) are handled in a separate category, distinct from General Average. The York-Antwerp Rules state that salvage costs are to be treated as General Average.
Common general average event examples
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