By Irene Joseph and Sree Madhuri
On April 01, 2021, Shoei-Kisen, the ship owner of the infamous MV Ever Given which blocked the Suez Canal, declared a ‘general average’. Many experts claim that this may have been the largest and most complex general average claim that has occurred in terms of the number of different property interests. The last time such a container vessel had declared a large general average was following the fire incident that occurred aboard Maersk Honam.[1]
However, this time MV Ever Given caused a great sensation when it disrupted the global trade at one of the busiest trade routes – the Suez Canal for almost six days, after which it was re-floated through salvage operations.[2] While there was lack of clarity over the extent of involvement of technical or human errors, it is almost certain that every cargo owner had to contribute towards the cost of loss even if there has not been any explicit damage to the cargo based on the underlying principles of general average as expounded in Maritime Law.
The concept of ‘General Average’ has been in practice since ancient times and eventually found its relevance in maritime law and practices. The concept is based on the equity principle and binds all the parties – shipowner, cargo owners, and parties that are entitled to freight, to contribute proportionately for the extraordinary costs or sacrifices made to preserve the interests of all parties in the common adventure. The law of general average is vague and abstruse, however, well established, especially with the codification of the York-Antwerp Rules.[3] These Rules were amended multiple times over the years; however, it is the Rules of 2004 that hold immense significance in maritime law and practices. As one goes through these rules, a question arises as to when a general average can be refused by the parties, especially when the extraordinary sacrifice or expense is a consequence of negligence. Therefore, in light of this, the following segments will address the said issue with the reference to York-Antwerp Rules, 2004 (hereinafter “Rules of 2004” or “the Rules”) as well as the disadvantageous position of a carrier in this setup.
CRITICAL ANALYSIS
‘Fault’ under Rule D of York-Antwerp Rules, 2004
The New Jason Clause, which is usually included in bills of lading, protects all actions of the negligence of the parties, thereby granting the requisite general average contributions. Unlike the New Jason Clause, the York-Antwerp Rules do not explicitly talk about ‘negligence’ and the contribution thereafter. However, if a loss is suffered due to the ‘fault’ of one of the interests, it would attract ‘Rule D’ of the Rules of 2004.[4]
“RULE D – Rights 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.”[5]
The objective of the said Rule is to keep the fault issue out of the average adjustment. Although the first part of the provision may seem to protect the non-actionable faults of one of the parties, the second part, which reflects the common law principle, makes a fault actionable.[6] Once an actionable fault is established against one of the parties, the general average claim cannot be incurred. The relevance of the second part of the provision in the contemporary world is significant to note as the court’s interpretations have compromised the position of the carrier.
Unseaworthiness as Actionable Fault and Carrier’s Liability
Although ‘Rule D’ does not specifically name any parties and adapts a neutral terminology, in the contemporary world, the carrier’s liabilities have increased considerably. The duty of due diligence is quite a huge responsibility laid down on the carrier by the Hague-Visby Rules as well. This can be seen in the Mt. Cape Bonny case, where the cargo owners were not entitled to contribute to the general average expenditure incurred by the carrier owners. The primary reason for the same was the failure of due diligence, which led to the “unseaworthiness” of the vessel.[7] Similar is the factual scenario of the Mt. Isa case.[8] Even before the Rules were codified, the unseaworthiness of the ship was one of the prime reasons for the non-contribution of general average.[9] The Mt. Cape Bonny case led to the acknowledgement of “actionable fault” under ‘Rule D’ of the Rules. The particular segment of the provision acts as a defensive mechanism for the cargo owners. However, it was explicitly recognised in the BSLE case [10] that once a defence under ‘Rule D’ of the Rules is determined, even according to the guarantee, the insurers are well within their rights to challenge the adjustment, including non-contribution towards the general average expenditure.
With actionable fault as defence, it can be predicted that, in years to come, the archaic concept of the general average may come to an end or fade away due to its non-favourability to the parties involved and its inability to safeguard the interests, especially those of the carrier. With acknowledgment of such a defence, the uncertainty in differentiating between ‘general average’ and ‘particular average’ is quite challenging, as the former has transformed into the latter. Notwithstanding the aforementioned stance, the court’s reasoning is appreciated in considering unseaworthiness as part of the actionable fault. However, with the ruling of Allianz’s case, we again come across a new challenge in determining what attributes to the unseaworthiness of the vessel and whether it is beyond the conditioning of the vessel.
Passage Planning – a boon or a bane?
