UNDERSTANDING GENERAL AVERAGE IN THE MARITIME INDUSTRY
The term "General Average" holds a significant role in maritime law, especially in the aftermath of maritime incidents such as the Ever Given grounding in the Suez Canal. This practice, often invoked in times of emergencies, calls for a collective sharing of responsibility among various stakeholders within the shipping industry. But what exactly does the General Average entail?
The Concept of General Average
At its core, the General Average represents a guiding principle within maritime law that necessitates the equitable distribution of losses or damages incurred due to the deliberate sacrifice of either a portion of the vessel or its cargo to safeguard the entire entity during an emergency situation. This sacrifice, often seen as a voluntary relinquishing of a "lesser" interest to preserve a clearly more significant one, reflects the idea of shared responsibility.
In simpler terms, the General Average can be likened to a communal loss-sharing mechanism, wherein the shipowner and cargo owners, including shippers, collectively contribute to offset the losses arising from such sacrifices. Unlike conventional notions of responsibility, where the carrier is held accountable for cargo losses, General Average shifts the responsibility to all cargo owners onboard the vessel, in addition to the ship itself.
Operational Aspects of General Average
Upon the declaration of the General Average, cargo owners are typically required to provide a deposit to a General Average fund before their cargo can be released. In cases where cargo is insured, the responsibility for this deposit often falls to the insurance company, which also contributes to any additional losses. The specifics of the General Average are commonly outlined in the bill of lading, encompassing a range of potential expenses, such as towing and salvage operations.
Instances of General Average
Historically, the practice of General Average involved sacrificing cargo or ship equipment during adverse weather conditions to lighten the ship's load. While such scenarios are less frequent today, instances of General Average are more likely to involve actions such as extinguishing fires onboard or towing vessels encountering engine issues.
The Rationale Behind General Average
The urgent nature of maritime emergencies leaves little room for extensive deliberation over which specific cargo to jettison. To circumvent potential disputes that could consume precious time, the practice of the General Average evolved. This practice hinges on the belief that all cargo owners whose goods remain safe contribute a portion based on their share or percentage to support those whose cargo was sacrificed.
Regulatory Framework and Its Evolution
The concept of the General Average is deeply rooted in admiralty law across numerous countries. The regulatory foundation can be traced back to the York-Antwerp Rules of 1890, which have since been updated multiple times, with the most recent revisions in 2004 and 2016. These maritime rules establish the rights and responsibilities of both ship and cargo owners in scenarios where cargo sacrifices are necessary for the ship's rescue.
Elements Required for General Average Application
For the General Average to apply, three critical conditions must be met:
1. The ship must face an "imminent" and seemingly "inevitable" peril.
2. There must be a voluntary jettison of part of the ship's cargo to avert the danger.
3. The attempt to prevent imminent peril through sacrifice must be successful.
The distribution of costs and losses within the General Average is overseen by an average adjuster, an impartial third party designated by the shipowner. This adjuster determines the costs owed to and by each stakeholder, eligible losses for General Average consideration, overall incident costs, and individual party contributions.
Notable Cases of General Average
Ever Given: The grounding of the Ever Given in the Suez Canal led to a declaration of General Average by Japanese Shoei Kisen Kaisha. This incident, blocking one of the world's busiest shipping routes, triggered a complex procedure expected to span up to seven years due to the scale and complexity of the case.
Ever Forward: The Ever Forward container ship's grounding in the Chesapeake Bay prompted Taiwanese shipping company Evergreen to declare General Average, citing increasing costs related to the ship's refloating efforts.
CMA CGM Libra: In 2011, the CMA CGM Libra ran aground, leading to a General Average declaration by the shipowner. While the majority complied, a debate ensued as a fraction contested their responsibility, sparking an industry-wide discussion and legal considerations.
Maersk Honam: After a fire incident on the Maersk Honam in 2018, Maersk invoked General Average to cover the high costs of berthing and discharging operations. Cargo owners had to contribute a portion of their cargo's value to secure its release.
Ancient Origins and Lasting Significance
While General Average is a contemporary maritime practice, its roots extend back to ancient maritime law. Notably, elements of General Average were present in the Lex Rhodia, the maritime code of Rhodes dating back to circa 800 BC. Similarly, the Code of Hammurabi Law around 1755-1750 BC stipulated compensation for saving a ship from total loss. These historical foundations highlight the enduring importance of equitable loss-sharing within maritime operations.
General Average is a cornerstone of maritime law that addresses emergent challenges through shared responsibility, ensuring the preservation of vessels, cargo, and the industry as a whole. As history evolves, this principle continues to adapt and shape the dynamics of the maritime world.
To dive deeper into the complexities of the General Average and its pivotal role in the maritime world, we invite you to read the original article on SAFETY4SEA. Discover the historical origins, regulatory framework, and notable cases that underscore the enduring significance of this principle in safeguarding vessels, cargo, and the maritime industry as a whole.
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