In Alize 1954 v. Allianz case, similar to the aforementioned judgments, declared that the vessel was unseaworthy and that the cargo owners are not entitled to contribute to the general average expenditure.[11] However, the facts and aspects of the case are unique. In this case, before leaving for a Chinese port, the owners were aware that the entry and exit would be difficult as the unexplored shallow water was flowing outside the marked fairway channel. The master was told that in certain parts of the marked fairway channel, there was shallow water and due to this sole reason, the master of the vessel deviated from the marked channel.[12] Even before the deviation, a warning was sent to the mariners not to step out of the marked channel as they might encounter uncharted shoal areas. Despite the warning, the master deviated and ended up aground on an unmarked shoal.[13]
The court recognised this act of the master as negligence. However, it was claimed by the cargo interests that the passage plan was decided even before the departure. The court, acknowledging this argument, stated that it would still amount to negligence and unseaworthiness as due diligence was not exercised by choosing a defective passage plan.
However, when looking at these facts, which are unique and distinct from the usual, a mere blind application of the well-known principle of unseaworthiness seems eccentric. This is a case where unseaworthiness did not involve the physical attributes and conditioning of the vessel, but laid emphasis on the theoretical aspects of the factual matrix. If a passage plan was properly prepared, even before the departure, it should not amount to the vessel being unseaworthy as no prudent owner would want to navigate the vessel via a defective passage plan. As stated above, the facts do not concern the physical conditioning of the vessel and therefore, it was rather a mistake of the court for not being able to differentiate the concepts of navigational purposes and unseaworthiness. The court, given the set of facts, should have laid down a comprehensive reason for coming to the said conclusion or should have thought about the various possibilities and options available.
CONCLUSION
The aforementioned analysis throws light upon the lacunae involved in the concept of general average. It may be observed that the liability of a carrier under the general average is quite unreasonable, and it particularly defeats the principles on which the concept was established, i.e., equity. The defence of actionable fault also dents the usage of this concept in principle. In addition to this, another line of question that arises from this theme is whether there is any difference left between the concept of General Average and Particular Average if the former is being applied interchangeably with the latter. With the interpretation given by various Courts, the differentiating line between these concepts has seemingly faded, thereby compromising the very basics of the concepts involved.
The concept of general average is a well-established theory that has served well in maritime history. However, complications are arising in the contemporary world, especially with the increasing popularity of and coincidence with Marine Insurance. Secondary importance is given to the general average, only after Marine Insurance, by the underwriters and parties. The decreasing interest in general average in practice is quite evident.
[1] Matt Leonard, ‘Ever Given, general average and why shippers will share the costs of a ship’s rescue’ (Supply Chain Dive, 8 April 2021) < https://www.supplychaindive.com/news/ever-given-general-average-shipper-cost/597994/> accessed 20 April 2022
[2] Will Waters, ‘Ever Given vessel owner declares general average’ (Lloyds Loading List, 6 April 2021) <https://www.lloydsloadinglist.com/freight-directory/news/%E2%80%98Ever-Given%E2%80%99-vessel-owner-declares-%E2%80%98general-average%E2%80%99/78806.htm> accessed 20 April 2022
[3] Angus Glennie, ‘Richard R Cornah, Richard C G Sarll and Joseph B Shead (eds) Lowndes & Rudolf: General Average and York-Antwerp Rules’ (2019) 23 (3) Edinburgh Law Review < https://doi.org/10.3366/elr.2019.0591> accessed 29 April 2022
[4] Lowndes and Rudolf, The Law of General Average and the York-Antwerp Rules (Richard Cornah, R.C.G. Sarll, and J.B. Shead eds, 5th edn, Sweet & Maxwell, 2018)
[5] York-Antwerp Rules 2004, Rule D
[6] Goulandris Brothers Ltd v B. Goldman & Sons Ltd [1957] 2 Lloyd’s Rep 207
[7] MT “Cape Bonny” Tankschiffahrts GmbH & Co KG v Ping An Property [2017]EWHC 3036 (Comm)
[8] Mount Isa Mines Ltd v The Ship “Thor Commander” [2018] FCA 1326
[9] Schloss v Heriot (1863) 14 CB (NS) 59
[10] Navalmar UK Ltd v Ergo Versicherung AG (The BSLE Sunrise) [2019] EWHC 2860 (Comm)
[11] Alize 1954 v Allianz Elementar Versicherungs AG, [2020] EWCA Civ 293
[12] Nicholas Walser, ‘A general average claim: What makes a vessel unseaworthy?’ (Gately, 20 August 2019) <https://gateleyplc.com/insight/quick-reads/a-general-average-claim-what-makes-a-vessel-unseaworthy/> accessed 21 April 2022
[13] Dr Johanna Hjalmarsson, ‘Cargo claims – Round-up of cases featured in Quadrant Chambers’ recent Cargo Claims forum’ (Lloyd’s Shipping and Trade Law, 30 October 2019) <https://www.shippingandtradelaw.com/shipping/carriage-of-goods/cargo-claims-137669.htm> accessed 30 April 2022
Centre for Maritime Law 